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Item 8. Financial Statements and Supplementary Data

2025-02-24 compared with 2024-03-01 · 1034 added, 899 removed, 1007 unchanged (66% of the section changed)

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Consolidated Statements of Comprehensive Income 75

Consolidated Statements of Equity 83

Consolidated Statements of Stockholders' Equity 76

Consolidated Statements of Cash Flows 77

Notes to the Consolidated Financial Statements 85

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Kenvue Inc.

Opinion on the Financial Statements

To the Board of Directors and Stockholders of Kenvue Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Kenvue Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and January 1, 2023, and the related consolidated statements of operations, of comprehensive income, of equity and of cash flows for each of the three fiscal years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and January 1, 2023, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for global intangible low-taxed income in 2023.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

and its subsidiaries (the “Company”) as of December 29, 2024 and December 31, 2023, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for each of the three fiscal years in the period ended December 29, 2024, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 29, 2024 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

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Revenue Recognition—U.S.

As described in Notes 1 and 19 to the consolidated financial statements, the Company’s total net sales were $15.4 billion for the fiscal year ended December 31, 2023, of which, $6.8 billion is related to U.S.

As described in Notes 1 and 18 to the consolidated financial statements, the Company’s net sales were $15.5 billion for the fiscal year ended December 29, 2024, of which, $6.7 billion is related to U.S.

Management recognizes the revenue from these sales at a single point in time when obligations under the terms of a contract with the customer are satisfied;

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Florham Park, New Jersey

March 1, 2024

February 24, 2025

We have served as the Company’s auditor since 2021.

CONSOLIDATED BALANCE SHEETS

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

December 31, 2023 January 1, 2023

(Dollars in Millions, Except Per Share Data;

Shares in Thousands)

December 29, 2024 December 31, 2023

Current assets

Cash and cash equivalents $ 1,070 $ 1,382

Trade receivables, less allowances for credit losses ($ 25 and $ 35 as of December 31, 2023 and January 1, 2023, respectively)

Trade receivables, less allowances for credit losses ($ 26 and $ 25 as of December 29, 2024 and December 31, 2023, respectively)

Prepaid expenses and other receivables 494 567

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Total Assets 25,601 27,851

Liabilities and Equity

Liabilities and Stockholders’ Equity

Current liabilities

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Total current liabilities 5,739 5,481

Employee related obligations 360 214

Long-term debt 7,055 7,687

Deferred taxes on income 2,261 2,621

Employee-related obligations

Other liabilities 536 491

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Commitments and contingencies (Note 17)

Preferred stock, $ 0.01 par value, 750,000 shares authorized, no shares issued and outstanding as of December 31, 2023

Stockholders’ Equity

Preferred stock, $ 0.01 par value, 750,000 shares authorized;

no shares issued and outstanding as of December 29, 2024 and December 31, 2023

Common stock, $ 0.01 par value, 12,500,000 shares authorized;

1,915,407 and 1,915,057 shares issued and outstanding as of December 31, 2023

1,924,977 and 1,913,768 shares issued and outstanding as of December 29, 2024, respectively;

1,915,407 and 1,915,057 shares issued and outstanding as of December 31, 2023, respectively

Additional paid-in capital

Treasury stock, at cost, 350 shares

Retained earnings 429 —

Net investment from Johnson & Johnson — 25,425

16,130 16,147

Treasury stock, 11,208 and 350 shares at cost as of December 29, 2024 and December 31, 2023, respectively

( 242 ) ( 7 )

(Accumulated deficit) Retained earnings ( 93 ) 429

Accumulated other comprehensive loss ( 6,146 ) ( 5,377 )

Total equity 11,211 19,970

Total Liabilities and Equity $ 27,851 $ 27,316

Total stockholders’ equity

Total Liabilities and Stockholders’ Equity

$ 25,601 $ 27,851

See accompanying Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Dollars in Millions, Except Per Share Data;

Shares in Millions)

Fiscal Twelve Months Ended

December 31, 2023 January 1, 2023 January 2, 2022

December 29, 2024 December 31, 2023 January 1, 2023

Net sales $ 15,455 $ 15,444 $ 14,950

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Selling, general, and administrative expenses 6,329 6,141 5,633

Other operating (income) expense, net ( 10 ) ( 23 ) 15

Restructuring expenses 185 — —

Impairment charges 578 — 12

Other operating expense (income), net 26 ( 10 ) ( 35 )

Operating income 1,841 2,512 2,675

Other expense (income), net 72 38 ( 5 )

Other expense, net 48 72 38

Interest expense, net 378 250 —

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Diluted $ 0.54 $ 0.90 $ 1.20

Weighted average common stock

Weighted-average number of shares outstanding

Basic 1,915 1,846 1,716

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Fiscal Twelve Months Ended

December 31, 2023 January 1, 2023 January 2, 2022

December 29, 2024 December 31, 2023 January 1, 2023

Net income $ 1,030 $ 1,664 $ 2,064

Other comprehensive income (loss)

Foreign currency translation, net of taxes

Other comprehensive (loss) income, net of taxes

Foreign currency translation

( 783 ) 219 ( 1,045 )

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Prior service cost, net of amortization ( 2 ) 8 ( 1 )

(Gain)/loss, net of amortization ( 101 ) 58 18

Loss (gain), net of amortization 32 ( 101 ) 58

Effect of exchange rates

Net change, net of income tax provision (benefit) ( 102 ) 63 25

37 ( 102 ) 63

Derivatives and hedges:

Unrealized gain/(loss) arising during period 66 12 ( 3 )

Reclassification to net income (loss) ( 28 ) ( 2 ) 3

Net change, net of income tax provision 38 10 —

Other comprehensive income (loss) 155 ( 972 ) ( 898 )

Other comprehensive (loss) income before reclassifications ( 6 ) 66 12

Amounts reclassified to the Consolidated Statements of Operations

( 17 ) ( 28 ) ( 2 )

Other comprehensive (loss) income ( 769 ) 155 ( 972 )

Comprehensive income $ 261 $ 1,819 $ 1,092

See accompanying Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in Millions, Shares in Thousands)

Fiscal Twelve Months Ended December 31, 2023

Common Stock Additional Paid-In Capital

Treasury Stock

Retained Earnings Net Investment from Johnson & Johnson Accumulated Other Comprehensive Loss Total Equity

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in Millions;

Shares in Thousands)

Fiscal Twelve Months Ended December 29, 2024, December 31, 2023, and January 1, 2023 (1)

Common Stock Additional Paid-In Capital Treasury Stock Retained Earnings (Accumulated Deficit) Net Investment from J&J

Accumulated Other Comprehensive Loss Total Stockholders’ Equity

Shares Amount Shares Amount

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Other comprehensive loss — — — — — — — ( 972 ) ( 972 )

Net transfers from Johnson & Johnson — — — — — — 913 — 913

Balance, January 2, 2022 (1)

Net transfers to J&J — — — — — — ( 1,750 ) — ( 1,750 )

Stock-based compensation

— — — — — — 137 — 137

Net income — — — — — — 2,064 — 2,064

Other comprehensive loss — — — — — — — ( 972 ) ( 972 )

Net transfers to Johnson & Johnson — — — — — — ( 1,613 ) — ( 1,613 )

Balance, January 1, 2023

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Cash dividends on common stock — — — — — ( 766 ) — — ( 766 )

Net transfers to Johnson & Johnson — — — — — — ( 308 ) — ( 308 )

Net transfers to J&J — — — — — — ( 308 ) — ( 308 )

Stock-based compensation — — 153 — — — 35 — 188

Distribution to Johnson & Johnson in connection with the Separation — — ( 13,788 ) — — — — — ( 13,788 )

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

Issuance of common stock under the Kenvue 2023 Plan 513 — 8 — — — — — 8

Issuance of common stock under the Kenvue 2023 Plan, net

513 — 8 — — — — — 8

Purchase of treasury stock ( 350 ) — — 350 ( 7 ) — — — ( 7 )

Reclassification of Net Investment from J&J — — 25,712 — — — ( 25,712 ) — —

Separation-related adjustments — — ( 160 ) — — — 91 ( 77 ) ( 146 )

Balance, December 31, 2023

1,915,057 19 16,147 350 ( 7 ) 429 — ( 5,377 ) 11,211

Reclassification of Net Investment from Johnson & Johnson — — 25,712 — — — ( 25,712 ) — —

Net income — — — — — 1,030 — — 1,030

Other comprehensive loss — — — — — — — ( 769 ) ( 769 )

Cash dividends on common stock — — — — — ( 1,552 ) — — ( 1,552 )

Stock-based compensation — — 254 — — — — — 254

Issuance of common stock under the Kenvue 2023 Plan, net

9,569 — 69 — — — — — 69

Purchase of treasury stock ( 10,858 ) — — 10,858 ( 235 ) — — — ( 235 )

Separation-related adjustments — — ( 340 ) — — — — — ( 340 )

Balance, December 29, 2024 1,913,768 $ 19 $ 16,130 11,208 $ ( 242 ) $ ( 93 ) $ — $ ( 6,146 ) $ 9,668

(1) Includes cumulative effect of change in accounting principle related to Global Intangible Low-Taxed Income (“GILTI”).

See Note 1, “Description of the Company and Summary of Significant Accounting Policies,” for more information.

(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.

See accompanying Notes to Consolidated Financial Statements.

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Fiscal Twelve Months Ended

December 31, 2023 January 1, 2023 January 2, 2022

December 29, 2024 December 31, 2023 January 1, 2023

Cash flows from operating activities

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Deferred income taxes ( 285 ) ( 114 ) 180

Impairment charges 578 — 12

Losses (gains) on investments 72 7 ( 1 )

Other 69 ( 1 ) 14

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Other current and non-current assets ( 17 ) ( 429 ) 119

Accounts payable 390 52 330

Accrued liabilities

Accounts payable and accrued liabilities

( 536 ) 1,454 35

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Proceeds from J&J upon repayment of the Facility Agreement — 8,941 —

Proceeds from sale of assets 21 8 77

(Costs associated with) proceeds from sale of assets ( 6 ) 21 8

Other investing activities 15 ( 40 ) ( 23 )

Net cash flows used in investing activities ( 425 ) ( 488 ) ( 390 )

Cash flows from (used in) financing activities

(Payments of) proceeds from loans and notes payables ( 14 ) 14 ( 7 )

Cash flows used in financing activities

Proceeds from (payments of) loans and notes payables 2 ( 14 ) 14

Proceeds from Commercial Paper Program, net of issuance cost 157 574 —

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Dividends paid ( 1,552 ) ( 766 ) —

Net transfer from (to) J&J ( 274 ) ( 1,597 ) 7

Net transfers to J&J — ( 274 ) ( 1,597 )

Purchase of treasury stock

( 235 ) ( 7 ) —

Other financing activities 63 ( 179 ) —

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Cash and cash equivalents, beginning of period 1,382 1,231 740

Net increase in cash and cash equivalents 151 491 122

Net (decrease) increase in cash and cash equivalents ( 312 ) 151 491

Cash and cash equivalents, end of period $ 1,070 $ 1,382 $ 1,231

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$ 439 $ 224 $ —

(1) Net cash paid includes payments to J&J under the Tax Matters Agreements (as defined in FN 12, “Relationship with J&J,”) for income tax liabilities, which J&J has paid on the Company’s behalf post Kenvue IPO to the tax authorities.

(1) Net cash paid includes payments to J&J under the Tax Matters Agreements (as defined in Note 12, “Relationship with J&J”) for income tax liabilities, which J&J has paid on the Company’s behalf post-Kenvue IPO to the tax authorities.

See accompanying Notes to Consolidated Financial Statements.

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Description of the Company and Business Segments

(“Kenvue” or the “Company”) is a pure play consumer health company with iconic brands including Aveeno ® , BAND-AID ® Brand Adhesive Bandages, Johnson’s ® , Listerine ® , Neutrogena ® , Tylenol ® , and Zyrtec ® .

The Company is organized into three business segments:

(“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 reportable 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, as well as 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, as well as women’s health, wound care, and other products.

The Self Care segment includes a broad product range such as pain care;

cough, cold, and allergy;

digestive health;

smoking cessation;

and other products.

The Skin Health and Beauty segment is focused on face and body care, as well as 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 was wholly owned by J&J and primarily represented J&J’s Consumer Health Business.

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.

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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 5, “Borrowings”, and 3) any cash and cash equivalents in excess of the $ 1.17 billion in cash and cash equivalents retained by the Company immediately following the Kenvue IPO.

On May 8, 2023, in conjunction with the Consumer Health Business Transfer, the Company distributed $ 13.8 billion to J&J from 1) the net proceeds received from the sale of the common stock in the Kenvue IPO, 2) the net proceeds received from the Debt Financing Transactions as defined in Note 5, “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 Inc.

common stock owned by J&J.

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 9.5 % of the outstanding shares of Kenvue common stock.

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 audited financial statements for all periods presented, including the historical results of the Company prior to April 4, 2023, are now referred to as the “Consolidated Financial Statements”.

The audited financial statements for all periods presented, including the historical results of the Company prior to April 4, 2023, are referred to as the “Consolidated Financial Statements.”

Intercompany balances and transactions have been eliminated.

The 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 twelve months ended December 29, 2024, the Company recorded out-of-period adjustments primarily related to the Separation, which corrected an overstatement in Additional paid-in capital of $ 340 million, including the $ 84 million

($ 65 million net of tax) related to certain cloud computing arrangements described below.

This amount did not have an impact on the operating results for the fiscal twelve months ended December 29, 2024.

The Company concluded that these adjustments were not material to the Consolidated Financial Statements for either the current period or prior periods.

As of December 29, 2024, the Consolidated Balance Sheet reflects an adjustment for a change in classification from Property, plant, and equipment, net of $ 288 million to Other assets and Additional paid-in capital of $ 169 million and $ 84 million, respectively, related to certain cloud computing arrangements, net of amortization of $ 35 million.

The Company concluded that this adjustment was not material to the 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 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.

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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 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.

Indirect costs were allocated to the Company for the purposes of preparing the Consolidated 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 based on 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 Consolidated Balance Sheet represent balances in accounts specifically identifiable to the Company that were not swept into J&J and its affiliates’ bank accounts.

Cash and cash equivalents on the 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 is impacted by changes in comprehensive income, 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.

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 twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 was based on currency movements specific to the Company’s Consolidated Financial Statements.

Foreign currency translation recorded during the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 was based on currency movements specific to the Consolidated Financial Statements.

The income tax amounts in the 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.

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

The effects of the settlement of these transactions between the Company and J&J are reflected in the Consolidated Statements of Cash Flows as “Net transfer from (to) J&J” within financing activities, and in the Consolidated Balance Sheets and Consolidated Statements of Equity as “Net transfers to Johnson & Johnson”.

The effects of the settlement of these transactions between the Company and J&J were reflected in the Consolidated Statements of Cash Flows as “Net transfers to J&J” within financing activities, and in the Consolidated Statements of Stockholders' Equity as “Net transfers to J&J.”

Reclassifications

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

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with U.S.

The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“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, goodwill and intangible asset and liability valuations.

Estimates are used when accounting for, among other things, sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes and related valuation allowances, withholding taxes, pensions, 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.

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The Company follows the concept of a fiscal year, which ends on the Sunday nearest to the end of the month of December.

Normally each fiscal year consists of 52 weeks, but every five or six years the fiscal year consists of 53 weeks, and therefore includes additional shipping days, as was the case in fiscal year 2020, and will be the case again in fiscal year 2026.

Normally, each fiscal year consists of 52 weeks;

however, the fiscal year consists of 53 weeks every five or six years.

For fiscal years which consist of 53 weeks, this results in additional shipping days, as was the case in fiscal year 2020, and will be the case again in fiscal year 2026.

Fiscal year 2024 refers to the fiscal twelve months ended December 29, 2024.

Fiscal year 2022 refers to the fiscal twelve months ended January 1, 2023.

Fiscal year 2023 refers to the fiscal twelve months ended December 31, 2023.

Fiscal year 2022 refers to the fiscal twelve months ended January 1, 2023.

Reportable Segments

The Company operates in the following reportable segments:

The Company operates in the following reportable business segments:

1) Self Care, 2) Skin Health and Beauty, and 3) Essential Health.

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Trade receivable balances are written off against the allowance when it is deemed probable that the trade receivable will not be collected.

A summary of the change in the allowance for credit losses during the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 is presented below:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Allowance for credit losses, beginning of period $ ( 25 ) $ ( 35 ) $ ( 32 )

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The Company utilizes the straight-line method of depreciation over the estimated useful lives.

Building and building equipment

20 - 30 years

Land and leasehold improvements 10 - 20 years

The approximate ranges for estimated useful lives are as follows:

Machinery and equipment 2 – 13 years

Buildings and building equipment

20 – 40 years

Software 3 – 8 years

Land improvements

10 – 20 years

Upon retirement or other disposal of property, plant, and equipment, the costs and related amounts of accumulated depreciation or amortization are eliminated from the asset and accumulated depreciation accounts, respectively.

The difference, if any, between the net asset value and the proceeds are recorded in Other (income) expense, net, operating.

The difference, if any, between the net asset value and the proceeds are recorded in Other operating expense (income), net.

Capitalized Internal-Use Software

Internal-use software development costs are accounted for in accordance with ASC 350-40, Internal-Use Software .

Internal-use software development costs are accounted for in accordance with Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software .

The costs incurred in the preliminary stages of development are expensed as incurred.

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The Company amortizes intangible assets with a finite life over their respective useful lives on a straight-line basis.

The estimated useful lives of patents, trademarks and customer relationships range from 3 years to 40 years and for other intangibles ranges from 20 years to 40 years.

The estimated useful lives for patents, trademarks, and customer relationships range from 10 years to 40 years and for other intangibles ranges from 20 years to 40 years.

The useful life for customer relationships is estimated based on various customer attributes including customer type, size, geography, length of relationships, and nature of relationships.

Intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment or whenever events or changes in circumstances indicate they may be impaired.

The Company may perform or bypass an optional qualitative assessment before proceeding to a quantitative impairment test.

If the Company determines the fair value of the indefinite-lived intangible asset is more likely than not greater than its carrying amount, no additional testing is necessary.

If not, it writes the carrying value down to the fair value.

Intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment on the first day of the fiscal fourth quarter, or more frequently if events or changes in circumstances between annual tests indicate that assets may be impaired.

The Company has the option to first assess qualitative factors to determine whether the quantitative indefinite-lived intangible asset impairment test is necessary.

If the Company determines the estimated fair value of the indefinite-lived intangible asset is more likely than not greater than its carrying amount based on the results of the qualitative test, no additional testing is necessary.

If the Company determines the estimated fair value of the indefinite-lived intangible asset is more likely than not less than the carrying value based on the results of the qualitative test, a quantitative fair value test is performed.

The Company may bypass the qualitative assessment in any period and proceed directly to performing the quantitative fair value test.

If the Company determines the estimated fair value of the indefinite-lived intangible asset is less than the carrying value based on the results of the quantitative fair value test, an indefinite-lived intangible asset impairment charge will be recorded equal to the amount of the difference (up to the carrying value of the indefinite-lived intangible asset).

See Note 4, “Intangible Assets and Goodwill,” for more information on intangible assets.

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The Consolidated Balance Sheets reflect goodwill established based on past transactions allocated to the Company’s operations by J&J prior to the Kenvue IPO.

Goodwill is not amortized but is tested for impairment at least annually in the fourth quarter at the reporting unit level on the first day of the fiscal fourth quarter, or more frequently if impairment indicators exist.

Goodwill is not amortized but is subjected to annual tests of impairment at the reporting unit level

on the first day of the fiscal fourth quarter, or more frequently if events or changes in circumstances between annual tests indicate that goodwill may be impaired.

The Company has the option to first assess qualitative factors to determine whether the quantitative goodwill impairment test is necessary.

If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed.

The Company may bypass the qualitative assessment in any period and proceed directly to the quantitative impairment test.

If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill).

If the Company determines the estimated fair value of goodwill is more likely than not greater than its carrying amount based on the results of the qualitative test, no additional testing is necessary.

If the Company determines the estimated fair value of goodwill is more likely than not less than the carrying value based on the results of the qualitative test, a quantitative fair value test is performed.

The Company may bypass the qualitative assessment in any period and proceed directly to performing the quantitative fair value test.

If the Company determines the estimated fair value of goodwill is less than the carrying value based on the results of the quantitative fair value test, a goodwill impairment charge will be recorded equal to the amount of the difference (up to the carrying value of goodwill).

See Note 4, “Intangible Assets and Goodwill,” for more information on goodwill.

Impairment of Long-Lived Assets

Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

If indicators of impairment are present, the asset group is tested for recoverability by comparing the carrying value of the asset group to the related estimated undiscounted future cash flows expected to be derived from the asset group, which include the amount and timing of the projected future cash flows.

If the expected undiscounted cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value.

If quoted market prices are not available, the Company will estimate fair value using a discounted value of estimated future cash flows.

Indefinite-lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances between annual tests indicate that the asset may be impaired.

Impairment losses on indefinite-lived intangible assets are recognized based on a comparison of the fair value of the asset to its carrying value.

No impairment was recognized for the fiscal twelve months ended December 31, 2023 and January 2, 2022.

See Note 4, “Intangible Assets and Goodwill,” for impairment recorded in the fiscal twelve months ended January 1, 2023.

Long-lived assets with finite lives are subjected to a test of impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

If any indicators of impairment are present, the asset group is tested for recoverability by comparing the carrying value of the asset group to the net undiscounted future cash flows expected to be derived from the asset group, which includes the amount and timing of the projected future cash flows.

If the net undiscounted cash flows are less than the carrying value of the asset group, the Company then performs the next step, which is to determine the fair value of the asset group, and record an impairment, if any.

If quoted market prices are not available, the Company estimates fair value using a discounted value of estimated future cash flows.

Impairment charges for the fiscal twelve months ended December 29, 2024 and January 1, 2023 consisted of:

Fiscal Twelve Months Ended

(Dollars in Millions) December 29, 2024 January 1, 2023

Dr.Ci:Labo ® asset impairment (1)

Skillman fixed asset impairment (2)

Other asset impairment (3)

Impairment charges

(1) Represents the impairment charge recognized during the fiscal three months ended June 30, 2024 in relation to Dr.Ci:Labo ® long-lived assets.

See “—Dr.Ci:Labo ® Asset Impairment” below and Note 4, “Intangible Assets and Goodwill,” for more information.

(2) Represents the impairment charge recorded during the fiscal three months ended March 31, 2024 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 recognized during the fiscal three months ended June 30, 2024 related to certain software development assets and the impairment charge recognized during the fiscal twelve months ended January 1, 2023 related to certain definite-lived trademarks deemed as irrecoverable.

No impairments were recognized for the fiscal twelve months ended December 31, 2023.

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 increased expenses related to brand support 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 Impairment charges in the 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 Consolidated Balance Sheet as of December 29, 2024.

Debt Discounts and Premiums, Issuance Costs, and Deferred Financing Costs

Debt issuance costs and discounts are presented as a reduction of Long-term debt and are amortized as a component within Interest expense, net in the Company’s Consolidated Statements of Operations over the term on the related debt using the effective interest method.

Discounts and debt issuance costs are presented as a reduction of Long-term debt and Loans and notes payable on the Consolidated Balance Sheets and are amortized as a component within Interest expense, net in the Consolidated Statements of Operations over the term on the related debt using the effective interest method.

Financial Instruments

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The effects of foreign currency derivatives were allocated to the Company based on the portion that was deemed to be associated with the Company’s operations.

Additionally, in certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany product sales and third-party purchases of materials denominated in a foreign currency.

The Company uses interest rate swaps as an instrument to manage interest rate risk related to forecasted fixed rate borrowings, and cross currency interest rate swaps to manage the risk related to foreign currency net investments.

The Company uses various types of derivative financial instruments including forward foreign exchange contracts, interest rate swaps, and cross currency interest rate swap contracts to manage its exposure to the variability of forecasted cash flows, changes in the fair value of foreign-denominated intercompany debt attributable to foreign exchange rate fluctuations, interest rate risk related to future debt issuances, and foreign subsidiaries with local functional currency.

As required by U.S.

GAAP, all derivative instruments held by the Company are recorded on the Consolidated Balance Sheets at fair value.

Fair value is the exit price that would be received to sell an asset or paid to transfer a liability.

Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability.

The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value, with Level 1 having the highest priority and Level 3 having the lowest.

Changes in the fair value of derivatives designated as cash flow hedges are recorded within gain or loss on cash flow hedges as a component of other comprehensive income until the underlying transaction affects earnings and are then reclassified to earnings in the same account as the hedged transaction.

Changes in fair value of derivatives designated as net investment hedges are recorded within foreign currency translation (“CTA”) as a component of other comprehensive income until the hedged investment is either sold or substantially liquidated and are then reclassified to earnings.

Changes in the fair value of derivatives designated as cash flow hedges are recorded within Gain (Loss) on Derivatives and Hedges as a component of Other comprehensive (loss) income until the underlying transaction affects earnings and are then reclassified to earnings in the same account as the hedged transaction.

Changes in the fair value of derivatives designated as net investment hedges are recorded within Currency Translation Adjustments (“CTA”) as a component of Other comprehensive (loss) income until the hedged investment is either sold or substantially liquidated and are then reclassified to earnings.

Any changes in the fair value of derivatives designated as fair value hedges are recorded in Net income.

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The overall risk management strategy includes reasons for undertaking hedge transactions and entering into derivatives.

See Note 16, “Fair Value Measurements”, for more information on fair value instruments.

See Note 16, “Fair Value Measurements,” for more information on financial instruments.

Defined Benefit Retirement Plans

The Company’s defined benefit retirement plan costs are valued using actuarial valuations.

The Company recognizes the funded or unfunded status of its defined benefit pension plans on the Consolidated Balance Sheets and recognizes changes in the funded status that arise during the period but that are not recognized as components of net periodic benefit cost, within other comprehensive income, net of income taxes.

The projected benefit obligation represents the actuarial present value of benefits expected to be paid upon our employee’s expected date of separation or retirement.

The Company recognizes the funded or unfunded status of its defined benefit pension plans on the Consolidated Balance Sheets and recognizes changes in the funded status that are not recognized as components of net periodic benefit cost within Other comprehensive (loss) income, net of income taxes.

The projected benefit obligation represents the actuarial present value of benefits expected to be paid upon an employee’s expected date of separation or retirement.

Amounts related to the Company’s defined benefit pension plans are recorded based on estimates and assumptions.

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See Note 7, “Pensions,” for more information.

The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration.

For operating leases, right-of-use (“ROU”) assets are included in Other assets, and lease liabilities are included in Accrued liabilities and Other liabilities on the Consolidated Balance Sheets.

For finance leases, ROU assets are included in Property, plant, and equipment, net, and lease liabilities are included in Loans and notes payable and Long-term debt on the Consolidated Balance Sheets.

The ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent an obligation to make lease payments arising from the lease.

Short-term leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets.

The related lease expense for such short-term leases is not significant.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of all minimum lease payments over the lease term.

When the implicit rate of the lease is not readily determinable, the Company uses its incremental borrowing rate for leases entered into after the Separation based on the information available at the commencement date in determining the present value of lease payments.

Prior to the Separation, the Company used J&J’s incremental borrowing rate.

The Company elected not to separate nonlease components from lease components;

as such, lease and nonlease components are combined as a single lease component.

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 that option.

Operating lease expense is recognized on a straight-line basis over the lease term.

For finance leases, amortization of the ROU asset is recognized on a straight-line basis over the shorter of the economic life of the asset or the lease term, and interest expense is recorded in connection with the lease liability using the effective interest rate method.

See Note 8, “Leases,” for more information.

Revenue Recognition

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The Company’s global payment terms are typically between 30 to 90 days.

Trade promotions, comprised of coupons, product listing allowances, cooperative advertising arrangements, volume-based incentive programs, as well as discounts to customers, rebates, sales incentives, and product returns, are accounted for as

variable consideration and recorded as a reduction in sales in the same period as the related sale.

To estimate variable consideration, the Company may apply both the “expected value” method and the “most likely amount” method based on the form of variable consideration, after considering which method would provide the best prediction of consideration to be received from the Company’s customers.

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The reserves related to sales returns are recorded at full sales value and are estimated based on historical sales and returns information.

See Note 19, “Segments of Business and Geographic Areas”, for further disaggregation of net sales.

See Note 18, “Segments of Business and Geographic Areas,” for disaggregation of Net sales.

Net Income Per Share

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Diluted net income per share is computed by dividing net income by the weighted-average number of shares plus the effect of dilutive potential shares outstanding for the applicable period using the treasury stock method.

Dilutive potential shares include shares from equity awards and have been excluded where their inclusion would be anti-dilutive.

Dilutive potential shares include shares from equity-based awards and have been excluded where their inclusion would be anti-dilutive.

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.

Costs incurred by the Company and those costs incurred by J&J determined to be for the benefit of the Company are included in the Consolidated Financial Statements.

These non-recurring Separation-related costs were $ 468 million and $ 213 million for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively and are included in SG&A expenses.

The Company did not incur Separation-related costs in the fiscal twelve months ended January 2, 2022.

Advertising expenses worldwide, which comprised television, radio, print media and digital advertising, were $ 1,349 million, $ 1,356 million, and $ 1,461 million for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively, and are included in SG&A expenses in the Consolidated Statements of Operations.

Shipping and Handling

Shipping and handling costs incurred were $ 320 million, $ 322 million, and $ 305 million for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively, and are included in SG&A expense in the Consolidated Statements of Operations.

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 prior to April 4, 2023 determined to be for the benefit of the Company were included in the Consolidated Financial Statements.

These Separation-related costs were $ 296 million, $ 468 million, and $ 213 million for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

The Separation-related costs are included in Cost of sales and Selling, general, and administrative expenses in the Consolidated Statements of Operations.

Advertising expenses worldwide, which comprised television, radio, print media, and digital advertising, were $ 1,635 million, $ 1,349 million, and $ 1,356 million for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively, and are included in Selling, general, and administrative expenses in the Consolidated Statements of Operations.

Shipping and Handling Costs

Shipping and handling costs, which includes costs for shipping, handling, and distribution, were $ 505 million, $ 508 million, and $ 547 million for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively, and are included in Selling, general, and administrative expenses in the Consolidated Statements of Operations.

Product Liability

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Research and Development

Research and development costs were $ 399 million, $ 375 million, and $ 355 million for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively, and are included in SG&A expenses in the Consolidated Statements of Operations.

Research and development expenses are expensed as incurred and included in Selling, general, and administrative expenses in the Consolidated Statements of Operations.

Research and development costs were $ 408 million, $ 399 million, and $ 375 million for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

Income taxes are recorded based on amounts refundable or payable for the current fiscal year and include the results of any differences between U.S.

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Prior to the Kenvue IPO, U.S.

federal, state and foreign income tax payables and receivables for entities that file a combined, consolidated or group income tax return with J&J were deemed settled with J&J and were included in the “Net Investment from J&J.”

federal, state and foreign income tax payables and receivables for entities that file a combined, consolidated, or group income tax return with J&J were deemed settled with J&J and were included in “Net Investment from J&J.”

Management establishes valuation allowances on deferred tax assets when it is determined to be “more likely than not” that some portion or all of the deferred tax assets may not be realized.

Management considers positive and negative evidence in evaluating the Company’s ability to realize its deferred tax assets, including its historical results and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis.

Management considers positive and negative evidence in evaluating the Company’s ability to realize its deferred tax assets, including its historical results, forecasts of future ability to realize deferred tax assets, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis.

The Company has unrecognized tax benefits for uncertain tax positions.

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These estimates may be revised in the future and such changes may have a material additional expense or benefit to the Company’s financial results and its effective tax rate.

See Note 14, “Income Taxes”, for more information on income taxes and see “Change in Accounting Principle” within this footnote for more information on GILTI accounting method change.

See Note 14, “Income Taxes,” for more information on income taxes.

Stock-Based Compensation

The Company recognizes compensation costs related to stock options granted ratably over the requisite service period, which is the vesting period of the award, based on the estimated fair value of the stock award on the grant date.

The estimated fair value of stock options is determined using the Black-Scholes option valuation model.

The Company recognizes compensation costs related to equity-based awards granted ratably over the requisite service period, which is the vesting period of the award, based on the estimated grant date fair value of the awards.

The Company accounts for forfeitures during the period in which they occur.

Stock-based compensation expense is recognized in the Consolidated Statements of Operations and is classified as a non-cash activity in the Consolidated Statements of Cash Flows.

The grant date fair value of each stock option granted is estimated on the grant date using the Black-Scholes option valuation model.

Stock options generally vest over a three-year period with annual vesting.

The Company recognizes compensation costs related to restricted stock units (“RSUs”) ratably over the requisite service period based on the fair value of the Company’s common stock on the grant date.

The grant date fair value of each restricted stock unit (“RSU”) granted is equivalent to the closing price of Kenvue common stock on the New York Stock Exchange on the grant date.

RSUs generally vest over a three-year period with annual vesting.

The Company recognizes compensation costs related to performance stock units (“PSUs”), each of which has a singular market condition, ratably over the requisite service period based on the estimated fair value of the PSU on the grant date.

The estimated fair value of PSUs is determined using the Monte Carlo valuation model.

See Note 11, “Stock-Based Compensation,” for more information on the conversion of J&J awards to Kenvue awards in connection with the completion of the Exchange Offer.

Stock-based compensation expense is recognized in the Consolidated Statements of Operations and is classified as a non-cash activity in the Consolidated Statements of Cash Flows.

The Company accounts for forfeitures during the period in which they occur.

The Company grants performance stock units (“PSUs”) with both performance vesting conditions and market-based vesting conditions (the “Performance PSUs”).

During the performance period, stock-based compensation expense for the Performance 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 Performance PSUs that are expected to be earned will be recognized as an adjustment to stock-based compensation expense in the period of the change.

The grant date fair value of each Performance PSU granted, inclusive of the fair value associated with the achievement of the specified performance metrics and the relative total shareholder return goal, is estimated on the grant date using the Monte Carlo valuation model.

See Note 11, “Stock-Based Compensation—J&J Plans and Conversion of J&J Awards,” for more information on the conversion of J&J awards to Kenvue awards in connection with the completion of the Exchange Offer.

Prior to the Kenvue IPO, certain employees of the Company participated in J&J’s stock-based compensation plans.

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The Company also received allocated stock-based compensation expense relating to employees of central support functions provided by J&J.

Restructuring Expenses

Certain costs incurred associated with restructuring activities, including one-time termination benefits and employee-related costs, are accounted for in accordance with ASC 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.

In accordance with existing benefit arrangements, future employee termination costs to be incurred in conjunction with involuntary separations are accrued when such separations are probable and estimable.

The related expense for these restructuring costs is recorded in the Restructuring expenses line item in the Consolidated Statements of Operations.

Other charges are recorded in the Cost of sales or Selling, general, and administrative expenses line items in the Consolidated Statements of Operations, as applicable.

Segment profit is based on Operating income and management excludes restructuring expenses and other charges in assessing segment financial performance.

Foreign Currency

For translation of its international operations, the Company has determined that the majority of its local currencies are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years, or where a substantial portion of its cash flows are not in the local currency.

The Company has accounted for operations in Argentina and Turkey as highly inflationary.

The net assets of international operations where the local currencies have been determined to be the functional currencies are translated into U.S.

dollars, the reporting currency, using period-end exchange rates and at the average exchange rates for the reporting period for revenue and expense accounts.

The cumulative foreign currency translation adjustment is recorded as a

component of Accumulated other comprehensive loss in equity.

dollars, the reporting currency, using period-end exchange rates and at the average exchange rates for the

reporting period for revenue and expense accounts.

The cumulative foreign currency translation adjustment is recorded as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets.

Foreign currency translation recorded in these Consolidated Financial Statements is based on currency movements specific to the Company’s assets and liabilities included on the Consolidated Balance Sheets during the periods presented.

Foreign currency exchange gains and losses on transactions occurring in a currency other than an operation’s functional currency are recognized as a component of Other expense (income), net in the Consolidated Statements of Operations.

Net currency transaction losses (gains) were $ 64 million, $ 105 million, and $( 16 ) million for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

The Company has accounted for operations in Argentina, Turkey, and Egypt as highly inflationary.

Foreign currency exchange gains and losses on transactions occurring in a currency other than an operation’s functional currency are recognized as a component of Other expense, net in the Consolidated Statements of Operations.

Net currency transaction losses were $ 26 million, $ 64 million, and $ 105 million for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

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 between 30 and 120 days), are not affected by a participating supplier’s decision to participate in the program.

Invoices from suppliers participating in the supplier finance program are recorded in Accounts payable on the Consolidated Balance Sheets.

The rollforward of the Company’s outstanding obligations confirmed as valid under its supplier finance program for the fiscal twelve months ended December 29, 2024 is as follows:

(Dollars in Millions)

December 29, 2024

Confirmed obligations outstanding at the beginning of the fiscal year $ 227

Invoices confirmed during the fiscal year

Confirmed invoices paid during the fiscal year

Confirmed obligations outstanding at the end of the fiscal year $ 260

Variable Interest Entities and Net Economic Benefit Arrangements

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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 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.

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 of the economic benefits and losses of such entities.

When the precedent conditions are met, the Deferred Local Businesses will be transferred 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 Company’s 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 in the Company’s Consolidated Financial Statements.

In the fiscal twelve months ended December 31, 2023, J&J transferred the equity interests in the majority of the Deferred Legal Entities to the Company that previously had been consolidated as VIEs in the Company’s Consolidated Financial Statements, except for the Deferred Legal Entities below.

Accordingly, the assets and liabilities of these entities are recognized on the 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 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 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) December 31, 2023

(Dollars in Millions) December 29, 2024 December 31, 2023

Current assets

14 unchanged sentences

Total liabilities $ 30 $ 34

The Company recognized net income of $ 85 million related to the Deferred Legal Entities for the fiscal twelve months ended December 31, 2023 in the Company’s Consolidated Statements of Operations.

The Company recognized Net income of $ 17 million and $ 85 million for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, related to the Deferred Legal Entities in the Consolidated Statements of Operations.

Net Economic Benefit Arrangements

With respect to certain Deferred Local Businesses that are legal entities, as described above, 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).

In relations to the net economic benefit arrangements, the Company recognized a receivable of $ 10 million and a payable of $ 49 million to J&J as of December 31, 2023 on the Company’s Consolidated Balance Sheets and $ 36 million of net income for the fiscal twelve months ended December 31, 2023 in the Company’s Consolidated Statements of Operations.

Reclassifications

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

For additional information on the realignment of certain allocations in segment financial results in fiscal year 2022, see Note 19, “Segments of Business and Geographic Areas”.

Change in Accounting Principle

GILTI Accounting Method Change

Effective in the third quarter of fiscal year 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.

The Company’s former parent, 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 believes that the change in accounting is preferable as it does 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 Company’s Consolidated Financial Statements were as follows:

December 31, 2023 January 1, 2023

(Dollars in Millions) Prior to Change Effect of Change As Reported Prior to Change Effect of Change As Adjusted

Consolidated Balance Sheets:

Deferred taxes on income $ 158 $ — $ 158 $ 147 $ — $ 147

Accrued taxes on income $ 142 $ — $ 142 $ 329 $ — $ 329

Deferred taxes on income $ 2,664 $ ( 43 ) $ 2,621 $ 2,428 $ 51 $ 2,479

Additional paid-in capital $ 16,085 $ 62 $ 16,147 $ — $ — $ —

Retained Earnings $ 452 $ ( 23 ) $ 429 $ — $ — $ —

Net investment from Johnson & Johnson $ — $ — $ — $ 25,474 $ ( 49 ) $ 25,425

Accumulated other comprehensive loss $ ( 5,381 ) $ 4 $ ( 5,377 ) $ ( 5,453 ) $ ( 2 ) $ ( 5,455 )

Fiscal Twelve Months Ended

December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions, Except Per Share Data)

Prior to Change Effect of Change As Reported Prior to Change Effect of Change As Adjusted Prior to Change Effect of Change As Adjusted

Consolidated Statements of Operations:

Income before taxes $ 2,190 $ — $ 2,190 $ 2,637 $ — $ 2,637 $ 2,925 $ — $ 2,925

Provision for taxes 643 ( 117 ) 526 550 23 573 894 ( 47 ) 847

Net income $ 1,547 $ 117 $ 1,664 $ 2,087 $ ( 23 ) $ 2,064 $ 2,031 $ 47 $ 2,078

Basic net income per share $ 0.84 $ 0.06 $ 0.90 $ 1.22 $ ( 0.02 ) $ 1.20 $ 1.18 $ 0.03 $ 1.21

Diluted net income per share $ 0.84 $ 0.06 $ 0.90 $ 1.22 $ ( 0.02 ) $ 1.20 $ 1.18 $ 0.03 $ 1.21

Fiscal Twelve Months Ended

December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) Prior to Change Effect of Change As Reported Prior to Change Effect of Change As Adjusted Prior to Change Effect of Change As Adjusted

Consolidated Statements of Comprehensive Income:

Foreign currency translation, net of taxes

$ 213 $ 6 $ 219 $ ( 1,053 ) $ 8 $ ( 1,045 ) $ ( 926 ) $ 3 $ ( 923 )

Other comprehensive income (loss) $ 149 $ 6 $ 155 $ ( 980 ) $ 8 $ ( 972 ) $ ( 901 ) $ 3 $ ( 898 )

Fiscal Twelve Months Ended

December 31, 2023

(Dollars in Millions) Prior to Change Effect of Change As Reported

Consolidated Statements of Equity:

Net transfers 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 $ 1,547 $ 117 $ 1,664

Other comprehensive income $ 149 $ 6 $ 155

Reclassification of Net Investment from Johnson & Johnson (Additional paid-in capital) $ 25,626 $ 86 $ 25,712

Reclassification of Net Investment from Johnson & Johnson (Net Investment from Parent) $ ( 25,626 ) $ ( 86 ) $ ( 25,712 )

Separation-related adjustments $ ( 118 ) $ ( 28 ) $ ( 146 )

Ending balance $ 11,167 $ 44 $ 11,211

Fiscal Twelve Months Ended

January 1, 2023 January 2, 2022

(Dollars in Millions) Prior to Change Effect of Change As Reported Prior to Change Effect of Change As Adjusted

Consolidated Statements of Equity:

Net transfers from J&J $ 24,872 $ 102 $ 24,974 $ 21,928 $ 55 $ 21,983

Accumulated other comprehensive loss ( 4,473 ) ( 10 ) ( 4,483 ) ( 3,572 ) ( 13 ) ( 3,585 )

Cumulative effect adjustment to beginning balance $ 20,399 $ 92 $ 20,491 $ 18,356 $ 42 $ 18,398

Net income $ 2,087 $ ( 23 ) $ 2,064 $ 2,031 $ 47 $ 2,078

Other comprehensive loss $ ( 980 ) $ 8 $ ( 972 ) $ ( 901 ) $ 3 $ ( 898 )

Net transfers from (to) Johnson & Johnson $ ( 1,485 ) $ ( 128 ) $ ( 1,613 ) $ 913 $ — $ 913

Ending balance $ 20,021 $ ( 51 ) $ 19,970 $ 20,399 $ 92 $ 20,491

Fiscal Twelve Months Ended

December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) Prior to Change Effect of Change As Reported Prior to Change Effect of Change As Adjusted Prior to Change Effect of Change As Adjusted

Consolidated Statements of Cash Flows:

Net income $ 1,547 $ 117 $ 1,664 $ 2,087 $ ( 23 ) $ 2,064 $ 2,031 $ 47 $ 2,078

Deferred income taxes $ 3 $ ( 117 ) $ ( 114 ) $ 157 $ 23 $ 180 $ 568 $ ( 47 ) $ 521

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 $ 23 million and $ 39 million as of December 29, 2024 and December 31, 2023, respectively, in relation to the net economic benefit arrangements on the Consolidated Balance Sheets.

The Company recognized Net income of $ 51 million and $ 36 million for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, in relation to the net economic benefit arrangements in the Consolidated Statements of Operations.

Recently Adopted Accounting Standards

Accounting Standards Update (“ASU”) 2022-04:

Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations

The Company adopted the standard as of the beginning of fiscal year 2023, which requires that a buyer in a supplier finance program disclose additional information about the program for financial statement users.

The standard includes an amendment to present rollforward information in each annual reporting period, which is effective for fiscal years beginning after December 15, 2023.

The Company will adopt this amendment beginning in fiscal year 2024.

The Company has facilitated a voluntary supply chain financing 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.

Prior to the establishment of the Company’s supplier financing program in the second quarter of fiscal year 2023, the Company participated in J&J’s supplier financing program.

As of December 31, 2023 and January 1, 2023, the Company’s accounts payable balances included $ 227 million and $ 293 million, respectively, related to invoices from suppliers participating in the supplier finance program.

Recently Issued Accounting Standards Not Yet Adopted

Accounting Standards Update (“ASU”) 2023-07 — Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board (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 include 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 adoption in the fiscal three months ended December 29, 2024 has resulted in additional disclosures, including the disclosure of significant segment expenses, within Note 18, “Segments of Business and Geographic Areas.” There was no effect on the Company’s financial position, results of operations, or cash flows.

ASU 2022 — 04:

Liabilities — Supplier Finance Programs (Subtopic 405-50)–Disclosure of Supplier Finance Program Obligations

In September 2022, the FASB issued ASU 2022-04 — Liabilities — Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”).

ASU 2022-04 requires that a buyer in a supplier finance program disclose sufficient information about the program for financial statement users.

This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with the exception for the amendment on rollforward information.

This amendment requires entities to present rollforward information in each annual reporting period, which is effective for fiscal years beginning after December 15, 2023.

The adoption in the fiscal three months ended December 29, 2024 has resulted in additional disclosures for rollforward information of the Company’s outstanding obligations confirmed as valid under its supplier finance program for the fiscal twelve months ended December 29, 2024.

There was no effect on the Company’s financial position, results of operations, or cash flows.

Refer to “ — Supplier Finance Program” above for additional information.

Recent Accounting Standards Not Yet Adopted

ASU 2023-09—Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09 — Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

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.

2 unchanged sentences

The Company is currently evaluating this guidance and the impact on its income tax disclosures.

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 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.

ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03— Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”).

Among other various new disclosures, ASU 2024-03 requires public entities to disaggregate operating expenses included in certain expense captions presented on the face of the income statement into specific categories (including purchases of inventory, employee compensation, depreciation, and intangible asset amortization) to provide enhanced transparency into the nature of expenses.

This guidance is effective for public entities for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027.

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.

As of December 31, 2023 and January 1, 2023, inventories were comprised of:

(Dollars in Millions) December 31, 2023 January 1, 2023

Companies are required to apply the amendments either 1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or 2) retrospectively to all periods presented in the financial statements.

Early adoption is permitted.

The Company is currently evaluating this guidance and the impact on its disclosures.

No other new accounting standards that were issued or became effective during the fiscal twelve months ended December 29, 2024 had, or are expected to have, a significant impact on the Consolidated Financial Statements.

As of December 29, 2024 and December 31, 2023, inventories were comprised of:

(Dollars in Millions) December 29, 2024 December 31, 2023

Raw materials and supplies $ 274 $ 304

2 unchanged sentences

Total inventories $ 1,591 $ 1,851

Property, Plant, and Equipment and Cloud Computing Arrangements

Property, Plant, and Equipment

As of December 31, 2023 and January 1, 2023, property, plant and equipment at cost and the related accumulated depreciation were:

(Dollars in Millions) December 31, 2023 January 1, 2023

As of December 29, 2024 and December 31, 2023, property, plant, and equipment at cost and the related accumulated depreciation were:

(Dollars in Millions) December 29, 2024 December 31, 2023

Machinery and equipment $ 2,250 $ 2,447

6 unchanged sentences

Total property, plant, and equipment, net (1)

Depreciation expense in the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 was $ 305 million, $ 296 million, and $ 317 million, respectively.

$ 1,849 $ 2,042

(1) As of December 29, 2024, the Consolidated Balance Sheet reflects an adjustment for a change in classification from Property, plant, and equipment, net of $ 288 million to Other assets and Additional paid-in capital of $ 169 million and $ 84 million, respectively, related to certain cloud computing arrangements, net of amortization of $ 35 million.

The Company concluded that this adjustment was not material to the Consolidated Financial Statements for either the current period or prior periods.

Cloud Computing Arrangements

Certain of the Company’s information technology contracts have been deemed to be cloud computing arrangements, which include software as a service, platform as a service, and infrastructure as a service contracts.

Certain costs incurred for the implementation of the cloud computing arrangements are capitalized and amortized on a straight-line basis over the term of the contract.

For each component of the cloud computing arrangements, amortization begins when the component becomes ready for its intended use.

Capitalized implementation costs are presented in Other assets on the Consolidated Balance Sheets, which is the same financial statement line item in which a prepayment of the fees for the associated cloud computing arrangements would be presented.

Amortization expense recorded on capitalized implementation costs is presented in Selling, general, and administrative expenses and Cost of sales in the Consolidated Statements of Operations, which are the same financial statement line items in which the expense for fees related to the associated cloud computing arrangements are presented.

Capitalized implementation costs and accumulated amortization related to the Company’s cloud computing arrangements were as follows as of December 29, 2024:

(Dollars in Millions)

December 29, 2024

Cloud computing arrangements, gross

accumulated amortization

Total cloud computing arrangements, net

See “—Property, Plant, and Equipment” above for information related to cloud computing arrangements for the fiscal twelve months ended December 31, 2023.

Depreciation Expense

Depreciation expense for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 was as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Depreciation expense (1)

$ 353 $ 305 $ 296

(1) Depreciation for the fiscal twelve months ended December 29, 2024 includes $ 145 million of amortization of integration and development costs capitalized in connection with cloud computing arrangements, as discussed in “—Cloud Computing Arrangements” above.

See “—Property, Plant, and Equipment” above for information related to cloud computing arrangements for the fiscal twelve months ended December 31, 2023.

Intangible Assets and Goodwill

As of December 31, 2023 and January 1, 2023, the gross and net amounts of intangible assets were:

December 31, 2023 January 1, 2023

As of December 29, 2024 and December 31, 2023, the gross and net amounts of intangible assets were:

December 29, 2024 December 31, 2023

(Dollars in Millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

3 unchanged sentences

Other intangibles (1)

1,276 ( 694 ) 582 1,320 ( 669 ) 651

Total definite-lived intangible assets $ 7,319 $ ( 3,548 ) $ 3,771 $ 7,889 $ ( 3,518 ) $ 4,371

3 unchanged sentences

Total intangible assets, net $ 12,022 $ ( 3,548 ) $ 8,474 $ 13,137 $ ( 3,518 ) $ 9,619

The weighted average amortization period for patents and trademarks is 20 years.

The weighted average amortization period for customer relationships is 32 years and is driven by large established distributors in various regional markets.

These customers have been operating in these markets for many years and are expected to continue to operate in these markets for the foreseeable future.

The weighted average amortization period for other intangible assets is 34 years.

A majority of the other

intangible assets relates to the acquisition of Pfizer Consumer Health in 2006.

Carrying amount changes for the fiscal twelve months ended December 31, 2023 and January 1, 2023 were driven by currency translations.

The Company recognized an intangible asset impairment of $ 12 million related to certain definite-lived trademarks deemed as irrecoverable in Other operating (income) expense, net for the fiscal twelve months ended January 1, 2023.

The Company did not recognize an intangible asset impairment during the fiscal twelve months ended December 31, 2023 and January 2, 2022.

Amortization expense, which was included in Cost of Sales, for the Company’s amortizable assets was as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

Trademarks $ 187 $ 187 $ 213

Customer relationships and Other intangibles

Total Amortization expense $ 322 $ 348 $ 414

The estimated amortization expense before tax for the five succeeding years is approximately:

(1) The majority of the other intangible assets balance relates to the acquisition of Pfizer Consumer Health in 2006.

Gross carrying amount changes for the fiscal twelve months ended December 29, 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 of Long-Lived Assets.” The change was further driven by the impact of currency translations.

The Company recognized an intangible asset impairment of $ 12 million related to certain definite-lived trademarks deemed as irrecoverable in the Impairment charges line item in the Consolidated Statement of Operations for the fiscal twelve months

ended January 1, 2023.

No intangible asset impairments were recognized for the fiscal twelve months ended December 31, 2023.

Amortization expense for the Company’s amortizable assets, which is included in Cost of sales, was $ 269 million, $ 322 million, and $ 348 million for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

The schedule of amortization expense for the five succeeding fiscal years is as follows:

(Dollars in Millions)

1 unchanged sentence

$ 257 $ 257 $ 252 $ 252 $ 243

During the fiscal twelve months ended January 1, 2023, the Company realigned and began managing its operations differently, and as a result the Company reallocated its goodwill to align with the new operating segments during the fiscal twelve months ended January 1, 2023.

This realignment in segment structure resulted in a change in the Company’s former reporting units, which are now divided between:

1) Self Care, 2) Skin Health and Beauty, and 3) Essential Health, which are also the Company’s reportable segments.

As a result of this realignment, goodwill was reassigned to each of the reporting units using a relative fair value approach.

The Company estimates the fair values of a reporting unit using a discounted cash flow model.

Goodwill by reportable segment was as follows:

(Dollars in Millions) Consumer Health Business Self Care Skin Health and Beauty Essential Health Total

Goodwill at January 2, 2022

Goodwill by reportable business segment was as follows:

(Dollars in Millions) Self Care Skin Health and Beauty Essential Health Total (1)

Goodwill as of January 1, 2023

$ 5,194 $ 2,365 $ 1,626 $ 9,185

Currency translation/other ( 664 ) — — — ( 664 )

Goodwill at July 3, 2022 $ 9,146 $ — $ — $ — $ 9,146

Realignment of segment goodwill ( 9,146 ) 5,193 2,334 1,619 —

Currency translation/other — 1 31 7 39

Goodwill at January 1, 2023

Currency translation

114 ( 50 ) 22 86

Currency translation/other — 114 ( 50 ) 22 86

Goodwill at December 31, 2023

Goodwill as of December 31, 2023

5,308 2,315 1,648 9,271

Currency translation

( 254 ) ( 130 ) ( 44 ) ( 428 )

Goodwill as of December 29, 2024

$ 5,054 $ 2,185 $ 1,604 $ 8,843

(1) The majority of the Goodwill balance relates to the acquisition of Pfizer Consumer Health in 2006.

The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants.

The Company estimates the fair values of a reporting unit using a discounted cash flow model.

The Company estimates the fair value of a reporting unit using a discounted cash flow model.

The discounted cash flow model relies on assumptions regarding revenue and net income growth rates, projected working capital needs, capital expenditures, and discount rates.

To estimate fair value, the Company discounts the forecasted cash flows of each reporting unit.

The discount rate the Company uses represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return a market participant would expect to earn.

The discount rate the Company uses represents the estimated weighted-average cost of capital, which reflects the overall level of inherent risk involved in the reporting unit’s operations and the rate of return a market participant would expect to earn.

The quantitative fair value test is performed utilizing long-term growth rates and discount rates applied to the estimated cash flows in estimation of fair value.

To forecast a reporting unit’s cash flows the Company takes into consideration economic conditions and trends, estimated future operating results, management’s projections, and a market participant’s view of growth rates and product lives, and anticipates future economic conditions.

Revenue growth rates inherent in these forecasts are based on input from internal and

external market research that compare factors such as growth in global economies, recent industry trends and product lifecycles.

To forecast a reporting unit’s cash flows, the Company takes into consideration economic conditions and trends, estimated future operating results, management’s projections, a market participant’s view of growth rates and product lives, and anticipated future economic conditions.

Revenue growth rates inherent in these forecasts are based on input from internal and external market research that compare factors such as growth in global economies, recent industry trends, and product lifecycles.

Macroeconomic factors such as changes in economies, changes in the competitive landscape, changes in government legislation, product lifecycles, industry consolidations, and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets.

Accordingly, if market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future.

Re-segmentation Goodwill Impairment Test

Following the change in reporting units during the fiscal twelve months ended January 1, 2023, the Company performed a quantitative impairment test on each of the reporting units:

1) Self Care, 2) Skin Health and Beauty, and 3) Essential Health.

After completing the testing, the fair value of each of these reporting units exceeded its carrying value, and, therefore, there was no impairment to goodwill.

Annual Goodwill Impairment Tests

The Company completed its annual goodwill impairment tests for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 by performing a quantitative assessment on each of the reporting units and concluded that no impairment to goodwill was necessary as the fair value of each reporting unit was in excess of its respective carrying value.

The components of the Company’s debt as of December 31, 2023 and January 1, 2023 were as follows:

(Dollars in Millions) December 31, 2023 January 1, 2023

The Company completed its annual goodwill impairment tests for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 by performing a quantitative assessment on each of the reporting units and concluded that no impairment to goodwill was necessary as the fair value of each reporting unit was in excess of its respective carrying value.

The components of the Company’s debt as of December 29, 2024 and December 31, 2023 were as follows:

(Dollars in Millions) December 29, 2024 December 31, 2023

5.50 % Senior Notes due 2025

7 unchanged sentences

Discounts and debt issuance costs ( 64 ) ( 72 )

Current portion of long-term debt—principal amount, net of discounts and debt issuance costs

Total long-term debt 7,055 7,687

Current portion of long-term debt — —

Current portion of long-term debt—principal amount

Commercial paper 800 600

2 unchanged sentences

Total debt $ 8,607 $ 8,286

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 in a private placement.

(1) As of December 29, 2024, Other includes $ 113 million of finance lease liabilities associated with the Global and North America Headquarters Lease.

See Note 8, “Leases,” for more information.

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.

1 unchanged sentence

See “—Facility Agreement” below for additional details.

In connection with the issuance of the Senior Notes, the Company entered into a registration rights agreement with the initial purchasers, pursuant to which the Company was obligated to use commercially reasonable efforts to file with the SEC and cause to become effective a registration statement with respect to an offer to exchange each series of Senior Notes for registered notes with terms that are substantially identical in all material respects to the notes of such series.

On October 19, 2023, the Company completed an exchange offer of its outstanding unregistered Senior Notes (“the Original Senior Notes”) for new notes

registered pursuant to the Securities Act (the “Exchange Senior Notes”).

In connection with the issuance of the Senior Notes, the Company entered into a registration rights agreement with the initial purchasers, pursuant to which the Company was obligated to use commercially reasonable efforts to file with the Securities and Exchange Commission (the “SEC”) and cause to become effective a registration statement with respect to an offer to exchange each series of Senior Notes for registered notes with terms that are substantially identical in all material respects to the notes of such series.

On October 19, 2023, the Company completed an exchange offer of its outstanding unregistered Senior Notes (the “Original Senior Notes”) for new notes registered pursuant to the Securities Act (the “Exchange Senior Notes”).

The terms of each series of the Exchange Senior Notes are substantially identical to the terms of the applicable series of Original Senior Notes, except the Exchange Senior Notes are registered under the Securities Act, and certain transfer restrictions, registration rights, and provisions relating to additional interest relating to the Company’s registrations do not apply to the Exchange Senior Notes.

As a result of this exchange, we incurred filing and legal fees that were not significant, which the Company capitalized as debt issuance costs.

The unamortized discounts and debt issuance costs related to the Senior Notes at December 31, 2023 were approximately $ 72 million.

Amortization of discounts and debt issuance costs related to the Senior Notes for the fiscal twelve months ended December 31, 2023 was $ 5 million.

The weighted average effective interest rate of the Company’s long-term debt as of December 31, 2023 was 5.1 %.

As a result of this exchange, the Company incurred filing and legal fees that were not significant, which the Company capitalized as debt issuance costs.

The weighted-average effective interest rate of the Company’s long-term debt was 5.1 % and 5.1 % as of December 29, 2024 and December 31, 2023, respectively.

The weighted-average effective interest rate of the Company’s current portion of long-term debt was 5.5 % as of December 29, 2024.

The interest payments are due on March 22 and September 22 of each year and commenced on September 22, 2023.

8 unchanged sentences

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.

The schedule of principal payments required on the Company’s Senior Notes for the next five years, and thereafter, is as fol lows:

The schedule of principal payments required on the Company’s Senior Notes for the five succeeding fiscal years, and thereafter, is as fol lows:

(Dollars in Millions)

5 unchanged sentences

Any such issuance will mature within 364 days from date of issue.

The Commercial Paper Program contains representations and warranties, covenants and default that are customary for this type of financing.

The Commercial Paper 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 December 29, 2024, the Company had $ 797 million of outstanding balances under its Commercial Paper Program, net of a related discount of $ 3 million.

Interest expense incurred as a result of the Commercial Paper Program for the fiscal twelve months ended December 31, 2023 was $ 25 million.

The weighted average effective interest rate of the Company’s commercial paper as of December 31, 2023 was 5.2 % and the weighted average maturities as of December 31, 2023 were less than 90 days.

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.

The weighted-average effective interest rate of the Company’s commercial paper was 5.2 % and 5.2 % as of December 29, 2024 and December 31, 2023, respectively.

The weighted-average maturities were less than 90 days as of both December 29, 2024 and December 31, 2023.

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.

Interest is payable on the loans under the Revolving Credit Facility at 1) in the case of borrowings denominated in U.S.

2 unchanged sentences

Interest payments are due 1) in the case of Term SOFR or EURIBOR borrowings, on the last day of each interest period applicable to the borrowing (or, in the case of any borrowing with an interest period of more than three months’ duration, every three months), 2) in the case of an adjusted base rate borrowing, on the last day of each March, June, September, and December, and 3) in the case of swingline borrowings, on the fifth business day after the borrowing.

In connection with entering the Revolving Credit Facility, the Company paid an immaterial amount of debt issuance costs.

These costs related to securing the Revolving Credit Facility are presented within Prepaid expenses and other receivables on the Consolidated Balance Sheets.

connection with entering the Revolving Credit Facility, the Company paid an immaterial amount of debt issuance costs.

These costs related to securing the Revolving Credit Facility are presented within Other assets on the Consolidated Balance Sheets.

The Revolving Credit Facility contains representations and warranties, covenants, and events of default that are customary for this type of financing, including covenants restricting the incurrence of liens and the entry into certain merger transactions.

2 unchanged sentences

Kenvue unconditionally guarantees all of the obligations of the borrowers (other than itself) under the Revolving Credit Facility on an unsecured basis.

As of December 31, 2023, the Company had no outstanding balances under its Revolving Credit Facility.

As of both December 29, 2024 and December 31, 2023, the Company had no outstanding balances under its Revolving Credit Facility.

On January 30, 2025, the Company requested an extension of the maturity date of its Revolving Credit Facility from March 6, 2028 to March 6, 2029, and on February 21, 2025, such extension became effective with respect to all lenders under the Revolving Credit Facility, each of which accepted such request.

The terms of the Revolving Credit Facility otherwise remain unchanged.

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.

Interest on loans made from the Facility Agreement was charged at an interest rate equal to the Secured Overnight Financing Rate (“SOFR”) less an adjusted margin of 15 basis points, with a floor of 0 % (a weighted average interest rate of 4.7 %) to be paid monthly in arrears.

The Company recognized interest income of $ 33 million for the fiscal twelve months ended December 31, 2023 in relation to the Facility Agreement.

Interest on loans made from the Facility Agreement was charged at an interest rate equal to the Secured Overnight Financing Rate less an adjusted margin of 15 basis points, with a floor of 0 % (a weighted-average interest rate of 4.7 %) to be paid monthly in arrears.

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 remitted this cash back to J&J as a distribution back to J&J in connection with the Separation.

The cash flows for the lending, and repayment, of the principal balance of the Facility Agreement are presented within cash flows from investing activities within the Statement of Cash Flows.

Cash inflows from the interest earned on the Facility Agreement are presented within Interest expense, net in the Company’s Consolidated Statements of Operations and are presented as cash inflows from operations within the Statement of Cash Flows.

The Company earned interest income of $ 33 million for the fiscal twelve months ended December 31, 2023 in relation to the Facility Agreement.

The Company remitted this cash back to J&J as a distribution in connection with the Separation.

The cash flows for the lending, and repayment, of the principal balance of the Facility Agreement are presented within cash flows from investing activities within the Consolidated Statement of Cash Flows.

Cash inflows from the interest earned on the Facility Agreement are presented within Interest expense, net in the Consolidated Statements of Operations and are presented as cash inflows from operations within the Consolidated Statement of Cash Flows.

Interest Expense, Net

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

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

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 29, 2024 December 31, 2023

Interest expense $ 431 $ 358

Interest income (1)

Interest expense, net $ 250 $ — $ —

(1) Includes interest income of $ 33 million for the fiscal twelve months ended December 31, 2023 recognized in relation to the Facility Agreement with J&J.

( 53 ) ( 108 )

Total interest expense, net $ 378 $ 250

(1) Includes interest income of $ 33 million for the fiscal twelve months ended December 31, 2023 recognized in relation to the Facility Agreement.

No Interest expense, net was recognized for the fiscal twelve months ended January 1, 2023.

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 $ 8.0 billion as of December 31, 2023.

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 December 31, 2023 due to the nature and short-term duration of the instrument.

The estimated fair value of the Company’s Senior Notes was $ 7.5 billion and $ 8.0 billion as of December 29, 2024 and December 31, 2023, respectively.

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 December 29, 2024 and December 31, 2023 due to the nature and short-term duration of the instrument.

Compliance with Covenants

1 unchanged sentence

Employee-Related Obligations

As of December 31, 2023 and January 1, 2023, employee related obligations recorded on the Company’s Consolidated Balance Sheets were:

(Dollars in Millions) December 31, 2023 January 1, 2023

As of December 29, 2024 and December 31, 2023, employee-related obligations recorded on the Consolidated Balance Sheets were:

(Dollars in Millions) December 29, 2024 December 31, 2023

Pension benefits $ 339 $ 342

1 unchanged sentence

Severance benefits

Total employee obligations 386 221

Total employee-related obligations

current benefits in Accrued liabilities ( 37 ) ( 26 )

Employee-related obligations — non-current

In connection with the completion of the Separation, the Company converted all multiemployer plans to a multiple employer plan or a single-employer plan.

In connection with the completion of the Separation, the Company converted all multiemployer pension plans to a multiple-employer pension plan or a single-employer pension plan.

Single-Employer Plans

The Company is the plan sponsor for certain defined benefit retirement plans (collectively, “the Plans”) and these Consolidated Financial Statements reflect the periodic benefit costs and funded status of such plans.

The Company is the plan sponsor for certain defined benefit retirement plans (collectively, “the Plans”), and the Consolidated Financial Statements reflect the periodic benefit costs and funded status of such plans.

The Company uses December 31 as the fiscal year-end measurement date for the Plans, which are located outside the United States.

Net periodic benefit costs for the Company’s defined benefit retirement plans sponsored by the Company for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 included the following components:

Net periodic benefit costs for the Plans sponsored by the Company for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 included the following components:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Service cost $ 30 $ 21 $ 8

Interest cost 28 26 4

Amortization of (gain) loss ( 2 ) 4 6

Amortization of loss (gain) 3 ( 2 ) 4

Special events

Expected return on plan assets ( 34 ) ( 25 ) ( 1 )

Net periodic benefit cost $ 30 $ 15 $ 15

The service cost component of net periodic benefit cost is presented in the same line items in the Consolidated Statements of Operations where other employee compensation costs are reported, including Cost of sales and SG&A expenses.

All other components of net periodic benefit costs are presented as part of Other expense (income), net in the Consolidated Statements of Operations.

Total net periodic benefit cost

$ 33 $ 30 $ 15

The special events component of net periodic benefit cost for the fiscal twelve months ended December 29, 2024 is presented as part of Restructuring expenses in the Consolidated Statement of Operations.

All other components of net periodic benefit costs are presented as part of Other expense, net in the Consolidated Statements of Operations.

During the fiscal twelve months ended December 29, 2024, the Company recognized a settlement loss of $ 6 million associated with global workforce reductions in connection with the 2024 Multi-Year Restructuring Initiative (as defined in Note 19, “Restructuring Expenses and Operating Model Optimization Initiatives”).

During the fiscal twelve months ended December 31, 2023, the Company converted a defined benefit plan to a defined contribution plan, which resulted in a settlement loss of $ 14 million, partially offset by a curtailment gain of $ 4 million.

The net balance is disclosed in the “Special events” line within Net periodic benefit cost.

The following table provides the weighted-average actuarial assumptions:

This net balance, as well as the settlement loss recognized in the fiscal twelve months ended December 29, 2024, are disclosed in “Special events” within Net periodic benefit cost.

The following table provides the weighted-average actuarial assumptions related to the Plans sponsored by the Company for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023:

Fiscal Twelve Months Ended

Worldwide Benefit Plans December 31, 2023 January 1, 2023 January 2, 2022

December 29, 2024 December 31, 2023 January 1, 2023

Net Periodic Benefit Cost

5 unchanged sentences

3.3 % 3.3 % 2.5 %

Expected long-term rate of return on plan asses

Expected long-term rate of return on plan assets

5.5 % 5.5 % 2.9 %

9 unchanged sentences

The assessment is determined using projections from external financial sources, long-term historical averages, actual returns by asset class, and the various asset class allocations by market.

The following table sets forth information related to the benefit obligation and the fair value of plan assets for the fiscal twelve months ended December 31, 2023 and January 1, 2023 for the Plans sponsored by the Company:

The following table sets forth information related to the benefit obligation and the fair value of plan assets for the fiscal twelve months ended December 29, 2024 and December 31, 2023 for the Plans sponsored by the Company:

Fiscal Twelve Months Ended

(Dollars in Millions)

December 31, 2023 January 1, 2023

December 29, 2024 December 31, 2023

Change in Benefit Obligation

4 unchanged sentences

Plan participants’ contributions

Curtailments, settlements & restructuring ( 50 ) —

Curtailments, settlements, and restructuring

( 39 ) ( 50 )

Benefits paid from plan ( 15 ) ( 22 )

7 unchanged sentences

Actual return on plan assets 21 ( 30 )

Curtailments, settlements & restructuring

Curtailments, settlements, and restructuring

( 29 ) ( 36 )

Effect of exchange rates ( 23 ) 18

2 unchanged sentences

Funded status — end of year

$ ( 260 ) $ ( 294 )

Amounts recognized on the Consolidated Balance Sheets consist of the following:

Other assets $ 84 $ 53

Accrued liabilities ( 9 ) ( 9 )

Employee related obligations - non-current ( 338 ) ( 209 )

Employee-related obligations ( 335 ) ( 338 )

Total recognized on the Consolidated Balance Sheets — end of year

$ ( 260 ) $ ( 294 )

Amounts recognized in Accumulated Other Comprehensive Income consist of the following:

Net actuarial (gain) loss $ 123 $ ( 15 )

Amounts recognized in Accumulated other comprehensive loss consist of the following:

Net actuarial loss $ 170 $ 123

Prior service cost ( 5 ) ( 6 )

1 unchanged sentence

Accumulated benefit obligations — end of year

(1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates.

The actuarial loss in 2023 was primarily related to increases in discount rates and changes in the rate of compensation.

(Dollars in Millions) December 31, 2023 January 1, 2023

(1) The actuarial gain in the fiscal twelve months ended December 29, 2024 was primarily related to an increase in the discount rate.

The actuarial loss in the fiscal twelve months ended December 31, 2023 was primarily related to a decrease in the discount rates and an increase in the rate of compensation.

The amounts recognized in net periodic benefit cost and Other comprehensive (loss) income related to the Plans sponsored by the Company for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 were as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Net periodic benefit cost $ 33 $ 30 $ 15

Net actuarial loss (gain) (1)

Amortization of net actuarial loss 4 ( 4 )

Net actuarial gain (loss) ( 36 ) 118 ( 82 )

Amortization of net actuarial gain (loss) ( 9 ) 4 ( 4 )

Effect of exchange rates ( 7 ) 9 ( 6 )

Total (income)/loss recognized in other comprehensive income, before tax $ 131 $ ( 92 )

Total recognized in net periodic benefit cost and other comprehensive income $ 161 $ ( 77 )

(1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates.

The actuarial loss in 2023 was primarily related to decreases in discount rates and changes in the rate of compensation.

The Company’s pension plans are funded in accordance with local regulations.

Total (income) loss recognized in Other comprehensive (loss) income, before tax $ ( 52 ) $ 131 $ ( 92 )

Total recognized in net periodic benefit cost and Other comprehensive (loss) income $ ( 19 ) $ 161 $ ( 77 )

The Plans are funded in accordance with local regulations.

Additional discretionary contributions are made when deemed appropriate to meet the long-term obligations of the Plans.

For certain plans, funding is not a common practice, as funding provides no economic benefit.

Consequently, the Company’s pension plans are not funded.

The following table displays the projected future benefit payments from the Company’s defined benefit retirement plans and other benefit plans:

For certain plans, funding is not a common practice, as funding provides no economic benefit, and consequently, these plans are not funded.

The schedule of projected future benefit payments from the Plans for the ten succeeding fiscal years is as follows:

(Dollars in Millions)

Projected future benefit payments

Retirement plans $ 35 $ 38 $ 37 $ 38 $ 41 $ 231

2025 2026 2027 2028 2029 2030–2034

$ 50 $ 34 $ 34 $ 36 $ 39 $ 220

The Company currently has $ 14 million in projected benefit plan contributions.

3 unchanged sentences

The Company’s retirement plan assets as of December 29, 2024 were primarily comprised of debt, equity, and other assets.

Other assets are mainly comprised of monetary assets such as cash and real estate property.

Other assets are mainly comprised of monetary assets such as cash, insurance contracts, and insured benefits to employees allocated from a pension Trustee.

The Company further invests in commingled funds that are actively investing with a focus to meet the allocation and risk exposure by focusing on debt or equity securities.

The increased volatility associated with equity securities that generate higher expected returns are offset by long duration fixed income securities that help reduce the volatility of the overall portfolio.

Investment risk exposure is carefully controlled with plan assets rebalanced to target allocations on a periodic basis and continued monitoring through investment portfolio reviews.

The Company’s retirement plan asset allocation at the end of December 31, 2023 and January 1, 2023 and target allocations for 2024 are as follows:

The asset allocation as of December 29, 2024 and December 31, 2023 and target allocations for 2025 related to the Plans are as follows:

Percent of Plan Assets Target Allocation

Worldwide Retirement Plans

December 31, 2023 January 1, 2023 2024

Equity securities

December 29, 2024 December 31, 2023 2025

Debt instruments

49 % 54 % 58 %

Debt securities

Equity securities

14 % 19 % 13 %

21 unchanged sentences

Substantially all cash and monetary assets are classified within Level 1 of the valuation hierarchy.

Insurance contracts with a defined return are classified as Level 2 assets within the valuation hierarchy.

As of December 31, 2023, other assets also included insured benefits to employees allocated from a pension Trustee.

As of December 29, 2024, insurance contracts with a defined return are classified as Level 3 assets within the valuation hierarchy.

Other assets also included insured benefits to employees allocated from a pension Trustee.

The value of these assets is determined based on the vested value of the underlying employee obligations multiplied by the publicly available coverage ratio of the Trustee.

These assets are categorized as Level 3.

• Commingled Funds — The fair value of non-publicly traded funds is determined using the NAV provided by the administrator of the fund when the Company has the ability to redeem the asset at measurement date.

• Commingled Funds —The fair value of non-publicly traded funds is determined using the NAV provided by the administrator of the fund when the Company has the ability to redeem the asset at the measurement date.

When the Company is using the NAV as a practical expedient, those investments are not included in the valuation hierarchy.

1 unchanged sentence

Assets in the Level 2 category have a quoted market price.

The following table sets forth the retirement plans' investments measured at fair value as of December 31, 2023 and January 1, 2023:

The following table sets forth the Plans’ investments measured at fair value as of December 29, 2024 and December 31, 2023:

Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (1)

Assets Measured at NAV

(Dollars in Millions)

December 31, 2023

(Dollars in Millions) December 29, 2024

Debt instruments $ — $ 223 $ — $ — $ 223

1 unchanged sentence

44 — 151 — 195

$ 56 $ 1 $ 146 $ — $ 203

Commingled funds

Total investments at fair value

$ 52 $ 315 $ 151 $ 8 $ 526

Investments at fair value $ 82 $ 299 $ 146 $ 8 $ 535

(1) The activity of the Level 3 Other Assets is consist of $ 127 million transfers from J&J and $ 19 million of returns during the year resulting from additional vested benefits and the trustee’s coverage ratio.

Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets

(Dollars in Millions)

January 1, 2023

(1) The activity of the Level 3 other assets was not significant.

Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (1)

Assets Measured at NAV

(Dollars in Millions) December 31, 2023

Debt instruments $ — $ 197 $ — $ — $ 197

1 unchanged sentence

56 1 146 — 203

Commingled funds

— 101 — 8 109

Investments at fair value $ 9 $ 9 $ 1 $ 19

Total investments at fair value

$ 82 $ 299 $ 146 $ 8 $ 535

(1) The activity of the Level 3 other assets consists of $ 127 million transfers from J&J and $ 19 million of returns during the year resulting from additional vested benefits and the trustee’s coverage ratio.

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.

Prior to the Separation, the Company’s employees participated in J&J’s defined benefit pension plans, which covered eligible employees in the United States and certain foreign jurisdictions.

J&J also provided 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 Company's Consolidated Balance Sheets.

J&J’s defined benefit pension plans were accounted for as multiemployer pension plans, and assets and liabilities associated with these plans were not reflected on the 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 Consolidated Statements of Operations include expense allocations for these benefits, which were determined using a proportional allocation method.

Total benefit plan expense allocated to the Company amounted to $ 17 million, $ 54 million, and $ 93 million for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

The Consolidated Statements of Operations for the fiscal twelve months ended December 31, 2023 and January 1, 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 $ 17 million and $ 54 million for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively.

No allocations were made subsequent to the fiscal three months ended July 2, 2023, during which Kenvue became a fully independent company.

In connection with the Separation, J&J has provided participation rights for a 15-year period for certain employees to continue receiving the pension benefits within the United States and Canada.

As a result of this benefit provided to Kenvue employees, an asset has been recorded on the Consolidated Balance Sheet during the fiscal twelve months ended December 31, 2023 in the amount of $ 94 million that will be amortized straight line over the 15-year period ended 2039.

In the United States, the Company has voluntary 401(k) savings plans designed to enhance the existing retirement programs covering eligible employees.

The Company matches a percentage of each employee’s contributions consistent with the provisions of the plan for which he/she is eligible.

Total matching contributions attributable to the Company’s employees were $ 46 million, $ 14 million, and $ 14 million for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

The Company has 401(k) savings plans designed to enhance the existing retirement programs covering eligible employees.

The Company matches a percentage of each employee’s contributions consistent with the provisions of the plan for which they are eligible.

Total contributions attributable to the Company’s employees were $ 108 million, $ 46 million, and $ 14 million for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

Post-Employment Benefit Plans

Additionally, J&J maintains a post-employment benefit plan to provide limited benefits to its former employees, including former employees of the Company, if they are involuntarily terminated.

The duration of these benefits is generally based on the employee’s term of service with J&J, and includes both severance compensation and other benefits, including medical coverage.

The post-employment plan is published and is considered a benefit to employees which is earned over the employee’s term of service.

As a result, J&J recognizes the cost of this benefit as it is earned by the employee as required by ASC 712, Compensation — non-retirement post-employment benefits.

The cost of this benefit allocated to the Company in the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 was approximately $ 18 million, $ 46 million, and $ 49 million, respectively, and is reflected as an expense in the Consolidated Statements of Comprehensive Income.

Right of Use (“ROU”) assets are included in Other assets and lease liabilities are included in Accrued liabilities and Other liabilities on the Consolidated Balance Sheets.

The ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of all minimum lease payments over the lease term.

The Company uses its incremental borrowing rate for leases entered into after the

Separation based on the information available at commencement date in determining the present value of lease payments, when the implicit rate of the lease is not readily determinable.

Prior to the Separation, the Company used J&J’s incremental borrowing rate.

The Company primarily has operating leases for space, vehicles, manufacturing equipment and data processing equipment.

The Company does not have any significant finance leases.

In connection with the Kenvue IPO, J&J and Kenvue also entered into various lease agreements, in which the Company subleased properties from J&J.

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 that option.

Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Operating lease expense is recognized on a straight-line basis over the lease term.

Global Corporate Headquarters Lease

On April 20, 2023, the Company entered into a long-term lease for a newly renovated office building and a newly constructed research and development building in Summit, New Jersey that, when completed, will encompass a total of approximately 290,000 square feet and serve as the Company’s new global corporate headquarters.

The lease commenced in January 2024.

The expected lease expense is approximately $ 10 million per year with an initial term of 15 years.

In addition to corporate office space, this campus will house laboratory space to principally support research and development.

The relocation to this campus is expected to commence in 2025 for the office building and continue through 2026 for the new research and development building.

The Company will continue to operate from its interim corporate headquarters in Skillman, New Jersey until that time.

On February 21, 2024, we listed our headquarters in Skillman for sale, which met the criteria to be classified as held for sale at that date.

Lease Assets and Liabilities

Right of Use assets (“ROU assets”) and lease liabilities associated with the Company's operating leases are included on the Consolidated Balance Sheets as of December 31, 2023 and January 1, 2023 were as follows:

Prior to the Separation, J&J maintained a post-employment benefit plan to provide limited benefits to its former employees, including former employees of the Company, if they were involuntarily terminated.

The duration of these benefits was generally based on the employee’s term of service with J&J, and included both severance compensation and other benefits, including medical coverage.

The post-employment plan was published and was considered a benefit to employees which was earned over the employee’s term of service.

As a result, J&J recognized the cost of this benefit as it was earned by the employee as required by ASC 712, Compensation—non-retirement post-employment benefits.

The cost of this benefit allocated to the Company in the fiscal twelve months ended December 31, 2023 and January 1, 2023 was approximately $ 18 million and $ 46 million, respectively, and is reflected as an expense in the Consolidated Statements of Comprehensive Income.

No allocations were made subsequent to the fiscal three months ended July 2, 2023, during which Kenvue became a fully independent company.

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 and North America corporate headquarters in Summit, New Jersey (as described in the “—Global and North America Headquarters Lease” section below).

The Company did not have significant finance leases during the fiscal twelve months ended December 31, 2023 and January 1, 2023.

The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Global and North America Headquarters Lease

On April 20, 2023, the Company entered into a long-term lease for a newly renovated global and North America corporate headquarters building and a newly constructed research and development building in Summit, New Jersey (the “Global and North America Headquarters Lease”).

The Company expects to officially open the new global and North America corporate headquarters in March 2025.

The relocation to this new campus from multiple U.S.-based locations will continue through 2026 when the new research and development building is expected to be complete.

When construction is completed, the campus will encompass approximately 290,000 square feet.

The Global and North America Headquarters Lease collectively includes the lease associated with the global and North America corporate headquarters building (the “Corporate Office Lease”), the lease associated with the land where the research and development building is under construction (the “State-of-the-Art Lab Facility Lease”), and the lease associated with land to be used for amenities (the “Amenities Lease”).

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

ROU assets and lease liabilities associated with the Company's operating leases and finance leases are included on the Consolidated Balance Sheets as of December 29, 2024 and December 31, 2023 as follows:

Operating Leases Finance Leases

(Dollars in Millions) December 29, 2024 (1)

January 1, 2023

December 31, 2023 (2)

December 29, 2024 December 31, 2023

ROU assets included in:

Other non-current assets $ 139 $ 110

Property, plant, and equipment, net $ — $ — $ 111 *

Other assets 111 139 — *

Total ROU assets $ 111 $ 139 $ 111 *

Lease liabilities included in:

Accrued and other current liabilities 44 35

Other non-current liabilities 97 81

Accrued liabilities $ 36 $ 44 $ — *

Loans and notes payable — — 2 *

Long-term debt — — 119 *

Other liabilities 76 97 — *

Total lease liabilities $ 112 $ 141 $ 121 *

* The Company did not have significant finance leases as of December 31, 2023.

(1) Includes leases with J&J of $ 35 million of ROU assets, $ 11 million of current lease liabilities, and $ 24 million of non-current lease liabilities.

See Note 12, “Relationship with J&J,” for more information.

For the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, sublease income, short-term lease expense, and variable operating lease costs were not material.

Operating lease costs for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 were $ 48 million, $ 42 million, and $ 54 million, respectively.

(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.

The operating lease costs for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 were as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Operating lease costs

$ 48 $ 48 $ 42

For the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, sublease income and variable operating lease costs were not significant.

For the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, finance lease costs, including amortization of ROU assets and interest on lease liabilities, were not significant.

Maturity of Lease Liabilities

As of December 31, 2023, the estimated operating lease future payments before tax for the five succeeding years and thereafter is approximately:

(Dollars in Millions) Fiscal Twelve Months Ended

The schedule of payments required on the Company’s operating leases and finance leases for the five succeeding fiscal years, and thereafter, is as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) Operating Leases

Finance Leases

2025 $ 41 $ 2 $ 43

Thereafter 15 248 263

Total 123 269 392

Imputed interest 11 148 159

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Other Information

Other information related to operating leases for fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 were as follows:

Cash paid for amounts included in the measurement of lease liabilities related to operating leases for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 was as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

Cash paid from operating cash flows for amounts included in the measurement of lease liabilities $ 49 $ 43 $ 55

For the fiscal twelve months ended December 31, 2023, $ 120 million of ROU assets were obtained in exchange for new operating lease liabilities.

For both the fiscal twelve months ended January 1, 2023 and January 2, 2022, the amount of ROU assets obtained in exchange for new operating lease liabilities was not material.

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Cash paid for amounts included in the measurement of lease liabilities:

Operating leases

$ 50 $ 49 $ 43

For the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, cash paid for amounts included in the measurements of lease liabilities related to finance leases was not significant.

ROU assets obtained in exchange for new lease liabilities related to operating leases and finance leases for the fiscal twelve months ended December 29, 2024 and December 31, 2023 was as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 29, 2024 December 31, 2023

ROU assets obtained in exchange for new lease liabilities:

Operating leases

Finance leases

* The Company did not have significant finance leases during the fiscal twelve months ended December 31, 2023.

For the fiscal twelve months ended January 1, 2023, the amount of ROU assets obtained in exchange for new lease liabilities was not material.

Lease Term and Discount Rate

The following table discloses the weighted-average remaining lease term and weighted-average discount rate for the Company's leases, excluding short-term leases:

December 31, 2023 January 1, 2023

Weighted-average remaining lease term 5 years 7 years

The following table discloses the weighted-average remaining lease term and weighted-average discount rate for the Company's operating and finance leases, excluding short-term leases:

December 29, 2024 December 31, 2023 January 1, 2023

Weighted-average remaining lease term:

Operating leases

5 years 5 years 7 years

Finance leases

Weighted-average discount rate:

Operating leases

3.9 % 3.6 % 2.3 %

Finance leases

* The Company did not have significant finance leases during the fiscal twelve months ended December 31, 2023 and January 1, 2023.

Accrued and Other Liabilities

Accrued liabilities consisted of:

(Dollars in Millions) December 31, 2023 January 1, 2023

(Dollars in Millions) December 29, 2024 December 31, 2023

Accrued expenses $ 368 $ 465

Accrued compensation and benefits 325 406

Lease liability 44 35

Operating lease liabilities

Tax indemnification liability (1)

Other accrued liabilities

Accrued liabilities $ 1,456 $ 906

Other liabilities consisted of:

(Dollars in Millions) December 31, 2023 January 1, 2023

Accrued income taxes - noncurrent $ 188 $ 584

Noncurrent lease liability 97 81

Total accrued liabilities

$ 1,132 $ 1,456

Other liabilities, non-current, consisted of:

(Dollars in Millions) December 29, 2024 December 31, 2023

Accrued income taxes

Operating lease liabilities

Tax indemnification liability (1)

Other noncurrent accrued liabilities (2)

Other liabilities $ 491 $ 727

(1) The balance primarily relates to the Tax Matters Agreement 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 12, “Relationship with J&J,” for more information.

(2) The increase in Other current and noncurrent accrued liabilities relates primarily to the agreements entered into with J&J in connection with the Separation Agreement, which went into effect in the second quarter of fiscal year 2023.

See Note 12, “Relationship with J&J,” for more information.

Other accrued liabilities

Total other liabilities

(1) The balances primarily relate to the Tax Matters Agreement (as defined in Note 12, “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 12, “Relationship with J&J—Tax Indemnification,” for more information.

Accumulated Other Comprehensive Loss

Components of other comprehensive loss consisted of the following:

Components of Accumulated other comprehensive loss consisted of the following:

(Dollars in Millions) Foreign Currency Translation

Employee Benefit Plans (1)

Gain (Loss) On Cash Flow Hedges

Gain (Loss) on Derivatives and Hedges (2)

Total Accumulated Other Comprehensive Loss

January 2, 2022 $ ( 4,431 ) $ ( 51 ) $ ( 1 ) $ ( 4,483 )

OCI before reclassifications

( 923 ) 29 ( 3 ) ( 897 )

Amounts reclassified to the Consolidated Statements of Operations

— ( 4 ) 3 ( 1 )

Net current period OCI

( 923 ) 25 — ( 898 )

January 2, 2022 ( 4,431 ) ( 51 ) ( 1 ) ( 4,483 )

OCI before reclassifications

( 1,045 ) 66 12 ( 967 )

Amounts reclassified to the Consolidated Statements of Operations

— ( 3 ) ( 2 ) ( 5 )

Net current period OCI

Other comprehensive (loss) income before reclassifications ( 1,045 ) 66 12 ( 967 )

Amounts reclassified to the Consolidated Statement of Operations

— ( 3 ) ( 2 ) ( 5 )

Net current period Other comprehensive (loss) income ( 1,045 ) 63 10 ( 972 )

January 1, 2023 ( 5,476 ) 12 9 ( 5,455 )

OCI before reclassifications

219 ( 181 ) 66 104

Amounts reclassified to the Consolidated Statements of Operations

Other comprehensive income (loss) before reclassifications 219 ( 181 ) 66 104

Amounts reclassified to the Consolidated Statement of Operations

— 2 ( 28 ) ( 26 )

Net current period OCI

Net current period Other comprehensive income (loss) 219 ( 179 ) 38 78

December 31, 2023 ( 5,257 ) ( 167 ) 47 ( 5,377 )

Other comprehensive (loss) income before reclassifications ( 783 ) 29 ( 6 ) ( 760 )

Amounts reclassified to the Consolidated Statement of Operations

— 8 ( 17 ) ( 9 )

Net current period Other comprehensive (loss) income ( 783 ) 37 ( 23 ) ( 769 )

December 29, 2024 $ ( 6,040 ) $ ( 130 ) $ 24 $ ( 6,146 )

(1) Net change for the fiscal twelve months ended December 31, 2023 includes Separation adjustments of $ 77 million in connection with transfers of certain pensions plans by J&J to the Company.

(1) Net change for the fiscal twelve months ended December 31, 2023 includes Separation adjustments of $ 77 million in connection with transfers of certain pension plans by J&J to the Company.

(2) For the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, the Company recorded a total after-tax change in Accumulated other comprehensive loss of $( 23 ) million, $ 38 million, and $ 10 million, respectively, related to its cash flow hedge portfolio.

Amounts in Accumulated other comprehensive loss are presented net of the related tax impact.

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For additional details on comprehensive income, see the Consolidated Statements of Comprehensive Income.

The income tax (benefit) expense allocated to the components of Accumulated other comprehensive loss before reclassification are as follows:

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

Fiscal Twelve Months Ended

(Dollars in Millions)

December 31, 2023 January 1, 2023 January 2, 2022

December 29, 2024 December 31, 2023 January 1, 2023

Foreign currency translation

1 unchanged sentence

Employee benefit plans

$ 50 $ 30 $ 10

The income tax (benefit) expense allocated to gain (loss) on cash flow hedges before reclassification was not significant for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022.

The income tax (benefit) expense allocated to the reclassifications from Accumulated other comprehensive loss to the Consolidated Statements of Operations was not significant for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022.

The provision (benefit) for taxes allocated to gain (loss) on derivatives and hedges before reclassification was $ 11 million for the fiscal twelve months ended December 29, 2024.

The provision (benefit) for taxes allocated to gain (loss) on derivatives and hedges before reclassification was not significant for the fiscal twelve months ended December 31, 2023 and January 1, 2023.

The provision (benefit) for taxes allocated to the reclassifications from Accumulated other comprehensive loss to the

Consolidated Statements of Operations was not significant for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023.

Stock-Based Compensation

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J&J’s 2012 Long-Term Incentive Plan (the “J&J 2012 Plan”) expired on April 26, 2022.

Prior to that expiration, on March 7, 2022, J&J’s Board approved the 2022 Long-Term Incentive Plan, (the “J&J 2022 Plan”, together with the J&J 2012 Plan, the “J&J Plans”).

Prior to that expiration, on March 7, 2022, J&J’s Board of Directors approved the 2022 Long-Term Incentive Plan, (the “J&J 2022 Plan,” together with the J&J 2012 Plan, the “J&J Plans”).

The J&J 2022 Plan became effective subsequent to the expiration of the J&J 2012 Plan.

The J&J Plans provide for the grant of stock options, RSUs, PSUs, other stock-based awards, and cash awards to employees and directors, including

the Company’s personnel.

The J&J Plans provide for the grant of stock options, RSUs, PSUs, other stock-based awards, and cash awards to employees and directors, including the Company’s personnel.

Stock-based compensation granted pursuant to the J&J Plans was denominated in shares of J&J’s common stock.

As such, all awards granted subsequent to the effective date of the J&J 2022 Plan and prior to the completion of the Exchange Offer were issued under the J&J 2022 Plan.

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 (see the “Kenvue 2023 Plan” section below within this footnote for additional details) 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.

The awards were converted using the conversion ratio that was determined in accordance with the Employee Matters Agreement (as defined in Note 12, “Relationship with J&J”).

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 (see “—Kenvue 2023 Plan” below for additional details) 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.

The awards were converted using the conversion ratio that was determined in accordance with the Employee Matters Agreement (as defined in Note 12, “Relationship with J&J—Transactions with J&J, Including the Separation Agreement”).

This change in the awards was considered to be a modification for accounting purposes.

7 unchanged sentences

These RSUs provide for accelerated vesting in certain change in control scenarios.

The incremental cost of each RSU replaced is estimated based on the fair value of the Company’s common stock at the deemed Conversion Date, adjusted to reflect that the RSUs do not have dividend participation rights through the vesting date (using a dividend rate assumption consistent with the assumption disclosed within the table below).

The incremental cost of each RSU replaced was estimated based on the fair value of the Company’s common stock at the deemed Conversion Date, adjusted to reflect that the RSUs do not have dividend participation rights through the vesting date (using a dividend rate assumption consistent with the assumption disclosed within the table below).

Conversion of Stock Options

4 unchanged sentences

Each stock option has a weighted-average exercise price of approximately $ 21.01 as of the Conversion Date.

The fair value of each stock option is estimated using the Black-Scholes option valuation model.

The fair value of each stock option was estimated using the Black-Scholes option valuation model.

The assumptions used in calculating the fair value of the converted stock options were as follows:

7 unchanged sentences

0.5 years – 6.5 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.

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

(2) Expected dividend yield was 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 was then annualized.

(3) Risk-free rate was based on the U.S.

Treasury yield curve in effect as of the Conversion Date.

(4 ) Expected term is consistent with the historical experiences of J&J for awards similar to those in the Kenvue population.

(4) Expected term was consistent with the historical experiences of J&J for awards similar to those in the Kenvue population.

As noted above, the conversion of J&J awards to Kenvue awards was accounted for as a modification.

As a result, the J&J awards were deemed to be canceled and replaced by Kenvue awards, resulting in incremental stock-based compensation expense of $ 25 million recognized in the fiscal twelve months ended December 31, 2023 in relation to J&J denominated stock options which had vested.

With respect to the deemed cancellation of J&J stock options, PSUs, and RSUs that had not yet vested, the Company reversed $ 148 million of previously recognized stock-based compensation expense.

From the Conversion Date through the end of the fiscal twelve months ended December 31, 2023, the Company recognized $ 215 million of

compensation costs attributable to the RSUs and stock options described above.

With respect to the deemed cancelation of J&J stock options, PSUs, and RSUs that had not yet vested, the Company reversed $ 148 million of previously recognized stock-based compensation expense.

From the Conversion Date through the end of the fiscal twelve months ended December 31, 2023, the Company recognized $ 215 million of compensation costs attributable to the RSUs and stock options described above.

In total, the Company recognized incremental stock-based compensation expense of $ 240 million in the fiscal twelve months ended December 31, 2023.

Kenvue 2023 Plan

In March 2023, the Company’s Board approved the 2023 Long-Term Incentive Plan (the “Kenvue 2023 Plan”) providing for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, RSUs, 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.

Stock-based compensation granted pursuant to the Kenvue 2023 Plan is denominated in shares of the Company’s common stock.

In March 2023, the Company’s Board approved the 2023 Long-Term Incentive Plan (the “Kenvue 2023 Plan”) which provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, RSUs, 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.

Stock-based compensation granted pursuant to the Kenvue 2023 Plan is denominated in shares of Kenvue common stock.

The Kenvue 2023 Plan was approved by J&J, as sole shareholder of the Company, prior to the Kenvue IPO and became effective in May 2023.

The maximum aggregate number of shares of common stock that was approved for issuance under the Kenvue 2023 Plan was 188,897,256 .

69,438,910 shares underlying awards converted from J&J awards to Kenvue awards (as described in the “J&J Plans and Conversion of J&J Awards” section above), will not reduce the maximum aggregate number of shares of common stock that may be issued under the Kenvue 2023 Plan.

69,438,910 shares underlying awards converted from J&J awards to Kenvue awards (as described in “—J&J Plans and Conversion of J&J Awards” above) will not reduce the maximum aggregate number of shares of common stock that may be issued under the Kenvue 2023 Plan.

To meet share requirements resulting from the exercise of stock options and the vesting of RSUs and PSUs, the Company may use either authorized and unissued shares or shares of treasury stock.

Since the inception of the Kenvue 2023 Plan, all issuances resulting from the exercise of stock options and the vesting of RSUs and PSUs were issued from the authorized and unissued Kenvue 2023 Plan share pool.

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.

The Founder Shares were granted to executive officers in the form of stock options and PSUs and to non-executive individuals in the form of either RSUs or as stock options and PSUs.

The Company expects to recognize approximately $ 71 million in stock-based compensation expense related to 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.

The expense will be amortized over the requisite service period of the awards, which ranges from one to three years .

The components and classification of stock-based compensation expense directly attributable to those employees specifically identified as employees of the Company and allocations from J&J for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, were as follows:

The components and classification of stock-based compensation expense for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, were as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Stock options $ 84 $ 90 $ 43

1 unchanged sentence

PSUs 18 22 20

Stock-based compensation expense $ 188 $ 137 $ 141

Total stock-based compensation expense

$ 254 $ 188 $ 137

Cost of sales $ 100 $ 67 $ 30

Selling, general, and administrative expenses 154 121 107

Stock-based compensation expense $ 188 $ 137 $ 141

Stock-based compensation expense includes $ 2 million, $ 26 million, and $ 38 million for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively, of allocated charges from J&J based on percentage attribution related to J&J employees providing services to the Company.

Following the completion of the Separation, the Company no longer allocates charges of this nature.

The Company’s unrecognized compensation expense and the related remaining requisite service periods for stock options, RSUs, and PSUs outstanding for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, were as follows:

Total stock-based compensation expense

$ 254 $ 188 $ 137

Stock-based compensation expense includes $ 2 million and $ 26 million for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, of allocated charges from J&J based on percentage attribution related to J&J employees providing services to the Company.

No allocations were made subsequent to the fiscal three months ended July 2, 2023, during which Kenvue became a fully independent company.

The Company’s unrecognized stock-based compensation expense and the related weighted-average remaining requisite service periods for stock options, RSUs, and PSUs outstanding as of December 29, 2024 were as follows:

(Dollars in Millions)

Stock Options

December 31, 2023 January 1, 2023 January 2, 2022

Unrecognized compensation expense

$ 107 $ 34 $ 28

December 29, 2024

Unrecognized stock-based compensation expense

Weighted-average remaining requisite service period

1.44 years 1.21 years 1.76 years

Unrecognized compensation expense

$ 148 $ 58 $ 49

Unrecognized stock-based compensation expense

Weighted-average remaining requisite service period

1.38 years 1.27 years 1.74 years

Unrecognized compensation expense

$ 31 $ 13 $ 13

Unrecognized stock-based compensation expense

Weighted-average remaining requisite service period

2.78 years 1.28 years 1.82 years

(1) Unrecognized stock-based compensation expense for the Performance PSUs (as defined in “—Restricted Stock Units and Performance Stock Units” below) is calculated based on the Company’s best estimate of achievement of the specified performance metrics.

Stock Options

Under the Kenvue 2023 Plan, Kenvue granted stock options which expire 10 years from the grant date and vest over service periods that range from six months to four years .

All stock options are granted using the close price of Kenvue common stock on the New York Stock Exchange on the grant date.

The fair value of each stock option award is estimated using the Black-Scholes option valuation model.

The weighted average assumptions used in calculating the fair value of stock options granted the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, were as follows:

Under the Kenvue 2023 Plan, Kenvue grants stock options which expire 10 years from the grant date and vest over service periods that range from six months to four years .

All stock options are granted using the closing price of Kenvue common stock on the New York Stock Exchange on the grant date.

The grant date fair value of each stock option granted is estimated on the grant date 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 twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, were as follows:

Fiscal Twelve Months Ended

December 31, 2023 January 1, 2023 January 2, 2022

December 29, 2024 December 31, 2023 January 1, 2023

Expected volatility (1)

6 unchanged sentences

6 years 6 years 7 years

(1) For awards granted under the Kenvue 2023 Plan, expected volatility is based on the historical volatility of a selected group of the Company’s peers and other factors.

For awards granted under the J&J Plans, expected volatility was based on a blended rate of 10-year weekly historical overall volatility rate and a five-week average implied volatility rate based on at-the-money traded J&J stock options with a contractual term of two years .

(2) For awards granted under the Kenvue 2023 Plan, 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.

For awards granted under the J&J Plans, expected dividend yield was calculated using the assumed dividend payout per common share as a percentage of the spot J&J common share price as of the grant date.

(1) For awards granted under the Kenvue 2023 Plan, expected volatility is based on the six-year historical volatility of a selected group of the Company’s peers and other factors.

For stock options granted under the J&J Plans, expected volatility was based on a blended rate of 10-year weekly historical overall volatility rate and a five-week average implied volatility rate based on at-the-money traded J&J stock options with a contractual term of two years .

(2) For stock options granted under the Kenvue 2023 Plan, 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.

For stock options granted under the J&J Plans, expected dividend yield was calculated using the assumed dividend payout per common share as a percentage of the spot J&J common share price as of the grant date.

(3) Risk-free rate is based on the U.S.

Treasury yield curve in effect as of the grant date for options granted under both the Kenvue 2023 Plan and the J&J Plans.

(4) For awards granted under the Kenvue 2023 Plan, expected term is consistent with the historical experiences of J&J for awards similar to those in the Kenvue population.

For awards granted under the J&J plans, expected term was calculated based on J&J’s historical data.

A summary of stock option activity under the Kenvue 2023 Plan during the fiscal twelve months ended is presented below:

Treasury yield curve in effect as of the grant date for stock options granted under both the Kenvue 2023 Plan and the J&J Plans.

(4) For stock options granted under the Kenvue 2023 Plan during the fiscal twelve months ended December 29, 2024, expected term is calculated as the average of the vesting periods and the contractual terms of the stock options given the lack of trading history of Kenvue common stock as of the time of valuation.

For stock options granted under the Kenvue 2023 Plan during the fiscal twelve months ended December 31, 2023, expected term was consistent with the historical experiences of J&J for awards similar to those in the Kenvue population.

For stock options granted under the J&J Plans, expected term was calculated based on J&J’s historical data.

A summary of stock option activity under the Kenvue 2023 Plan during the fiscal twelve months ended December 29, 2024 is presented below:

Aggregate Intrinsic Value

3 unchanged sentences

(Dollars in Millions)

Options outstanding of Kenvue common stock at January 1, 2023

Awards converted from J&J Plans

56,958 $ 21.01

Options outstanding as of December 31, 2023

64,188 $ 20.60 7.2 years $ 83

Options granted 13,565 19.01

Options exercised ( 5,530 ) 18.30

Options canceled/forfeited/adjusted (1)

Options canceled/forfeited

( 5,338 ) 21.27

Options outstanding at December 31, 2023

Options outstanding as of December 29, 2024

66,885 $ 20.42 6.9 years $ 95

Options exercisable at December 31, 2023

Options exercisable as of December 29, 2024

29,100 $ 19.94 5.0 years $ 54

(1) Includes employee transfers in and out.

The weighted average fair value of stock options granted was $ 3.82 , $ 23.23 , and $ 20.86 in the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

The total intrinsic value of stock options exercised was $ 96 million , $ 64 million, and $ 56 million in the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

During 2023, the majority of the exercises occurred pre-Separation.

Cash proceeds received from the exercise of stock options denominated in Kenvue common stock was $ 7 million in the fiscal twelve months ended December 31, 2023.

The tax benefit associated with cash proceeds received from the exercise of stock options in the fiscal twelve months ended December 31, 2023 was $ 18 million, of which $ 17 million related to the exercise of stock options prior to the Separation.

Restricted Share Units and Performance Share Units

Under the Kenvue 2023 Plan, Kenvue granted RSUs which vest over service periods that range from one year to three years .

Kenvue also granted 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 service periods that range from one year to three years and the achievement, over a three-year period, of relative total shareholder return for Kenvue stock.

The number of shares earned at the end of the three-year period will vary, based on actual performance, from 0 % to 200 % of the target number of PSUs granted.

The weighted-average grant date fair value of stock options granted was $ 3.17 , $ 3.82 , and $ 23.23 in the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

The total intrinsic value of stock options exercised was $ 21 million, $ 96 million, and $ 64 million in the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

Cash proceeds received from the exercise of stock options was $ 95 million in the fiscal twelve months ended December 29, 2024.

The tax benefit associated with cash proceeds received from the exercise of stock options in the fiscal twelve months ended December 29, 2024 was $ 4 million.

Restricted Stock Units and Performance Stock Units

Restricted Stock Units

Under the Kenvue 2023 Plan, Kenvue grants RSUs which vest over service periods that range from one year to three years .

All RSUs granted have forfeitable dividend participation rights during the vesting period.

Under the Kenvue 2023 Plan, Kenvue grants insignificant RSUs to non-employee directors which vest, but are not issued, immediately upon grant.

For awards granted under the J&J Plans, the grant date fair value of RSUs granted was equivalent to the fair market value on the grant date, discounted by the expected dividend yield, as the RSUs did not have dividend participation rights during the vesting period.

Performance Stock Units

Beginning in the fiscal twelve months ended December 29, 2024, under the Kenvue Plan, the Company grants PSUs with both performance vesting conditions and market-based vesting conditions.

The Performance PSUs are paid in shares of Kenvue’s common stock after the end of a three-year performance period.

The Performance PSUs have forfeitable dividend participation rights during the vesting period.

The vesting of Performance 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 Performance PSUs granted.

The weighted-average assumptions used in calculating the fair value of Performance PSUs granted during the fiscal twelve months ended December 29, 2024 were as follows:

Fiscal Twelve Months Ended

December 29, 2024

Expected volatility (1)

Risk-free rate (2)

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

(2) Risk-free rate is based on the U.S.

Treasury yield curve in effect as of the grant date for Performance PSUs granted.

Under the Kenvue Plan, the Company granted PSUs with only market-based vesting conditions during the fiscal twelve months ended December 31, 2023 (the “Market PSUs”).

The Market PSUs are paid in shares of Kenvue’s common stock after the end of a three-year performance period.

The vesting of Market PSUs is tied to the completion of service periods that range from one year to three years and the achievement, over a three-year period, of relative total shareholder return for Kenvue common stock.

The number of shares earned at the end of the three-year period will vary, based on actual performance, from 0 % to 200 % of the target number of Market PSUs granted.

The grant date fair value of each Market PSU granted, inclusive of the fair value associated with the relative total shareholder return goal, was estimated on the grant date using the Monte Carlo valuation model.

Under the J&J Plans, J&J granted PSUs, which were paid in shares of J&J common stock after the end of a three-year performance period.

The vesting of PSUs was tied to the completion of service periods that ranged from six months to three years and the achievement, over a three-year period, of two equally-weighted goals that directly aligned with or helped drive long-term J&J shareholder return:

The vesting of these PSUs was tied to the completion of service periods that ranged from six months to three years and the achievement, over a three-year period, of two equally-weighted goals that directly aligned with or helped drive long-term J&J shareholder return:

adjusted operational earnings per share and relative total shareholder return.

The number of shares earned at the end of the three-year period varied, based on actual performance, from 0 % to 200 % of the target number of PSUs granted.

The fair value of RSUs granted under the Kenvue 2023 Plan is equivalent to the close price of Kenvue stock on the grant date as all RSUs granted have dividend participation rights during the vesting period.

For awards granted under the J&J Plans, the fair value of RSUs granted was equivalent to the fair market value on the grant date, discounted by the expected dividend yield, as the RSUs did not have dividend participation rights during the vesting period.

For PSUs granted under the Kenvue 2023 Plan, the fair value for the relative total shareholder return goal of each PSU granted was estimated on the grant date using a Monte Carlo valuation model.

For PSUs granted under the J&J Plans, the fair value for the net income per share goal of each PSU was estimated on the grant date using the fair market value of J&J shares at the grant date, discounted by the expected dividend yield, as the PSUs did not have dividend participation rights during the vesting period, and the fair value for the relative total shareholder return of each PSU was estimated on the grant date using a Monte Carlo valuation model.

The grant date fair value for the net income per share goal of each PSU was estimated on the grant date using the fair market value of J&J shares at the grant date, discounted by the expected dividend yield, as the PSUs did not have dividend participation rights during the vesting period, and the fair value for the relative total shareholder return of each PSU was estimated on the grant date using the Monte Carlo valuation model.

As discussed in “—J&J Plans and Conversion of J&J Awards” above, the PSUs granted under the J&J Plans were replaced with Kenvue RSU awards, and as such, there are none outstanding as of December 29, 2024.

Restricted Stock Unit and Performance Stock Unit Activity

A summary of unvested RSU and PSU activity under the Kenvue 2023 Plan during the fiscal twelve months ended December 29, 2024 is presented below:

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Weighted-Average Grant Date Fair Value

Shares of Kenvue at January 1, 2023

Awards converted from J&J Plans

Shares as of December 31, 2023

13,298 $ 22.49 1,630 $ 23.58

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( 5,540 ) 22.64 ( 1 ) 23.22

Canceled/forfeited/adjusted

Canceled/forfeited

( 2,207 ) 20.74 ( 181 ) 22.15

Shares at December 31, 2023

Shares as of December 29, 2024

13,633 $ 20.77 $ 2,675 $ 21.43

The weighted average grant date fair value of RSUs granted was $ 153.69 and $ 152.73 in the fiscal twelve months ended January 1, 2023, and January 2, 2022, respectively.

The aggregate fair value of RSUs issued was $ 44 million and $ 45 million in the fiscal twelve months ended January 1, 2023 and January 2, 2022, respectively.

The weighted average grant date fair value of PSUs granted was $ 178.45 and $ 187.50 in the fiscal twelve months ended January 1, 2023 and January 2, 2022, respectively.

The aggregate fair value of PSUs issued was $ 4 million and $ 5 million in the fiscal twelve months ended January 1, 2023 and January 2, 2022, respectively.

The weighted-average grant date fair value of RSUs granted was $ 20.37 and $ 153.69 in the fiscal twelve months ended December 31, 2023, and January 1, 2023, respectively.

The aggregate fair value of RSUs issued was $ 1 million and $ 44 million in the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively.

The weighted-average grant date fair value of PSUs granted was $ 23.57 and $ 178.45 in the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively.

The aggregate fair value of PSUs issued was $ 0 million and $ 4 million in the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively.

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), and J&J ceased to be a related party on that date.

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.

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The 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 are charged to J&J’s affiliates.

Allocated costs included in Cost of sales in the Company’s Consolidated Statements of Operations relate to enterprise-wide support primarily consisting of facilities, insurance, logistics, quality, and compliance which are predominantly allocated based on Net sales.

Allocated costs included in SG&A expenses primarily relate to finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services, and general commercial support functions and are predominantly allocated based on Net sales or headcount.

See Note 1, “Description of the Company and Summary of Significant Accounting Policies”.

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 Company’s Consolidated Statements of Operations for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 were as follows:

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 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 Consolidated Statements of Operations for the fiscal twelve months ended December 31, 2023 and January 1, 2023 were as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 31, 2023 January 1, 2023

Cost of sales

Selling, general, and administrative expenses

Total $ 145 $ 828 $ 831

Total costs allocated

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 periods 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 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 (to) from Johnson & Johnson

Net transfers (to) from Johnson & Johnson are included in Net investment from Johnson & Johnson in the Consolidated Balance Sheets and Consolidated Statements of Equity and within financing activities in the Consolidated Statements of Cash Flows and represent the net effect of transactions between the Company and J&J.

No transactions were recorded in the Net transfers (to) from Johnson & Johnson subsequent the second quarter of fiscal year 2023.

The components of Net transfers (to) from Johnson & Johnson for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 were as follows:

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 subsequent to the fiscal three months ended July 2, 2023, during which Kenvue became a fully independent company.

Net Transfers to J&J

Net transfers to J&J are included in Net Investment from J&J in the Consolidated Statements of Stockholders' Equity and within financing activities in the 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 to J&J subsequent to the fiscal three months ended July 2, 2023, during which Kenvue became a fully independent company.

The components of Net transfers to J&J for the fiscal twelve months ended December 31, 2023 and January 1, 2023 were as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 31, 2023 January 1, 2023

Cash pooling and general financing activities $ ( 446 ) $ ( 2,568 )

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Allocated derivative and hedging gains — 65

Net transfers (to) from Johnson & Johnson as reflected in the Consolidated Statements of Cash Flows

Net transfers to J&J as reflected in the Consolidated Statements of Cash Flows

$ ( 274 ) $ ( 1,597 )

Stock-based compensation expense (1)

( 34 ) ( 153 )

Net transfers (to) from Johnson & Johnson as reflected in the Consolidated Statements of Equity

Net transfers to J&J as reflected in the Consolidated Statements of Stockholders' Equity

$ ( 308 ) $ ( 1,750 )

(1) Stock-based compensation expense is separately shown within the Consolidated Statements of Equity in the fiscal twelve months ended December 31, 2023, and therefore no longer a reconciling item between the Consolidated Statements of Equity and the Consolidated Statements of Cash Flows.

(2) Other primarily relates to the impact of the change in accounting principle for GILTI in the fiscal twelve months ended December 31, 2023 and January 1, 2023, as well as Talc liability transferred to J&J, net of deferred taxes of $ 251 million in the fiscal twelve months ended January 2, 2022.

Please see Note 1, “Description of the Company and Summary of Significant Accounting Policies—Change in Accounting Principle,” for more information on the impact of change in accounting principle related to GILTI.

(1) Other primarily relates to the impact of the change in accounting principle for Global Intangible Low-Tax Income (“GILTI”) in the fiscal twelve months ended December 31, 2023 and January 1, 2023.

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 in the pre-Separation balance sheet were retained by J&J and certain assets and liabilities not included in the pre-Separation balance sheet were transferred to Kenvue.

Separation related adjustments have been recognized in Net investment from Johnson & Johnson, net impact of which resulted in an increase in net assets and total equity by $ 91 million .

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

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 twelve months ended December 31, 2023.

The impact on net assets primarily represents 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:

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• 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 (the “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, if pursued;

• 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 will provide 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 will provide to Kenvue certain manufacturing services for terms of varying duration following 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;

• 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 Kenvue IPO, J&J and Kenvue also entered into various lease agreements, in which the Company subleased properties from J&J.

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 8, “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 Company’s Consolidated Financial Statements:

(Dollars in Millions) December 31, 2023 January 1, 2023

Accounts payable and accrued liabilities

(Dollars in Millions) December 29, 2024 December 31, 2023

Prepaid expenses and other receivables $ 109 $ 213

Accounts payable and Accrued liabilities

Other assets $ 78 $ 87

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Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 29, 2024 December 31, 2023

Cost of sales $ 203 $ 148

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The Company believes that it has complied with these requirements to date.

The Company recorded approximately $ 168 million net liability 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 noncurrent assets and noncurrent liabilities, respectively, on the Consolidated Balance Sheets as of December 31, 2023.

Debt Financing Transactions and IPO Consideration

During the second quarter of fiscal year 2023, the Company received debt proceeds of $ 7.7 billion from the issuance of the Senior Notes, earned $ 13 million of interest on the proceeds of these bonds from investments in money market accounts, and received initial proceeds from its Commercial Paper Program of $ 1.2 billion.

The Company recorded a net liability totaling approximately $ 104 million and $ 168 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 Consolidated Balance Sheets as of December 29, 2024 and December 31, 2023, respectively.

Debt Financing Transactions and Kenvue IPO Consideration

During the fiscal six months ended July 2, 2023, the Company received debt proceeds of approximately $ 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 balance of the loans and all accrued interest were repaid by J&J for a total cash inflow of $ 9.0 billion.

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.

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

Other operating (income) expense, net for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 consisted of:

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

Other operating expense (income), net for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 consisted of:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Litigation expense (income) $ 4 $ 26 $ ( 7 )

$ 26 $ ( 7 ) $ 92

Royalty income ( 34 ) ( 35 ) ( 39 )

( 35 ) ( 39 ) ( 89 )

(Gain)/loss on disposal of fixed assets ( 9 ) 8 22

Impact of Deferred Markets (3) (Note 1)

Loss (gain) on disposal of fixed assets 6 ( 9 ) 8

Impact of Deferred Markets (1)

Contingent liability reversal (2)

Total Other operating (income) expense, net $ ( 10 ) $ ( 23 ) $ 15

(1) Includes $ 154 million of Talc-Related costs and $ 74 million of beneficial settlements for Brazil VAT legal resolution for the fiscal twelve months ended January 2, 2022.

(2) In connection with a J&J corporate restructuring that started in October 2021, rights to receive streams of royalties payable from certain third parties to a Company affiliate were transferred to a subsidiary of J&J.

Such J&J subsidiary retained those rights following the Separation.

(3) Includes income taxes and service fees to be paid to J&J under the net economic benefit arrangements.

Total Other operating expense (income), net $ 26 $ ( 10 ) $ ( 35 )

(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.

(5) Includes impact of foreign derivative contracts, intangible asset impairment, pension related and other miscellaneous operating (income) expenses.

Other expense (income), net for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 consisted of:

(3) Other consists primarily of other miscellaneous operating (income) expenses for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023.

Other also includes the impact of foreign derivative contracts for the fiscal twelve months ended December 31, 2023.

Other expense, net for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 consisted of:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Currency losses on transactions $ 1 $ 58 $ 42

Losses (gains) on investments 72 7 ( 1 )

Tax indemnification release (1)

( 4 ) 7 ( 3 )

Total Other expense (income), net $ 72 $ 38 $ ( 5 )

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

For the purposes of the Consolidated Financial Statements, income taxes and related income tax accounts have been calculated using the separate return method as if the Company filed income tax returns on a standalone basis for the entirety of each of the periods presented.

Total other expense, net $ 48 $ 72 $ 38

(1) Includes the release of tax indemnification reserves that were no longer considered to be probable.

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

Prior to the Kenvue IPO, the Company’s operations were calculated on a carve-out basis and included certain hypothetical foreign tax credit benefits.

Following the Kenvue IPO, these hypothetical foreign tax credit benefits are not available for future utilization by the Company and were removed from the tax provision.

Furthermore, the Company operated as part of J&J until the completion of the Exchange Offer on August 23, 2023, and therefore the Company will be included in J&J’s U.S.

Furthermore, the Company operated as part of J&J until the completion of the Exchange Offer on August 23, 2023, and therefore the Company was included in J&J’s U.S.

Federal consolidated income tax return until that date.

The Company will then file a standalone U.S.

Federal consolidated income tax return for the remainder of fiscal year 2023.

The Company expects to file income tax returns on a standalone basis in most other jurisdictions in which it operates for fiscal year 2023.

Certain current income tax liabilities related to our activities included in J&J’s income tax returns were assumed to be immediately settled with J&J through the Net Parent Investment or Additional Paid-In Capital accounts on the Consolidated Balance Sheets and reflected in the Consolidated Statements of Cash Flows as a financing activity.

Following the Exchange Offer, the Company’s operating footprint as well as tax return elections and assertions are expected to be different and therefore, our income taxes, as presented in the consolidated financial statements, may differ in future periods.

Effective in the third quarter of fiscal year 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”.

The tables below reflect this change in accounting principle for all periods presented.

The provision for taxes on income consists of:

The Company filed a standalone U.S.

Federal consolidated income tax return and a standalone return in most other jurisdictions in which it operates for the remainder of fiscal year 2023 and will continue to file a standalone return for all fiscal years thereafter.

Certain current income tax liabilities related to the Company’s activities included in J&J’s income tax returns were assumed to be immediately settled with J&J through the Net Investment from J&J or Additional paid-in capital accounts on the Consolidated Balance Sheets and reflected in the Consolidated Statements of Cash Flows as a financing activity for the fiscal twelve months ended December 31, 2023 and January 1, 2023.

Following the Exchange Offer, the Company’s operating footprint, as well as tax return elections and assertions, are different, and therefore, the Company’s income taxes, as presented in the Consolidated Financial Statements, may differ in future periods.

The Provision for taxes on income for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 consisted of:

Fiscal Twelve Months Ended

(Dollars in Millions)

December 31, 2023 January 1, 2023 January 2, 2022

December 29, 2024 December 31, 2023 January 1, 2023

taxes $ 287 $ 266 $ 75

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Provision for taxes $ 385 $ 526 $ 573

A comparison of income tax expense at the U.S.

statutory rate of 21 % in the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, to the Company’s effective tax rate is as follows:

A comparison of the Provision for taxes at the U.S.

statutory rate of 21 % in the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, to the Company’s effective tax rate is as follows:

Fiscal Twelve Months Ended

(Dollars in Millions)

December 31, 2023 January 1, 2023 January 2, 2022

December 29, 2024 December 31, 2023 January 1, 2023

$ 352 $ 825 $ 1,238

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Change in valuation allowance 1.0 2.5 2.2

Tax benefits on stock-based compensation

( 0.5 ) ( 0.2 ) ( 0.3 )

Tax shortfall (windfall) on stock-based compensation 0.5 ( 0.5 ) ( 0.2 )

All other ( 0.5 ) ( 0.3 ) 0.1

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(1) Includes the impact of the tax on GILTI and other foreign income that is taxable under the U.S.

tax code as well as implications of repatriating foreign earnings.

tax code as well as tax implications of repatriating foreign earnings.

(2) International operations reflect the impacts of operations in jurisdictions with statutory tax rates different than the U.S.

For each of the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, the Company had operations in Singapore under various tax incentives.

The Company’s largest international operations are in Canada, China, Japan, Singapore, and Switzerland.

For all periods presented the Company has subsidiaries operating in Singapore under various tax incentives.

The 2023 amount includes $ 46 million net reduction in uncertain tax benefits.

The amounts for the fiscal twelve months ended December 29, 2024 and December 31, 2023 include a $ 4 million net increase in uncertain tax benefits and a $ 46 million net reduction in uncertain tax benefits, respectively.

The worldwide effective income tax rates for the fiscal twelve months ended December 29, 2024 was 27.2 % and is higher than the U.S.

corporate tax rate primarily due to the following:

• The issuance of debt in the first quarter of 2023 resulted in an increase in annual interest expense and reduced our capacity to utilize foreign tax credits against U.S.

taxes on foreign inclusions are driven by reduced foreign tax credit utilization, as well as unfavorable return-to-provision adjustments, which was primarily driven by non-deductible expenses.

This increase from the statutory tax rate was partially offset by the impairment to the Dr.Ci:Labo ® skin health business and the corresponding reversal of a deferred tax liability at the higher Japanese tax rate, the remeasurement of the state deferred tax liability as a result of a change in the Company’s state tax rate, and regional cash planning resulting in a partial release of a valuation allowance.

The worldwide effective income tax rates for the fiscal twelve months ended December 31, 2023 was 24.0 % and is higher than the U.S.

corporate tax rate primarily due to the following:

• The issuance of debt in the fiscal three months ended April 2, 2023 resulted in an increase in annual interest expense and reduced the Company’s capacity to utilize foreign tax credits against U.S.

foreign source income.

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corporate tax rate primarily due to the following:

• The overall domestic loss from the fiscal twelve months ended January 2, 2022 is being recaptured in the United States in the fiscal twelve months ended January 1, 2023 allowing the Company to claim additional U.S.

• The overall domestic loss from the fiscal twelve months ended January 2, 2022 is being recaptured in the United States in the fiscal twelve months ended January 1, 2023, thereby allowing the Company to claim additional U.S.

foreign tax credits against the Company’s U.S.

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The additional U.S.

foreign tax credit benefit is reflected in U.S.

foreign tax credit benefit is reflected

taxes on international income within the rate reconciliation.

This benefit is offset by state taxes on current U.S.

income and valuation allowances on state NOL carryforwards.

The worldwide effective income tax rates for the fiscal twelve months ended January 2, 2022 was 28.9 % and is higher than the U.S.

corporate tax rate primarily due to the following:

• As a result of Talc settlement payments, there is a taxable loss in the U.S.

preventing the Company from claiming a Section 250 deduction and utilizing U.S.

foreign tax credits against the Company’s U.S.

tax on foreign earnings.

The incremental U.S.

tax on foreign earnings is reflected in U.S.

taxes on international income within the rate reconciliation.

income and valuation allowances on state net operating loss carryforwards.

The increase in the worldwide effective income tax rate for the fiscal twelve months ended December 29, 2024 as compared to the fiscal twelve months ended December 31, 2023 was primarily the result of fewer releases of uncertain tax positions due to the expiration of certain statutes of limitations and reduced tax benefits derived from the Separation as compared to the fiscal twelve months ended December 31, 2023, unfavorable return-to-provision adjustments and shortfall on stock-based compensation recorded during the fiscal twelve months ended December 29, 2024, as well as changes to the jurisdictional mix of income.

These increases were offset by the impairment to the Dr.Ci:Labo ® skin health business and the corresponding reversal of a deferred tax liability, the remeasurement of the state deferred tax liability as a result of a change in the Company’s state tax rate, and a partial release of a valuation allowance.

The increase in the worldwide effective income tax rate for the fiscal twelve months ended December 31, 2023 as compared to the fiscal twelve months ended January 1, 2023 was primarily the result of higher U.S.

taxes on foreign income.

issuance of debt in the first quarter of 2023, the resulting increase in annual interest expense reduced the Company’s capacity to utilize foreign tax credits against U.S.

With the issuance of debt in the fiscal three months ended April 2, 2023, the resulting increase in annual interest expense reduced the Company’s capacity to utilize foreign tax credits against U.S.

foreign source income.

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tax on foreign earnings only existed through the Kenvue IPO date during the fiscal twelve months ended December 31, 2023 in comparison to the entire fiscal twelve months ended January 1, 2023.

The tax rate is further increased by international operations as result of earnings mix changes, tax leakage on repatriation of foreign earnings from lower tier subsidiaries, and return to provision adjustments offset by reductions in unrecognized tax benefits.

The decrease of the worldwide effective income tax rate for the fiscal twelve months ended January 1, 2023 as compared to the fiscal twelve months ended January 2, 2022 was primarily the result of U.S.

incremental taxes on foreign earnings.

As a result of Talc settlement payments, there is a taxable loss in the United States preventing the Company from claiming a Section 250 deduction and utilizing U.S.

foreign tax credits against the Company’s U.S.

tax on foreign earnings.

The incremental U.S.

tax on foreign earnings is reflected in U.S.

taxes on international income within the rate reconciliation.

Temporary differences and carryforwards as of December 31, 2023 and January 1, 2023 were as follows:

Fiscal Twelve Months Ended

December 31, 2023 January 1, 2023

The tax rate was further increased by international operations as result of earnings mix changes, tax leakage on repatriation of foreign earnings from lower tier subsidiaries, and return-to-provision adjustments offset by reductions in unrecognized tax benefits.

Temporary differences and carryforwards as of December 29, 2024 and December 31, 2023 were as follows:

December 29, 2024 December 31, 2023

(Dollars in Millions)

Employee-related obligations

$ 18 $ — $ 29 $ —

Stock-based compensation

1 unchanged sentence

Goodwill and intangibles — ( 2,434 ) — ( 2,752 )

Reserves & liabilities 114 — 120 —

Net operating loss (“NOL”) & tax credit carryforward

Reserves and liabilities

Net operating loss (“NOL”) and tax credit carryforward

Undistributed foreign earnings

1 unchanged sentence

Miscellaneous international

R&D capitalized for tax

Research and development capitalized for tax

Miscellaneous U.S.

— ( 11 ) 15 —

560 ( 2,548 ) 525 ( 2,913 )

Valuation allowance

6 unchanged sentences

state and foreign NOL carryforwards and $ 58 million and $ 37 million of deferred tax assets related to U.S.

federal and state, and foreign credit carryforwards as of December 31, 2023 and January 1, 2023 respectively.

federal and state, and foreign tax credit carryforwards as of December 29, 2024 and December 31, 2023, respectively.

Foreign NOLs expire over various years based on local laws;

however, if unused, the majority of foreign NOL carryforwards will expire between 2025 through 2034.

Existing Federal tax credit carryforwards will expire in 2033.

Existing Federal tax credit carryforwards will expire between 2034 and 2044.

state NOLs generally expire between 2034 and 2044.

Tax credit carryforwards of our Puerto Rico subsidiary do not expire.

The Company assessed NOLs, credit carryforwards and other deferred tax assets for realizability and, based upon all available evidence, recorded valuation allowances against deferred tax assets on a “more-likely than not” standard.

As of December 31, 2023, January 1, 2023, and January 2, 2022, valuation allowances of $ 75 million, $ 250 million, and $ 186 million have been recorded against certain NOLs and foreign tax credit carryforwards respectively.

The Company recognized a net change in valuation allowance of $( 175 ) million, $ 64 million, and $ 42 million in the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 respectively.

On December 31, 2023, the net change was primarily related to a reduction in U.S.

State and foreign tax credit carryforwards and related valuation allowances to reflect the Company’s separation from J&J recorded through the net parent investment at the time of the Kenvue IPO.

Tax credit carryforwards of the Company’s Puerto Rico subsidiary do not expire.

The Company assessed NOLs, tax credit

carryforwards, and other deferred tax assets for realizability and, based upon all available evidence, recorded valuation allowances against deferred tax assets on a “more likely than not” standard.

As of December 29, 2024, December 31, 2023, and January 1, 2023, valuation allowances of $ 89 million, $ 75 million, and $ 250 million have been recorded against certain NOLs and foreign tax credit carryforwards respectively.

The Company recognized a net change in valuation allowance of $ 14 million, $( 175 ) million, and $ 64 million in the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 respectively.

For the fiscal twelve months ended December 29, 2024, the net change was primarily related to an increase in foreign NOL carryforwards that the Company does not expect to utilize in future periods and a release of a valuation allowance on the Company’s foreign tax credit carryforwards.

The Company has recorded deferred tax liabilities on all undistributed earnings of its international subsidiaries through the fiscal twelve months ended December 31, 2017 and certain undistributed earnings arising after the fiscal twelve months ended December 31, 2017.

For all other undistributed earnings from our subsidiaries organized outside the United States, the Company has not recorded deferred taxes where the earnings are indefinitely reinvested.

For all other undistributed earnings from the Company’s subsidiaries organized outside the United States, the Company has not recorded deferred taxes where the earnings are indefinitely reinvested.

The Company intends to continue to reinvest these earnings in those international operations.

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The Company estimates that the tax effect of this repatriation would be approximately $ 116 million under currently enacted tax laws and regulations and at current currency exchange rates.

The following table summarizes the activity related to unrecognized tax benefits:

The following table summarizes the activity related to unrecognized tax benefits for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023:

Fiscal Twelve Months Ended

(Dollars in Millions)

December 31, 2023 January 1, 2023 January 2, 2022

Beginning of year $ 437 $ 469 $ 519

December 29, 2024 December 31, 2023 January 1, 2023

Beginning of fiscal year

$ 185 $ 437 $ 469

Increases related to current year tax positions 21 26 32

4 unchanged sentences

Net decreases related to the Separation

End of fiscal year

$ 176 $ 185 $ 437

End of year $ 185 $ 437 $ 469

The unrecognized tax benefits of $ 185 million at December 31, 2023, if recognized, $ 169 million would affect the Company’s annual effective tax rate.

Pursuant to the Tax Matters Agreement between J&J and the Company, certain liabilities for unrecognized tax benefits have been reduced to reflect the fact that the liabilities are retained by J&J, including with respect to the US.

As of December 29, 2024, the Company had unrecognized tax benefits of $ 176 million.

If recognized, $ 161 million would affect the Company’s annual effective tax rate.

Pursuant to the Tax Matters Agreement between J&J and the Company, certain liabilities for unrecognized tax benefits have been reduced during the fiscal twelve months ended December 31, 2023 to reflect the fact that the liabilities are retained by J&J, including with respect to the U.S.

federal income tax, or have been reclassified as indemnification payables to J&J where the liabilities relate to the Company for periods prior to the Kenvue IPO.

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.

1 unchanged sentence

The Company has therefore reduced its unrecognized tax benefits for U.S.

federal uncertain tax positions as reflected in the table above under Net decreases related to the Separation.

In other major jurisdictions where the Company conducts business, the years that remain open to tax audits range from 2015 and forward.

federal uncertain tax positions as reflected in the table above under Net decreases related to the Separation during the fiscal twelve months ended December 31, 2023.

In other major jurisdictions where the Company conducts business, the years that are under tax audit or remain open to tax audits range from 2014 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.

1 unchanged sentence

The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities on the Consolidated Balance Sheets.

Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense on the Company’s Consolidated Statements of Operations.

The Company recognized after tax interest expense (benefit) of $( 8 ) million, $ 13 million and $ 16 million in the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

The total amount of accrued interest was $ 19 million and $ 147 million as of December 31, 2023 and January 1, 2023, respectively.

Interest expense and penalties related to unrecognized tax benefits are classified as Provision for taxes in the Consolidated Statements of Operations.

The Company recognized after-tax interest expense (benefit) of $ 5 million, $( 8 ) million, and $ 13 million in the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

The total amount of accrued interest was $ 23 million and $ 19 million as of December 29, 2024 and December 31, 2023, respectively.

On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 (“IRA”), which, among other things, introduced 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 for the fiscal twelve months ended December 31, 2023, the IRA is not expected to have a material impact on the Company’s Consolidated Financial Statements.

The Company will continue to evaluate the impact of this law as additional guidance and clarification becomes available.

On December 15, 2022, the EU Member States formally adopted the European Union’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organisation for Economic Co-operation and Development (“OECD”) Pillar Two Framework that was supported by over 130 countries worldwide.

The EU effective dates

are January 1, 2024 and January 1, 2025 for different aspects of the directive.

On July 17, 2023, the OECD published Administrative Guidance proposing certain safe harbor rules that effectively extend certain effective dates to January 1, 2027.

The OECD continues to release additional guidance, including guidance on safe harbors for which we may qualify, and many countries have already implemented legislation consistent with the OECD Pillar Two Framework.

Due to these new rules, our income tax expense could be unfavorably impacted as the legislation becomes effective in countries in which we conduct business.

However, based on the Company’s current analysis for currently enacted laws, we do not expect a material impact to the Consolidated Financial Statements.

We are continuing to evaluate the Model Global Anti-Base Erosion (“GloBE”) Rules for Pillar Two and related legislation, and their potential impact on future periods.

Based on the Company’s current analysis, as well as recently published guidance by the U.S.

Treasury and by the Internal Revenue Service, the IRA did not have a significant impact on the Consolidated Financial Statements.

The Company will continue to evaluate the impact of this law as additional guidance and clarification become available.

The Company has included the 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 impact of currently enacted laws for Pillar Two is not significant, 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.

Net Income Per Share

Prior to the completion of the Kenvue IPO, the Company had 1,716,160,000 of common stock outstanding, of which 1,716,159,990 shares were issued to J&J through a subscription agreement in May 2023.

The Company had 1,924,976,532 shares of common stock issued and 1,913,768,088 shares of common stock outstanding as of December 29, 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.

As of December 31, 2023, the Company had 1,915,407,047 and 1,915,057,047 shares of common stock issued and outstanding, respectively.

For the purposes of the Company’s net income per share calculations, 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.

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.

During the fiscal twelve months ended December 31, 2023, 44,745,842 shares were determined to be anti-dilutive under the treasury stock method and therefore were excluded from the diluted net income per share calculation.

Net income per share for the fiscal twelve months ended December 31, 2023 and January 1, 2023 were calculated as follows:

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-based awards that are outstanding during the period.

The Company had 52,113,910 and 44,745,842 shares during the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, that were determined to be anti-dilutive under the treasury stock method and therefore were excluded from the diluted net income per share calculation.

For both the fiscal twelve months ended December 29, 2024 and December 31, 2023, the majority of anti-dilutive shares related to stock options.

There were no equity-based 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 twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 was calculated as follows:

Fiscal Twelve Months Ended

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

December 31, 2023 January 1, 2023 January 2, 2022

(In Millions, Except Per Share Data)

December 29, 2024 December 31, 2023 January 1, 2023

Net income $ 1,030 $ 1,664 $ 2,064

Basic weighted-average number of shares outstanding

1,915 1,846 1,716

Diluted effects of stock-based awards 8 4 —

Diluted weighted-average number of shares outstanding

1,923 1,850 1,716

Net income per share:

2 unchanged sentences

Share Repurchase Program

During the third quarter of fiscal year 2023, the Company’s Board authorized a share repurchase program, under which the Company is authorized to repurchase up to 27 million shares of its outstanding common stock in open market or privately negotiated transactions.

During the fiscal three months ended October 1, 2023, the Company’s Board authorized a share repurchase program, under which the Company is authorized to repurchase up to 27,000,000 shares of its outstanding common stock in open market or privately negotiated transactions.

The program has no expiration date and may be suspended or discontinued at any time.

The intent of this repurchase program is to offset dilution from the vesting or exercise of equity awards under Kenvue’s equity incentive plan.

Through December 31, 2023, approximately 350,000 shares have been repurchased under the program for $ 7 million or an average of $ 20.47 .

The intent of this repurchase program is to offset dilution from the vesting or exercise of equity-based awards under the Kenvue 2023 Plan.

The Company repurchased 10,858,444 shares of outstanding common stock for $ 235 million under the program during the fiscal twelve months ended December 29, 2024.

Fair Value Measurements

4 unchanged sentences

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:

December 31, 2023 January 1, 2023

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 as of December 29, 2024 and December 31, 2023:

December 29, 2024 December 31, 2023

(Dollars in Millions) Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3

Forward foreign exchange contracts $ 81 $ — $ 81 $ — $ 63 $ — $ 63 $ —

Interest rate swaps — — — — 29 — 29 —

Total $ 63 $ — $ 63 $ — $ 68 $ — $ 68 $ —

Cross currency swap contracts

71 — 71 — — — — —

$ 152 $ — $ 152 $ — $ 63 $ — $ 63 $ —

Forward foreign exchange contracts

Cross currency swaps

$ ( 76 ) $ — $ ( 76 ) $ — $ ( 50 ) $ — $ ( 50 ) $ —

Interest rate swaps — — — — ( 39 ) — ( 39 ) —

Total $ ( 75 ) $ — $ ( 75 ) $ — $ ( 54 ) $ — $ ( 54 ) $ —

Cross currency swap contracts ( 1 ) — ( 1 ) — ( 25 ) — ( 25 ) —

Total liabilities

$ ( 77 ) $ — $ ( 77 ) $ — $ ( 75 ) $ — $ ( 75 ) $ —

Net amount presented in Prepaid expenses and other receivables:

2 unchanged sentences

$ ( 13 ) $ — $ ( 13 ) $ — $ ( 30 ) $ — $ ( 30 ) $ —

As of December 31, 2023 and January 1, 2023, cash equivalents were $ 329 million and $ 80 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 December 31, 2023 and January 1, 2023.

Net amount presented in Other assets:

$ 36 $ — $ 36 $ — $ — $ — $ — $ —

As of December 29, 2024 and December 31, 2023, cash equivalents were $ 118 million and $ 329 million, respectively, which were primarily comprised of time deposits and money market funds.

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 interest rate swaps and cross currency swaps are recorded at fair value that is derived from observable market data, including foreign exchange rates and yield curves.

All derivative instruments are classified as Level 2 securities.

The fair value of the Company’s derivative assets is included in Prepaid expenses and other receivables on the Company’s Consolidated Balance Sheets.

The fair value of the Company’s derivative liabilities is included in Accounts payable on the Company’s Consolidated Balance Sheets.

There were no transfers between Level 1, Level 2, or Level 3 during the fiscal twelve months ended December 31, 2023 and the fiscal twelve months ended January 1, 2023.

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

December 31, 2023 January 1, 2023

(Dollars in Millions) Forward foreign exchange contracts Cross currency swaps

Total Forward foreign exchange contracts Interest rate swaps Total

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 Consolidated Balance Sheets.

The fair value of the Company’s derivative liabilities is included in Accounts payable on the Consolidated Balance Sheets.

There were no transfers between Level 1, Level 2, or Level 3 during the fiscal twelve months ended December 29, 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 as of December 29, 2024 and December 31, 2023:

December 29, 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

$ 3,570 $ — $ 3,570 $ 3,522 $ — $ 3,522

Undesignated forward foreign exchange contracts

$ 588 $ — $ 588 $ — $ — $ —

Fair value hedges $ 30 $ — $ 30 $ — $ — $ —

Net investment hedges $ — $ 1,900 $ 1,900 $ — $ 500 $ 500

For the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, the Company recorded a total after-tax change in Accumulated other comprehensive loss of $ 38 million, $ 10 million, and $ — million respectively, related to its cash flow hedge portfolio.

Undesignated hedging instruments $ 574 $ — $ 574 $ 588 $ — $ 588

Cash Flow Hedges

For the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, the Company recorded a total after-tax change in Accumulated other comprehensive loss of $( 23 ) million, $ 38 million, and $ 10 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 income (loss), depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction.

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.

The terms of these contracts are generally no longer than 12 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 income (loss).

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 expense (income), net in the Company’s Consolidated Statements of Operations, as applicable.

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 expense, net in the 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 maximum length of time over which the Company is hedging transactional 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 gains and losses on forward foreign exchange contracts designated as cash flow hedges within Other comprehensive income (loss) and amount reclassified into earnings:

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 for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023:

Fiscal Twelve Months Ended

(Dollars in Millions)

December 31, 2023 January 1, 2023 January 2, 2022

Gain (loss) recognized in Other comprehensive income (loss) $ 18 $ 11 $ ( 3 )

Gain (loss) reclassified from Other comprehensive income (loss) to earnings $ 28 $ ( 2 ) $ 3

The following tables are a summary of the reclassifications to Net Income related to the Company’s forward foreign exchange contracts for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022:

December 29, 2024 December 31, 2023 January 1, 2023

Gain recognized in Other comprehensive (loss) income $ 5 $ 18 $ 11

Gain (loss) reclassified from Other comprehensive (loss) income into earnings $ 13 $ 28 $ ( 2 )

The following tables present 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 twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023:

Fiscal Twelve Months Ended

December 29, 2024

(Dollars in Millions) Net Sales Cost of Sales Other expense (income), net

Gain (loss) on cash flow hedges $ 1 $ 30 $ ( 3 )

Gain on forward foreign exchange contracts not designated as hedges $ — $ — $ 10

(Dollars in Millions) Net sales Cost of sales Other expense, net

(Loss) gain reclassified from Other comprehensive (loss) income into earnings $ ( 1 ) $ 15 $ ( 1 )

Fiscal Twelve Months Ended

January 1, 2023

(Dollars in Millions) Net Sales Cost of Sales Other expense (income), net

Gain on cash flow hedges $ 21 $ 12 $ 30

Gain on forward foreign exchange contracts not designated as hedges $ — $ — $ 33

December 31, 2023

(Dollars in Millions) Net sales Cost of sales Other expense, net

Gain (loss) reclassified from Other comprehensive (loss) income into earnings $ 1 $ 30 $ ( 3 )

Fiscal Twelve Months Ended

January 1, 2023

(Dollars in Millions) Net Sales Cost of Sales Other expense (income), net

Gain (loss) on cash flow hedges $ 11 $ ( 23 ) $ ( 21 )

Loss on forward foreign exchange contracts not designated as hedges $ — $ — $ ( 15 )

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 expense (income), net in the Company’s Consolidated Statements of Operations.

As of December 31, 2023 and January 1, 2023, respectively, the Company held forward foreign exchange contracts that were not designated in cash flow hedging relationships of $ 4 million and $ — million , respectively.

(Dollars in Millions) Net sales Cost of sales Other expense, net

Gain reclassified from Other comprehensive (loss) income into earnings $ 21 $ 12 $ 30

Forward Starting Interest Rate Swaps

Beginning in the fourth quarter of fiscal year 2022, 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.

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 twelve months ended December 31, 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 expense (income), net in the Company’s Consolidated Statements of Operations over the life of the 5-year , 10-year , and 30-year bonds.

For the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, the Company reclassified $ 4 million, $ — million , and $ — million , respectively, from Other comprehensive income (loss) to the Consolidated Statements of Operations.

The $ 38 million gain in Accumulated other comprehensive loss will be amortized and recorded in Interest expense, net in the Consolidated Statements of Operations over the life of the 5-year , 10-year , and 30-year bonds.

For the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, the amounts reclassified from Other comprehensive (loss) income to the Consolidated Statements of Operations were not significant.

Fair Value Hedges

Forward Foreign Exchange Contracts

Beginning in 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 are 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 expense, net in the 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 are excluded from the assessment of the hedge effectiveness.

The value of the Excluded Components was not significant to the Consolidated Financial Statements in the current period.

The changes in fair value attributable to the Excluded Components are recorded in Accumulated other comprehensive loss and are recognized in Other expense, net in the Consolidated Statements of Operations on a systematic and rational basis over the life of the hedging instrument.

Net Investment Hedges

The Company designated certain forward foreign exchange contracts and cross currency swap contracts as net investment hedges to mitigate foreign exchange exposure related to non-U.S.

Forward Foreign Exchange Contracts

Beginning in the fiscal three months ended July 2, 2023, the Company entered into forward foreign exchange contracts 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 second quarter of fiscal year 2023, the Company designated as a net investment hedge forward foreign exchange contracts 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 CTA as a component of Other comprehensive income (loss).

The Company has elected to exclude the changes in the fair value attributable to time value and spot-forward rate differences (the “excluded components”) from the assessment of the hedge effectiveness.

The changes in fair value attributable to the excluded components were initially recorded within CTA as a component of Other comprehensive income (loss) and were recognized into Other expense (income), net in the Company’s Consolidated Statements of Operations ratably over the life of the contract.

The forward currency exchange contracts designated as net investment hedges were settled in the third quarter of fiscal year 2023.

During the fourth quarter of fiscal year 2023, the Company designated as a net investment hedge cross currency swap contracts 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 income (loss) and will remain there until the hedged net investments are sold or substantially liquidated.

The excluded components were excluded from the assessment of the hedge effectiveness and had an initial value of $ 7 million as of December 31, 2023.

The changes in fair value attributable to the excluded components were recognized into interest expense on a systematic and rational basis through the swap accrual over the life of the hedging instrument.

The following table is a summary of gains and losses on cross currency swap contracts designated as net investment hedges within Other comprehensive income (loss) and amount reclassified into earnings:

The Company designated these 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.

The Company 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 expense, net in the 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

Beginning in the fiscal three months ended December 31, 2023, the Company entered into cross currency swap contracts to hedge exposure in foreign subsidiaries with local functional currencies.

These contracts are designated as net investment hedges at the date of contract inception in accordance with the appropriate accounting guidance.

These contracts are 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 value of the Excluded Net Investment Hedge Components on Cross Currency Swap Contracts was not significant to the Consolidated Financial Statements in the current period.

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 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 for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023:

Fiscal Twelve Months Ended

(Dollars in Millions)

December 31, 2023 January 1, 2023 January 2, 2022

Loss recognized in CTA within Other comprehensive income (loss) $ ( 25 ) $ — $ —

The Company did not reclassify any gains or losses from CTA within Other comprehensive income to earnings during the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 related to cross currency swap contracts.

December 29, 2024 December 31, 2023 January 1, 2023

Gain (loss) recognized in CTA within Other comprehensive (loss) income $ 99 $ ( 25 ) $ —

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 twelve months ended December 29, 2024, December 31, 2023, and January 1, 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 monetary assets and liabilities in non-functional currencies.

These contracts are not designated as cash flow hedging relationships, and the net allocated gains and losses related to these contracts are recognized within Other expense, net in the Consolidated Statements of Operations.

As of December 29, 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 $ 0 million and $ 4 million, respectively.

The following table is a summary of the gains and losses recognized within Other expense, net related to the undesignated forward foreign exchange contracts for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023:

Fiscal Twelve Months Ended

(Dollars in Millions)

December 29, 2024 December 31, 2023 January 1, 2023

(Loss) gain recognized in Other expense, net $ ( 7 ) $ 10 $ 33

Effectiveness

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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 December 31, 2023 and January 1, 2023, such investments totaled $ 71 million and $ 66 million, respectively, and were included in Other assets on the Consolidated Balance Sheets.

During the fiscal twelve months ended December 29, 2024, the Company recorded $ 72 million of impairment charges within Other expense, net in the Consolidated Statement of Operations to fully write off the equity investment balance.

As of December 29, 2024 and December 31, 2023, such investments totaled $ 0 million and $ 71 million, respectively, and were included in Other assets on the Consolidated Balance Sheets.

Commitments and Contingencies

The Company and/or certain of its subsidiaries are involved from time to time in various lawsuits and claims relating to intellectual property, commercial contracts, product liability, labeling, marketing, advertising, pricing, 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 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 cybersecurity, 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 December 29, 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 that are material and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with Accounting Standards Codification 450-20-25.

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 Consolidated Balance Sheets.

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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;

scientific and legal

discovery has commenced or is complete;

proceedings are in early stages;

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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 Company’s Consolidated Balance Sheets, is not expected to have a material adverse effect on the Company’s financial position.

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 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.

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Changes to the accruals may be required in the future as additional information becomes available.

Claims for personal injury have been made against our subsidiary Johnson & Johnson Consumer Inc.

(“JJCI”), along with other sellers of acetaminophen-containing products, in federal court alleging that in utero exposure to acetaminophen (the active ingredient in Tylenol ® , an over-the-counter pain medication) is associated with the development of autism spectrum disorder and/or attention-deficit/hyperactivity disorder in children.

Claims for personal injury have been made against the Company's subsidiary Johnson & Johnson Consumer Inc., now known as Kenvue Brands LLC (“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.

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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.

No trial dates have been set in the remaining actions.

A Notice of Appeal was filed for those cases in March 2024.

In August 2024, all remaining cases then pending in the multi-district litigation were dismissed.

As of December 2024, all cases were on appeal.

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 our subsidiary Johnson & Johnson Inc.

In addition, lawsuits have been filed in state court against JJCI, the Company, and J&J, and trial dates are being set.

Lawsuits have also 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 these claims and lawsuits.

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 over-the-counter (“OTC”) business including the U.S.

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.

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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 over-the-counter Zantac (ranitidine) products.

Plaintiffs in the underlying actions allege that Zantac and other over-the-counter medications that contain ranitidine may degrade and result in unsafe levels of NDMA (N-nitrosodimethylamine) and can cause or have caused various cancers in patients using the products and seek declaratory and monetary relief.

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.

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In 2016, JJI sold the Canadian Zantac business to Sanofi Consumer Health, Inc.

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.

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 over-the-counter 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.

litigation related to OTC Zantac (ranitidine) products.

Beginning in 2019, multiple putative class actions naming J&J and/or JJI were filed in Canada with similar allegations regarding Zantac or ranitidine use.

J&J and/or JJI are named in two of the five outstanding putative class actions.

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.

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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 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 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, and an appeal is pending before the U.S.

Court of Appeals for the Eleventh Circuit.

In September 2023, the Nonprescription Drugs Advisory Committee (the “NDAC”) of the 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 sellers and manufacturers of PE-containing products, asserting various causes of action including violation of consumer protection statutes, negligence and unjust enrichment.

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 September 2023, the Nonprescription Drugs Advisory Committee (the “NDAC”) of the U.S.

Food and Drug Administration (the “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 the FDA nor the NDAC raised concerns about safety issues with use of oral PE at the recommended dose.

In November 2024, the FDA issued a proposed order to remove the ingredient from the OTC monograph.

The public now has the opportunity to comment for 180 days before the FDA issues a final order.

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.

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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 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.

In November 2024, the U.S.

District Court for the Eastern District of New York dismissed plaintiffs’ streamlined complaint, and a Notice of Appeal was filed in December 2024.

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.

In December 2024, a representative action was filed in the Federal Court of Australia, Victoria Registry, against the Company’s subsidiary Johnson & Johnson Pacific Pty Limited alleging false and misleading representations and seeking damages and associated relief based on broadly similar causes of action to those in the United States.

In February 2025, a representative action was filed in the High Court of New Zealand, Auckland Registry against Johnson & Johnson (New Zealand) Limited and the Company's subsidiaries JNTL Consumer Health (New Zealand) Limited and Johnson & Johnson Pacific Pty Limited, alleging breaches of the Fair Trading Act 1986 and the Consumer Guarantees Act 1993.

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.

The complaints allege that the Company made false or misleading statements, and omitted material facts, about PE and the efficacy of certain PE-containing products and seek damages for all shareholders who acquired shares pursuant to the registration statement and the final prospectus filed on May 4, 2023 with the U.S.

Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act relating to the Company’s Registration Statement on Form S-1 (the “IPO Prospectus”) for the Kenvue IPO.

The two cases have been consolidated as In re Kenvue Inc.

Securities Litigation and a lead plaintiff has been appointed.

Finally, in January 2024, shareholder derivative complaints were filed in the U.S.

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.

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 the Kenvue IPO disclosures regarding PE and seek damages and equitable relief.

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 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.

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 the 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 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 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.

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Environmental Protection Agency and U.S.

Department of Justice, which is subject to public comment.

The settlement, if judicially approved, will be confirmed through a judicial Consent Decree.

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.

Department of Justice, which was confirmed through a judicial Consent Decree in December 2024.

A Notice of Appeal was filed in January 2025.

The case has been administratively closed but can be re-opened upon request.

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 environmental investigation and remediation activities at designated hazardous waste sites or to reimburse the government or third parties for the costs they have incurred in performing investigation, oversight, or remediation at such sites.

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 and, as a result, has agreed to indemnify the Company for the Talc-Related Liabilities and any costs associated with resolving such claims.

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, including matters that have commenced in the United States naming the Company or its affiliates.

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.

Acquisitions and Divestitures

During the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, the Company did not make any significant acquisitions.

During the fiscal twelve months ended January 2, 2022, the Company divested several brands and facilities and recognized a pre-tax gain of $ 25 million within Other expense (income), net.

During the fiscal twelve months ended December 31, 2023 and January 1, 2023, the Company did not have any significant divestitures.

Segments of Business and Geographic Areas

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.

During fiscal year 2022, the Company realigned its historical segment structure, resulting in three operating segments, which are also its reportable segments:

The Company is organized into three reportable business segments:

Self Care, Skin Health and Beauty, and Essential Health.

Prior period presentations conform to the current segment reporting structure.

Segment profit is based on Operating income, excluding depreciation and amortization, non-recurring Separation-related costs, restructuring expenses and operating model optimization initiatives, the impact of the conversion of stock-based awards, issuance of Founder Shares, Other operating (income) expense, 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.

The Company’s CODM, the Chief Executive Officer, uses Segment adjusted operating income as the measure of profit or loss and to evaluate the performance of the Company’s segments.

For each segment, the CODM uses this information to assist in evaluating underlying trends, to monitor budget and forecast versus actual results, to make investment decisions to allocate resources both in total, and between the segments, and to make key segment personnel decisions.

Segment profit is based on Operating income, excluding depreciation, amortization of intangible assets, Separation-related costs, restructuring and operating model optimization initiatives, impairment charges, the impact of the conversion of stock-based awards, issuance of Founder Shares, Other operating expense (income), net, and unallocated general corporate administrative expenses (referred to herein as “Segment adjusted operating income”), as the CODM 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:

In assessing segment performance and managing operations, the CODM does not review segment assets.

The Company operates the business through the following three reportable business segments based on product categories:

Reportable Segments Product Categories

Self Care Pain Care

Cough, Cold, and Allergy

Self Care Cough, Cold, and Allergy

Other Self Care (Digestive Health, Smoking Cessation, Eye Care, and Other)

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Other Essential Health (Women’s Health, Wound Care, and Other)

The Company’s product categories as a percentage of Net sales for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 were as follows:

The Company’s product categories as a percentage of Net sales for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 were as follows:

Fiscal Twelve Months Ended

Product Categories

December 31, 2023 January 1, 2023 January 2, 2022

Pain Care 14 % 13 % 11 %

December 29, 2024 December 31, 2023 January 1, 2023

Cough, Cold, and Allergy 14 % 13 % 13 %

Pain Care 13 14 13

Other Self Care 15 15 14

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Segment Net Sales and Segment Adjusted Operating Income

Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 were as follows:

Segment Net Sales

Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 were as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

Self Care $ 6,451 $ 6,030 $ 5,643

December 29, 2024 December 31, 2023 January 1, 2023

(Dollars in Millions) Self Care

Skin Health and Beauty

Essential Health

Self Care Skin Health and Beauty

Essential Health Total Self Care Skin Health and Beauty

Essential Health Total

$ 6,527 $ 4,240 $ 4,688 $ 15,455 $ 6,451 $ 4,378 $ 4,615 $ 15,444 $ 6,030 $ 4,350 $ 4,570 $ 14,950

Segment Adjusted Operating Income

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

Self Care $ 2,299 $ 2,088 $ 1,952

Skin Health and Beauty 679 708 878

Essential Health 1,011 1,111 1,224

Segment adjusted operating income (1)

Segment adjusted Cost of sales (1)

2,287 1,738 2,102 6,127 2,249 1,952 2,228 6,429 2,140 1,943 2,157 6,240

Other segment expense items (2)

2,067 1,895 1,424 5,386 1,903 1,747 1,376 5,026 1,802 1,699 1,302 4,803

Segment adjusted operating income $ 2,173 $ 607 $ 1,162 $ 3,942 $ 2,299 $ 679 $ 1,011 $ 3,989 $ 2,088 $ 708 $ 1,111 $ 3,907

Reconciliation to Income before taxes

Depreciation (3)

Amortization of intangible assets

Separation-related costs (4)

Restructuring expenses and operating model optimization initiatives (2)

Restructuring and operating model optimization initiatives 221 32 100

Impairment charges 578 — 12

Conversion of stock-based awards (5)

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Operating income $ 1,841 $ 2,512 $ 2,675

Other expense (income), net 72 38 ( 5 )

Other expense, net 48 72 38

Interest expense, net 378 250 —

Income before taxes $ 1,415 $ 2,190 $ 2,637

(1) In the first quarter of fiscal year 2023, the Company adjusted the allocation for certain intangible asset amortization costs within Cost of Sales 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 segment adjusted operating income did not change as a result of this update.

(2) Exclusive of the restructuring expenses and operating model optimization initiatives included in Other operating expense (income), net in the Company’s Consolidated Statements of Operations.

(3) Segment adjusted operating income excludes the impact of the conversion of stock-based awards (see Note 11, Stock-Based Compensation).

This adjustment primarily represents the add-back of the net impact of the gain on reversal of previously recognized stock-based compensation expense of $ 148 million, offset by stock-based compensation expense recognized in the fiscal twelve months ended December 31, 2023 relating to employee services provided prior to the Separation of $ 203 million.

(4) On August 25, 2023, the Company’s Compensation & Human Capital Committee approved equity grants to individuals employed by Kenvue as of October 2, 2023.

Depreciation & Amortization

Depreciation and amortization by segment for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 were as follows:

(1) The Company defines Segment adjusted cost of sales as Cost of sales adjusted for amortization of intangible assets, Separation-related costs, conversion of stock-based awards, Founder Shares, operating model optimization initiatives, and general corporate/unallocated expenses.

(2) Other segment expense items for each reportable segment include employee-related costs, brand support, shipping and handling costs, research and development costs, and certain other operating expenses (income).

(3) Depreciation includes the amortization of integration and development costs capitalized in connection with cloud computing arrangements.

(4) Separation-related costs includes depreciation expense on Separation-related assets for the fiscal twelve months ended December 29, 2024.

(5) Segment adjusted operating income excludes the impact of the conversion of stock-based awards that occurred on August 23, 2023 (see Note 11, “Stock-Based Compensation” for additional information).

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 twelve months ended December 29, 2024 and December 31, 2023 relating to employee services provided prior to the Separation.

(6) 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 (see Note 11, “Stock-Based Compensation” for additional information).

Depreciation and Amortization

Depreciation and amortization by reportable segment for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 were as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 (1)

January 2, 2022

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

Self Care $ 217 $ 202 $ 202

1 unchanged sentence

Essential Health 231 195 195

Total depreciation and amortization (1)

$ 622 $ 627 $ 644

(1) The Company adjusted the allocation for certain intangible asset amortization costs within Cost of sales to align with segment financial results as measured by the Company, including the CODM.

Accordingly, the Company has updated its depreciation and amortization disclosures in the impacted period.

Total depreciation and amortization did not change as a result of this update.

(1) Depreciation includes the amortization of integration and development costs capitalized in connection with cloud computing arrangements.

Geographic Information

Net sales are attributed to a geographic region based on the location of the customer and for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 were as follows:

Net sales are attributed to a geographic region based on the location of the customer and for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 were as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) December 31, 2023 January 1, 2023 January 2, 2022

(Dollars in Millions) December 29, 2024 December 31, 2023 January 1, 2023

North America (1)

3 unchanged sentences

Latin America 1,343 1,339 1,198

Total Net sales

$ 15,455 $ 15,444 $ 14,950

(1) Includes U.S.

net sales in the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 of $ 6,767 million, $ 6,599 million, and $ 6,516 million, respectively.

Long-lived assets consisting of property, plant and equipment, net of accumulated depreciation as of December 31, 2023 and January 1, 2023 as follows:

Long-Lived Assets

(Dollars in Millions) December 31, 2023 January 1, 2023

Net sales in the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 of $ 6,719 million, $ 6,767 million, and $ 6,599 million, respectively.

Long-lived assets consisting of property, plant, and equipment, net of accumulated depreciation as of December 29, 2024 and December 31, 2023 were as follows:

(Dollars in Millions) December 29, 2024 December 31, 2023

North America (1)

2 unchanged sentences

Latin America 198 245

Total long-lived assets

$ 1,849 $ 2,042

(1) Includes U.S.

long-lived assets as of December 31, 2023 and January 1, 2023 of $ 794 million and $ 670 million, respectively.

long-lived assets as of December 29, 2024 and December 31, 2023 of $ 848 million and $ 794 million, respectively.

Major Customers

One customer accounted for approximately 12 %, 13 %, and 14 % of total net sales in the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

Restructuring

During 2018, J&J announced plans to implement actions across its global supply chain that were intended to enable the Company to focus resources and increase investments in critical capabilities, technologies, and solutions necessary to

manufacture and supply its product portfolio of the future, enhance agility, and drive growth.

These supply chain actions have included expanding its use of strategic collaborations, and bolstering its initiatives to reduce complexity, improving cost-competitiveness, enhancing capabilities, and optimizing its network.

The restructuring charges associated with the program, and directly attributed to the Company, were primarily related to contractors/outside services, asset write-downs, and accelerated depreciation.

The program was completed in the fiscal fourth quarter of fiscal year 2022 and as such, no costs were recognized for this program in the fiscal twelve months ended December 31, 2023.

Costs have been recognized in the Consolidated Statements of Operations in the fiscal twelve months ended January 1, 2023 and January 2, 2022 as follows:

One of the Company’s customers accounted for approximately 12 %, 12 %, and 13 % of total Net sales for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

Restructuring Expenses and Operating Model Optimization Initiatives

2024 Multi-Year Restructuring Initiative

As part of the Company’s continued transformation to a fit-for-purpose consumer company, during the fiscal year 2024, the Company began strategic initiatives intended to enhance organizational efficiencies and better position Kenvue for future growth (“Our Vue Forward”).

To further Our Vue Forward, on May 6, 2024, the Company’s Board approved a multi-year initiative (the “2024 Multi-Year Restructuring Initiative”) to build on the Company’s strengths, improve underlying information technology infrastructure, and optimize its cost structure by rebalancing resources to better position the Company for future growth.

The 2024 Multi-Year Restructuring Initiative primarily includes 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 $ 550 million, consisting of information technology 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.

The Company planned to incur approximately $ 275 million in pre-tax restructuring expenses and other charges in each of fiscal year 2024 and fiscal year 2025.

The Company incurred lower than expected spend in fiscal year 2024 due to the shift in timing of certain information technology and project-related costs to fiscal year 2025 and lower than expected employee-related costs relating to severance spend due to employee redeployment and voluntary exits.

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 twelve months ended December 29, 2024:

Fiscal Twelve Months Ended

(Dollars in Millions) January 1, 2023 January 2, 2022

(Dollars in Millions)

December 29, 2024

Restructuring expenses $ 185

Cost of sales 27

Selling, general, and administrative expenses 9

Other expense, net, operating — 1

Total $ 100 $ 117

Selected Quarterly Financial Data (Unaudited)

As described in Note 1, “Description of the Company and Summary of Significant Accounting Policies,” effective in the third quarter of fiscal year 2023, the Company changed its accounting principle for GILTI from the deferred approach to the period cost approach, which resulted in adjustments to the Provisions for taxes and Income before taxes line items in the Consolidated Statements of Operations and Other comprehensive income (loss) line in the Consolidated Statements of Comprehensive Income.

Selected unaudited quarterly financial data has been adjusted for the change in accounting principle for the fiscal years 2023 and 2022 and is summarized below:

Fiscal Three Months Ended

(Dollars in Millions Except Per Share Data)

December 31, 2023 October 1, 2023 July 2, 2023 April 2, 2023

Net sales $ 3,666 $ 3,915 $ 4,011 $ 3,852

Gross profit $ 2,043 $ 2,250 $ 2,225 $ 2,125

Income before taxes $ 357 $ 585 $ 639 $ 609

Provision for income taxes $ 30 $ 147 $ 209 $ 140

Net income $ 327 $ 438 $ 430 $ 469

Basic net income per share $ 0.17 $ 0.23 $ 0.22 $ 0.27

Diluted net income per share $ 0.17 $ 0.23 $ 0.22 $ 0.27

Other comprehensive income (loss) $ 369 $ ( 240 ) $ ( 190 ) $ 216

Fiscal Three Months Ended

(Dollars in Millions Except Per Share Data) January 1, 2023 October 2, 2022 July 3, 2022 April 3, 2022

Net sales $ 3,767 $ 3,789 $ 3,804 $ 3,590

Gross profit $ 2,046 $ 2,125 $ 2,158 $ 1,956

Income before taxes $ 512 $ 738 $ 775 $ 612

Provision for income taxes $ 151 $ 152 $ 170 $ 100

Net income $ 361 $ 586 $ 605 $ 512

Basic net income per share $ 0.21 $ 0.34 $ 0.35 $ 0.30

Diluted net income per share $ 0.21 $ 0.34 $ 0.35 $ 0.30

Other comprehensive income (loss) $ 750 $ ( 630 ) $ ( 817 ) $ ( 275 )

Total pre-tax restructuring expenses and other charges

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 twelve months ended December 29, 2024 and inception to date through December 29, 2024:

Fiscal Twelve Months Ended Inception To Date Through December 29, 2024

(Dollars in Millions)

December 29, 2024

Employee-related costs (1)

Information technology and project-related costs (2)

Other implementation costs (3)

Total pre-tax restructuring expenses and other charges

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

(2) Information technology and project-related costs primarily include advisory costs to operationalize the initiative.

(3) Other implementation costs primarily include 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 twelve months ended December 29, 2024:

(Dollars in Millions)

Employee-related Costs (1)

Information Technology and Project-Related Costs (2)

Other Implementation Costs (3)

Accrued restructuring expenses and other charges as of December 31, 2023

$ — $ — $ — $ —

Charges to earnings

106 99 16 221

Cash payments

( 75 ) ( 34 ) ( 7 ) ( 116 )

Non-cash charges

( 6 ) — ( 6 ) ( 12 )

Accrued restructuring expenses and other charges as of December 29, 2024

$ 25 $ 65 $ 3 $ 93

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

(2) Information technology and project-related costs primarily include advisory costs to operationalize the initiative.

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

S upply Chain Optimization Initiatives

Restructuring charges associated with supply chain optimization initiatives, and directly attributed to the Company, were primarily related to contractors/outside services, asset write-downs, and accelerated depreciation.

The initiatives were completed in the fiscal fourth quarter of fiscal year 2022 and as such, no costs were recognized for these initiatives in the fiscal twelve months ended December 29, 2024 and December 31, 2023.

Costs have been recognized in the Consolidated Statement of Operations in the fiscal twelve months ended January 1, 2023 as follows:

Fiscal Twelve Months Ended

(Dollars in Millions) January 1, 2023

Cost of sales $ 55

Selling, general, and administrative expenses 45

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data