Kenvue (US:KVUE)2025-05-08 20:04Part I—Financial Information Financial Statements (unaudited) Presents Kenvue Inc.'s unaudited condensed consolidated financial statements for Q1 2025, including balance sheets, operations, cash flows, and notes Condensed Consolidated Balance Sheets (in Millions) | Account | March 30, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Total Current Assets | $5,710 | $5,525 | | Total Assets | $26,257 | $25,601 | | Total Current Liabilities | $6,666 | $5,739 | | Total Liabilities | $16,204 | $15,933 | | Total Stockholders' Equity | $10,053 | $9,668 | | Total Liabilities and Stockholders' Equity | $26,257 | $25,601 | Condensed Consolidated Statements of Operations Net sales decreased to $3,741 million in Q1 2025, while operating and net income both increased year-over-year Condensed Consolidated Statements of Operations (in Millions, Except Per Share Data) | Account | Three Months Ended Mar 30, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net sales | $3,741 | $3,894 | | Gross profit | $2,168 | $2,242 | | Operating income | $558 | $550 | | Net income | $322 | $296 | | Diluted EPS | $0.17 | $0.15 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $428 million in Q1 2025, offsetting cash used in investing and financing Condensed Consolidated Statements of Cash Flows (in Millions) | Cash Flow Activity | Three Months Ended Mar 30, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash flows from operating activities | $428 | $287 | | Net cash flows used in investing activities | $(167) | $(152) | | Net cash flows used in financing activities | $(310) | $(326) | | Net decrease in cash and cash equivalents | $(13) | $(227) | | Cash and cash equivalents, end of period | $1,057 | $1,155 | Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies, business segments, legal proceedings, and the 'Our Vue Forward' restructuring - The company is organized into three reportable business segments: Self Care, Skin Health and Beauty, and Essential Health29 - Separation-related costs, primarily for IT disentanglement, were $38 million in Q1 2025, down from $67 million in Q1 2024. These costs are expected to continue through the first half of fiscal 20254041 - The company is involved in numerous legal proceedings, including claims related to acetaminophen, Zantac, phenylephrine (PE), and benzoyl peroxide (BPO). J&J has indemnified Kenvue for talc-related liabilities in the U.S. and Canada103107119 - The '2024 Multi-Year Restructuring Initiative' is expected to incur approximately $550 million in pre-tax charges through 2025 to optimize the cost structure. In Q1 2025, the company incurred $67 million in related charges125126127 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, sales performance, the 'Our Vue Forward' restructuring, and liquidity Results of Operations Net sales decreased 3.9% in Q1 2025, while gross profit margin improved and operating and net income increased Q1 2025 vs Q1 2024 Results of Operations (in Millions) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $3,741 | $3,894 | (3.9)% | | Gross profit | $2,168 | $2,242 | (3.3)% | | Operating income | $558 | $550 | 1.5% | | Net income | $322 | $296 | 8.8% | - Organic sales declined 1.2%, reflecting a 0.9% volume decrease and a 0.3% negative impact from price/mix. The decline was primarily driven by competitive pressures in U.S. Skin Health and Beauty and a weak cough/cold season outside the U.S148149 - Gross profit margin expanded to 58.0% from 57.6%, benefiting from supply chain optimization initiatives, which were partially offset by volume deleverage and unfavorable value realization150 - SG&A expenses decreased by $36 million, primarily due to savings from the 'Our Vue Forward' initiative and lower separation-related costs151 Segment Results Self Care organic sales grew, while Skin Health and Beauty and Essential Health saw declines or flat performance, impacting adjusted operating income Q1 2025 Segment Performance vs Q1 2024 (in Millions) | Segment | Net Sales | Net Sales Change | Organic Sales Change | Adjusted Operating Income | Adj. Op. Income Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Self Care | $1,667 | (1.8)% | 0.3% | $566 | (5.8)% | | Skin Health and Beauty | $977 | (7.3)% | (4.8)% | $92 | (37.0)% | | Essential Health | $1,097 | (3.9)% | 0.0% | $239 | (9.5)% | | Total | $3,741 | (3.9)% | (1.2)% | $897 | (11.3)% | - Self Care organic sales growth of 0.3% was driven by strength in North America Allergy Care and Pain Care, offset by a weak cough/cold season outside the U.S., particularly in China167 - Skin Health and Beauty's 4.8% organic sales decline was caused by volume decreases (2.9%) and unfavorable price/mix (1.9%), mainly due to competitive pressures and strategic pricing in the U.S169 Liquidity and Capital Resources The company maintains robust liquidity, supported by cash from operations and credit facilities, managing debt and dividends - Primary liquidity sources include $1.06 billion in cash, a $4.0 billion revolving credit facility (undrawn), and a $4.0 billion commercial paper program ($1.68 billion outstanding)179 - Net cash from operating activities increased to $428 million in Q1 2025 from $287 million in Q1 2024, driven by favorable working capital changes173174 - Key financing activities in Q1 2025 included a $750 million repayment of Senior Notes, $392 million in dividend payments, and $63 million in treasury stock purchases, funded partially by $868 million in net proceeds from commercial paper176 - The company declared a quarterly dividend of $0.205 per share, payable in May 2025184 Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposures were reported from those disclosed in the company's Annual Report on Form 10-K - There have been no material changes in market risk from those disclosed in the company's most recent Annual Report194 Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal controls, as a new global ERP system is being implemented in phases - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter195 - No material changes were made to the company's internal control over financial reporting during the quarter196 - The company is in a multi-year implementation of a new global ERP system, which is expected to occur in phases over the next several years197 Part II—Other Information Legal Proceedings Legal proceedings information is incorporated by reference from Note 13, "Commitments and Contingencies", covering key litigation matters like acetaminophen and Zantac - Information regarding legal proceedings is incorporated by reference from Note 13, "Commitments and Contingencies," of the financial statements199 Risk Factors There have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the company's Annual Report200 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred; the company repurchased 3.0 million shares for $62.8 million to offset dilution, with 12.8 million shares remaining Share Repurchases in Q1 2025 (Shares in Thousands) | Period | Total Shares Purchased | Average Price Paid | Shares Remaining in Program | | :--- | :--- | :--- | :--- | | Dec 30, 2024 – Jan 26, 2025 | 3,000 | $20.94 | 12,792 | | Jan 27, 2025 – Mar 30, 2025 | 0 | N/A | 12,792 | | Total | 3,000 | - | 12,792 | - The Board authorized a share repurchase program for up to 27,000,000 shares with no expiration date, intended to offset dilution from equity-based awards202 Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 arrangements during the quarter - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the quarter204 Exhibits This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and various incorporated agreements - The filing includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act205