01—Abstract
Summary
Summary of the 10-Q filed November 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Kenvue Inc. reported third-quarter 2024 results for the fiscal three months ended September 29, 2024, with Net sales of $3.90 billiona, essentially flat versus $3.92 billion a year earlier.
Net sales decreased $16 millionb, or 0.4%, reflecting unfavorable foreign currency of $50 million, or 1.3%, offset by Organic growth of $34 million, or 0.9%. Net income fell to $383 million from $438 million, and diluted EPS was $0.20 versus $0.23. Operating income declined 7.9% to $654 million, pressured by higher brand marketing spend in SG&A, which rose to 40.8% of net sales from 39.1%, partly offset by gross margin expansion to 58.5% from 57.5%.
For the nine months, Net income declined 44.9% to $737 millionc, driven largely by a $578 million impairment charge, of which $488 million related to the Dr.Ci:Labo® business. Operating cash flow was $976 million versus $2,218 million, primarily due to working capital timing. Cash and cash equivalents were $1.06 billion at quarter end, and total debt was $8.70 billion, including $1.65 billion in loans and notes payable.
The company paid $1.16 billiond in dividends and repurchased $114 million of shares during the nine months. The company also disclosed a 2024 Multi-Year Restructuring Initiative with expected pre-tax charges of approximately $550 million, and ongoing litigation exposures including acetaminophen, phenylephrine, benzoyl peroxide and Zantac-related matters. The company stated it is not able to reasonably estimate the likelihood or magnitude of potential liability for several of these matters.
02—Key points
Key Highlights
- Q3 2024 Net sales were $3,899 million, down $16 million, or 0.4%, from $3,915 million; Organic growth was 0.9%, with value realization of 2.5% offset by volume decreases of 1.6%.
- Q3 2024 Operating income declined 7.9% to $654 million, and Net income declined 12.6% to $383 million; diluted EPS was $0.20 versus $0.23.
- Nine-month Operating income fell 33.8% to $1,358 million, reflecting a $578 million impairment charge, including $488 million for the Dr.Ci:Labo® business.
- Essential Health was the standout segment, with nine-month Segment adjusted operating income up 24.2% to $914 million, while Skin Health and Beauty Segment adjusted operating income declined 5.3% to $502 million.
- Nine-month operating cash flow was $976 million, down from $2,218 million, primarily due to working capital timing; capital expenditures were $302 million.
- The 2024 Multi-Year Restructuring Initiative is expected to total approximately $550 million in pre-tax charges, with approximately $146 million recognized through the nine months.
- Cash dividends paid totaled $1,159 million for the nine months, and the Board declared a $0.205 quarterly dividend per share payable November 27, 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Kenvue kept $0.10.
- Revenue$3.90B100.0%
- Cost of revenue−$1.62B41.5%
- Gross profit$2.28B58.5%
- Operating costs−$1.63B41.8%
- Operating income$654.0M16.8%
- Interest, other & tax−$271.0M7.0%
- Net income$383.0M9.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 7, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $3.90B$4.01B | −2.8% |
| Cost of Revenue | $1.62B$1.79B | −9.5% |
| Gross Profit | $2.28B$2.23B | +2.6% |
| R&D Expenses | $97.00M$99.00M | −2.0% |
| SG&A Expenses | $1.59B$1.52B | +4.5% |
| Operating Income | $654.00M$702.00M | −6.8% |
| Interest Expense | $108.00M$118.00M | −8.5% |
| Net Income | $383.00M$430.00M | −10.9% |
| EPS (Basic) | $0.20$0.23 | −13.0% |
| EPS (Diluted) | $0.20$0.23 | −13.0% |
| Shares Outstanding (Basic) | 1.92B1.84B | +4.2% |
| Shares Outstanding (Diluted) | 1.92B1.84B | +4.7% |
05—Questions
Frequently Asked Questions
Why did Kenvue's net income decline so sharply in the first nine months of 2024?
Nine-month Net income fell 44.9% to $737 million from $1,337 million. The main driver was a $578 million impairment charge, which primarily reflected a $488 million non-cash charge on the Dr.Ci:Labo® business. Interest expense, net also rose to $283 million from $154 million, and the provision for taxes decreased to $332 million from $496 million.
How did the company's segments perform in the third quarter?
Self Care net sales rose 0.7% to $1,625 million, but segment adjusted operating income fell 7.8% to $557 million. Skin Health and Beauty net sales decreased 4.2% to $1,072 million, with Organic growth down 2.7%, while its adjusted operating income rose 6.1% to $191 million. Essential Health net sales increased 1.6% to $1,202 million, with Organic growth of 4.5%, and adjusted operating income rose 5.8% to $291 million.
What liquidity and debt position does Kenvue report?
As of September 29, 2024, cash and cash equivalents were $1,057 million and total debt was $8,701 million, including $1,648 million of loans and notes payable and $7,053 million of long-term debt. The Revolving Credit Facility of $4.0 billion had no outstanding balance, and $887 million was outstanding under the $4.0 billion Commercial Paper Program. The company stated it was in compliance with all debt covenants.
What legal risks does the filing highlight?
The filing discloses product liability and related litigation involving acetaminophen (Tylenol®), phenylephrine, benzoyl peroxide products, and Zantac-related indemnification claims. It also describes securities and derivative lawsuits tied to phenylephrine disclosures. For several matters, the company stated it is unable to reasonably estimate the likelihood or magnitude of potential liability. Talc-related liabilities in the United States and Canada are retained by J&J under the Separation Agreement.
06—Continue