Kenvue Inc.
02/20/2026 | Press release | Distributed by Public on 02/20/2026 06:13
Annual Report for Fiscal Year Ending December 28, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Company Overview
At Kenvue, our purpose is to realize the extraordinary power of everyday care. As a global leader at the intersection of healthcare and consumer goods, we are the world's largest pure-play consumer health company by revenue with $15.1 billion in Net sales in the fiscal year 2025. By combining the power of science with meaningful consumer insights and our digital strategy, we empower consumers to live healthier lives every day. Built on more than a century of heritage and trusted by generations, our differentiated portfolio of iconic brands-including Aveeno®, BAND-AID®Brand, Johnson's®, Listerine®, Neutrogena®, Nicorette®, Tylenol®, and Zyrtec®-is backed by science and recommended by healthcare professionals, which further reinforces our consumers' connections to our brands.
Our portfolio includes Self Care, Skin Health and Beauty, and Essential Health products, allowing us to connect with consumers globally in their daily rituals and the moments that matter most.
Our global scale and the breadth of our brand portfolio are complemented by our well-developed capabilities and accelerated through our digital strategy, allowing us to dynamically capitalize on and respond to current trends impacting our categories and geographic markets.
With a sole focus on consumer health, our marketing organization operates efficiently by leveraging our precision marketing, e-commerce, and broader digital capabilities to develop unique consumer insights and further enhance the relevance of our brands. Similarly, our research and development organization combines these consumer insights with deep, multi-disciplinary scientific expertise, and active engagement with healthcare professionals, to drive innovative new products, solutions, and experiences centered around consumer health.
Our Business Segments
We operate our business through the following three reportable business segments:
•Self Care.Our Self Care product categories include: Cough, Cold, and Allergy; Pain Care; and Other Self Care (Digestive Health, Smoking Cessation, Eye Care, and Other). Major brands in the segment include Benadryl®, Calpol®, Motrin®, Nicorette®, Rhinocort®, Tylenol®, Zarbee's®, and Zyrtec®.
•Skin Health and Beauty.Our Skin Health and Beauty product categories include: Face and Body Care; and Hair, Sun, and Other. Major brands in the segment include Aveeno®, Dr.Ci:Labo®, Le Petit Marseillais®, Lubriderm®, Neutrogena®, OGX®, and Rogaine®.
•Essential Health. Our Essential Health product categories include: Oral Care; Baby Care; and Other Essential Health (Women's Health, Wound Care, and Other). Major brands in the segment include BAND-AID® Brand, Carefree®, Desitin®, Johnson's®, Listerine®, o.b.®tampons, and Stayfree®.
For additional information about our three reportable business segments, see Note 18, "Segments of Business and Geographic Areas,"to theConsolidated Financial Statements included herein.
Separation from J&J
In November 2021, J&J, our former parent company, announced its intention to separate its Consumer Health segment into an independent publicly traded company. Kenvue was incorporated in Delaware in February 2022, as a wholly owned subsidiary of J&J, to serve as the ultimate parent company of J&J's Consumer Health Business. In April 2023, J&J completed the transfer of substantially all of the assets and liabilities of the Consumer Health Business to us and our subsidiaries. In May 2023, we completed an initial public offering and began trading on the NYSE under the ticker symbol "KVUE." In July 2023, J&J announced an exchange offer under which its shareholders could exchange shares of J&J common stock for shares of our common stock owned by J&J. In August 2023, J&J completed the Exchange Offer, completing the Separation and our transition to being a fully independent public company. In May 2024, J&J completed an additional exchange offer through which J&J exchanged indebtedness of J&J for shares of our common stock owned by J&J. Following the completion of the Debt-for-Equity Exchange, J&J did not own any shares of our common stock.
We are incurring certain non-recurring separation-related costs in connection with our establishment as a standalone public company (the "Separation-related costs"). Separation-related costs associated with information technology and other activities, primarily related to the disentanglement of systems and the discontinuance of certain information technology assets, are substantially completed. However, costs related to legal entity name changes and certain other separation-related activities are expected to continue for a longer period than originally anticipated. For additional information about the Separation, see Note 1, "Description of the Company and Summary of Significant Accounting Policies," and Note 12, "Relationship with J&J," to the Consolidated Financial Statements included herein.
Relationship with J&J
We entered into the Separation Agreement and various other agreements with J&J for the purpose of effecting the Separation. These agreements provide a framework for our relationship with J&J and govern various interim and ongoing relationships between us and J&J that follow the completion of the Kenvue IPO. See Note 12, "Relationship with J&J," to the Consolidated Financial Statements included herein for additional information on these agreements.
Kenvue Global and North America Headquarters
On April 20, 2023, we 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. In March 2025, we began operating out of the new global and North America corporate headquarters. The relocation to our new campus from multiple U.S.- based locations will continue through 2026 when the new research and development building is expected to be complete.
On February 21, 2024, we listed our former corporate headquarters in Skillman, New Jersey, for sale, which met the criteria to be classified as held for sale at that date. For the fiscal three months ended March 31, 2024, an impairment charge of $68 million was recorded on the held for sale asset associated with the former corporate headquarters in Skillman. During the fiscal three months ended December 28, 2025, we completed the sale of the Skillman, New Jersey, facility and recognized a gain of $17 million. See Note 1, "Description of the Company and Summary of Significant Accounting Policies-Impairment of Long-Lived Assets-Assets Held for Sale," to the Consolidated Financial Statements included herein for more information.
Recent Developments
Restructuring
See Note 20, "Subsequent Events," to the Consolidated Financial Statements included herein for information about our restructuring initiative approved by our Board on February 17, 2026.
Strategic Review and Proposed Transaction with K-C
In July 2025, we announced that our Board had previously initiated a comprehensive review of strategic alternatives and has established a strategic review committee (the "Strategic Review Committee") to oversee the ongoing process, which was discontinued effective February 18, 2026. On November 2, 2025, following our Board's review of strategic alternatives, our Board unanimously approved the execution of the Merger Agreement pursuant to which K-C will acquire all of the outstanding shares of the Company for a combination of stock and cash in a series of transactions, as described in Note 1, "Description of the Company and Summary of Significant Accounting Policies-Proposed Transaction with Kimberly-Clark," to the Consolidated Financial Statements included herein. Pursuant to the terms and subject to the conditions of the Merger Agreement, Company shareholders will receive the Merger Consideration consisting of 1) 0.14625 shares of K-C common stock and 2) $3.50 in cash for each share of the Company they own. Upon completion of the Proposed Transaction, current K-C shareholders are expected to own approximately 54%, and current Company shareholders are expected to own approximately 46% of the combined company on a fully diluted basis.
The Merger Agreement contains customary representations, warranties, covenants, and termination rights. The Proposed Transaction is expected to close in the second half of 2026 and is conditioned on the satisfaction or waiver of other customary closing conditions, including the receipt of antitrust clearance in the United States and a number of foreign regulatory approvals. On January 29, 2026, our shareholders approved the adoption of the Merger Agreement and K-C's shareholders approved the issuance of K-C common stock in connection with the Proposed Transaction, in each case at a special meeting of shareholders held for that purpose. Additionally, the waiting period applicable to the Proposed Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired on February 4, 2026.
We are incurring costs, which primarily consist of expenses incurred in connection with the Proposed Transaction, including advisory fees, legal costs, and other professional service costs (the "Proposed Transaction costs").
Acetaminophen Regulatory Developments
In September 2025, officials in the U.S. federal government alleged that in utero exposure to acetaminophen (the active ingredient in Tylenol®, an over-the-counter pain medication) may be associated with an increased risk of neurological conditions such as autism spectrum disorder and attention-deficit/hyperactivity disorder in children and cautioned against the use of Tylenol®by pregnant women. The FDA also stated it initiated the process for a label change for acetaminophen and issued a notice to physicians. A third party, Informed Consent Action Network, filed a citizen petition in September 2025 regarding safety-related labeling changes for the use of over-the-counter acetaminophen-containing drug products during pregnancy. Our subsidiary, Kenvue Brands LLC, submitted its response to the citizen petition in October 2025, requesting that the FDA deny the petition. In November 2025, a second citizen petition was filed by a third party, the Americans for Scientific Integrity, requesting the FDA update the labeling of OTC acetaminophen-containing drug products to reflect a potential risk of neurodevelopmental harm, including autism spectrum disorder, from exposure during early childhood. The foregoing actions may depress sales of acetaminophen and could result in an increased risk of future litigation containing similar claims. See Note 17, "Commitments and Contingencies," to the Consolidated Financial Statements included herein for details regarding certain litigation matters that are currently pending related to acetaminophen.
Goodwill
For the fiscal twelve months ended December 28, 2025, we performed a qualitative assessment on each of our reporting units on the annual test date and concluded that no impairment to goodwill was necessary as it was more likely than not that the estimated fair value of each reporting unit was in excess of its respective carrying value.
In addition to the qualitative assessment performed as of the annual test date for the fiscal twelve months ended December 28, 2025, there was a reassessment of the long-term outlook for the Skin Health and Beauty business during the fiscal three months ended September 28, 2025. The revised outlook aimed to address slower growth in the broader skincare categories, as well as the recent decline in profitability of the Skin Health and Beauty reporting unit. We revised the internal forecasts to reflect the updated outlook. These changes in circumstances were determined to be a triggering event, which resulted in a quantitative interim impairment assessment of the fair value of the Skin Health and Beauty reporting unit. We also elected to perform a quantitative interim impairment assessment for the Self Care and Essential Health reporting units in conjunction with the assessment performed for the Skin Health and Beauty reporting unit.
We estimate the fair value of a reporting unit using a combination of a discounted cash flow model and a market-based approach. The discounted cash flow model relies on assumptions regarding revenue and net income growth rates, projected working capital needs, capital expenditures, and discount rates. Forecasted cash flows are discounted to present value to estimate the fair value. Under the market-based approach, we utilize the guideline public company method and market transaction method. These methods utilize valuation multiples derived from comparable publicly traded companies and relevant industry transactions, which are then applied to the reporting unit's operating performance metrics. Based on the results of the assessment, the estimated fair value of the Skin Health and Beauty reporting unit exceeded the carrying value by approximately 10%; therefore, no impairment charge was recorded for the fiscal three months ended September 28, 2025. If all other assumptions were held constant, an increase of approximately 100 basis points in the selected discount rate would have resulted in an impairment charge. No impairment to goodwill was necessary for any of the reporting units, as the estimated fair value of each reporting unit exceeded its respective carrying value.
A decline in forecasted Net sales or net income, or adverse macroeconomic developments such as rising interest rates, could significantly reduce the excess between fair value and carrying value. We will continue to monitor the performance of the Skin Health and Beauty business; further deterioration of market conditions or an inability to execute on our strategies could lead to an impairment charge of the goodwill associated with the Skin Health and Beauty reporting unit in the future.
Macroeconomic Developments
Macroeconomic developments, including changes in global trade policies, may adversely affect prevailing economic conditions and our business, results of operations, or financial condition. In 2025, the U.S. government issued executive orders imposing tariffs on goods imported into the United States. These actions, as well as retaliatory tariffs imposed by other countries on U.S. exports, are expected to increase supply chain costs in certain geographies and create economic uncertainty for consumers. While the situation is fluid, based on our current analysis of the effects of the tariffs that have been implemented by the United States and retaliatory measures that are in effect as of the reporting date, we estimate gross tariff exposure of approximately
$130 million annualized. We continue to monitor the potential impacts that the increased tariffs and other trade restrictions may have on our business, and we continue to focus on internal mitigating actions to partially offset the impact.
Key Factors Affecting Our Results
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below, in Part I, Item 1A, "Risk Factors," and the section titled "Cautionary Note Regarding Forward-Looking Statements" included herein.
Our Brands and Product Portfolio
We have a world-class, global portfolio of iconic brands, and for over 135 years, we have been making and investing in products that are trusted by generations of consumers. Our business is balanced and resilient with leading brands across categories and geographic markets. Our brands are widely recognized and represent a combination of global powerhouses and regional brands, many of which hold leading positions in their respective categories. Our brands are built for moments that uniquely matter; these moments of care create an emotional connection to our products, enabling deep bonds between consumers and our brands.
Consumers, customers, and third-party partners value and trust the reputation, reliability, and status of our brands and the quality, performance, and functionality of our products, and we believe there are significant opportunities to further increase our category and brand penetration by continuing to deepen our brand relevance and salience across our portfolio, continually earning a place for our products in consumers' hearts and homes.
Shifting Consumer Preferences
Everyday care has never been a more essential part of the consumer health journey. Globally, preferences and expectations for consumer health products continue to evolve, with a heightened focus on preventative care and science-backed solutions. Consumers are also shifting the paradigm of beauty towards health. Other recent trends that have affected consumer preferences include an aging population, premiumization (where consumers switch their purchases to premium alternatives), a growing middle class in emerging markets, and the rise of digital ecosystems that create new opportunities for personalized health solutions. We expect these trends to continue so that consumers will continue to seek solutions that meet their health goals, creating growth opportunities across our product portfolio.
Innovation
We rely on science. We have always prioritized science as the core of how we provide care, and we remain committed to this approach. Our ability to quickly develop new products and technologies and to adapt and market our products on an ongoing basis to meet evolving consumer preferences is an essential component of our business strategy. Several of our products have a long history of life-enhancing, first-to-market innovations. In many situations, we have driven the innovation and clinical compendium of entire categories. By leveraging world-class research and development capabilities and a team of research and development professionals, we have a multi-disciplinary and differentiated approach to innovation.
Increased Competition
Our products are sold in a highly competitive global marketplace, which, in recent years, has experienced increased retail trade concentration, the emergence of retail buying alliances, including the consolidation of bargaining strength across multiple partners, the rapid growth of e-commerce, the rise of agentic shopping, and the integration of traditional and digital operations at key customers. One of our customers accounted for approximately 12% of total Net salesin each of thefiscal twelve months ended December 28, 2025, December 29, 2024, and December 31, 2023. Our top 10 customers represented approximately 41%of total Net salesin each of the fiscal twelve months ended December 28, 2025, December 29, 2024, and December 31, 2023. As a result of these trends, certain large-format customers have significant bargaining strength and represent a significant portion of our total Net sales.
Sourcing, Manufacturing, and Supply Chain Management
Our ability to meet the needs of our consumers and customers depends on the proper functioning of our manufacturing and supplier operations. Our manufacturing operations require the timely delivery of sufficient amounts of complex, high-quality components and materials. We have built our supply chain network to deploy resources across the globe where they are most needed. We optimize our sourcing, manufacturing, and demand planning capabilities to meet evolving market dynamics. Our
extensive distribution network and sales organization enable us to establish strategic partnerships with key suppliers and retailers across multiple markets and channels, where we further leverage our scale to drive flexible manufacturing capacity and supply chain optimization. We believe this approach builds and supports our resilience across economic cycles and allows us to prioritize or expand our geographic focus based on our strategic priorities.
Restructuring
As part of our continued transformation to a fit-for-purpose consumer company, during the fiscal year 2024, we began strategic initiatives intended to enhance organizational efficiencies and better position us for future growth ("Our Vue Forward"). To further Our Vue Forward, on May 6, 2024, our Board approved a multi-year initiative (the "2024 Multi-Year Restructuring Initiative") to build on our strengths, improve our underlying information technology infrastructure, and optimize our cost structure by rebalancing resources to better position us 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. As of the end of fiscal year 2025, we have substantially completed all actions under the 2024 Multi-Year Restructuring Initiative. See Note 19, "Restructuring Expenses and Operating Model Optimization Initiatives," to the Consolidated Financial Statements included herein for further information.
Macroeconomic Trends
Macroeconomic factors affect consumer spending patterns and thereby our results of operations. These factors include general economic conditions, inflation, consumer confidence, employment rates, business conditions, the availability of credit, interest rates, tax rates, and fuel and energy costs. Factors that impact consumer discretionary spending, which remain volatile globally, continue to create a complex and challenging retail environment for us and our third-party partners. We intend to continue to evaluate and adjust our operating strategies and cost management opportunities to help mitigate any impacts on our results of operations resulting from broader macroeconomic conditions and policy changes, while remaining focused on the long-term growth of our business.
Economic challenges, including the impact from acts of war, military actions, terrorist attacks, or civil unrest, may continue to cause economic uncertainty and volatility. The impact of these issues may adversely affect prevailing economic conditions and our business, results of operations, or financial condition.
Foreign Currency Exposure
We report our consolidated financial results in U.S. dollars but have significant non-U.S. operations. A large portion of our business is conducted in currencies other than U.S. dollars, and generally the applicable local currency is our functional currency in that locality. As a result, we face foreign currency exposure on the translation into U.S. dollars of our results of operations in numerous jurisdictions. We manage the impact of foreign exchange rate translation and transaction exposures through operational means and the use of derivative financial instruments such as forward foreign exchange contracts and cross currency swap contracts. In addition, as we continue to expand our global operations, our exposure to foreign currency risk could become more significant, particularly if the U.S. dollar strengthens in the future.
Acquisitions and Divestitures
We did not complete any significant acquisitions or divestitures during the fiscal twelve months ended December 28, 2025, December 29, 2024, and December 31, 2023.
Legal Proceedings
See Note 17, "Commitments and Contingencies," to the Consolidated Financial Statements included herein for additional information regarding legal proceedings.
Results of Operations
A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended December 28, 2025 and the fiscal twelve months ended December 29, 2024 is presented below. A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended December 29, 2024 and the fiscal twelve months ended December 31, 2023 can be found under the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Annual Report on Form 10-K for the fiscal twelve months ended December 29, 2024 filed on February 24, 2025 with the SEC (the "2024 Annual Report").
Fiscal Twelve Months Ended December 28, 2025 Compared with Fiscal Twelve Months Ended December 29, 2024
Our results for the fiscal twelve months ended December 28, 2025 and December 29, 2024 were as follows:
| Fiscal Twelve Months Ended |
Change In Fiscal Year
|
|||||||||||||||||||||||||
| December 28, 2025 | December 29, 2024 | Change 2024 to 2025 | ||||||||||||||||||||||||
| (Dollars in Millions) | Amount | Percent | ||||||||||||||||||||||||
| Net sales | $ | 15,124 | $ | 15,455 | $ | (331) | (2.1) | % | ||||||||||||||||||
| Cost of sales | 6,332 | 6,496 | (164) | (2.5) | ||||||||||||||||||||||
| Gross profit | 8,792 | 8,959 | (167) | (1.9) | ||||||||||||||||||||||
| Selling, general, and administrative expenses | 6,088 | 6,329 | (241) | (3.8) | ||||||||||||||||||||||
| Restructuring expenses | 290 | 185 | 105 | 56.8 | ||||||||||||||||||||||
| Impairment charges | 23 | 578 | (555) | (96.0) | ||||||||||||||||||||||
| Other operating (income) expense, net | (23) | 26 | (49) | * | ||||||||||||||||||||||
| Operating income | 2,414 | 1,841 | 573 | 31.1 | ||||||||||||||||||||||
| Other expense, net | 36 | 48 | (12) | (25.0) | ||||||||||||||||||||||
| Interest expense, net | 379 | 378 | 1 | 0.3 | ||||||||||||||||||||||
| Income before taxes | 1,999 | 1,415 | 584 | 41.3 | ||||||||||||||||||||||
| Provision for taxes | 529 | 385 | 144 | 37.4 | ||||||||||||||||||||||
| Net income | $ | 1,470 | $ | 1,030 | $ | 440 | 42.7 | % | ||||||||||||||||||
* Calculation not meaningful.
Net Sales
Net sales were $15.1 billion and $15.5 billion for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, a decrease of $331 million, or 2.1%. Excluding the impact of favorable changes in foreign currency exchange rates of 0.2% and the reduction in Net sales related to divestitures of 0.1%, Organic sales (a non-GAAP financial measure as defined in "Segment Results-Organic Sales Change" below) decreased 2.2% driven by volume-related decreases of 2.3% partially offset by favorable value realization (defined as price, including mix) of 0.1%. Volume-related decreases across segments were impacted by trade inventory reductions driven by retailer inventory management in the United States and changes in shipment timing as compared to the prior fiscal year in China, as well as lower seasonal incidences impacting Allergy Care, pediatric Pain Care, and Cough and Cold. Favorable value realization was driven by new pricing actions, partially offset by strategic price investments, primarily in Skin Health and Beauty. For additional information about the Net sales of our three reportable business segments, see "-Segment Results" below.
The following table presents a reconciliation of the change in U.S. GAAP Net sales to the change in Organic sales for the fiscal twelve months ended December 28, 2025 as compared to the fiscal twelve months ended December 29, 2024:
| Fiscal Twelve Months Ended December 28, 2025 vs. December 29, 2024 | ||||||||||||||||||||||||||||||||||||||
| Reported Net Sales Change | Impact of Foreign Currency | Acquisitions and Divestitures | Organic Sales Change | |||||||||||||||||||||||||||||||||||
| Total Organic Sales Change |
Price/Mix(1)
|
Volume | ||||||||||||||||||||||||||||||||||||
| Total | (2.1) | % | 0.2 | % | (0.1) | % | (2.2) | % | 0.1 | % | (2.3) | % | ||||||||||||||||||||||||||
(1)Also referred to as value realization.
Cost of Sales
Cost of sales were $6.3 billion and $6.5 billion for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, a decrease of $164 million, or 2.5%. Gross profit margin expanded 10 basis points to 58.1% for the fiscal twelve months ended December 28, 2025 as compared to 58.0% for the fiscal twelve months ended December 29, 2024. Changes in Cost of sales were primarily due to volume-related Net sales decreases. Changes in both Cost of sales and gross profit margin were also driven by gains attributable to the realization of benefits associated with our supply chain optimization initiatives,
partially offset by net input cost inflation and the impact of tariffs imposed on goods imported into the United States. Changes in both Cost of sales and gross profit margin were also impacted by a reduction in stock-based compensation expense attributable to a refinement to the methodology of our stock-based compensation expense allocations, forfeitures of unvested stock-based awards, and the vesting of stock-based awards.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses were $6.1 billion and $6.3 billion for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, a decrease of $241 million, or 3.8%. Selling, general, and administrative expenses as a percentage of Net sales decreased 70 basis points to 40.3% for the fiscal twelve months ended December 28, 2025, as compared to 41.0% for the fiscal twelve months ended December 29, 2024. The decrease in Selling, general, and administrative expenses was primarily attributable to a $187 million decrease in Separation-related costs and savings from Our Vue Forward, partially offset by higher expenses related to brand support and Proposed Transaction costs incurred in the fiscal twelve months ended December 28, 2025. The decrease was also driven by a reduction in stock-based compensation expense attributable to forfeitures of unvested stock-based awards as well as the vesting of stock-based awards, partially offset by a refinement to the methodology of our stock-based compensation expense allocations.
Restructuring Expenses
Restructuring expenses were $290 million and $185 million for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, an increase of $105 million. Restructuring expenses relate to costs incurred under Our Vue Forward, and the increase was driven by higher information technology and project-related costs. See Note 19, "Restructuring Expenses and Operating Model Optimization Initiatives," to the Consolidated Financial Statements included herein for additional information.
Impairment Charges
Impairment charges were $23 million and $578 million for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, a decrease of $555 million. Impairment charges for the fiscal twelve months ended December 28, 2025 were driven by a non-cash impairment charge of $23 million related to the ORSL®trade name following regulatory changes in India. Impairment charges for the fiscal twelve months ended December 29, 2024 were driven by a non-cash charge of $488 million ($337 million after-tax) to adjust the carrying value of intangible assets and property, plant, and equipment related to the Dr.Ci:Labo®skin health business. The impairment was due primarily to revisions to internal forecasts for the business as a result of updates in our strategy 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. Impairment charges for the fiscal twelve months ended December 29, 2024 were also driven by the impact of a $68 million non-cash impairment charge related to our former corporate headquarters in Skillman, New Jersey, which was classified as held for sale on February 21, 2024. Additionally, we recognized a non-cash impairment charge of $22 million related to certain software development assets. See Note 1, "Description of the Company and Summary of Significant Accounting Policies-Impairment of Long-Lived Assets," to the Consolidated Financial Statements included herein for additional information.
Other Operating (Income) Expense, Net
Other operating (income) expense, net was $(23) million and $26 million for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, a change of $49 million. Other operating (income) expense, net for the fiscal twelve months ended December 28, 2025 and December 29, 2024 was driven by the $38 million and $59 million impact, respectively, of net economic benefit arrangements with J&J in connection with the Deferred Local Businesses (see Note 1, "Description of the Company and Summary of Significant Accounting Policies-Variable Interest Entities and Net Economic Benefit Arrangements," to the Consolidated Financial Statements included herein for additional information), partially offset by $37 million and $34 million, respectively, of royalty income. Other operating (income) expense, net for the fiscal twelve months ended December 28, 2025 was also driven by the $17 million gain recognized on the sale of the Skillman, New Jersey, facility. See Note 13, "Other Operating (Income) Expense, Net and Other Expense, Net," to the Consolidated Financial Statements included herein for additional information.
Other Expense, Net
Other expense, net was $36 million and $48 million for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, a decrease of $12 million. Other expense, net for the fiscal twelve months ended December 28, 2025 was driven by $46 million of currency losses on transactions. Other expense, net for the fiscal twelve months ended December 29,
2024 was driven by $72 million in losses on investments, partially offset by a $21 million gain recognized on the release of tax indemnification reserves that were no longer considered to be probable. See Note 13, "Other Operating (Income) Expense, Net and Other Expense, Net," to the Consolidated Financial Statements included herein for additional information.
Interest Expense, Net
Interest expense, net was $379 million and $378 million for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, an increase of $1 million. Interest expense, net in both fiscal periods primarily consisted of interest expense, including amortization of discounts and debt issuance costs, recognized on the Senior Notes (as defined in Note 5, "Borrowings," to the Consolidated Financial Statements included herein) and notes issued under our commercial paper program. See Note 5, "Borrowings," to the Consolidated Financial Statements included herein for additional information.
Provision for Taxes
Provision for taxes was $529 million and $385 million for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, an increase of $144 million. The increase in Provision for taxes was primarily the result of higher current year pre-tax income, income tax benefits recognized during the fiscal twelve months ended December 29, 2024 resulting from the impairment to the Dr.Ci:Labo® skin health business, as well as an increase in unrecognized tax benefits driven by new developments in ongoing tax audits during the fiscal twelve months ended December 28, 2025 as compared to the fiscal twelve months ended December 29, 2024. The increase was partially offset by favorable return-to-provision adjustments. In addition, the worldwide effective income tax rates for the fiscal twelve months ended December 28, 2025 and December 29, 2024 were 26.5% and 27.2%, respectively. See Note 14, "Income Taxes," to the Consolidated Financial Statements included herein for additional information.
Segment Results
Segment profit is based on Operating income, excluding depreciation, amortization of intangible assets, Separation-related costs, restructuring expenses and operating model optimization initiatives, impairment charges, the impact of the conversion of stock-based awards, issuance of Founder Shares (as defined below), Proposed Transaction costs, Other operating (income) expense, net, and unallocated general corporate administrative expenses (referred to herein as "Segment adjusted operating income"), as the Chief Operating Decision Maker (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 our Company, are not allocated to the segments. In assessing segment performance and managing operations, the CODM does not review segment assets.
See Note 18, "Segments of Business and Geographic Areas," to the Consolidated Financial Statements included herein for additional information.
A detailed discussion of the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 28, 2025 and the fiscal twelve months ended December 29, 2024 is presented below. A detailed discussion of the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 29, 2024 and the fiscal twelve months ended December 31, 2023 can be found under the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our 2024 Annual Report.
Fiscal Twelve Months Ended December 28, 2025 Compared with Fiscal Twelve Months Ended December 29, 2024
The following tables present Segment net sales and Segment adjusted operating income and the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 28, 2025 and December 29, 2024. See Note 18, "Segments of Business and Geographic Areas," to the Consolidated Financial Statements included herein for further details regarding Segment net sales and Segment adjusted operating income.
| Fiscal Twelve Months Ended |
Change In Fiscal Year
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| December 28, 2025 | December 29, 2024 | Change 2024 to 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Millions) | Self Care | Skin Health and Beauty | Essential Health | Total | Self Care | Skin Health and Beauty | Essential Health | Total | Amount | Percent | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 6,378 | $ | 4,114 | $ | 4,632 | $ | 15,124 | $ | 6,527 | $ | 4,240 | $ | 4,688 | $ | 15,455 | $ | (331) | (2.1) | % | ||||||||||||||||||||||||||||||||||||||||||
|
Segment adjusted Cost of sales(1)
|
2,285 | 1,671 | 2,056 | 6,012 | 2,287 | 1,738 | 2,102 | 6,127 | (115) | (1.9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other segment expense items(2)
|
1,984 | 1,966 | 1,400 | 5,350 | 2,067 | 1,895 | 1,424 | 5,386 | (36) | (0.7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment adjusted operating income | $ | 2,109 | $ | 477 | $ | 1,176 | $ | 3,762 | $ | 2,173 | $ | 607 | $ | 1,162 | $ | 3,942 | $ | (180) | (4.6) | % | ||||||||||||||||||||||||||||||||||||||||||
| Reconciliation to Income before taxes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Depreciation(3)
|
300 | 329 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Amortization of intangible assets(4)
|
257 | 269 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Separation-related costs(5)
|
88 | 296 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Restructuring expenses and operating model optimization initiatives(6)
|
335 | 221 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Impairment charges(7)
|
23 | 578 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Conversion of stock-based awards(8)
|
7 | 39 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Founder Shares(9)
|
7 | 29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Proposed Transaction costs(10)
|
25 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other operating (income) expense, net
|
(23) | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General corporate/unallocated expenses | 329 | 314 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Operating income
|
$ | 2,414 | $ | 1,841 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other expense, net
|
36 | 48 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Interest expense, net
|
379 | 378 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Income before taxes
|
$ | 1,999 | $ | 1,415 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)We define 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 (as defined below), operating model optimization initiatives, and general corporate/unallocated expenses.
(2)Other segment expense items for each reportable business segment include brand support, employee-related costs, shipping and handling costs, research and development costs, and certain other operating expenses (income).
(3)Depreciation consists of depreciation of property, plant, and equipment and amortization of integration and development costs capitalized in connection with cloud computing arrangements.
(4)Relates to the amortization of definite-lived intangible assets (primarily trademarks, trade names, and customer lists) over their estimated useful lives.
(5)Separation-related costs includes depreciation expense on Separation-related assets for the fiscal twelve months ended December 29, 2024. See Note 1, "Description of the Company and Summary of Significant Accounting Policies-Separation-Related Costs," to the Consolidated Financial Statements included herein for additional information regarding Separation-related costs.
(6)Restructuring expenses and operating model optimization initiatives relate to the 2024 Multi-Year Restructuring Initiative. See Note 19, "Restructuring Expenses and Operating Model Optimization Initiatives," to the Consolidated Financial Statements included herein for additional information.
(7)Impairment charges for the fiscal twelve months ended December 28, 2025 includes $23 million recognized in connection with the ORSL®trade name following regulatory changes in India. Impairment charges for the fiscal twelve months ended December 29, 2024 includes $488 million recognized in relation to Dr.Ci:Labo®long-lived assets, $68 million recognized on the held for sale asset associated with the Company's former corporate headquarters in Skillman, New Jersey, and $22 million recognized on certain software development assets. See Note 1, "Description of the Company and Summary of Significant Accounting Policies-Impairment of Long-Lived Assets," to the Consolidated Financial Statements included herein for additional information.
(8)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," to the Consolidated Financial Statements included herein 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 28, 2025 and December 29, 2024 relating to employee services provided prior to the Separation.
(9)On August 25, 2023, our Compensation & Human Capital Committee approved equity grants to individuals employed by Kenvue as of October 2, 2023 (the "Founder Shares"). On October 2, 2023, the Founder Shares were granted to all Kenvue employees in the form of stock options and performance stock units ("PSUs") to executive officers and either stock options and PSUs or restricted stock units ("RSUs") to non-executive individuals.
(10)Proposed Transaction costs primarily consist of expenses incurred in connection with the Proposed Transaction, including advisory fees, legal costs, and other professional service costs.
| Fiscal Twelve Months Ended |
Change in Fiscal Year
|
|||||||||||||||||||||||||||||||||||||
| December 28, 2025 | December 29, 2024 | Change 2024 to 2025 | ||||||||||||||||||||||||||||||||||||
| (Dollars in Millions) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||
| Segment Net Sales | ||||||||||||||||||||||||||||||||||||||
| Self Care | $ | 6,378 | 42.2 | % | $ | 6,527 | 42.3 | % | $ | (149) | (2.3) | % | ||||||||||||||||||||||||||
| Skin Health and Beauty | 4,114 | 27.2 | 4,240 | 27.4 | (126) | (3.0) | ||||||||||||||||||||||||||||||||
| Essential Health | 4,632 | 30.6 | 4,688 | 30.3 | (56) | (1.2) | ||||||||||||||||||||||||||||||||
| Segment net sales | $ | 15,124 | 100.0 | % | $ | 15,455 | 100.0 | % | $ | (331) | (2.1) | % | ||||||||||||||||||||||||||
| Self Care | $ | 2,109 | $ | 2,173 | $ | (64) | (2.9) | % | ||||||||||||||||||||||||||||||
| Skin Health and Beauty | 477 | 607 | (130) | (21.4) | ||||||||||||||||||||||||||||||||||
| Essential Health | 1,176 | 1,162 | 14 | 1.2 | ||||||||||||||||||||||||||||||||||
|
Segment adjusted operating income(1)
|
$ | 3,762 | $ | 3,942 | $ | (180) | (4.6) | % | ||||||||||||||||||||||||||||||
(1)Refer to the table above for the reconciliation of Segment adjusted operating income to Operating income and Income before taxes in the Consolidated Financial Statements.
Organic Sales Change
We define Organic sales, a non-GAAP financial measure, as Net sales excluding the impact of changes in foreign currency exchange rates and the impact of acquisitions and divestitures. We assess our Net sales performance by measuring the period-over-period change in Organic sales. Management believes reporting period-over-period changes in Organic sales provides investors with supplemental information that is useful in assessing our results of operations by excluding the impact of certain items that we believe do not directly reflect our underlying operations.
The following table presents a reconciliation of the change in U.S. GAAP Net sales to the change in Organic sales for the fiscal twelve months ended December 28, 2025 as compared to the fiscal twelve months ended December 29, 2024:
| Fiscal Twelve Months Ended December 28, 2025 vs. December 29, 2024 | ||||||||||||||||||||||||||||||||||||||
| Reported Net Sales Change | Impact of Foreign Currency | Acquisitions and Divestitures | Organic Sales Change | |||||||||||||||||||||||||||||||||||
| Total Organic Sales Change |
Price/Mix(1)
|
Volume | ||||||||||||||||||||||||||||||||||||
| Self Care | (2.3) | % | 0.7 | % | - | % | (3.0) | % | 0.4 | % | (3.4) | % | ||||||||||||||||||||||||||
| Skin Health and Beauty | (3.0) | - | (0.3) | (2.7) | (0.9) | (1.8) | ||||||||||||||||||||||||||||||||
| Essential Health | (1.2) | (0.5) | - | (0.7) | 0.5 | (1.2) | ||||||||||||||||||||||||||||||||
| Total | (2.1) | % | 0.2 | % | (0.1) | % | (2.2) | % | 0.1 | % | (2.3) | % | ||||||||||||||||||||||||||
(1)Also referred to as value realization.
Self Care Segment
Self Care Segment Net Sales
The Self Care Segment Net sales were $6.4 billion and $6.5 billion for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, a decrease of $149 million, or 2.3%. Excluding the impact of favorable changes in foreign currency exchange rates of 0.7%, Organic sales decreased 3.0% driven by volume-related decreases of 3.4%, partially offset by favorable value realization of 0.4%. Volume-related decreases, primarily in China and the United States, were primarily attributable to the impact of softer seasons on Allergy Care, Cough and Cold, and pediatric Pain Care, coupled with changes in shipment timing as compared to the prior fiscal period due to the impact of lower inventory replenishment following inventory builds in the prior year. Volume-related decreases were partially offset by growth in Smoking Cessation in Europe, Middle East, and Africa. Favorable value realization was primarily attributable to new pricing actions, partially offset by strategic price investments.
Self Care Segment Adjusted Operating Income
The Self Care Segment adjusted operating income decreased by $64 million, or 2.9%, to $2,109 million for the fiscal twelve months ended December 28, 2025 as compared to the fiscal twelve months ended December 29, 2024. The decrease was primarily driven by volume-related Net sales decreases, volume deleverage at internal manufacturing sites, unfavorable changes in foreign currency exchange rates, net input cost inflation, and the impact of tariffs imposed on goods imported into the United States, partially offset by lower expenses related to brand support, the realization of benefits associated with our supply chain optimization initiatives, and savings from Our Vue Forward resulting in administrative expense reductions.
Skin Health and Beauty Segment
Skin Health and Beauty Segment Net Sales
The Skin Health and Beauty Segment Net sales were $4.1 billion and $4.2 billion for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, a decrease of $126 million, or 3.0%. Excluding the impact of the reduction in Net sales related to divestitures of 0.3%, Organic sales decreased 2.7% driven by both volume-related decreases of 1.8% and unfavorable value realization of 0.9% attributable to strategic price investments. Volume-related decreases were attributable to changes in shipment timing as compared to the prior fiscal year due to the impact of lower inventory replenishment following inventory builds in the prior year in China, as well as trade inventory reductions driven by retailer inventory management in the United States. Volume-related decreases were further impacted by performance in the United States, primarily attributable to distribution losses, underperformance in e-commerce, and current fiscal year competitive pressures resulting in market share losses, as well as a softer sun season in the United States.
Skin Health and Beauty Segment Adjusted Operating Income
The Skin Health and Beauty Segment adjusted operating income decreased by $130 million, or 21.4%, to $477 million for the fiscal twelve months ended December 28, 2025 as compared to the fiscal twelve months ended December 29, 2024. The decrease was primarily driven by volume-related Net sales decreases, unfavorable value realization, higher expenses related to brand support, net input cost inflation, unfavorable changes in foreign currency exchange rates, and the impact of tariffs
imposed on goods imported into the United States, partially offset by the realization of benefits associated with our supply chain optimization initiatives and savings from Our Vue Forward resulting in administrative expense reductions.
Essential Health Segment
Essential Health Segment Net Sales
The Essential Health Segment Net sales were $4.6 billion and $4.7 billion for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, a decrease of $56 million, or 1.2%. Excluding the impact of unfavorable changes in foreign currency exchange rates of 0.5%, Organic sales decreased 0.7% driven by volume-related decreases of 1.2%, partially offset by favorable value realization of 0.5%. Volume-related decreases were attributable to trade inventory reductions driven by retailer inventory management in the United States, primarily in Oral Care and Wound Care, as well as market deceleration and competitive pressures in Oral Care in North America, partially offset by growth across product categories in Latin America. Favorable value realization was primarily attributable to new pricing actions, partially offset by strategic price investments.
Essential Health Segment Adjusted Operating Income
The Essential Health Segment adjusted operating income increased by $14 million, or 1.2%, to $1,176 million for the fiscal twelve months ended December 28, 2025 as compared to the fiscal twelve months ended December 29, 2024. The increase was primarily driven by the realization of benefits associated with our supply chain optimization initiatives, savings from Our Vue Forward resulting in administrative expense reductions, lower expenses related to brand support, and favorable value realization, partially offset by volume-related Net sales decreases, unfavorable changes in foreign currency exchange rates, net input cost inflation, and the impact of tariffs imposed on goods imported into the United States.
Liquidity and Capital Resources
Cash Flows
Summarized cash flow information for the fiscal twelve months ended December 28, 2025 and December 29, 2024 were as follows:
|
Change In Fiscal Year
|
||||||||||||||||||||||||||
| Fiscal Twelve Months Ended | Change 2024 to 2025 | |||||||||||||||||||||||||
| (Dollars in Millions) | December 28, 2025 | December 29, 2024 | Amount | Percent | ||||||||||||||||||||||
| Net income | $ | 1,470 | $ | 1,030 | $ | 440 | 42.7 | % | ||||||||||||||||||
| Net changes in assets and liabilities | $ | 52 | $ | (571) | $ | 623 | * | |||||||||||||||||||
| Net cash flows from operating activities | $ | 2,197 | $ | 1,769 | $ | 428 | 24.2 | % | ||||||||||||||||||
| Net cash flows used in investing activities | $ | (436) | $ | (425) | $ | (11) | 2.6 | % | ||||||||||||||||||
| Net cash flows used in financing activities | $ | (1,837) | $ | (1,565) | $ | (272) | 17.4 | % | ||||||||||||||||||
* Calculation not meaningful.
A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended December 28, 2025 and the fiscal twelve months ended December 29, 2024 is presented below. A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended December 29, 2024 and the fiscal twelve months ended December 31, 2023 can be found under the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our 2024 Annual Report.
Operating Activities
Net cash flows from operating activities were $2.2 billion and $1.8 billion for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, an increase of $428 million. The increase was primarily attributable to net changes in working capital balances driven by Accounts payable and accrued liabilities due to the timing of payments and Trade receivables due to the timing of sales relative to collections.
Investing Activities
Net cash flows used in investing activities were $436 million and $425 million for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, an increase of $11 million. Net cash flows used in investing activities were primarily driven by purchases of property, plant, and equipment in both the fiscal twelve months ended December 28, 2025 and December 29, 2024.
Financing Activities
Net cash flows used in financing activities were $1.8 billion and $1.6 billion for the fiscal twelve months ended December 28, 2025 and December 29, 2024, respectively, an increase of $272 million. Net cash flows used in financing activities for the fiscal twelve months ended December 28, 2025 were primarily driven by $1,581 million of dividends paid, the $750 million repayment of the 5.50% Senior Notes due 2025, $197 million of payments made to purchase treasury stock, and $146 million of net repayments of our commercial paper program, partially offset by $746 million of net proceeds from the issuance of the 4.85% Senior Notes due 2032. Net cash flows used in financing activities for the fiscal twelve months ended December 29, 2024 were primarily driven by $1,552 million of dividends paid and $235 million of payments made to purchase treasury stock, partially offset by $157 million of net proceeds from our commercial paper program.
Sources of Liquidity
Our primary sources of liquidity are cash on hand, which consisted of Cash and cash equivalents of $1.1 billion as of December 28, 2025, cash flows from operations, borrowing capacity under our Revolving Credit Facility (as defined below) of $4.0 billion which expires in March 2029, and authorized commercial paper program issuance of $4.0 billion. Also, on February 24, 2025, we filed a registration statement on Form S-3 with the SEC under which from time to time we may sell securities. On May 22, 2025, we issued a series of senior unsecured notes maturing in 2032 (the "2025 Senior Notes") in an aggregate principal amount of $750 million.
As of December 28, 2025, total debt was $8,524 million. As of December 28, 2025, we had $7,687 million of Senior Notes (as defined below) outstanding, net of related discounts and debt issuance costs of $63 million, no amounts outstanding under the Revolving Credit Facility, and $699 million of outstanding balances under our commercial paper program, net of a related discount of $1 million.
Our ability to fund our operating needs will depend on our ability to continue to generate positive cash flows from operations and on our ability to obtain debt financing on acceptable terms or to issue additional equity or equity-linked securities. Based upon our history of generating positive cash flows, we believe our existing cash and cash generated from operations will be sufficient to service our current obligations for at least the next 12 months.
Management believes that our cash balances and funds provided by operating activities, along with borrowing capacity and access to capital markets, taken as a whole, provide adequate liquidity to meet all of our current and long-term obligations when due, including third-party debt, adequate liquidity to fund capital expenditures, and flexibility to meet investment opportunities that may arise. However, we cannot assure you that we will be able to obtain additional debt or equity financing on acceptable terms in the future.
Cash and cash equivalents decreased by $8 million during the fiscal twelve months ended December 28, 2025 to $1,062 million as of December 28, 2025, as compared to $1,070 million as of December 29, 2024. Cash and cash equivalents held by our foreign subsidiaries was $1,020 million and $1,044 million as of December 28, 2025 and December 29, 2024, respectively.
Restructuring
As part of our continued transformation to a fit-for-purpose consumer company, during the fiscal year 2024, we began Our Vue Forward to enhance organizational efficiencies and better position Kenvue for future growth. To further Our Vue Forward, on May 6, 2024, our Board approved the 2024 Multi-Year Restructuring Initiative to build on our strengths, improve our underlying information technology infrastructure, and optimize our cost structure by rebalancing resources to better position us for future growth. We planned to incur approximately $275 million in pre-tax restructuring expenses and other charges in each of fiscal year 2024 and fiscal year 2025. We 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.
As of the end of fiscal year 2025, we have substantially completed all actions under the 2024 Multi-Year Restructuring Initiative. The 2024 Multi-Year Restructuring Initiative resulted in pre-tax restructuring expenses and other charges totaling
$556 million through the fiscal twelve months ended December 28, 2025. A majority of the pre-tax expenses and other charges have been, and are expected to continue to be, paid in cash and funded primarily through cash flows generated from operations. We began to realize savings resulting from the 2024 Multi-Year Restructuring Initiative in fiscal year 2024, and we have realized annualized pre-tax gross cost savings in excess of $350 million as of the end of fiscal year 2025. We largely reinvested savings realized from the 2024 Multi-Year Restructuring Initiative in future growth opportunities, including immediate reinvestment behind advertising, product promotion, and healthcare professional engagement. See Note 19, "Restructuring Expenses and Operating Model Optimization Initiatives," to the Consolidated Financial Statements included herein for further information.
See Note 20, "Subsequent Events," to the Consolidated Financial Statements included herein for information about our restructuring initiative approved by our Board on February 17, 2026.
Supplier Finance Program
As a part of our ongoing efforts to maximize working capital and manage liquidity, we work with suppliers to optimize payment terms and conditions on accounts payable through a voluntary supplier finance program. The program provides some of our suppliers with the opportunity to sell receivables due from us (our accounts payables) to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. We are not a party to the arrangements between the suppliers and the third-party financial institutions. Our obligations to the suppliers, including amounts due, and scheduled payment dates (which have general payment terms between 30 and 120 days), are not affected by a participating supplier's decision to participate in the program. See Note 1, "Description of the Company and Summary of Significant Accounting Policies-Supplier Finance Program," to the Consolidated Financial Statements included herein for further information.
Senior Notes
On March 22, 2023, we issued eight series of senior unsecured notes (the "2023 Senior Notes") in an aggregate principal amount of $7.75 billion. The net proceeds to us from the 2023 Senior Notes were approximately $7.7 billion after deductions of discounts and issuance costs of $77 million. The interest payments on the 2023 Senior Notes are due on March 22 and September 22 of each year and commenced on September 22, 2023. On May 22, 2025, we issued the 2025 Senior Notes in an aggregate principal amount of $750 million, which bear an interest rate of 4.850% per annum. The interest payments on the 2025 Senior Notes are due on May 22 and November 22 of each year and commenced on November 22, 2025. The 2025 Senior Notes, collectively with the 2023 Senior Notes, are referred to as the "Senior Notes."
On February 13, 2026, we issued a notice of full redemption to the holders of the 5.35% Senior Notes due 2026. All $750 million aggregate principal amount outstanding of the 5.35% Senior Notes due 2026 will be redeemed on February 23, 2026 at par plus accrued and unpaid interest to, but not including, the redemption date.
The Senior Notes are governed by an indenture and supplemental indentures between us and a trustee (collectively, the "Indenture"). The Indenture contains certain covenants, including limitations on us and certain of our subsidiaries' ability to incur liens or engage in certain sale-leaseback transactions. The Indenture also contains restrictions on our ability to consolidate, merge, or sell substantially all of our assets. In addition, the Indenture contains other customary terms, including certain events of default, upon the occurrence of which the Senior Notes may be declared immediately due and payable.
For further details on the Senior Notes, see Note 5, "Borrowings-Senior Notes," to the Consolidated Financial Statements included herein.
Commercial Paper Program
On March 3, 2023, we entered into a commercial paper program. Our Board has authorized the issuance of up to $4.0 billion in an aggregate principal amount of commercial paper under the commercial paper program. Any such issuance will mature within 364 days from date of issue. The commercial paper program contains representations and warranties, covenants, and defaults that are customary for this type of financing. The commercial paper notes issued under the commercial paper program are unsecured notes ranking at least pari passuwith all of our other senior unsecured indebtedness. For further details on the commercial paper program, see Note 5, "Borrowings-Commercial Paper Program," to the Consolidated Financial Statements included herein.
Revolving Credit Facility
On March 6, 2023, we 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. On January 30, 2025, we requested an extension of the maturity date of the 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. For further details on the Revolving Credit Facility, see Note 5, "Borrowings-Revolving Credit Facility," to the Consolidated Financial Statements included herein.
Interest Expense, Net
We recognized Interest expense, net of $379 million in the Consolidated Statement of Operations during the fiscal twelve months ended December 28, 2025, which primarily includes interest expense, including amortization of discounts and debt issuance costs, recognized on the Senior Notes and interest expense recognized on notes issued under our commercial paper program.
Compliance with Covenants
As of December 28, 2025, we were in compliance with all debt covenants, and no default or event of default has occurred.
Future Cash Requirements
We expect our future cash requirements will relate to working capital, capital expenditures, restructuring and integration, compensation and benefit-related obligations, interest expense and debt service obligations, litigation costs, the return of capital to shareholders, including through the payment of any dividends, and other contractual obligations that arise in the normal course of business. We may also use cash to enter into business development transactions, such as licensing arrangements or strategic acquisitions.
As of December 28, 2025, we expect our primary cash requirements for fiscal year 2026 to include capital expenditures. We made payments of $475 million for purchases of property, plant, and equipment during the fiscal twelve months ended December 28, 2025.
Share Repurchase Program
Our Board has authorized a share repurchase program, under which we are authorized to repurchase up to 27,000,000 shares of our 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-based awards under the Kenvue 2023 Plan (as defined in Note 11, "Stock-Based Compensation," to the Consolidated Financial Statements included herein). On November 2, 2025, we entered into the Merger Agreement pursuant to which K-C will acquire all of the outstanding shares of the Company for a combination of stock and cash in a series of transactions, as described in Note 1, "Description of the Company and Summary of Significant Accounting Policies-Proposed Transaction with Kimberly-Clark," to the Consolidated Financial Statements included herein. In accordance with the terms of the Merger Agreement, and subject to the exceptions therein, we are not permitted to repurchase, redeem, or otherwise acquire any of our equity interests without the prior written consent of K-C. Prior to entering into the Merger Agreement, we repurchased approximately 9,179,000 shares of our outstanding common stock for $197 million under the program during the fiscal twelve months ended December 28, 2025. No shares have been repurchased subsequent to the execution of the Merger Agreement.
Contractual Obligations
We are party to contractual obligations involving commitments to make payments to third parties, which impact our short-term and long-term liquidity and capital resource needs. Our contractual cash obligations include required payments of short-term and long-term debt principal and interest, purchase obligations, expected obligations under our pension plans, operating and
finance lease payments, and tax-related obligations. Our material cash requirements include the following contractual and other obligations:
•Debt Obligations and Interest Payments-See Note 5, "Borrowings," to the Consolidated Financial Statements included herein for additional information on our debt and the timing of expected future principal and interest payments.
•Purchase Obligations-As of December 28, 2025, we had purchase obligations of approximately $0.6 billion in connection with suppliers for the purchases of raw materials, packaging, other materials, and finished goods in the normal course of business, which are payable within 12 months.
•Pensions-It is our objective to contribute to the pension plans to ensure adequate funds are available to make benefit payments to plan participants and beneficiaries when required. See Note 7, "Pensions," to the Consolidated Financial Statements included herein for additional information on our pension plans and the timing of expected future payments related to projected benefit plan contributions.
•Leases-See Note 8, "Leases," to the Consolidated Financial Statements included herein for additional information on our operating and finance leases and the timing of expected future payments.
See Note 14, "Income Taxes," to the Consolidated Financial Statements included herein for additional information on our tax-related obligations.
Future Litigation
In the ordinary course of business, we are involved in litigation, claims, government inquiries, investigations, charges, and proceedings. See Note 17, "Commitments and Contingencies," to the Consolidated Financial Statements included herein for further details regarding certain matters that are currently pending. Our ability to successfully resolve pending and future litigation may adversely impact our financial condition, results of operations, or cash flows.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements (as defined under the rules and regulations of the SEC) or any relationships with unconsolidated entities that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, Net sales or expenses, results of operations, liquidity, cash requirements, or capital resources.
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those policies and estimates made in accordance with U.S. GAAP that are most important and material to the preparation of the Consolidated Financial Statements and which require management's most subjective and complex judgments due to the need to select policies from various alternatives available and to make estimates about matters that are inherently uncertain. We base our estimates on historical experience and other factors that we believe to be reasonable under the circumstances. On an ongoing basis, we review our estimates to ensure that these estimates appropriately reflect changes in our business and new information as it becomes available. If historical experience and other factors we use to make these estimates do not reasonably reflect future activity, our business, results of operations, or financial condition could be adversely affected.
Revenue Recognition
Our revenue contracts represent a single performance obligation to sell our products to customers. Revenue from the sale of products to customers is recognized at a single point in time when ownership, risks, and rewards transfer, which can be on the date of shipment or the date of receipt by the customer depending on the terms of the contract. Net sales exclude taxes collected by us on behalf of governmental authorities and include the shipping and handling fees charged to customers.
The nature of our business gives rise to several types of variable consideration including 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, which are estimated at the time of the sale using the "expected value" method or the "most likely amount" method based on the form of variable consideration. Trade promotions, discounts to customers, rebates, and sales incentives are issued to customers at the point of sale and are estimated based on contractual terms, historical experience, trend analysis, and projected market conditions in the various markets served. Revenue is recognized net of provisions for discounts and trade promotions. The potential of estimates to vary differs by product,
customer type, and geographic location. Historically, adjustments to these estimates to reflect updated expectations or actual results have not been material to our overall business.
See Note 18 "Segments of Business and Geographic Areas," to the Consolidated Financial Statements included herein for disaggregation of Net sales and Note 1, "Description of the Company and Summary of Significant Accounting Policies-Revenue Recognition," to the Consolidated Financial Statements included herein for further information regarding revenue recognition.
Income Taxes
Prior to the Kenvue IPO, our 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 us and were removed from the tax provision. Furthermore, we operated as part of J&J until the completion of the Exchange Offer on August 23, 2023, and therefore we were included in J&J's U.S. federal consolidated income tax return until that date. We filed a standalone U.S. federal consolidated income tax return and a standalone return in most other jurisdictions in which we operated for the remainder of fiscal year 2023 and have continued to file a standalone return for all fiscal years thereafter. 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 Investment from J&J or Additional Paid-In Capital accounts on the Consolidated Balance Sheet and reflected in the Consolidated Statement of Cash Flows as a financing activity for the fiscal twelve months ended December 31, 2023. Following the Exchange Offer, our operating footprint, as well as tax return elections and assertions, are different, and therefore, our income taxes, as presented in the Consolidated Financial Statements, may differ in future periods.
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. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. We estimate deferred tax assets and liabilities based on enacted tax regulations and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities.
U.S. federal, state, and foreign income tax payables and receivables are recognized on the Consolidated Balance Sheets for entities that file separate income tax returns and make direct payments to taxing authorities. Prior to the Kenvue IPO, U.S. federal, state, and foreign income tax payables and receivables for entities that were included in the filing of 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 our ability to realize our deferred tax assets, including our historical results, forecasts of future ability to realize our deferred tax assets, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis.
We have unrecognized tax benefits for uncertain tax positions. We follow U.S. GAAP, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The estimates for these positions are regularly assessed based upon all available information. These estimates may be revised in the future and such changes may result in a material additional expense or benefit to our financial results or our effective tax rate.
In the United States, the Tax Cuts and Jobs Act of 2017 ("TCJA") includes provisions for Global Intangible Low-Tax Income ("GILTI"). GILTI is described as the excess of a U.S. shareholder's total net foreign income over a deemed return on tangible assets, as provided by the TCJA. In January 2018, the Financial Accounting Standards Board issued guidance that allowed companies to elect as an accounting policy whether to record the tax effects of GILTI in the period the tax liability is generated (i.e., "period cost") or to provide for deferred tax assets and liabilities related to basis differences that exist at the balance sheet date and are expected to affect the amount of GILTI inclusion in future years upon reversal (i.e., "deferred method"). We previously followed J&J's accounting policy to consider the deferred tax effects of GILTI. Effective in the fiscal three months ended October 1, 2023, we changed the accounting principle for GILTI from the deferred approach to the period cost approach.
We entered into a tax matters agreement with J&J in connection with the Separation. For more information on the Tax Matters Agreement, see Note 12, "Relationship with J&J-Tax Indemnification," to the Consolidated Financial Statements included herein and our 2025 Proxy Statement.
See Note 1, "Description of the Company and Summary of Significant Accounting Policies-Income Taxes," and Note 14, "Income Taxes," to the Consolidated Financial Statements included herein for further information regarding income taxes.
See Note 14, "Income Taxes," to the Consolidated Financial Statements included herein for the Company's analysis on material changes in tax law.
Intangible Assets and Goodwill
Intangible Assets Not Subject to Amortization
A significant portion of our intangible assets relates to trademarks and trade names that have an indefinite useful life. We re-evaluate the useful life determination for our indefinite-lived trademarks and trade names each year to determine whether events and circumstances continue to support an indefinite useful life.
Intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment, or more frequently if events or changes in circumstances between annual tests indicate that assets may be impaired. We have the option to first assess qualitative factors to determine whether the quantitative indefinite-lived intangible asset impairment test is necessary. We may bypass the qualitative assessment in any period and proceed directly to performing the quantitative impairment test.
As part of our qualitative assessment, we consider several factors including macroeconomics conditions (including changes in interest rates and discount rates), the recent and projected financial performance of our tested brands, significant changes in the specific market or regulatory environment in which we operate that would change the position of our products in the marketplace, pending litigation, and other factors, including the results of our last quantitative assessment.
When performing the quantitative impairment assessment, we compare the estimated fair value of our trademarks and trade names to their carrying amounts as of the test date, which is on the first day of the fiscal fourth quarter. We estimate the fair value of trademarks and trade names based on an income approach using the relief-from-royalty method. This valuation requires 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. As the fair value measurements required to estimate the fair value of the trademarks and trade names are based on significant inputs not observable in the market, they represent Level 3 measurements within the fair value hierarchy.
Intangible Assets Subject to Amortization
Our definite-lived intangible assets (primarily trademarks, trade names, and customers lists) are amortized over their estimated useful lives. We re-evaluate the useful life determinations for definite-lived intangible assets annually to determine whether events or circumstances warrant a revision to their remaining useful lives. Our definite-lived intangible assets are subjected to a test of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When assessing for potential indicators of impairment, we consider several factors including any macroeconomic conditions, adverse changes in legal factors or in the business climate that could affect the value of an asset, any adverse changes in the extent or manner in which an asset is used or is expected to be used, and current or forecasted reductions in Net sales, operating income, or cash flows associated with the use of an asset.
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. If the net undiscounted cash flows are less than the carrying value of the asset group, we then perform the next step, which is to determine the fair value of the asset group, and record an impairment, if any.
Goodwill
Goodwill is not amortized but is subjected to annual tests of impairment at the reporting unit level, or more frequently if events or changes in circumstances between annual tests indicate that goodwill may be impaired. We have the option to first assess qualitative factors to determine whether the quantitative goodwill impairment test is necessary. We may bypass the qualitative assessment in any period and proceed directly to performing the quantitative assessment.
When assessing for potential indicators of impairment, we consider several factors including macroeconomic industry and market conditions, significant adverse shifts in the operating environment or manner in which assets are used, and pending litigation.
When performing the quantitative assessment, we compare the estimated fair value of each of our reporting units to their carrying value as of the test date, which is on the first day of the fiscal fourth quarter. 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. We estimate the fair value of a reporting unit using a combination of a discounted cash flow model and a market-based approach. The discounted cash flow model relies on assumptions regarding revenue and net income growth rates, projected working capital needs, capital expenditures, and discount rates. Forecasted cash flows are developed using long-term growth rates and then discounted to present value to estimate the fair value. The discount rate we use 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. Under the market-based approach, we utilize the guideline public company method and market transaction method. These methods utilize valuation multiples derived from comparable publicly traded companies and relevant industry transactions, which are then applied to the reporting unit's operating performance metrics.
To forecast a reporting unit's cash flows, we take 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 global economies, changes in the competitive landscape, changes in government legislation, product lifecycles, industry consolidations, and other changes beyond our control could have a positive or negative impact on achieving its targets. Accordingly, if market conditions deteriorate, or if we are unable to execute our strategies, it may be necessary to record impairment charges in the future. As the fair value measurements required to estimate the fair value of our reporting units are based on significant inputs not observable in the market, they represent Level 3 measurements within the fair value hierarchy.
See Note 1, "Description of the Company and Summary of Significant Accounting Policies," and Note 4, "Intangible Assets and Goodwill," to the Consolidated Financial Statements included herein for further information regarding intangible assets and goodwill.
Stock-Based Compensation
We recognize 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 grant date fair value of each stock option granted is estimated on the grant date using the Black-Scholes option valuation model. The inputs used in determining the grant date fair value are the expected volatility, expected dividend yield, risk-free rate, and expected term.
The grant date fair value of each RSU granted is equivalent to the closing price of our common stock on the New York Stock Exchange on the grant date.
We grant PSUs, including those with both performance vesting conditions and market-based vesting conditions (the "Performance PSUs"). 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. The inputs used in determining the grant date fair value are the length of the performance period, the risk-free rate, and the stock prices, correlations, and expected volatility of the Company and the firms in the selected peer group. The payout of the Performance PSUs is assessed by determining the achievement of the specified performance metrics as well as by comparing the Company's total shareholder return ("TSR") during a three-year period to the respective TSR of companies in a selected performance peer group. Given the requirement to meet certain defined performance and market criteria, the recipient of a Performance PSU may earn a total payout ranging from 0% to 200% of the target award.
During the fiscal twelve months ended December 31, 2023, we granted PSUs that have a singular market condition (the "Market PSUs"). 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. The inputs used in determining the grant date fair value were the length of the performance period, the risk-free rate, and the stock prices, correlations, and expected volatility of the Company and the firms in the selected peer group. The payout of the Market PSUs awards is assessed by comparing the Company's TSR during a three-year period to the respective TSR of companies in a selected performance peer group. Given the requirement to meet certain defined market criteria, the recipient of a Market PSU may earn a total payout ranging from 0% to 200% of the target award.
For all equity-based awards, the original estimate of the grant date fair value is not subsequently revised unless the awards are modified. The Company accounts for forfeitures during the period in which they occur.
See Note 11, "Stock-Based Compensation," to the Consolidated Financial Statements included herein for more information on equity-based awards granted by Kenvue.
Recent Accounting Standards
See Note 1, "Description of the Company and Summary of Significant Accounting Policies-Recent Accounting Standards Not Yet Adopted," to the Consolidated Financial Statements included herein for a description of recently issued accounting standards not yet adopted and their anticipated impact to the Consolidated Financial Statements.
Other Information
Deferred Legal Entities and Deferred Markets
Pursuant to the Separation Agreement, in order to ensure compliance with applicable law, to obtain necessary governmental approvals and other consents, and for other business reasons, we and J&J deferred certain transfers of assets and assumptions of liabilities of businesses in certain non-U.S. jurisdictions, including China, Malaysia, and Russia, until after the completion of the Kenvue IPO. During the fiscal three months ended October 1, 2023, J&J transferred the equity interests in the majority of the Deferred Legal Entities (as defined in Note 1, "Description of the Company and Summary of Significant Accounting Policies-Variable Interest Entities and Net Economic Benefit Arrangements," to the Consolidated Financial Statements included herein) to the Company, and during the fiscal three months ended December 28, 2025, transferred the equity interests of the remaining Deferred Legal Entities that previously had been consolidated as Variable Interest Entities in the Consolidated Financial Statements. The Consolidated Financial Statements included herein include businesses in all jurisdictions in which we operate following the completion of the Separation, including any Deferred Markets (as defined and further discussed in Note 1, "Description of the Company and Summary of Significant Accounting Policies-Variable Interest Entities and Net Economic Benefit Arrangements," to the Consolidated Financial Statements included herein).
Provision for Taxes
On December 15, 2022, the EU Member States formally adopted the EU's Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development's (the "OECD") Pillar Two Inclusive Framework ("Pillar Two") 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 harbors 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 Pillar Two. Due to these new rules, our provision for taxes could be unfavorably impacted as the legislation becomes effective in countries in which we conduct business. However, based on our current analysis, currently enacted laws for Pillar Two do not have a significant impact on the Consolidated Financial Statements. We are continuing to evaluate the Model Global Anti-Base Erosion Rules for Pillar Two and related legislation, and their potential impact on future periods. In addition, in January 2025, the United States issued an executive order expressing disagreement with certain aspects of Pillar Two. In June 2025, the Group of Seven issued a statement supporting the exclusion of U.S. parented groups from certain aspects of Pillar Two in exchange for the United States not imposing certain retaliatory taxes. On January 5, 2026, the OECD announced the Side-by-Side ("SbS") package, implemented as administrative guidance and modifying the operation of the Pillar Two rules. The package introduces simplifications and new safe harbors for U.S. and other multinational companies where domestic and international tax systems meet robust requirements to coexist with Pillar Two, which would fully exempt U.S. parented groups from the application of the Income Inclusion Rule and Undertaxed Profits Rule Pillar Two top up taxes. The SbS package also extends the current Transitional Country-by Country Reporting Safe Harbor by one year. We will continue to monitor any additional changes to Pillar Two.
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