Item 1. FINANCIAL STATEMENTS

KENVUE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; Dollars in Millions, Shares in Thousands, Except Per Share Data)

						June 30, 2024						December 31, 2023
Assets
Current assets
Cash and cash equivalents						$	1,014					$	1,382
Trade receivables, less allowances for credit losses ($25 and $25 as of June 30, 2024 and December 31, 2023, respectively)						2,240						2,073
Inventories						1,849						1,851
Prepaid expenses and other receivables						557						567
Other current assets						221						265
Total current assets						5,881						6,138
Property, plant, and equipment, net						2,004						2,042
Intangible assets, net						8,762						9,619
Goodwill						8,973						9,271
Deferred taxes on income						206						158
Other assets						617						623
Total Assets						26,443						27,851
Liabilities and Equity
Current liabilities
Loans and notes payable						1,427						599
Accounts payable						2,437						2,489
Accrued liabilities						1,262						1,456
Accrued rebates, returns, and promotions						715						795
Accrued taxes on income						96						142
Total current liabilities						5,937						5,481
Employee related obligations						350						360
Long-term debt						7,051						7,687
Deferred taxes on income						2,392						2,621
Other liabilities						535						491
Total liabilities						16,265						16,640
Commitments and contingencies (Note 14)
Equity
Preferred stock, $0.01 par value, 750,000 shares authorized; no shares issued and outstanding as of June 30, 2024 and December 31, 2023						—						—
Common stock, $0.01 par value, 12,500,000 shares authorized; 1,920,014 and 1,915,064 shares issued and outstanding as of June 30, 2024, respectively; 1,915,407 and 1,915,057 shares issued and outstanding as of December 31, 2023, respectively						19						19
Additional paid-in capital						16,075						16,147
Treasury stock, 4,950 and 350 shares at cost as of June 30, 2024 and December 31, 2023, respectively						(98)						(7)
Retained earnings						17						429
Accumulated other comprehensive loss						(5,835)						(5,377)
Total equity						10,178						11,211
Total Liabilities and Equity						$	26,443					$	27,851

See accompanying Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; Dollars in Millions, Except Per Share Data)

						Fiscal Three Months Ended												Fiscal Six Months Ended
						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Net sales						$	4,000					$	4,011					$	7,894					$	7,863
Cost of sales						1,635						1,786						3,287						3,513
Gross profit						2,365						2,225						4,607						4,350
Selling, general, and administrative expenses						1,641						1,522						3,214						3,024
Restructuring expenses						48						—						89						—
Impairment charges						510						—						578						—
Other operating expense (income), net						12						1						22						(16)
Operating income						154						702						704						1,342
Other (income) expense, net						(3)						10						25						40
Interest expense, net						92						53						187						54
Income before taxes						65						639						492						1,248
Provision for taxes						7						209						138						349
Net income						$	58					$	430					$	354					$	899
Net income per share
Basic						$	0.03					$	0.23					$	0.18					$	0.51
Diluted						$	0.03					$	0.23					$	0.18					$	0.51
Weighted average number of shares outstanding
Basic						1,915						1,838						1,915						1,777
Diluted						1,920						1,838						1,920						1,777

See accompanying Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited; Dollars in Millions)

						Fiscal Three Months Ended												Fiscal Six Months Ended
						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Net income						$	58					$	430					$	354					$	899
Other comprehensive (loss) income, net of taxes
Foreign currency translation						(152)						(172)						(432)						(9)
Employee benefit plans						3						(10)						6						4
Derivatives and hedges						(11)						(8)						(32)						31
Other comprehensive (loss) income						(160)						(190)						(458)						26
Comprehensive (loss) income						$	(102)					$	240					$	(104)					$	925

See accompanying Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited; Dollars in Millions, Shares in Thousands)

						Fiscal Three Months Ended June 30, 2024
						Common Stock												Additional Paid-In Capital						Treasury Stock												Retained Earnings						Accumulated Other Comprehensive Loss						Total Equity
						Shares						Amount									Shares						Amount
Balance, March 31, 2024						1,914,698						$	19					$	16,033					4,950						$	(98)					$	342					$	(5,675)					$	10,621
Net income						—						—						—						—						—						58						—						58
Other comprehensive loss						—						—						—						—						—						—						(160)						(160)
Cash dividends on common stock						—						—						—						—						—						(383)						—						(383)
Stock-based compensation						—						—						61						—						—						—						—						61
Issuance of common stock under the Kenvue 2023 Plan, net						366						—						6						—						—						—						—						6
Separation-related adjustments						—						—						(25)						—						—						—						—						(25)
Balance, June 30, 2024						1,915,064						$	19					$	16,075					4,950						$	(98)					$	17					$	(5,835)					$	10,178

						Fiscal Three Months Ended July 2, 2023
						Common Stock												Additional Paid-In Capital						Retained Earnings						Net Investment from J&J						Accumulated Other Comprehensive Loss						Total Equity
						Shares						Amount
Balance, April 2, 2023**(1)**						—						$	—					$	—					$	—					$	25,611					$	(5,239)					$	20,372
Net income						—						—						—						430						—						—						430
Other comprehensive loss						—						—						—						—						—						(190)						(190)
Net transfers from J&J						—						—						—						—						10						—						10
Stock-based compensation						—						—						38						—						—						—						38
Distribution to J&J in connection with the Separation						—						—						(13,788)						—						—						—						(13,788)
Issuance of common stock in connection with the Kenvue IPO						1,914,894						19						4,222						—						—						—						4,241
Reclassification of Net Investment from J&J						—						—						25,712						—						(25,712)						—						—
Separation-related adjustments						—						—						—						—						91						(73)						18
Balance, July 2, 2023						1,914,894						$	19					$	16,184					$	430					$	—					$	(5,502)					$	11,131

(1) Includes cumulative effect of change in accounting principle related to Global Intangible Low-Taxed Income. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Change in Accounting Principle,” for more information.

						Fiscal Six Months Ended June 30, 2024
						Common Stock												Additional Paid-In Capital						Treasury Stock												Retained Earnings						Accumulated Other Comprehensive Loss						Total Equity
						Shares						Amount									Shares						Amount
Balance, December 31, 2023						1,915,057						$	19					$	16,147					350						$	(7)					$	429					$	(5,377)					$	11,211
Net income						—						—						—						—						—						354						—						354
Other comprehensive loss						—						—						—						—						—						—						(458)						(458)
Cash dividends on common stock						—						—						—						—						—						(766)						—						(766)
Stock-based compensation						—						—						142						—						—						—						—						142
Issuance of common stock under the Kenvue 2023 Plan, net						4,607						—						(6)						—						—						—						—						(6)
Purchase of treasury stock						(4,600)						—						—						4,600						(91)						—						—						(91)
Separation-related adjustments						—						—						(208)						—						—						—						—						(208)
Balance, June 30, 2024						1,915,064						$	19					$	16,075					4,950						$	(98)					$	17					$	(5,835)					$	10,178

						Fiscal Six Months Ended July 2, 2023**(1)**
						Common Stock												Additional Paid-In Capital						Retained Earnings						Net Investment from J&J						Accumulated Other Comprehensive Loss						Total Equity
						Shares						Amount
Balance, January 1, 2023**(2)**						—						$	—					$	—					$	—					$	25,425					$	(5,455)					$	19,970
Net income						—						—						—						430						469						—						899
Other comprehensive income						—						—						—						—						—						26						26
Net transfers to J&J						—						—						—						—						(308)						—						(308)
Stock-based compensation						—						—						38						—						35						—						73
Distribution to J&J in connection with the Separation						—						—						(13,788)						—						—						—						(13,788)
Issuance of common stock in connection with the Kenvue IPO						1,914,894						19						4,222						—						—						—						4,241
Reclassification of Net Investment from J&J						—						—						25,712						—						(25,712)						—						—
Separation-related adjustments						—						—						—						—						91						(73)						18
Balance, July 2, 2023						1,914,894						$	19					$	16,184					$	430					$	—					$	(5,502)					$	11,131

(1) Prior to April 4, 2023, the Company operated as a segment of J&J and not as a separate entity. The Company’s financial statements prior to April 4, 2023 were prepared on a combined basis and were derived from J&J’s historical consolidated financial statements and accounting records as if the Company had been operated on a standalone basis. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Basis of Presentation,” for more information.

(2) Includes cumulative effect of change in accounting principle related to Global Intangible Low-Taxed Income. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Change in Accounting Principle,” for more information.

See accompanying Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; Dollars in Millions)

						Fiscal Six Months Ended
						June 30, 2024						July 2, 2023
Cash flows from operating activities
Net income						$	354					$	899
Adjustments to reconcile net income to cash flows from operating activities
Depreciation and amortization						290						300
Stock-based compensation						142						73
Deferred income taxes						(205)						16
Impairment charges						578						—
Other						50						12
Net changes in assets and liabilities
Trade receivables						(233)						(55)
Inventories						(49)						143
Other current and non-current assets						35						(495)
Accounts payable and accrued liabilities						(237)						1,105
Employee related obligations						7						4
Accrued taxes on income						(44)						(207)
Other liabilities						39						(251)
Net cash flows from operating activities						727						1,544
Cash flows used in investing activities
Purchases of property, plant, and equipment						(243)						(132)
Transfer of funds to J&J pursuant to the Facility Agreement						—						(8,941)
Proceeds from J&J upon repayment of the Facility Agreement						—						8,941
Proceeds from sale of assets						—						14
Other investing activities						6						—
Net cash flows used in investing activities						(237)						(118)
Cash flows used in financing activities
Proceeds from (payments of) loans and notes payables						8						(14)
Proceeds from Commercial Paper Program, net of issuance cost						50						742
Proceeds from issuance of Senior Notes, net of issuance cost						—						7,686
Proceeds from Kenvue IPO, net						—						4,241
Distribution to J&J in connection with the Separation						—						(13,788)
Dividends paid						(766)						—
Net transfers to J&J						—						(274)
Purchases of treasury shares						(91)						—
Other financing activities						(17)						(11)
Net cash flows used in financing activities						(816)						(1,418)
Effect of exchange rate changes on cash and cash equivalents						(42)						(8)
Cash and cash equivalents, beginning of period						1,382						1,231
Net (decrease) increase in cash and cash equivalents						(368)						—
Cash and cash equivalents, end of period						$	1,014					$	1,231

See accompanying Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of the Company and Summary of Significant Accounting Policies

Description of the Company and Business Segments

Kenvue Inc. (“Kenvue” or the “Company”) is a pure play consumer health company with iconic brands including Aveeno®, BAND-AID® Brand, Johnson’s®, Listerine®, Neutrogena®, Tylenol®, and Zyrtec®. The Company is organized into three business segments: Self Care, Skin Health and Beauty, and Essential Health. The Self Care segment includes a broad product range such as pain care, cough, cold, and allergy, digestive health, smoking cessation, eye care, and other products. The Skin Health and Beauty segment is focused on face and body care, and hair, sun, and other products. The Essential Health segment includes oral care, baby care, women’s health, wound care, and other products.

Kenvue was initially formed as a wholly owned subsidiary of Johnson & Johnson (“J&J”). In November 2021, J&J announced its intention to separate its Consumer Health segment (the “Consumer Health Business”) into a new, publicly traded company (the “Separation”). Prior to the Kenvue IPO (as defined below), the Company primarily represented J&J’s Consumer Health Business. The Company also included certain other product lines previously reported in another segment of J&J. On April 4, 2023, in connection with the Separation, J&J completed in all material respects the transfer of the assets and liabilities of the Consumer Health Business to the Company and its subsidiaries (such transfer, the “Consumer Health Business Transfer”), other than the transfer of certain Deferred Local Businesses (as defined below in “—Variable Interest Entities and Net Economic Benefit Arrangements”).

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

On May 8, 2023, the Kenvue IPO was completed through the sale of 198,734,444 shares of common stock, par value $0.01 per share, including the underwriters’ full exercise of their option to purchase 25,921,884 shares to cover over-allotments, at an initial public offering price of $22 per share for net proceeds of $4.2 billion after deducting underwriting discounts and commissions of $131 million. On May 8, 2023, in conjunction with the Consumer Health Business Transfer, the Company distributed $13.8 billion to J&J from the 1) net proceeds received from the sale of the common stock in the Kenvue IPO, 2) net proceeds received from the Debt Financing Transactions as defined in Note 4, “Borrowings—Commercial Paper Program,” and 3) any cash and cash equivalents in excess of the $1.17 billion retained by the Company immediately following the Kenvue IPO. As of the closing of the Kenvue IPO, J&J owned 1,716,160,000 shares of Kenvue common stock, or approximately 89.6% of the total outstanding shares of Kenvue common stock.

On July 24, 2023, J&J announced an exchange offer (the “Exchange Offer”) under which its shareholders could exchange shares of J&J common stock for shares of Kenvue common stock owned by J&J. On August 23, 2023, J&J completed the Exchange Offer through which J&J accepted an aggregate of 190,955,435 shares of J&J common stock in exchange for 1,533,830,450 shares of Kenvue common stock, representing approximately 80.1% of Kenvue’s outstanding common stock as of August 23, 2023. As a result, Kenvue became a fully independent company, and as of the completion of the Exchange Offer, J&J owned approximately 9.5% of the outstanding shares of Kenvue common stock.

On May 17, 2024, J&J completed an additional exchange offer (the “Debt for Equity Exchange”) through which J&J exchanged indebtedness of J&J for 182,329,550 shares of Kenvue common stock owned by J&J. Following the completion of the Debt for Equity Exchange, J&J no longer owned any shares of Kenvue common stock.

Basis of Presentation

Effective April 4, 2023, the Company’s financial statements are presented on a consolidated basis, as J&J completed the Consumer Health Business Transfer on such date. The unaudited financial statements for all periods presented, including the historical results of the Company prior to April 4, 2023, are now referred to as the “Condensed Consolidated Financial Statements.”

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the

information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the Condensed Consolidated 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. These financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures for the fiscal twelve months ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed on March 1, 2024 with the SEC.

Intercompany balances and transactions have been eliminated. The Condensed Consolidated Financial Statements include the accounts of the Company and its affiliates and entities consolidated under the variable interest and voting models.

During the fiscal six months ended June 30, 2024, the Company recorded out-of-period adjustments primarily related to the Separation, which corrected an overstatement in Additional paid-in capital of $208 million. This amount did not have an impact on the operating results for the fiscal six months ended June 30, 2024. The Company concluded that these adjustments were not material to the Condensed Consolidated Financial Statements for either the current period or prior periods.

Periods prior to the Consumer Health Business Transfer

Prior to April 4, 2023, the Company operated as a segment of J&J and not as a separate entity. The Company’s financial statements prior to April 4, 2023 were prepared on a combined basis and were derived from J&J’s historical consolidated financial statements and accounting records as if the Company had been operated on a standalone basis.

Prior to the Kenvue IPO, the Company relied on J&J’s corporate and other support functions. Therefore, certain corporate and shared costs were allocated to the Company including the assets, liabilities, revenues, and expenses that J&J’s management determined were specifically or primarily identifiable to the Company, as well as direct and indirect costs that were attributable to the operations of the Company. Indirect costs are the costs of support functions that were provided on a centralized or geographic basis by J&J and its affiliates, which included, but were not limited to, facilities, insurance, logistics, quality, compliance, finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services, and general commercial support functions.

Indirect costs were allocated to the Company for the purposes of preparing condensed combined financial statements prior to the Kenvue IPO, based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method, primarily net sales, headcount, or other allocation methodologies that were considered to be a reasonable reflection of the utilization of services provided or benefit received by the Company during the periods presented, depending on the nature of the services received. Management considers that such allocations were made on a reasonable basis consistent with benefits received but may not necessarily be indicative of the costs that would have been incurred if the Company had been operated on a standalone basis for the periods presented.

Cash generated from the Company’s operations prior to April 4, 2023 was generally managed by J&J’s centralized treasury function and was swept into J&J and its affiliates’ bank accounts. Cash and cash equivalents on the Condensed Consolidated Balance Sheet represented balances in accounts specifically identifiable to the Company that were not swept into J&J and its affiliates’ bank accounts. J&J’s third-party interest expense was not allocated for any of the periods prior to April 4, 2023 as the Company was not the legal obligor of the debt and the borrowings were not directly attributable to the Company’s operations.

The Company’s equity balance in these financial statements prior to April 4, 2023 represents the excess of total assets over total liabilities. Equity was impacted by changes in comprehensive income and contributions from or to J&J prior to the Kenvue IPO, which was the result of treasury activities and net funding provided by or distributed to J&J.

J&J calculated foreign currency translation on its consolidated assets and liabilities, which included assets and liabilities of the Company prior to April 4, 2023. Foreign currency translation recorded during the fiscal six months ended June 30, 2024 and July 2, 2023 was based on currency movements specific to the Condensed Consolidated Financial Statements.

The income tax amounts in the Condensed Consolidated Financial Statements prior to the Kenvue IPO have been calculated based on a separate return methodology and presented as if the Company’s operations were reported by separate taxpayers in the jurisdictions in which the Company operates. See Note 11, “Income Taxes,” for further discussion.

Prior to the Kenvue IPO, all transactions between the Company and J&J were considered to be effectively settled for cash in the Condensed Consolidated Financial Statements at the time the transaction was recorded. The effects of the settlement of these

transactions between the Company and J&J were reflected in the Condensed Consolidated Statements of Cash Flows as “Net transfers to J&J” within financing activities, and in the Condensed Consolidated Statements of Equity as “Net transfers to J&J.”

Use of Estimates

The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. Estimates are used when accounting for, among other things, sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes and related valuation allowance, withholding taxes, pension, postretirement benefits, fair value of financial instruments, stock-based compensation assumptions, depreciation, amortization, employee benefits, contingencies, allocations of cost and expenses from J&J and its affiliates, and the valuation of goodwill, intangible assets, and liabilities. Actual results may or may not differ from those estimates.

Trade Receivable and Allowance for Credit Losses

A summary of the change in the allowance for credit losses during the fiscal six months ended June 30, 2024 and July 2, 2023 is presented below:

						Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023
Allowance for credit losses, beginning of period						$	(25)					$	(35)
Provision						(4)						(5)
Utilization						3						11
Currency translation adjustment						1						—
Allowance for credit losses, end of period						$	(25)					$	(29)

Separation-Related Costs

The Company and J&J incurred certain non-recurring separation-related costs in the establishment of Kenvue as a standalone public company (“Separation-related costs”). Costs incurred by the Company and those costs that were incurred by J&J determined to be for the benefit of the Company are included in the Condensed Consolidated Financial Statements. These Separation-related costs were $79 million and $102 million for the fiscal three months ended June 30, 2024 and July 2, 2023, respectively, and $146 million and $200 million for the fiscal six months ended June 30, 2024 and July 2, 2023, respectively. The Separation-related costs are included within Cost of sales and Selling, general, and administrative expenses in the Condensed Consolidated Statements of Operations.

Research and Development

Research and development expenses are expensed as incurred and included within Selling, general, and administrative expenses. Research and development costs were $105 million and $99 million for the fiscal three months ended June 30, 2024 and July 2, 2023, respectively, and $205 million and $188 million for the fiscal six months ended June 30, 2024 and July 2, 2023, respectively.

Leases

The Company has operating leases for space, vehicles, manufacturing equipment, and data processing equipment. In connection with the Separation, J&J and Kenvue also entered into various lease agreements, in which the Company subleased properties from J&J. The Company has finance leases, which primarily include the Company’s new global corporate headquarters in Summit, New Jersey (as described in the “—Global Headquarters Lease” section below). Lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that the Company will exercise the option. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Operating Lease Assets and Liabilities

Right of Use (“ROU”) assets and lease liabilities associated with the Company’s operating leases are included on the Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 as follows:

						Operating Leases
(Dollars in Millions)						June 30, 2024**(1)**						December 31, 2023**(2)**
ROU assets included in:
Other assets						$	123					$	139
Total ROU assets						123						139
Lease liabilities included in:
Accrued liabilities						40						44
Other liabilities						88						97
Total lease liabilities						$	128					$	141

(1) Includes leases with J&J of $43 million of ROU assets, $12 million of current lease liabilities, and $31 million of non-current lease liabilities.

(2) Includes leases with J&J of $52 million of ROU assets, $13 million of current lease liabilities, and $39 million of non-current lease liabilities.

Global Headquarters Lease

On April 20, 2023, the Company entered into a long-term lease for a newly renovated corporate office building and a newly constructed research and development building in Summit, New Jersey (the “Global Headquarters Lease”). When completed, the campus will encompass approximately 290,000 square feet and serve as the Company’s new global corporate headquarters and research and development center. The Global Headquarters Lease collectively includes the lease associated with the corporate office building (the “Corporate Office Lease”), the lease associated with the land where the research and development building will be constructed (the “State-of-the-Art Lab Facility Lease”), and the lease associated with land to be used for amenities (the “Amenities Lease”). The relocation to this campus is expected to occur in 2025 for the corporate office building and continue through 2026 for the new research and development building. The Company will continue operating from its interim corporate headquarters in Skillman, New Jersey, until that time.

The Corporate Office Lease and the State-of-the-Art Lab Facility Lease, each accounted for as a finance lease, commenced in January 2024 and May 2024, respectively. Each lease includes an initial term of 15 years as well as renewal options, which the Company is reasonably certain to exercise, that will extend the term of each lease through 2060. Each finance lease liability was calculated utilizing an incremental borrowing rate of 4.75% to discount lease payments over the expected term.

The Amenities Lease is expected to commence in January 2026.

ROU assets and lease liabilities associated with the Corporate Office Lease and the State-of-the-Art Lab Facility Lease are included on the Condensed Consolidated Balance Sheet as of June 30, 2024 as follows:

(Dollars in Millions)						June 30, 2024
ROU assets included in:
Property, plant, and equipment, net						$	107
Lease liabilities included in:
Long-term debt						$	111

For the fiscal six months ended June 30, 2024, $109 million of ROU assets were obtained in exchange for the new finance lease liabilities in connection with the Corporate Office Lease and State-of-the-Art Lab Facility Lease.

Impairment Charges

Impairment charges for the fiscal three and six months ended June 30, 2024 and July 2, 2023 consisted of:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Dr.Ci:Labo® asset impairment(1)						488						—						488						—
Skillman fixed asset impairment(2)						—						—						68						—
Other asset impairment(3)						22						—						22						—
Impairment charges						$	510					$	—					$	578					$	—

(1) Represents the impairment charge recognized in relation to Dr.Ci:Labo® long-lived assets. See “—Dr.Ci:Labo® Asset Impairment” below and Note 3, “Intangible Assets and Goodwill,” for more information.

(2) Represents the impairment charge recorded on the held for sale asset associated with the Company’s interim corporate headquarters in Skillman, New Jersey. See “—Assets Held for Sale” below.

(3) Represents the impairment charge related to certain software development assets.

Dr.Ci:Labo*®* Asset Impairment

During the fiscal three months ended June 30, 2024, there was a significant change in the senior leadership of the Dr.Ci:Labo® business, resulting in a new strategic plan with a key focus on brand marketing expense designed to allow the brand to reach more consumers and appropriately address evolving market dynamics, including shifts in consumer sentiment in China as well as changing shopping patterns in the region. Following the change to the Company’s strategy for the brand, the Company made revisions to the internal forecasts relating to the Dr.Ci:Labo® asset group and concluded that the changes in circumstances, which impacted the forecasted cash flows in relation to this business, resulted in a triggering event, requiring an interim impairment review of the Dr.Ci:Labo® asset group. As a result of the interim impairment test, the Company concluded that the carrying value of long-lived assets of the asset group, consisting primarily of intangible assets, including trademarks and other intangibles, and property, plant, and equipment, exceeded their estimated fair value, resulting in impairment charges of $488 million recognized in the fiscal three months ended June 30, 2024, of which $463 million related to definite-lived intangible assets and $25 million related to property, plant, and equipment. Following the impairment charge, the carrying value of the Dr.Ci:Labo® asset group was $118 million.

The Company estimated the fair value of the definite-lived intangible assets within the Dr.Ci:Labo® asset group based on an income approach using the relief-from-royalty method. This valuation required significant judgments and estimates by management regarding several key inputs, including future cash flows consistent with management’s plans, sales growth rates, the selection of royalty rates, and a discount rate. The Company selected the assumptions used in the financial forecasts of cash flows specific to the remaining useful lives of the trademarks ranging from six to 15 years using historical data, supplemented by current and anticipated market conditions and estimated growth rates. The Company utilized a discount rate of 8%. As the fair value measurements were based on significant inputs not observable in the market, they represented Level 3 measurements within the fair value hierarchy.

Assets Held for Sale

The Company classifies assets as held for sale when: 1) management has committed to a plan to sell the assets, 2) the assets are available for immediate sale, 3) there is an active program to locate a buyer, and 4) the sale and transfer of the asset is probable within one year. On February 21, 2024, the Company listed its interim corporate headquarters in Skillman, New Jersey for sale, which met the criteria to be classified as held for sale at that date. The held for sale asset is measured at the lower of the carrying amount or the fair value less costs to sell.

The results of the impairment test performed upon classification as held for sale indicated that the carrying value of the Skillman, New Jersey facility exceeded its estimated fair value less costs to sell by $68 million. As a result, the Company recorded an impairment charge equivalent to that amount within Other operating expense (income), net in the Condensed Consolidated Statement of Operations for the fiscal three months ended March 31, 2024. The fair value of the held for sale asset was determined utilizing third-party sales pricing as an input. The inputs utilized in the analysis are classified as Level 3 inputs within the fair value hierarchy.

The Company recorded the remaining asset held for sale balance related to the Skillman, New Jersey facility within Other current assets on the Condensed Consolidated Balance Sheet as of June 30, 2024.

Supplier Finance Program

The Company has facilitated a voluntary supplier finance program to provide some of its suppliers with the opportunity to sell receivables due from the Company (the Company’s accounts payables) to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. The Company is not a party to the arrangements between the suppliers and the third-party financial institutions. The Company’s obligations to its suppliers, including amounts due, and scheduled payment dates (which have general payment terms of 90 days), are not affected by a participating supplier’s decision to participate in the program. As of June 30, 2024 and December 31, 2023, the Company’s accounts payable balances included $273 million and $227 million, respectively, related to invoices from suppliers participating in the supplier finance program.

Variable Interest Entities and Net Economic Benefit Arrangements

When the Company makes an initial investment in or establishes other variable interests in an entity, the entity is first evaluated to determine if it is a Variable Interest Entity (“VIE”) and if the Company is the primary beneficiary of the VIE, and therefore subject to consolidation regardless of percentage ownership. The primary beneficiary of a VIE is a party that meets both of the following criteria: 1) it has the power to direct the activities that most significantly impact the economic performance of the VIE; and 2) it has the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. Periodically, the Company assesses whether any change in its interest in or relationship with the entity affects the determination as to whether the entity is a VIE, and, if so, whether the Company is the primary beneficiary.

In connection with the Separation, J&J and Kenvue entered into a separation agreement (the “Separation Agreement”) on May 3, 2023. Under the Separation Agreement, transfer of certain assets and liabilities of the Consumer Health Business in certain jurisdictions (each, a “Deferred Local Business”) was not completed prior to the Kenvue IPO and was deferred due to certain precedent conditions, which include ensuring compliance with applicable law and obtaining necessary governmental approvals and other consents, and for other business reasons. At the Kenvue IPO and until the Deferred Local Business transfers to the Company, J&J 1) holds and operates the Deferred Local Businesses on behalf of and for the benefit of the Company, and 2) will use reasonable best efforts to treat and operate, insofar as reasonably practicable and to the extent permitted by applicable law, each such Deferred Local Business in the ordinary course of business in all material respects consistent with past practice. The benefits and costs related to these Deferred Local Businesses will be assumed by the Company (see below “—Net Economic Benefit Arrangements”). In addition, the Company and J&J will use reasonable best efforts to take all actions to transfer each Deferred Local Business as promptly as reasonably practicable. When the precedent conditions are met, the Deferred Local Businesses will be transferred to the Company as per the terms of the arrangement with J&J.

The Company determined that certain Deferred Local Businesses that are legal entities (“Deferred Legal Entities”) are VIEs for which Kenvue is the primary beneficiary, since Kenvue has the power to direct the activities that most significantly impact such Deferred Legal Entities’ economic performance, as well as to obtain all the economic benefits and losses of such entities. These significant activities include, but are not limited to, product pricing, marketing and sales strategy, supply chain strategy, material supply and vendor management, budget planning, and labor and overhead management. Accordingly, the assets and liabilities of these entities are recognized on the Condensed Consolidated Balance Sheets at their historical carrying amounts as of the date when the Company entered into the arrangement, since the primary beneficiary of the VIEs and the VIEs themselves were under common control. Additionally, the results of the operations and cash flows are included within the Condensed Consolidated Financial Statements.

All Deferred Legal Entities are exposed to similar operational risks and are therefore monitored and evaluated on a similar basis by management. Accordingly, the financial information for Deferred Legal Entities has been aggregated and the following table summarizes the consolidated assets and liabilities of these entities, on the Condensed Consolidated Balance Sheets. The amounts represented in this table are only those assets of the VIEs that can be used to settle only the VIE’s obligations and the VIE’s creditors (or beneficial interest holders) have no recourse against the general credit of the primary beneficiary.

(Dollars in Millions)						June 30, 2024
Assets
Current assets
Cash and cash equivalents						$	122
Trade receivables, less allowances for credit losses						57
Inventories						26
Prepaid expenses and other receivables						2
Total current assets						207
Property, plant, and equipment, net						2
Deferred taxes on income						2
Other assets						1
Total assets						$	212
Liabilities
Current liabilities
Accounts payable						$	3
Accrued liabilities						11
Accrued rebates, returns, and promotions						13
Total current liabilities						27
Total liabilities						$	27

The Company recognized Net income of $4 million and $32 million for the fiscal three months ended June 30, 2024 and July 2, 2023, respectively, and $6 million and $32 million for the fiscal six months ended June 30, 2024 and July 2, 2023, respectively, related to the Deferred Legal Entities in the Condensed Consolidated Statements of Operations.

Net Economic Benefit Arrangements

With respect to certain Deferred Legal Entities and the Deferred Local Businesses that are not legal entities (“Deferred Markets”), the Company and J&J entered into net economic benefit arrangements effective on April 4, 2023, pursuant to which, among other things, J&J will transfer to the Company the net profits from the operations of each of the Deferred Markets (or, in the event the operations of any such Deferred Markets result in net losses to J&J, the Company will reimburse J&J for the amount of such net losses).

The Company recognized a net payable to J&J of $12 million in relation to the net economic benefit arrangements as of June 30, 2024 on the Condensed Consolidated Balance Sheet. The Company recognized Net income of $19 million and $16 million for the fiscal three months ended June 30, 2024 and July 2, 2023, respectively, and $33 million and $16 million for the fiscal six months ended June 30, 2024 and July 2, 2023, respectively, in relation to the net economic benefit arrangements in the Condensed Consolidated Statements of Operations.

Reclassifications

Certain prior period amounts have been reclassified to conform to current fiscal year presentation.

Change in Accounting Principle

Global Intangible Low-Taxed Income (“GILTI”) Accounting Method Change

Effective in the fiscal three months ended October 1, 2023, the Company changed the accounting principle for GILTI from the deferred approach to the period cost approach. In 2018, the Financial Accounting Standards Board (“FASB”) provided companies with an accounting policy choice in determining whether to measure the deferred tax effects of GILTI or to treat

GILTI as a period cost. J&J elected to account for the deferred effects of GILTI in 2018. However, as a standalone company that operates in a different industry with different peers than J&J, treating GILTI as a period cost is the prevailing accounting policy that the Company’s peers have elected. Therefore, management determined that the change in accounting was preferable as it did not believe that the impact of deferred taxes on GILTI provides a meaningful measure of future GILTI tax costs.

The effects of the change in accounting principle to the Condensed Consolidated Financial Statements were as follows:

						Fiscal Three Months Ended
						July 2, 2023
(Dollars in Millions, Except Per Share Data)						Prior to Change						Effect of Change						As Adjusted
Condensed Consolidated Statement of Operations:
Income before taxes						$	639					$	—					$	639
Provision for taxes						209						—						209
Net income						$	430					$	—					$	430
Basic net income per share						$	0.23					$	—					$	0.23
Diluted net income per share						$	0.23					$	—					$	0.23

						Fiscal Six Months Ended
						July 2, 2023
(Dollars in Millions, Except Per Share Data)						Prior to Change						Effect of Change						As Adjusted
Condensed Consolidated Statement of Operations:
Income before taxes						$	1,248					$	—					$	1,248
Provision for taxes						488						(139)						349
Net income						$	760					$	139					$	899
Basic net income per share						$	0.43					$	0.08					$	0.51
Diluted net income per share						$	0.43					$	0.08					$	0.51

						Fiscal Three Months Ended
						July 2, 2023
(Dollars in Millions)						Prior to Change						Effect of Change						As Adjusted
Condensed Consolidated Statement of Comprehensive (Loss) Income:
Foreign currency translation, net of taxes						$	(177)					$	5					$	(172)
Other comprehensive loss						$	(195)					$	5					$	(190)

						Fiscal Six Months Ended
						July 2, 2023
(Dollars in Millions)						Prior to Change						Effect of Change						As Adjusted
Condensed Consolidated Statement of Comprehensive (Loss) Income:
Foreign currency translation, net of taxes						$	(16)					$	7					$	(9)
Other comprehensive income						$	19					$	7					$	26

						Fiscal Three Months Ended
						July 2, 2023
(Dollars in Millions)						Prior to Change						Effect of Change						As Adjusted
Condensed Consolidated Statement of Equity:
Net investment from J&J						$	25,521					$	90					$	25,611
Accumulated other comprehensive loss						(5,239)						—						(5,239)
Cumulative effect adjustment to beginning balance						$	20,282					$	90					$	20,372
Net income						$	430					$	—					$	430
Other comprehensive loss						$	(195)					$	5					$	(190)
Net transfers from J&J						$	10					$	—					$	10
Stock-based compensation						$	38					$	—					$	38
Distribution to J&J in connection with the Separation						$	(13,788)					$	—					$	(13,788)
Issuance of common stock in connection with the Kenvue IPO						$	4,241					$	—					$	4,241
Separation-related adjustments						$	22					$	(4)					$	18
Ending balance						$	11,040					$	91					$	11,131

						Fiscal Six Months Ended
						July 2, 2023
(Dollars in Millions)						Prior to Change						Effect of Change						As Adjusted
Condensed Consolidated Statement of Equity:
Net investment from J&J						$	25,474					$	(49)					$	25,425
Accumulated other comprehensive loss						(5,453)						(2)						(5,455)
Cumulative effect adjustment to beginning balance						$	20,021					$	(51)					$	19,970
Net income						$	760					$	139					$	899
Other comprehensive income						$	19					$	7					$	26
Net transfers to J&J						$	(308)					$	—					$	(308)
Stock-based compensation						$	73					$	—					$	73
Distribution to J&J in connection with the Separation						$	(13,788)					$	—					$	(13,788)
Issuance of common stock in connection with the Kenvue IPO						$	4,241					$	—					$	4,241
Separation-related adjustments						$	22					$	(4)					$	18
Ending balance						$	11,040					$	91					$	11,131

						Fiscal Six Months Ended
						July 2, 2023
(Dollars in Millions)						Prior to Change						Effect of Change						As Adjusted
Condensed Consolidated Statement of Cash Flows:
Net income						$	760					$	139					$	899
Deferred income taxes						$	155					$	(139)					$	16

Recent Accounting Standards

SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors

In March 2024, the SEC adopted final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (“SEC Release No. 33-11275”), which requires disclosure of governance, risk management, and strategy related to material climate-related risks as well as disclosure of material greenhouse gas emissions in registration statements and annual reports. In addition, certain disclosures as it relates to severe weather events and other natural conditions and carbon offsets and renewable energy credits would also be required. The SEC voluntarily stayed the final rules pending completion of judicial review following legal challenges. The rules are effective for large accelerated filers for annual

periods ending December 31, 2025, pending resolution of the stay. The Company is currently assessing the impact of these rules on the Condensed Consolidated Financial Statements.

Accounting Standards Update (“ASU”) 2023-09: Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 enhances the transparency of income tax disclosures, primarily by requiring public business entities to disclose 1) consistent categories and greater disaggregation of information in the rate reconciliations and 2) the disclosure of income taxes paid disaggregated by jurisdiction, among other requirements. This guidance is effective for public entities for the fiscal years beginning after December 15, 2024, and early adoption is permitted. The amendments are applicable on a prospective basis, although retrospective basis is also permitted. The Company is currently evaluating this guidance and the impact on its income tax disclosures.

ASU 2023-07: Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 scopes in entities with a single reportable segment and requires those entities to provide all disclosures required in Topic 280. Among other various new disclosures, ASU 2023-07 additionally requires that current annual disclosures about a reportable segment’s profit or loss and assets also be provided in interim periods. Enhanced reporting requirements for all entities includes disclosure of 1) significant segment expenses, 2) the title and position of the chief operating decision maker (the “CODM”), and 3) how the CODM uses disclosed measure(s) of a segment’s profit or loss in assessing segment performance and allocating resources. This guidance is effective for public entities for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. Companies are required to apply the amendments retrospectively to all prior periods presented in the financial statements, and early adoption is permitted. The Company is currently evaluating this guidance and expects that adoption will result in new disclosures, including significant segment expenses.

No other new accounting standards that were issued or became effective during the fiscal six months ended June 30, 2024 had, or are expected to have, a significant impact on the Condensed Consolidated Financial Statements.

2. Inventories

As of June 30, 2024 and December 31, 2023, inventories were comprised of:

(Dollars in Millions)						June 30, 2024						December 31, 2023
Raw materials and supplies						$	292					$	304
Goods in process						131						115
Finished goods						1,426						1,432
Total inventories						$	1,849					$	1,851

3. Intangible Assets and Goodwill

As of June 30, 2024 and December 31, 2023, the gross and net amounts of intangible assets were:

						June 30, 2024																		December 31, 2023
(Dollars in Millions)						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Definite-lived intangible assets:
Patents and trademarks						$	4,056					$	(1,728)					$	2,328					$	4,444					$	(1,698)					$	2,746
Customer relationships						2,027						(1,126)						901						2,125						(1,151)						974
Other intangibles						1,293						(681)						612						1,320						(669)						651
Total definite-lived intangible assets						$	7,376					$	(3,535)					$	3,841					$	7,889					$	(3,518)					$	4,371
Indefinite-lived intangible assets:
Trademarks						$	4,866					$	—					$	4,866					$	5,187					$	—					$	5,187
Other						55						—						55						61						—						61
Total intangible assets, net						$	12,297					$	(3,535)					$	8,762					$	13,137					$	(3,518)					$	9,619

Gross carrying amount changes for the fiscal period ended June 30, 2024 were primarily driven by the impact of $479 million in intangible asset impairments, of which $463 million related to impairment charges recognized in relation to Dr.Ci:Labo® definite-lived intangible assets, including trademarks and other intangibles, as described in Note 1, “Description of the Company and Summary of Significant Accounting Policies—Impairment Charges.” The change was further driven by the impact of currency translations.

No intangible asset impairments were recognized for both the fiscal three and six months ended July 2, 2023.

Amortization expense for the Company’s amortizable assets, which is included in Cost of sales, was $72 million and $79 million for the fiscal three months ended June 30, 2024 and July 2, 2023, respectively, and $146 million and $160 million for the fiscal six months ended June 30, 2024 and July 2, 2023, respectively.

Goodwill by reportable segment was as follows:

(Dollars in Millions)						Self Care						Skin Health and Beauty						Essential Health						Total
Goodwill as of December 31, 2023						$	5,308					$	2,315					$	1,648					$	9,271
Currency translation						(147)						(127)						(24)						(298)
Goodwill as of June 30, 2024						$	5,161					$	2,188					$	1,624					$	8,973

4. Borrowings

The components of the Company’s debt as of June 30, 2024 and December 31, 2023 were as follows:

(Dollars in Millions)						June 30, 2024						December 31, 2023
Senior Notes
5.50% Senior Notes due 2025						$	750					$	750
5.35% Senior Notes due 2026						750						750
5.05% Senior Notes due 2028						1,000						1,000
5.00% Senior Notes due 2030						1,000						1,000
4.90% Senior Notes due 2033						1,250						1,250
5.10% Senior Notes due 2043						750						750
5.05% Senior Notes due 2053						1,500						1,500
5.20% Senior Notes due 2063						750						750
Other(1)						118						9
Discounts and debt issuance costs						(67)						(72)
Total						$	7,801					$	7,687
Less: Current portion of long-term debt—principal amount						(750)						—
Total long-term debt						$	7,051					$	7,687
Current portion of long-term debt—principal amount						750						—
Commercial paper						670						600
Discounts and debt issuance costs						(3)						(1)
Other						10						—
Total loans and notes payable						$	1,427					$	599
Total debt						$	8,478					$	8,286

(1) As of June 30, 2024, Other includes $111 million of finance lease liabilities associated with the Global Headquarters Lease. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Leases,” for more information.

Senior Notes

On March 22, 2023, the Company issued eight series of senior unsecured notes (the “Senior Notes”) in an aggregate principal amount of $7.75 billion. The net proceeds to the Company from the Senior Notes were approximately $7.7 billion after deductions of discounts and issuance costs of $77 million. Upon release from escrow, these funds were loaned to J&J through a facility agreement (the “Facility Agreement”) dated April 5, 2023. See “—Facility Agreement” below for additional details.

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

Commercial Paper Program

On March 3, 2023, the Company entered into a commercial paper program (the “Commercial Paper Program”). The Company’s Board of Directors has authorized the issuance of up to $4.0 billion in an 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 defaults that are customary for this type of financing. The commercial paper notes issued under the Commercial Paper Program are unsecured notes ranking at least pari passu with all of the Company’s other senior unsecured indebtedness.

Prior to the Kenvue IPO, the Company issued $1.25 billion under its Commercial Paper Program which, collectively with the Senior Notes, are referred to as the “Debt Financing Transactions.” As of June 30, 2024, the Company had $668 million of outstanding balances under its Commercial Paper Program, net of a related discount of $2 million. As of December 31, 2023,

the Company had $599 million of outstanding balances under its Commercial Paper Program, net of a related discount of $1 million.

Revolving Credit Facility

On March 6, 2023, the Company entered into a credit agreement providing for a five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $4.0 billion to be made available in U.S. dollars and Euros. As of both June 30, 2024 and December 31, 2023, the Company had no outstanding balances under its Revolving Credit Facility.

Facility Agreement

On April 5, 2023, the Company and J&J entered into the Facility Agreement, allowing the Company to lend the proceeds from the issuance of debt (including commercial paper) in an aggregate amount of $8.9 billion to J&J.

Upon completion of the Kenvue IPO on May 8, 2023, the Facility Agreement was terminated and the balance of the loans, and all accrued interest, were repaid by J&J for a total cash inflow of $9.0 billion. The Company earned interest income of $33 million for both the fiscal three and six months ended July 2, 2023 in relation to the Facility Agreement. The Company remitted this cash back to J&J as a distribution in connection with the Separation.

Interest Expense, Net

The amount included in Interest expense, net in the Condensed Consolidated Statements of Operations consists of the following:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Interest expense						$	106					$	118					$	215					$	129
Interest income(1)						(14)						(65)						(28)						(75)
Total interest expense, net						$	92					$	53					$	187					$	54

(1) Includes interest income of $33 million for both the fiscal three and six months ended July 2, 2023 recognized in relation to the Facility Agreement.

Fair Value of Debt

The Company’s debt was recorded at the carrying amount. The estimated fair value of the Company’s Senior Notes was $7.6 billion as of June 30, 2024. Fair value was estimated using market prices using quoted prices in active markets which would be considered Level 2 in the fair value hierarchy. The carrying value of the commercial paper notes approximated the fair value as of June 30, 2024 due to the nature and short-term duration of the instrument.

Compliance with Covenants

As of June 30, 2024, the Company was in compliance with all debt covenants, and no default or event of default has occurred.

5. Pensions

Single Employer Plans

Net periodic benefit costs for the Company’s defined benefit retirement plans sponsored by the Company for the fiscal three and six months ended June 30, 2024 and July 2, 2023 included the following components:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Service cost						$	8					$	5					$	15					$	10
Interest cost						7						7						14						10
Amortization of loss						1						—						2						—
Expected return on plan assets						(9)						(7)						(18)						(10)
Total net periodic benefit cost						$	7					$	5					$	13					$	10

The service cost component of net periodic benefit cost is presented in the same line items in the Condensed Consolidated Statements of Operations where other employee compensation costs are reported, including Cost of sales and Selling, general, and administrative expenses. All other components of net periodic benefit costs are presented as part of Other (income) expense, net in the Condensed Consolidated Statements of Operations.

Participation in J&J Plans

J&J has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. J&J also provides medical benefits, principally to its U.S. retirees and their dependents through its other postretirement benefit plans. Prior to the Separation, the Company’s employees participated in J&J’s defined benefit pension plans, which were accounted for as multiemployer plans, and assets and liabilities associated with these plans were not reflected on the Condensed Consolidated Balance Sheets. After the Separation, the Company no longer had any multiemployer plans, as they were all converted to a multiple employer pension plan or a single-employer pension plan. The Condensed Consolidated Statements of Operations for the fiscal three and six months ended July 2, 2023 include expense allocations for these benefits, which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to $1 million and $17 million for the fiscal three and six months ended July 2, 2023, respectively.

In connection with the completion of the Separation, J&J transferred certain pension plans to the Company during the fiscal six months ended July 2, 2023, resulting in the transfer of net pension assets of $86 million and net pension liabilities of $21 million.

6. Accrued and Other Liabilities

Accrued liabilities consisted of:

(Dollars in Millions)						June 30, 2024						December 31, 2023
Accrued expenses						$	315					$	465
Accrued compensation and benefits						253						406
Operating lease liabilities						40						44
Tax indemnification liability(1)						176						113
Other accrued liabilities						478						428
Total accrued liabilities						$	1,262					$	1,456

Other liabilities, non-current, consisted of:

(Dollars in Millions)						June 30, 2024						December 31, 2023
Accrued income taxes						$	173					$	188
Operating lease liabilities						88						97
Tax indemnification liability(1)						166						141
Other accrued liabilities						108						65
Total other liabilities						$	535					$	491

(1) The balances primarily relate to the Tax Matters Agreement (as defined in Note 9, “Relationship with J&J—Tax Indemnification”) entered into with J&J on May 3, 2023 that governs the parties’ respective rights, responsibilities, and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and other matters regarding taxes. See Note 9, “Relationship with J&J—Tax Indemnification,” for more information.

7. Accumulated Other Comprehensive Loss

Components of Accumulated other comprehensive loss consisted of the following:

(Dollars in Millions)						Foreign Currency Translation						Employee Benefit Plans**(1)**						Gain on Derivatives and Hedges**(2)**												Total Accumulated Other Comprehensive Loss
March 31, 2024						$	(5,537)					$	(164)					$	26											$	(5,675)
Other comprehensive (loss) income before reclassifications						(152)						2						(3)												(153)
Amounts reclassified to the Condensed Consolidated Statement of Operations						—						1						(8)												(7)
Net current period Other comprehensive (loss) income						(152)						3						(11)												(160)
June 30, 2024						$	(5,689)					$	(161)					$	15											$	(5,835)
April 2, 2023						$	(5,313)					$	26					$	48											$	(5,239)
Other comprehensive loss before reclassifications						(172)						(83)						(13)												(268)
Amounts reclassified to the Condensed Consolidated Statement of Operations						—						—						5												5
Net current period Other comprehensive loss						(172)						(83)						(8)												(263)
July 2, 2023						$	(5,485)					$	(57)					$	40											$	(5,502)

(1) Net change for the fiscal three months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pension plans by J&J to the Company.

(2) For the fiscal three months ended June 30, 2024 and July 2, 2023, the Company recorded a total after-tax change in Accumulated other comprehensive loss of $(12) million and $(8) million, respectively, related to its cash flow hedge portfolio.

(Dollars in Millions)						Foreign Currency Translation						Employee Benefit Plans**(1)**						Gain on Derivatives and Hedges**(2)**												Total Accumulated Other Comprehensive Loss
December 31, 2023						$	(5,257)					$	(167)					$	47											$	(5,377)
Other comprehensive (loss) income before reclassifications						(432)						4						(24)												(452)
Amounts reclassified to the Condensed Consolidated Statement of Operations						—						2						(8)												(6)
Net current period Other comprehensive (loss) income						(432)						6						(32)												(458)
June 30, 2024						$	(5,689)					$	(161)					$	15											$	(5,835)
January 1, 2023						$	(5,476)					$	12					$	9											$	(5,455)
Other comprehensive (loss) income before reclassifications						(9)						(69)						38												(40)
Amounts reclassified to the Condensed Consolidated Statement of Operations						—						—						(7)												(7)
Net current period Other comprehensive (loss) income						(9)						(69)						31												(47)
July 2, 2023						$	(5,485)					$	(57)					$	40											$	(5,502)

(1) Net change for the fiscal six months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pension plans by J&J to the Company.

(2) For the fiscal six months ended June 30, 2024 and July 2, 2023, the Company recorded a total after-tax change in Accumulated other comprehensive loss of $(33) million and $31 million, respectively, related to its cash flow hedge portfolio.

Amounts in Accumulated other comprehensive loss are presented net of the related tax impact. Foreign currency translation is not adjusted for income taxes where it relates to permanent investments in international operations. For additional details on comprehensive income, see the Condensed Consolidated Statements of Comprehensive (Loss) Income.

The provision (benefit) for taxes allocated to the components of Accumulated other comprehensive loss before reclassification are as follows:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Foreign currency translation						$	(3)					$	(13)					$	(5)					$	6
Employee benefit plans						—						(18)						—						(17)
Gain on derivatives and hedges						1						(4)						11						9
Total (benefit) provision for taxes recognized in Accumulated other comprehensive loss						$	(2)					$	(35)					$	6					$	(2)

The provision (benefit) for taxes allocated to the reclassifications from Accumulated other comprehensive loss to the Condensed Consolidated Statements of Operations was not significant for both the fiscal three and six months ended June 30, 2024 and July 2, 2023.

8. Stock-Based Compensation

The 2023 Long-Term Incentive Plan (the “Kenvue 2023 Plan”) provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock units (“RSUs”), performance stock units (“PSUs”), other stock-based awards, and cash awards to eligible employees, non-employee directors, independent contractors, and consultants of the Company and its subsidiaries and affiliated entities.

For the fiscal three and six months ended June 30, 2024, stock-based compensation expense was recognized resulting from the grant of stock-based awards under the Kenvue 2023 Plan, which were denominated in shares of Kenvue common stock.

On August 23, 2023 (the “Conversion Date”), J&J equity-based awards held by Kenvue employees were accounted for as if they were forfeited by J&J and generally replaced by Kenvue equity-based awards under the Kenvue 2023 Plan with terms consistent to those applicable to the J&J awards, subject to adjustments to the number of underlying awards and option exercise prices to preserve the award’s value, except for certain performance-based awards that were replaced with Kenvue RSU awards.

For the fiscal three and six months ended July 2, 2023, stock-based compensation expense was driven by stock-based awards granted under J&J’s long-term incentive plans, which were denominated in shares of J&J common stock.

The classification of stock-based compensation expense for the fiscal three and six months ended June 30, 2024 and July 2, 2023 was as follows:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Cost of sales						$	27					$	12					$	63					$	16
Selling, general, and administrative expenses						34						26						79						57
Total stock-based compensation expense						$	61					$	38					$	142					$	73

The increase in stock-based compensation expense for the fiscal three and six months ended June 30, 2024 as compared to the prior periods was primarily driven by a higher grant date fair value and shorter expense attribution period of the converted Kenvue stock-based awards outstanding in the current periods as compared to stock-based awards outstanding in the prior periods, which were granted under the J&J plans prior to the Conversion Date, as well as the grant of the Founder Shares (as defined in Note 15, “Segments of Business—Segment Net Sales and Segment Adjusted Operating Income”) on October 2, 2023 and stock options, RSUs, and PSUs awarded as part of the annual grant of stock-based awards under the Kenvue 2023 Plan that occurred during the fiscal three months ended March 31, 2024.

Grant activity for the fiscal six months ended June 30, 2024 primarily relates to stock options, RSUs, and PSUs awarded as part of the annual grant of stock-based awards under the Kenvue 2023 Plan that occurred during the fiscal three months ended March 31, 2024.

There was no significant grant activity during the fiscal three months ended June 30, 2024.

Stock Options

The Company did not grant a significant amount of stock options during the fiscal three months ended June 30, 2024.

During the fiscal three months ended March 31, 2024, the Company granted 13,496,000 stock options. The stock options expire 10 years from the grant date and vest over service periods that range from one year to four years.

The weighted average grant date fair value of stock options granted during the fiscal three months ended March 31, 2024 was $3.17. The grant date fair value of each stock option is estimated using the Black-Scholes option valuation model. The weighted average assumptions used in calculating the grant date fair value of stock options granted during the fiscal three months ended March 31, 2024 were as follows:

						Fiscal Three Months Ended
						March 31, 2024
Expected volatility(1)						21.3		%
Expected dividend yield(2)						3.9		%
Risk-free rate(3)						4.1		%
Expected term(4)						6 years

(1) Expected volatility is based on the historical volatility of a selected group of the Company’s peers and other factors.

(2) Expected dividend yield is calculated using the assumed dividend payout per common share as a percentage of the average Kenvue common share price for the prior three-month period, which is then annualized.

(3) Risk-free rate is based on the U.S. Treasury yield curve in effect as of the grant date for options granted.

(4) Given the lack of trading history of Kenvue common stock as of the time of valuation, the expected term is calculated as the average of the vesting periods and the contractual terms of the stock options.

Restricted Stock Units and Performance Stock Units

The Company did not grant a significant amount of RSUs or PSUs during the fiscal three months ended June 30, 2024.

During the fiscal three months ended March 31, 2024, the Company granted 6,963,000 RSUs which vest over service periods that range from one year to three years. The weighted average grant date fair value of RSUs granted during the fiscal three months ended March 31, 2024 was $19.02. The grant date fair value of RSUs granted is equivalent to the close price of Kenvue common stock on the New York Stock Exchange on the grant date. All RSUs granted have dividend participation rights during the vesting period.

During the fiscal three months ended March 31, 2024, the Company granted 1,180,000 PSUs which are paid in shares of Kenvue’s common stock after the end of a three-year performance period. The vesting of PSUs is tied to the completion of a three-year service period and the achievement, over a three-year period, of specified performance metrics as well as the relative total shareholder return for Kenvue common stock. The number of shares earned at the end of the three-year performance period will vary, based on actual performance, from 0% to 200% of the target number of PSUs granted. The grant date fair value of each PSU, inclusive of the fair value associated with the achievement of the specified performance metrics and the relative total shareholder return goal, was estimated on the grant date using a Monte Carlo valuation model. The weighted average grant date fair value of PSUs granted during the fiscal three months ended March 31, 2024 was $18.60. During the three-year performance period, stock-based compensation expense for the PSUs will be adjusted based on the Company’s best estimate of achievement of the specified performance metrics. The cumulative effect on current and prior periods of a change in the estimated number of PSUs that are expected to be earned will be recognized as an adjustment to stock-based compensation expense in the period of the adjustment.

9. Relationship with J&J

On August 23, 2023, Kenvue became a fully independent company upon the completion of the Exchange Offer (see Note 1, “Description of the Company and Summary of Significant Accounting Policies—Description of the Company and Business Segments”), and J&J ceased to be a related party on that date. The Company continues to have material agreements with J&J—see “—Transactions with J&J, including the Separation Agreement” section within this footnote for additional details of these material agreements that govern the Company’s relationship with J&J.

Cost Allocations from J&J Prior to Kenvue IPO

Prior to the Kenvue IPO, J&J provided significant support functions to the Company. The Condensed Consolidated Financial Statements reflect an allocation of these costs. Similarly, certain of the Company’s operations provided support to J&J’s affiliates and related costs for support were charged to J&J’s affiliates. Allocated costs included in Cost of sales in the Condensed Consolidated Statements of Operations related to enterprise-wide support primarily consisting of facilities, insurance, logistics, quality, and compliance, which were predominantly allocated based on Net sales. Allocated costs included in Selling, general, and administrative expenses primarily related to finance, human resources, benefits administration,

procurement support, information technology, legal, corporate strategy, corporate governance, other professional services, and general commercial support functions, and were predominantly allocated based on Net sales or headcount. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Basis of Presentation.”

Prior to Kenvue becoming a fully independent company, the allocations (excluding stock-based compensation expense), net of costs charged to J&J’s affiliates reflected in the Condensed Consolidated Statements of Operations for the fiscal three and six months ended July 2, 2023 were as follows:

						Fiscal Three Months Ended						Fiscal Six Months Ended
(Dollars in Millions)						July 2, 2023						July 2, 2023
Cost of sales						$	16					$	25
Selling, general, and administrative expenses						33						120
Total costs allocated						$	49					$	145

Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the period presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by the Company’s employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology, and infrastructure. No allocations were made after Kenvue became a fully independent company.

Net Transfers from (to) J&J

Net transfers from (to) J&J are included in Net investment from J&J in the Condensed Consolidated Statements of Equity and within financing activities in the Condensed Consolidated Statements of Cash Flows and represent the net effect of transactions between the Company and J&J. No transactions were recorded in Net transfers from (to) J&J subsequent to the fiscal three months ended July 2, 2023.

The components of Net transfers from (to) J&J for the fiscal three and six months ended July 2, 2023 were as follows:

						Fiscal Three Months Ended						Fiscal Six Months Ended
(Dollars in Millions)						July 2, 2023						July 2, 2023
Cash pooling and general financing activities						$	(37)					$	(446)
Corporate cost allocations						49						145
Taxes deemed settled with J&J						—						27
Net transfers from (to) J&J as reflected in the Condensed Consolidated Statements of Cash Flows						$	12					$	(274)
Other						(2)						(34)
Net transfers from (to) J&J as reflected in the Condensed Consolidated Statements of Equity						$	10					$	(308)

Transactions with J&J, including the Separation Agreement

In connection with the Separation, Kenvue entered into various agreements with J&J, including the Separation Agreement. In connection with the terms of the Separation Agreement, certain assets and liabilities included on the pre-Separation balance sheet were retained by J&J and certain assets and liabilities not included on the pre-Separation balance sheet were transferred to Kenvue. Separation related adjustments have been recognized in Net investment from J&J, the net impact of which resulted in an increase in net assets and total equity by $91 million for the fiscal three and six months ended July 2, 2023. The impact on net assets primarily represent 1) recognition of balances with J&J including indemnification matters, 2) changes to income tax assets and liabilities as a result of change in the basis of presentation, 3) contribution of certain liabilities including pension and employee related obligations from J&J, 4) the retention of assets and liabilities by J&J of certain Deferred Local Businesses (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies—Variable Interest Entities

and Net Economic Benefit Arrangements”), and 5) other assets and liability transfers between Kenvue and J&J in connection with the Separation.

The Separation Agreement sets forth certain agreements between J&J and Kenvue regarding, among other matters:

• the principal corporate actions and internal reorganization pursuant to which J&J transferred the Consumer Health Business to Kenvue;

• the allocation of assets and liabilities to J&J and Kenvue;

• J&J’s and Kenvue’s respective rights and obligations with respect to the Kenvue IPO;

• certain matters with respect to any subsequent distribution or other disposition by J&J of the shares of Kenvue common stock owned by J&J following the Kenvue IPO (the “Distribution”); and

• other agreements governing aspects of Kenvue’s relationship with J&J following the Kenvue IPO.

In connection with the Kenvue IPO, J&J and Kenvue also entered into various other material agreements. These agreements were entered into on May 3, 2023, unless otherwise indicated, and consist of the following:

• a tax matters agreement (the “Tax Matters Agreement”), which governs J&J’s and Kenvue’s respective rights, responsibilities and obligations with respect to all tax matters, including tax liabilities, tax attributes, tax contests, and tax returns (See “—Tax Indemnification” below);

• an employee matters agreement, which addresses certain employment, compensation, and benefits matters, including the allocation and treatment of certain assets and liabilities relating to Kenvue’s employees and compensation and benefit plans and programs in which Kenvue’s employees participate prior to the date of the Distribution;

• an intellectual property agreement, which governs J&J’s and Kenvue’s respective rights, responsibilities and obligations with respect to intellectual property matters, excluding certain intellectual property matters with respect to trademarks;

• a trademark phase-out license agreement, dated as of April 3, 2023, and pursuant to which J&J granted to Kenvue a license to use certain trademarks owned by J&J on a transitional basis following the completion of the Kenvue IPO;

• a transition services agreement (the “Transition Services Agreement”), pursuant to which J&J provides to Kenvue certain services for terms of varying duration following the Kenvue IPO;

• a transition manufacturing agreement (the “Transition Manufacturing Agreement”), pursuant to which J&J provides to Kenvue certain manufacturing services for terms of varying duration following the Kenvue IPO; and

• a registration rights agreement, pursuant to which Kenvue granted to J&J certain registration rights with respect to the shares of Kenvue common stock owned by J&J following the completion of the Kenvue IPO.

In connection with the Separation, J&J and Kenvue also entered into various operating lease agreements, in which the Company subleased properties from J&J. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Leases,” for more information.

The Company had the following balances and transactions with J&J and its affiliates, primarily in connection with the Tax Matters Agreement, Transition Services Agreement, and the Transition Manufacturing Agreement, reported in the Condensed Consolidated Financial Statements:

(Dollars in Millions)						June 30, 2024						December 31, 2023
Prepaid expenses and other receivables						$	151					$	213
Accounts payable and accrued liabilities						$	442					$	486
Other assets						$	81					$	87
Other liabilities						$	166					$	153

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Cost of sales						$	47					$	39					$	109					$	39
Selling, general, and administrative expenses						$	59					$	47					$	122					$	47

Tax Indemnification

The Company entered into the Tax Matters Agreement with J&J on May 3, 2023 that governs the parties’ respective rights, responsibilities, and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and other matters regarding taxes.

Allocation of Taxes

With respect to taxes other than those incurred in connection with the Separation and the Distribution, the Tax Matters Agreement provides that Kenvue will generally indemnify J&J for 1) any taxes of Kenvue for all periods after the Distribution and 2) any taxes of Kenvue or J&J for periods prior to the Distribution to the extent attributable to the Consumer Health Business. J&J will generally indemnify Kenvue for 1) any taxes of J&J for all periods after the Distribution and 2) any taxes of Kenvue or J&J for periods prior to the Distribution to the extent attributable to the business and operations conducted by J&J other than the Consumer Health Business. Furthermore, subject to certain exceptions, the Company is required to reimburse J&J for certain tax refunds it receives with respect to taxes paid prior to the effective date of the Tax Matters Agreement.

Preservation of the Intended Tax Treatment of Certain Steps of the Separation and the Distribution

With respect to taxes incurred in connection with the Separation and the Distribution, Kenvue will generally be required to indemnify J&J for any taxes resulting from the failure of certain steps of the Separation and the Distribution to qualify for their intended tax treatment, where such taxes are attributable to actions or omissions by Kenvue. In addition, during the time period ending two years after the date of the Distribution, August 23, 2025, covenants are in place that will limit or restrict certain actions, including share issuances, business combinations, sales of assets, and similar transactions by Kenvue. The Company does not believe that the above covenants have a material impact on the Company to date. The Company believes that it has complied with these requirements to date.

The Company recorded a net liability totaling approximately $243 million for income and non-income indemnification tax payables and refunds, unrecognized tax benefits and associated interest due to J&J as Prepaid expenses and other receivables and Accrued liabilities for current assets and current liabilities, respectively, and to Other assets and Other liabilities for non-current assets and non-current liabilities, respectively, on the Condensed Consolidated Balance Sheet as of June 30, 2024.

Debt Financing Transactions and Kenvue IPO Consideration

During the fiscal six months ended July 2, 2023, the Company received debt proceeds of $7.7 billion from the issuance of the Senior Notes and received initial proceeds from its Commercial Paper Program of $1.2 billion. The Company loaned the total proceeds to J&J through the Facility Agreement. Upon the completion of the Kenvue IPO on May 8, 2023, the Facility Agreement was terminated and the balance of the loans, and all accrued interest, were repaid by J&J for a total cash inflow of $9.0 billion. The Company remitted this cash back to J&J as a distribution in connection with the Separation.

10. Other Operating Expense (Income), Net and Other (Income) Expense, Net

Other operating expense (income), net for the fiscal three and six months ended June 30, 2024 and July 2, 2023 consisted of:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Litigation expense						$	2					$	21					$	4					$	20
Royalty income						(8)						(1)						(17)						(8)
Gain on disposal of fixed assets						—						—						—						(9)
Impact of Deferred Markets(1)						23						24						38						24
Contingent liability reversal(2)						—						(43)						—						(43)
Other(3)						(5)						—						(3)						—
Total other operating expense (income), net						$	12					$	1					$	22					$	(16)

(1) Includes the provision for taxes, minority interest expense, and service fees to be paid to J&J under the net economic benefit arrangements. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Variable Interest Entities and Net Economic Benefit Arrangements,” for more information regarding Deferred Markets.

(2) Includes the reversal of a contingent liability that was no longer considered to be probable.

(3) Includes impact of foreign derivative contracts and other miscellaneous operating (income) expenses.

Other (income) expense, net for the fiscal three and six months ended June 30, 2024 and July 2, 2023 consisted of:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Currency losses/(gains) on transactions						$	—					$	12					$	(4)					$	28
Losses on investments						—						—						31						7
Other(1)						(3)						(2)						(2)						5
Total other (income) expense, net						$	(3)					$	10					$	25					$	40

(1) Other consists primarily of net periodic benefit costs other than service cost components and miscellaneous non-operating (income) expenses.

11. Income Taxes

For interim financial statement purposes, U.S. GAAP provision (benefit) for taxes related to ordinary income is determined by applying an estimated annual effective income tax rate against a company’s ordinary income, subject to certain limitations on the benefit of losses. Provision (benefit) for taxes related to items not characterized as ordinary income is recognized as a discrete item when incurred. The estimation of the Company’s income tax provision requires the use of management forecasts and other estimates, application of statutory income tax rates, and an evaluation of valuation allowances. The Company’s estimated annual effective income tax rate may be revised, if necessary, in each interim period. Effective in the fiscal three months ended October 1, 2023, the Company changed its accounting principle for GILTI from the deferred approach to the period cost approach. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Change in Accounting Principle.”

The worldwide effective income tax rates were 10.8% and 32.7% for the fiscal three months ended June 30, 2024 and July 2, 2023, respectively, and 28.0% for both the fiscal six months ended June 30, 2024 and July 2, 2023. The decrease for the fiscal three months ended June 30, 2024 as compared to the fiscal three months ended July 2, 2023 was primarily the result of the impairment to the Dr.Ci:Labo® skin health business and the corresponding reversal of a deferred tax liability, as well as the remeasurement of the state deferred tax liability as a result of a change in the Company’s state tax rate. The decrease is offset by an increase in return to provision adjustments for tax returns filed during the fiscal three months ended June 30, 2024. The effective income tax rate remained flat for the fiscal six months ended June 30, 2024 as compared to the fiscal six months ended July 2, 2023 as different drivers impacted the tax rates for both periods. The effective income tax rate for the fiscal six months ended June 30, 2024 was increased primarily by reduced benefits for foreign tax credits, prior year releases of tax reserves due to statute of limitations expiring, and shortfall on stock-based compensation. This increase was offset by the impairment to the Dr.Ci:Labo® skin health business and the corresponding reversal of a deferred tax liability and the remeasurement of the state deferred tax liability as a result of a change in the Company’s state tax rate.

As discussed in Note 1, “Description of the Company and Summary of Significant Accounting Policies—Basis of Presentation,” prior to April 4, 2023, the Company operated as a segment of J&J and not as a separate entity. Accordingly, the effective worldwide income tax rate for the fiscal three and six months ended July 2, 2023 was calculated using the separate return method as if the Company filed income tax returns on both a standalone basis and on a carve-out basis. This resulted in the inclusion of certain hypothetical foreign tax credit benefits that did not exist following the Kenvue IPO.

As of June 30, 2024, the Company had approximately $173 million of liabilities from unrecognized tax benefits. The Company conducts business and files tax returns in numerous countries. The Company and J&J currently have tax audits in progress in several jurisdictions, which remain open from 2008 and forward. With respect to the United States, per the Tax Matters Agreement between J&J and the Company, J&J remains liable for all liabilities related to the final settlement of any U.S. federal income tax audits in which the Company is part of J&J’s federal consolidated return. In other major jurisdictions where the Company conducts business, the years that remain open to tax audits range from 2015 and forward. The Company believes it is possible that certain tax audits in major jurisdictions where the Company conducts business outside of the United States may be completed over the next 12 months by their respective taxing authorities. However, the Company is not able to provide a reasonably reliable estimate of the timing of any future tax payments or the amount of possible changes to the total unrecognized tax benefits associated with any audit closures or other events. The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities on the Condensed Consolidated Balance Sheets. Interest expense and penalties related to unrecognized tax benefits are classified as provision for taxes in the Condensed Consolidated Statements of Operations.

On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 (“IRA”), which, among other things, introduces a 15% minimum tax based on adjusted financial statement income of certain large corporations with a three-year average adjusted financial statement income in excess of $1 billion, an excise tax on corporate stock buybacks, and several tax incentives to promote clean energy. Based on the Company’s current analysis, as well as recently published guidance by the Internal Revenue Service, the IRA did not have a significant impact on the Condensed Consolidated Financial Statements. The Company will continue to evaluate the impact of this law as additional guidance and clarification becomes available.

The Company has included the estimated impact of enacted legislation related to the Organization for Economic Co-operation Development’s (“OECD”) Pillar Two Inclusive Framework in its provision for taxes beginning in the current fiscal year. While the estimated impact is not material, it is possible that further OECD implementation guidance, or legislation in countries in which the Company operates, could have a material effect on the Company’s provision for taxes in the future.

12. Net Income Per Share

The Company had 1,920,013,617 shares of common stock issued and 1,915,063,617 shares of common stock outstanding as of June 30, 2024. Prior to the completion of the Kenvue IPO, the Company had 1,716,160,000 shares of common stock outstanding, of which 1,716,159,990 shares were issued to J&J through a subscription agreement in May 2023. On May 8, 2023, the Kenvue IPO was completed through the sale of 198,734,444 shares of common stock, including the underwriters’ full exercise of their option to purchase 25,921,884 shares to cover over-allotments. For all periods prior to the Kenvue IPO, the shares issued through the subscription agreement are being treated akin to shares attributable to a stock split and, as a result, are being retrospectively presented for all of the periods.

Diluted net income per share is computed by giving effect to all potentially dilutive equity instruments or equity awards that are outstanding during the period. During the fiscal three and six months ended June 30, 2024, 63,630,207 and 59,645,294 shares, respectively, were determined to be anti-dilutive under the treasury stock method and therefore were excluded from the diluted net income per share calculation. There were no equity awards of the Company outstanding prior to the Kenvue IPO and no dilutive equity instruments of the Company outstanding prior to the Exchange Offer.

Net income per share for the fiscal three and six months ended June 30, 2024 and July 2, 2023 was calculated as follows:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(In Millions, Except Per Share Data)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Net income						$	58					$	430					$	354					$	899
Basic weighted average number of shares outstanding						1,915						1,838						1,915						1,777
Diluted effects of stock-based awards						5						—						5						—
Diluted weighted average number of shares outstanding						1,920						1,838						1,920						1,777
Net income per share:
Basic						$	0.03					$	0.23					$	0.18					$	0.51
Diluted						$	0.03					$	0.23					$	0.18					$	0.51

13. Fair Value Measurements

Fair value measurements are estimated based on valuations techniques and inputs categorized as follows:

• Level 1 – Quoted prices in active markets for identical assets or liabilities

• Level 2 – Significant other observable inputs

• Level 3 – Significant unobservable inputs

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis:

						June 30, 2024																								December 31, 2023
(Dollars in Millions)						Carrying Value						Level 1						Level 2						Level 3						Carrying Value						Level 1						Level 2						Level 3
Assets:
Forward foreign exchange contracts						$	45					$	—					$	45					$	—					$	63					$	—					$	63					$	—
Cross currency swap contracts						55						$	—					$	55					$	—					—						—						—						—
Total assets						$	100					$	—					$	100					$	—					$	63					$	—					$	63					$	—
Liabilities:
Forward foreign exchange contracts						$	(59)					$	—					$	(59)					$	—					$	(50)					$	—					$	(50)					$	—
Cross currency swap contracts						—						—						—						—						(25)						—						(25)						—
Total liabilities						$	(59)					$	—					$	(59)					$	—					$	(75)					$	—					$	(75)					$	—
Net amount presented in Prepaid expenses and other receivables:						$	29					$	—					$	29					$	—					$	18					$	—					$	18					$	—
Net amount presented in Accounts payable:						$	(21)					$	—					$	(21)					$	—					$	(30)					$	—					$	(30)					$	—
Net amount presented in Other assets:						$	34					$	—					$	34					$	—					$	—					$	—					$	—					$	—
Net amount presented in Other liabilities:						$	(1)					$	—					$	(1)					$	—					$	—					$	—					$	—					$	—

As of June 30, 2024 and December 31, 2023, cash equivalents were $187 million and $329 million, respectively, which were primarily comprised of time deposits and money market funds.

The carrying amount of Cash and cash equivalents, Trade receivables, Prepaid expenses and other receivables, and Loans and notes payable approximated fair value as of June 30, 2024 and December 31, 2023. The fair value of forward foreign exchange contracts is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest

rates and subsequently converted to the U.S. dollar at the current spot foreign exchange rate. The cross currency swap contracts are recorded at fair value that is derived from observable market data, including foreign exchange rates and yield curves.

The fair value of the Company’s derivative assets is included in Prepaid expenses and other receivables and Other Assets on the Condensed Consolidated Balance Sheets. The fair value of the Company’s derivative liabilities is included in Accounts payable and Other liabilities on the Condensed Consolidated Balance Sheets.

There were no transfers between Level 1, Level 2, or Level 3 during the fiscal three and six months ended June 30, 2024 and the fiscal twelve months ended December 31, 2023.

The following table sets forth the notional amounts of the Company’s outstanding derivative instruments:

						June 30, 2024																		December 31, 2023
(Dollars in Millions)						Forward foreign exchange contracts						Cross currency swap contracts						Total notional amount						Forward foreign exchange contracts						Cross currency swap contracts						Total notional amount
Cash flow hedges						$	4,225					$	—					$	4,225					$	3,522					$	—					$	3,522
Fair value hedges						$	146					$	—					$	146					$	—					$	—					$	—
Net investment hedges						$	—					$	1,500					$	1,500					$	—					$	500					$	500
Undesignated hedging instruments						$	543					$	—					$	543					$	588					$	—					$	588

Cash Flow Hedges

For the fiscal three and six months ended June 30, 2024, the Company recorded a total after-tax change in Accumulated other comprehensive loss of $(12) million and $(33) million, respectively, related to its cash flow hedge portfolio. For the fiscal three and six months ended July 2, 2023, the Company recorded a total after-tax change in Accumulated other comprehensive loss of $(8) million and $31 million, respectively, related to its cash flow hedge portfolio.

Forward Foreign Exchange Contracts

In certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposures to the variability of foreign exchange rates. Changes in the fair value of derivatives are recorded each period in earnings or Other comprehensive (loss) income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction.

Since 2022, the Company has entered into forward foreign exchange contracts to hedge a portion of forecasted cash flows denominated in foreign currency. The terms of these contracts are generally 12 months to 18 months. These contracts are designated as cash flow hedging relationships at the date of contract inception, in accordance with the appropriate accounting guidance. At inception, all designated hedging relationships are expected to be highly effective. These contracts are accounted for using the forward method, and all gains/losses associated with these contracts are recorded in Other comprehensive (loss) income. The Company reclassifies the gains and losses related to these contracts at the time the inventory is sold to the customer into Net sales or Cost of sales and Other (income) expense, net in the Condensed Consolidated Statements of Operations, as applicable.

The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. The maximum length of time over which the Company is hedging transaction exposure is 18 months. The amount ultimately realized in earnings may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity of the derivative.

The following table is a summary of the gains and losses recognized on forward foreign exchange contracts designated as cash flow hedges within Other comprehensive (loss) income and the gains and losses reclassified into earnings:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
(Loss) gain recognized in Other comprehensive (loss) income						$	(4)					$	(17)					$	(15)					$	—
Gain (loss) reclassified from Other comprehensive (loss) income into earnings						$	6					$	(6)					$	7					$	5

The following table is a summary of the gains and losses reclassified from Other comprehensive (loss) income into earnings related to the forward foreign exchange contracts for the fiscal three and six months ended June 30, 2024 and July 2, 2023:

						Fiscal Three Months Ended
						June 30, 2024																		July 2, 2023
(Dollars in Millions)						Net sales						Cost of sales						Other (income) expense, net						Net sales						Cost of sales						Other (income) expense, net
Gain (loss) reclassified from Other comprehensive (loss) income into earnings						$	—					$	18					$	(12)					$	(1)					$	(3)					$	(2)

						Fiscal Six Months Ended
						June 30, 2024																		July 2, 2023
(Dollars in Millions)						Net sales						Cost of sales						Other (income) expense, net						Net sales						Cost of sales						Other (income) expense, net
Gain (loss) reclassified from Other comprehensive (loss) income into earnings						$	—					$	12					$	(5)					$	—					$	7					$	(2)

Forward Starting Interest Rate Swaps

Beginning in the fiscal three months ended January 1, 2023, the Company entered into forward starting interest rate swaps in contemplation of securing long-term financing for the Separation or for other long-term financing purposes in the event the Separation did not occur. The Company designated these derivatives as cash flow hedges to reduce future interest rate exposure related to changes in the benchmark interest rate on forecasted 5-year, 10-year, and 30-year bonds that the Company issued in 2023. During the fiscal six months ended July 2, 2023, the Company recorded a gain of $48 million in Accumulated other comprehensive loss, of which $38 million was related to the settlement of its forward starting interest rate swaps upon the issuance of the forecasted debt. The $38 million gain in Accumulated other comprehensive loss will be amortized and recorded in Other (income) expense, net in the Condensed Consolidated Statements of Operations over the life of the 5-year, 10-year, and 30-year bonds. For the fiscal three and six months ended June 30, 2024 and July 2, 2023, the amounts reclassified from Other comprehensive (loss) income to the Condensed Consolidated Statements of Operations were not significant.

Fair Value Hedges

Forward Foreign Exchange Contracts

During the fiscal three months ended March 31, 2024, the Company entered into forward foreign exchange contracts to hedge against the risk of changes in the fair value of foreign denominated intercompany debt attributable to foreign exchange rate fluctuations. These contracts are designated as fair value hedging relationships at the date of contract inception in accordance with the appropriate accounting guidance. At inception, all designated fair value hedging relationships are expected to be highly effective. The contracts were accounted for using the spot method with changes in the fair value of the contract attributable to the changes in spot rates recorded within Other (income) expense, net in the Condensed Consolidated Statements of Operations. The Company has elected to exclude the changes in the fair value attributable to the difference between the spot price and the

forward price, as well as any cross currency basis spread, from the assessment of hedge effectiveness (the “Excluded Components”). The Excluded Components were excluded from the assessment of the hedge effectiveness. The initial value of the Excluded Components was not significant to the Condensed Consolidated Financial Statements in the period of inception. The changes in fair value attributable to the Excluded Components are recognized in Accumulated other comprehensive loss. The changes in fair value attributable to the Excluded Components will be recognized in Other (income) expense, net in the Condensed Consolidated Statements of Operations on a systematic and rational basis over the life of the hedging instrument.

Net Investment Hedges

Forward Foreign Exchange Contracts

The Company designated certain forward foreign exchange contracts as net investment hedges to mitigate foreign exchange exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates.

During the fiscal three months ended July 2, 2023, the Company designated forward foreign exchange contracts as a net investment hedge to sell foreign currency (denominated in the local currency of the affiliate) at specified forward rates. These contracts were accounted for using the spot method with changes in the fair value of the contracts attributable to changes in spot rates recorded within Cumulative Translation Adjustments (“CTA”) as a component of Other comprehensive (loss) income. The Company has elected to exclude the changes in the fair value attributable to time value (the “Excluded Net Investment Hedge Components on Forward Foreign Exchange Contracts”) from the assessment of the hedge effectiveness. The changes in fair value attributable to the Excluded Net Investment Hedge Components on Forward Foreign Exchange Contracts were initially recorded within CTA as a component of Other comprehensive (loss) income and were recognized into Other (income) expense, net in the Condensed Consolidated Statements of Operations ratably over the life of the contract. The forward foreign exchange contracts designated as a net investment hedge were settled during the fiscal three months ended October 1, 2023.

Cross Currency Swap Contracts

During the fiscal three months ended December 31, 2023 and the fiscal three months ended March 31, 2024, the Company designated cross currency swap contracts as net investment hedges to hedge exposure in foreign subsidiaries with local functional currencies. These contracts were accounted for using the spot method with changes in the fair value of the contracts attributable to changes in spot rates recorded within CTA as a component of Other comprehensive (loss) income and will remain there until the hedged net investments are sold or substantially liquidated. The Company has elected to exclude the changes in the fair value attributable to time value and spot-forward rate differences (the “Excluded Net Investment Hedge Components on Cross Currency Swap Contracts”) from the assessment of the hedge effectiveness. The Excluded Net Investment Hedge Components on Cross Currency Swap Contracts associated with the net investment hedge entered into during the fiscal three months ended December 31, 2023 had an initial value of $7 million in the period of inception, and the Excluded Net Investment Hedge Components on Cross Currency Swap Contracts associated with the net investment hedge entered into during the fiscal three months ended March 31, 2024 had an initial value of $(7) million in the period of inception. The changes in fair value attributable to the Excluded Net Investment Hedge Components on Cross Currency Swap Contracts are recognized into Interest expense, net in the Condensed Consolidated Statements of Operations on a systematic and rational basis through the swap accrual over the life of the hedging instrument.

The following table is a summary of the gains and losses recognized within Other comprehensive (loss) income related to the cross currency swap contracts designated as net investment hedges:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Gain (loss) recognized in CTA within Other comprehensive (loss) income						$	33					$	—					$	80					$	—

Other than amounts excluded from effectiveness testing, the Company did not reclassify any gains or losses from CTA within Other comprehensive (loss) income to earnings during the fiscal three and six months ended June 30, 2024 and July 2, 2023 related to the cross currency swap contracts.

Undesignated Hedging Instruments

Undesignated Forward Foreign Exchange Contracts

Since 2022, the Company has entered into forward foreign exchange contracts to offset the foreign currency exposure related to the settlement of payables and receivables of the Company. These contracts are not designated as cash flow hedging relationships, and the net allocated gains and losses related to these contracts were recognized within Other (income) expense, net in the Condensed Consolidated Statements of Operations. As of June 30, 2024 and December 31, 2023, respectively, the Company held forward foreign exchange contracts that were not designated in cash flow hedging relationships with a fair value of $(1) million and $4 million, respectively.

The following table is a summary of the gains and losses recognized within Other (income) expense, net related to the undesignated forward foreign exchange contracts for the fiscal three and six months ended June 30, 2024 and July 2, 2023:

						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
(Loss) gain recognized in Other (income) expense, net						$	(3)					$	(2)					$	(6)					$	4

Effectiveness

On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. When a derivative is no longer expected to be highly effective, hedge accounting is discontinued.

Statement of Cash Flows

Cash flows from derivatives designated in hedging relationships are reflected in the Condensed Consolidated Statements of Cash Flows consistent with the presentation of the hedged item. Cash flows from derivatives that were not accounted for as designated hedging relationships reflect the classification of the cash flows associated with the activities being economically hedged.

Credit Risk

The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material as it is the Company’s policy to contract with diverse, creditworthy counterparties based upon both strong credit ratings and other credit considerations. The Company has negotiated International Swaps and Derivatives Association, Inc. master agreements with its counterparties, which contain master netting provisions providing the legal right and ability to offset exposures across trades with each counterparty. Given the rights provided by these contracts, the Company presents derivative balances based on its “net” counterparty exposure. These agreements do not require the posting of collateral.

Investments in Equity Securities

The Company measures equity investments without readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. As of June 30, 2024 and December 31, 2023, such investments totaled $41 million and $71 million, respectively, and were included in Other assets on the Condensed Consolidated Balance Sheets.

14. Commitments and Contingencies

The Company and/or certain of its subsidiaries are involved from time to time in various lawsuits and claims relating to product liability, labeling, marketing, advertising, pricing, intellectual property, commercial contracts, foreign exchange controls, antitrust and trade regulation, labor and employment, indemnification, data privacy and security, environmental, health and safety, tax matters, governmental investigations, and other legal proceedings that arise in the ordinary course of their business.

The Company records accruals for loss contingencies associated with these legal matters when it is probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. As of June 30, 2024, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has

accordingly accrued for those contingent liabilities and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments. Accrued liabilities related to litigation matters are included in Accrued liabilities and Other liabilities on the Condensed Consolidated Balance Sheets. For these and other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the Company is unable to estimate the possible loss or range of loss beyond the amounts accrued. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such estimates and judgments can be affected by various factors including whether, among other things, damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has commenced or is complete; proceedings are in early stages; matters present legal uncertainties; significant facts are in dispute; procedural or jurisdictional issues exist; the number of potential claims is certain or predictable; comprehensive multi-party settlements are achievable; there are complex related cross-claims and counterclaims; and/or there are numerous parties involved.

In the Company’s opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued on the Condensed Consolidated Balance Sheets, is not expected to have a material adverse effect on the Company’s financial position. However, the resolution of, or increase in accruals for, one or more of these matters in any reporting period may have a material adverse effect on the Company’s results of operations and cash flows for that period.

Product Liability

The Company and/or certain of its subsidiaries are involved in numerous product liability claims and lawsuits involving multiple products. Claimants in these cases seek substantial compensatory and, where available, punitive damages. While the Company believes it has substantial defenses, it is not feasible to predict the ultimate outcome of litigation. From time to time, even if it has substantial defenses, the Company considers isolated settlements based on a variety of circumstances. The Company may accrue an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated. For certain of these matters, the Company may accrue additional amounts such as estimated costs associated with settlements, damages, and other losses. Product liability accruals can represent projected product liability for thousands of claims around the world, each in different litigation environments and with different fact patterns. Changes to the accruals may be required in the future as additional information becomes available.

Claims for personal injury have been made against the Company’s subsidiary Johnson & Johnson Consumer Inc. (“JJCI”), along with other third-party sellers of acetaminophen-containing products, in federal court alleging that in utero exposure to acetaminophen (the active ingredient in Tylenol®, an over-the-counter (“OTC”) pain medication) is associated with the development of autism spectrum disorder and/or attention-deficit/hyperactivity disorder in children. In October 2022, lawsuits filed in federal courts in the United States were organized as a multi-district litigation in the U.S. District Court for the Southern District of New York. In February 2024, the court entered final judgment in favor of JJCI and the other sellers of acetaminophen-containing products and dismissed the majority of cases then pending in the multi-district litigation. A Notice of Appeal was filed in March 2024, and certain additional cases were dismissed in August 2024. No trial dates have been set in the remaining actions. Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases. In addition, lawsuits have been filed in state court against JJCI, the Company and J&J, and lawsuits have been filed in Canada against the Company’s subsidiary Johnson & Johnson Inc. (Canadian affiliate) (“JJI”) and J&J. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out of these claims and lawsuits.

General Litigation

In 2006, J&J acquired Pfizer’s OTC business including the U.S. rights to OTC Zantac, which were on-sold to Boehringer Ingelheim (“BI”) as a condition to merger control approval such that BI assumed product liability risk for U.S. sales from and after December 2006. J&J received indemnification from BI and gave Pfizer indemnification in connection with the transfer of the Zantac business to BI from Pfizer, through J&J. In November 2019, J&J received a demand for indemnification from Pfizer, pursuant to the 2006 Stock and Asset Purchase Agreement between J&J and Pfizer. In January 2020, J&J received a demand for indemnification from BI, pursuant to the 2006 Asset Purchase Agreement among J&J, Pfizer, and BI. Pursuant to the agreements, Pfizer and BI have asserted indemnification claims against J&J ostensibly related to Zantac sales by Pfizer. In November 2022, J&J received a demand for indemnification from GlaxoSmithKline LLC, pursuant to the 2006 Stock and Asset Purchase Agreement between J&J and Pfizer, and certain 1993, 1998, and 2002 agreements between Glaxo Wellcome and Warner-Lambert entities. The notices seek indemnification for legal claims related to OTC Zantac (ranitidine) products. Plaintiffs in the underlying actions allege that Zantac and other OTC medications that contain ranitidine may degrade and result in unsafe levels of NDMA (N-nitrosodimethylamine) and can cause or have caused various cancers in individuals using the

products and seek declaratory and monetary relief. J&J has rejected all the demands for indemnification relating to the underlying actions. No J&J entity sold Zantac in the United States.

In 2016, JJI sold the Canadian Zantac business to Sanofi Consumer Health, Inc. (“Sanofi”). Under the 2016 Asset Purchase Agreement between JJI and Sanofi (the “2016 Purchase Agreement”), Sanofi assumed certain liabilities including those pertaining to Zantac (ranitidine) product sold by Sanofi after closing and losses arising from or relating to recalls, withdrawals, replacements or related market actions or post-sale warning in respect of products sold by Sanofi after the closing, and JJI is required to indemnify Sanofi for certain other excluded liabilities. In November 2019, JJI received a notice reserving rights to claim indemnification from Sanofi pursuant to the 2016 Purchase Agreement. The notice refers to indemnification for legal claims in class actions and various individual personal injury actions with similar allegations to the U.S. litigation related to OTC Zantac (ranitidine) products.

J&J and/or JJI have also been named in two of the five outstanding putative class actions filed in Canada with similar allegations regarding Zantac or ranitidine use. Of the two outstanding putative class actions naming J&J and/or JJI, the Quebec Superior Court action has been stayed, and the Ontario Superior Court of Justice action is pending, but not currently active. JJI was also named as a defendant, along with other manufacturers, in various personal injury actions in Canada related to Zantac products. JJI has provided Sanofi notice reserving rights to claim indemnification pursuant to the 2016 Purchase Agreement related to the class actions and personal injury actions. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out of these claims and lawsuits.

Beginning in May 2021, multiple putative class actions were filed in state and federal courts (California, Florida, New York, and New Jersey) against various J&J entities alleging violations of state consumer fraud statutes based on nondisclosure of alleged benzene contamination of certain Neutrogena® and Aveeno® sunscreen products and the affirmative promotion of those products as “safe”; and, in at least one case, alleging strict liability manufacturing defect, and failure to warn claims, asserting that the named plaintiffs suffered unspecified injuries as a result of alleged exposure to benzene. The Judicial Panel on Multi-District Litigation (the “JPML”) consolidated all pending actions, except one case pending in New Jersey state court, in the U.S. District Court for the Southern District of Florida, Fort Lauderdale Division. In October 2021, an affiliate of the Company reached an agreement in principle for the settlement of a nationwide class, encompassing the claims of the consolidated actions, subject to approval by the Florida federal Court. In December 2021, plaintiffs in the consolidated actions filed a motion for preliminary approval of a nationwide class settlement. In February 2023, an order granting final approval of the settlement, certifying the settlement class and awarding attorney’s fees was entered. A Notice of Appeal was filed in April 2023. In June 2024, the U.S. Court of Appeals for the Eleventh Circuit reversed the final approval order due to an intervening change in law and directed the lower court to reconsider the issues in light of recent appellate precedent.

In September 2023, the Nonprescription Drugs Advisory Committee (the “NDAC”) of the U.S. Food and Drug Administration (“FDA”) met to discuss new data on the effectiveness of orally administered phenylephrine (“PE”) and concluded that the current scientific data do not support that the recommended dosage of orally administered PE is effective as a nasal decongestant. Neither FDA nor the NDAC raised concerns about safety issues with use of oral PE at the recommended dose. FDA has stated it will consider the input of the NDAC, and the evidence, before taking any action on the status of oral PE. Beginning in September 2023, following the NDAC vote, putative class actions were filed against the Company and its affiliates, along with other third-party sellers and manufacturers of PE-containing products, asserting various causes of action including violation of consumer protection statutes, negligence and unjust enrichment. The complaints seek damages and injunctive relief. In December 2023, lawsuits filed in federal courts in the United States were organized as a multi-district litigation in the U.S. District Court for the Eastern District of New York. Separately, putative Canadian class actions were filed beginning in September 2023 against the Company’s affiliates, along with other third-party sellers and manufacturers of PE-containing products, alleging false, misleading representations, and seeking damages and declaratory relief based on similar causes of action.

Additionally, beginning in October 2023, two putative securities class actions were filed in the U.S. District Court for the District of New Jersey against the Company and certain of its officers, among other defendants. In December 2023, the two cases were consolidated as In re Kenvue Inc. Securities Litigation and a lead plaintiff was appointed. In March 2024, a consolidated amended complaint was filed that named the Company’s directors as defendants in addition to the defendants named in the initial complaints. The consolidated amended complaint brings claims under the Securities Act of 1933, as amended. It alleges that the Company’s registration statements and prospectuses filed with the SEC in connection with the Kenvue IPO on Form S-1 and the Exchange Offer on Form S-4 contained misleading statements and omissions about PE. It seeks damages for all shareholders who acquired shares pursuant to the Kenvue IPO and the Exchange Offer registration statements and prospectuses.

Finally, in January 2024, shareholder derivative complaints were filed in the U.S. District Court for the District of New Jersey against the Company as the nominal defendant and the Company’s directors and certain of its officers as defendants, among other defendants. The derivative complaints allege breaches of fiduciary duties based on disclosures in the Company’s SEC filings regarding PE, and they seek damages and equitable relief. The derivative complaints have been consolidated as In re Kenvue, Inc. Derivative Litigation and have been stayed. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out of these claims and lawsuits.

In March 2024, following the filing of a Citizen Petition with FDA by Valisure LLC that included testing results purporting to show that benzoyl peroxide (“BPO”) OTC acne products can degrade into benzene at levels well above the alleged limit of two parts per million, putative class actions were filed against the Company and its affiliates, along with other third-party sellers and manufacturers of BPO-containing acne products, asserting various causes of action including violation of consumer protection statutes, negligence, breach of express and implied warranties, and unjust enrichment. The complaints, pending in the U.S. District Court for the Central District of California, the U.S. District Court for the Northern District of Illinois, the U.S. District Court for the Western District of Missouri, and the U.S. District Court for the District of New Jersey, seek damages and injunctive relief. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out of these claims and lawsuits.

JJCI, along with more than 120 other companies, is a defendant in a cost recovery and action brought by Occidental Chemical Corporation in June 2018 in the U.S. District Court for the District of New Jersey, related to the clean-up of a section of the Lower Passaic River in New Jersey. Certain defendants (not including JJCI) have executed a settlement with the U.S. Environmental Protection Agency and U.S. Department of Justice, which is subject to confirmation through a judicial Consent Decree approval action that is currently pending. The case has been administratively closed but can be re-opened upon request, following a decision on the Consent Decree.

The Company or its subsidiaries are also parties to various proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and comparable state, local, or foreign laws in which the primary relief sought is the Company’s agreement to implement remediation activities at designated hazardous waste sites or to reimburse the government or third parties for the costs they have incurred in performing remediation at such sites.

Other

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 the Company for the Talc-Related Liabilities and any costs associated with resolving such claims. The Company will, however, remain responsible for all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold outside the United States or Canada.

15. Segments of Business

The Company historically operated as part of J&J and reported under J&J’s segment structure. Prior to the Separation, the Company’s CODM was J&J’s Consumer Health Segment Operating Committee. As the Company transitioned into an independent, publicly traded company, the Company’s CODM was determined to be the chief executive officer.

Segment profit is based on Operating income, excluding depreciation and amortization, Separation-related costs, restructuring and operating model optimization initiatives, impairment charges, the impact of the conversion of stock-based awards, issuance of Founder Shares (as defined below), Other operating expense (income), net, and unallocated general corporate administrative expenses (referred to herein as “Segment adjusted operating income”), as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which include expenses related to treasury, legal operations, and certain other expenses, along with gains and losses related to the overall management of the Company, are not allocated to the segments. In assessing segment performance and managing operations, management does not review segment assets.

The Company operates the business through the following three reportable business segments:

Reportable Segments			Product Categories
Self Care			Cough, Cold, and Allergy
			Pain Care
			Other Self Care (Digestive Health, Smoking Cessation, Eye Care, and Other)
Skin Health and Beauty			Face and Body Care
			Hair, Sun, and Other
Essential Health			Oral Care
			Baby Care
			Other Essential Health (Women’s Health, Wound Care, and Other)

The Company’s product categories as a percentage of Net sales for the fiscal three and six months ended June 30, 2024 and July 2, 2023 were as follows:

						Fiscal Three Months Ended												Fiscal Six Months Ended
Product Categories						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Cough, Cold, and Allergy						13		%				13		%				14		%				14		%
Pain Care						12						12						12						13
Other Self Care						15						16						17						15
Face and Body Care						18						19						18						19
Hair, Sun, and Other						10						10						9						10
Oral Care						11						10						10						10
Baby Care						9						9						9						9
Other Essential Health						12						11						11						10
Total						100		%				100		%				100		%				100		%

Segment Net Sales and Segment Adjusted Operating Income

Segment net sales and Segment adjusted operating income for the fiscal three and six months ended June 30, 2024 and July 2, 2023 were as follows:

						Segment Net Sales
						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Self Care						$	1,635					$	1,661					$	3,333					$	3,301
Skin Health and Beauty						1,103						1,147						2,157						2,258
Essential Health						1,262						1,203						2,404						2,304
Total net sales						$	4,000					$	4,011					$	7,894					$	7,863

						Segment Adjusted Operating Income
						Fiscal Three Months Ended												Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						July 2, 2023						June 30, 2024						July 2, 2023
Self Care						$	534					$	576					$	1,135					$	1,158
Skin Health and Beauty						165						201						311						350
Essential Health						359						250						623						461
Segment adjusted operating income**(1)**						$	1,058					$	1,027					$	2,069					$	1,969
Reconciliation to Income before taxes
Less:
Depreciation						69						68						144						139
Amortization						72						80						146						161
Separation-related costs						79						102						146						200
Restructuring and operating model optimization initiatives						58						—						108						—
Impairment charges						510						—						578						—
Conversion of stock-based awards(2)						6						—						28						—
Founder Shares(3)						9						—						17						—
Other operating expense (income), net						12						1						22						(16)
General corporate/unallocated expenses						89						74						176						143
Operating income						$	154					$	702					$	704					$	1,342
Other (income) expense, net						(3)						10						25						40
Interest expense, net						92						53						187						54
Income before taxes						$	65					$	639					$	492					$	1,248

(1) For the second fiscal quarter of 2024, the Company adjusted the allocation for certain Research 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.

(2) Segment adjusted operating income excludes the impact of the conversion of stock-based awards that occurred on August 23, 2023. The adjustment represents the net impact of the gain on reversal of previously recognized stock-based compensation expense, offset by stock-based compensation expense recognized in the fiscal three and six months ended June 30, 2024 relating to employee services provided prior to the Separation.

(3) On August 25, 2023, the Company’s Compensation & Human Capital Committee approved equity grants to individuals employed by Kenvue as of October 2, 2023 (the “Founder Shares”). On October 2, 2023, the Founder Shares were granted to all Kenvue employees in the form of stock options and PSUs to executive officers and either stock options and PSUs or RSUs to non-executive individuals.

16. Restructuring Expenses and Operating Model Optimization Initiatives

As part of the Company’s continued transformation to a fit-for-purpose consumer company, in the fiscal year 2024, the Company began to take steps intended to enhance organizational efficiencies and better position Kenvue for future growth. On May 6, 2024, the Company’s Board of Directors approved a multi-year initiative (the “2024 Multi-Year Restructuring Initiative”) to build on the Company’s strengths and optimize its cost structure by rebalancing resources to better position the

Company for future growth. These initiatives primarily include global workforce reductions, changes in management structure, and the transition to centralized shared-service functions in lower-cost locations.

The 2024 Multi-Year Restructuring Initiative is expected to result in pre-tax restructuring expenses and other charges totaling approximately $275 million in each of fiscal year 2024 and fiscal year 2025, for a total of approximately $550 million, consisting of IT and project-related costs (approximately 50%), employee-related costs (approximately 40%), and other implementation costs (approximately 10%). These charges are expected to be funded primarily through cash flows generated from operations.

Certain costs incurred associated with the restructuring activities related to the 2024 Multi-Year Restructuring Initiative, including one-time termination benefits and employee-related costs, are accounted for in accordance with Accounting Standards Codification Topic 420, Exit or Disposal Cost Obligations. The Company recognizes a liability and the related expense for these restructuring costs when the liability is incurred and can be measured. The related expense for these restructuring costs is recorded in the Restructuring expenses line item in the Condensed Consolidated Statements of Operations. Other charges are recorded in the Cost of sales or Selling, general, and administrative expenses line items in the Condensed Consolidated Statements of Operations, as applicable. Segment profit is based on Operating income and management excludes restructuring expenses and other charges associated with the 2024 Multi-Year Restructuring Initiative in assessing segment financial performance.

The following table summarizes the classification of pre-tax restructuring expenses and other charges incurred related to the 2024 Multi-Year Restructuring Initiative during the fiscal three and six months ended June 30, 2024:

						Fiscal Three Months Ended						Fiscal Six Months Ended
(Dollars in Millions)						June 30, 2024						June 30, 2024
Restructuring expenses						$	48					$	89
Cost of sales						9						15
Selling, general, and administrative expenses						1						4
Total pre-tax restructuring expenses and other charges						$	58					$	108

The following table summarizes the pre-tax restructuring expenses and other charges incurred by cost type related to the 2024 Multi-Year Restructuring Initiative during the fiscal three and six months ended June 30, 2024 and inception to date through June 30, 2024:

						Fiscal Three Months Ended						Fiscal Six Months Ended						Inception To Date Through June 30, 2024
(Dollars in Millions)						June 30, 2024						June 30, 2024
Employee-related costs(1)						$	29					$	64					$	64
IT and project-related costs(2)						18						31						31
Other implementation costs(3)						11						13						13
Total pre-tax restructuring expenses and other charges						$	58					$	108					$	108

(1) Employee-related costs primarily includes severance and other termination benefits.

(2) IT and project-related costs primarily includes advisory costs to operationalize the initiative.

(3) Other implementation costs primarily includes costs to terminate contracts, impairments of assets, and other associated costs to exit.

The following table summarizes the activity related to accrued restructuring expenses and other charges for the 2024 Multi-Year Restructuring Initiative during the fiscal six months ended June 30, 2024:

						Accrued Restructuring Expenses and Other Charges
(Dollars in Millions)						Employee-related Costs						IT and Project-Related Costs						Other Implementation Costs						Total Costs
Accrued restructuring expenses and other charges as of December 31, 2023						$	—					$	—					$	—					$	—
Charges to earnings						64						31						13						108
Cash payments						(24)						(10)						(5)						(39)
Non-cash charges						—						—						(6)						(6)
Accrued restructuring expenses and other charges as of June 30, 2024						$	40					$	21					$	2					$	63