01—Abstract
Summary
Summary of the 10-K filed March 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Kenvue Inc. (KVUE) reported net sales of $15.4 billiona for the fiscal twelve months ended December 31, 2023, up $494 million, or 3.3%, from $14.95 billion in 2022.
Organic growth was $747 millionb, driven by value realization (price including mix) and increased demand in Self Care, while Skin Health and Beauty and Essential Health saw volume declines. Net income fell to $1.66 billion from $2.06 billion, a decrease of 19.4%, as SG&A rose 9.0% to $6.1 billion, including $468 million of non-recurring Separation-related costs and higher standalone enterprise and transition services costs. Diluted EPS was $0.90 versus $1.20 in the prior year.
The filing documents the completion of the separation from Johnson & Johnson: a $4.2 billionc net-proceeds IPO in May 2023 of about 10.4% of common stock, followed by the August 2023 Exchange Offer that left J&J with about 9.5% ownership. Kenvue distributed $13.8 billion to J&J in connection with the Separation, funded by $7.7 billion of Senior Notes and $1.2 billion of initial commercial paper proceeds. Total debt was $8.3 billion at year end, and cash and cash equivalents were $1.4 billion.
Operating cash flow was $3.2 billiond, and the company paid $0.8 billion in dividends, including a quarterly dividend of $0.20 per share. The principal investor risks in the filing relate to litigation and contingent liabilities. Kenvue faces acetaminophen (Tylenol) multi-district litigation, in which a February 2024 final judgment favored the company and dismissed most cases, along with phenylephrine class actions and securities class actions filed after a September 2023 FDA advisory committee vote, for which the company states it cannot reliably estimate the outcome.
Talc-related liabilities for products sold in the United States and Canada are indemnified by J&J, but liabilities for talc products sold elsewhere remain with Kenvue. The company also depends on J&J for transitional manufacturing and services, and has joint and several liability with J&J for certain prior-period U.S. federal taxes.
02—Key points
Key Highlights
- Net sales of $15.4 billion in 2023, up 3.3% ($494 million), with organic growth of $747 million led by value realization and Self Care demand.
- Net income of $1.66 billion, down 19.4% from $2.06 billion, as SG&A rose 9.0% to $6.1 billion, including $468 million of non-recurring Separation-related costs.
- Segment adjusted operating income: Self Care $2.30 billion (up 10.1%), Skin Health and Beauty $679 million (down 4.1%), Essential Health $1.01 billion (down 9.0%).
- Completed separation from J&J: May 2023 IPO of about 10.4% of common stock ($4.2 billion net proceeds), then the August 2023 Exchange Offer; J&J retains about 9.5%.
- Took on $8.3 billion of total debt, including $7.75 billion of Senior Notes issued March 2023, and distributed $13.8 billion to J&J in connection with the Separation.
- Operating cash flow of $3.2 billion in 2023, up from $2.5 billion, with cash and cash equivalents of $1.4 billion at year end.
- Ongoing litigation exposure includes acetaminophen, phenylephrine and securities class actions; the company states it cannot reliably estimate potential liability for these matters.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Kenvue kept $0.11.
- Revenue$15.44B100.0%
- Cost of revenue−$6.80B44.0%
- Gross profit$8.64B56.0%
- Operating costs−$6.13B39.7%
- Operating income$2.51B16.3%
- Interest, other & tax−$848.0M5.5%
- Net income$1.66B10.8%
04—Financials
Financial Highlights
Figures from 10-KFY2023filed March 1, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $15.44B$15.05B | +2.6% |
| Cost of Revenue | $6.80B$6.63B | +2.5% |
| Gross Profit | $8.64B$8.42B | +2.7% |
| R&D Expenses | $399.00M$355.00M | +12.4% |
| SG&A Expenses | $6.14B$5.48B | +12.0% |
| Operating Income | $2.51B$2.92B | −14.0% |
| Interest Expense | $358.00M$0 | — |
| Net Income | $1.66B$2.08B | −19.9% |
| EPS (Basic) | $0.90$1.21 | −25.6% |
| EPS (Diluted) | $0.90$1.21 | −25.6% |
| Shares Outstanding (Basic) | 1.85B1.72B | +7.6% |
| Shares Outstanding (Diluted) | 1.85B1.72B | +7.8% |
05—Questions
Frequently Asked Questions
How did Kenvue's revenue and profitability perform in 2023?
Net sales rose $494 million, or 3.3%, to $15.4 billion. Gross profit rose 4.3% to $8.64 billion, but SG&A rose 9.0% to $6.14 billion, driven by standalone enterprise costs, transition services costs and $255 million higher Separation-related costs. Operating income fell 6.1% to $2.51 billion, and net income fell 19.4% to $1.66 billion, or $0.90 per diluted share.
What is Johnson & Johnson's remaining stake and how did the Separation affect the balance sheet?
After the May 2023 IPO and the August 2023 Exchange Offer, J&J owned about 9.5% of outstanding common stock, or 182,329,550 shares as of December 31, 2023. Total equity fell to $11.2 billion from $20.0 billion, reflecting the $13.8 billion distribution to J&J. Total debt was $8.3 billion, including $7.7 billion of long-term Senior Notes.
What are the main litigation risks?
The filing discloses acetaminophen product liability suits, in which a February 2024 final judgment favored the company and dismissed most cases in the multi-district litigation. It also discloses phenylephrine class actions and two securities class actions filed beginning October 2023, along with Zantac indemnification demands. The company states it cannot reasonably estimate the likelihood or magnitude of potential liability for these matters. Talc liabilities for U.S. and Canadian sales are indemnified by J&J, but talc-related claims for sales outside those markets remain the company's responsibility.
Is the dividend expected to continue?
Kenvue declared a quarterly cash dividend of $0.20 per share in 2023 and again on January 25, 2024, payable February 28, 2024. The company states it expects to continue paying quarterly dividends, but the declaration remains at the discretion of the Board.
What dependencies on J&J remain after the Separation?
J&J provides certain manufacturing services under a Transition Manufacturing Agreement, covering products including Tylenol, Zyrtec, Motrin and Benadryl, and certain IT, supply chain, human resources, finance and other services under a Transition Services Agreement. Some assets in China, Russia and other deferred markets had not transferred by year-end 2023. Kenvue also has joint and several liability with J&J for the consolidated U.S. federal income taxes of the J&J group for periods it was included in that group.
06—Continue