Proctor and Gamble 2015 Annual Report Download - page 31

29 The Procter & Gamble Company
Net earnings from discontinued operations decreased $2.3
billion in 2015 due primarily to $2.1 billion of after tax
impairment charges in our atteries business (see Note 2 to
the Consolidated Financial Statements) and the absence of
fiscal 2015 earnings from our divested Pet Care business. Net
earnings attributable to Procter & Gamble decreased $4.6
billion, or 40 to $7.0 billion.
Diluted net earnings per share from continuing operations
decreased $0.80, or 21, to $3.06 due to the decrease in net
earnings. e had a diluted net loss per share from discontinued
operations of $0.62 due primarily to the impairment charges
on the atteries business. This was a reduction of $0.78 per
share versus the prior year. Diluted net earnings per share
decreased $1.57, or 39, to $2.44.
Core EPS decreased 2 to $4.02. Core EPS represents diluted
net earnings per share from continuing operations excluding
charges for enezuelan deconsolidation, balance sheet
remeasurement charges from foreign exchange policy changes
and devaluation in enezuela (see below), charges for certain
European legal matters and incremental restructuring related
to our productivity and cost savings plan. The decline was
driven by reduced net sales, partially offset by minor brand
divestiture gains.
Fiscal year 2014 compared with fiscal year 2013
Net earnings from continuing operations increased $365
million or 3 to $11.3 billion in 2014 due to the increase in
sales and a 40-basis point expansion in net earnings margin.
The increase in net earnings margin was primarily driven by
the decrease in SG&Aas a percentage of net sales and the lower
tax rate, partially offset by the gross margin contraction and
the acquisition and divestiture-driven net reduction in other
non-operating income, net.
Net earnings from discontinued operations increased $18
million in 2014 due to stronger results in our atteries business
offsetting the ongoing impacts of prior year product recalls in
Pet Care. Net earnings attributable to Procter & Gamble
increased $331 million, or 3 to $11.6 billion.
Diluted net earnings per share from continuing operations
increased 4 to $3.86 primarily due to the increase in net
earnings. Diluted net earnings per share from discontinued
operations was $0.15 due to the earnings of the atteries and
Pet Care businesses. Diluted net earnings per share increased
4 to $4.01.
Core EPS increased 5 to $4.09 primarily due to increased net
sales, a 40 basis point net earnings margin expansion and the
reduction in shares outstanding. Core EPS represents diluted
net earnings per share from continuing operations excluding
charges from foreign exchange policy changes and the
devaluation of the foreign exchange rates in enezuela (see
below), the 2013 holding gain on the purchase of the balance
of our Iberian joint venture, the 2013 impairment of goodwill
and indefinite-lived intangible assets and charges in both years
for European legal matters and incremental restructuring
related to our productivity and cost savings plan.
Veneuela Imacts
Effective June 30, 2015, the Company deconsolidated its local
enezuelan operations from our Consolidated Financial
Statements. P&G has operated in enezuela for over 65 years
and remains committed to serving enezuelan consumers with
our leading brands and products to grow our business. e
expect our operations in enezuela will continue for the
foreseeable future. e continue to work proactively with the
enezuelan official agencies to ensure we fully understand and
remain compliant as the policies within which our enezuelan
subsidiaries operate evolve. e do not expect this change in
accounting to directly affect the local operations of our
enezuelan subsidiaries.
There are a number of currency and other operating controls
and restrictions in enezuela, which have evolved over time
and may continue to evolve in the future. These evolving
conditions have resulted in an other-than-temporary lack of
exchangeability between the enezuelan bolivar and U.S.
dollar and have restricted our enezuelan operations ability
to pay dividends and satisfy certain other obligations
denominated in U.S. dollars. For accounting purposes, this has
resulted in a lack of control over our enezuelan subsidiaries.
Therefore, in accordance with the applicable accounting
standards for consolidation, effective June 30, 2015, we
deconsolidated our enezuelan subsidiaries and began
accounting for our investment in those subsidiaries using the
cost method of accounting. This change resulted in a fourth
quarter fiscal 2015 one-time before-tax charge of $2.0 billion
($2.1 billion after tax, or $0.71 per share). In future periods,
our financial results will only include sales of finished goods
to our enezuelan subsidiaries to the extent we receive
payments from enezuela (expected to be largely through the
CENCOEX exchange market). Accordingly, we will no longer
include the results of our enezuelan subsidiaries operations
in future reporting periods (see Note 1 to the Consolidated
Financial Statements). Our operations in enezuela accounted
for less than 2 of consolidated net sales and earnings from
continuing operations (before the deconsolidation charge)
during fiscal 2015.
enezuela is a highly inflationary economy under U.S. GAAP.
As a result, prior to deconsolidation, the U.S. dollar had been
the functional currency for our subsidiaries in enezuela. A
number of changes have been initiated in the enezuelan
exchange rate system, including changes that resulted in
devaluations to their currency. Prior to deconsolidation,
currency remeasurement adjustments for non-dollar
denominated monetary assets and liabilities held by our
enezuelan subsidiaries, along with any other transactional
foreign exchange gains and losses, have been reflected in
earnings, and totaled $104 million, $275 million and $236
million on an after-tax basis in 2015, 2014 and 2013,
respectively.
There are currently three official exchange rate mechanisms
in enezuela. The CENCOEX (National Center for External
Commerce) exchange rate is 6.3 enezuelan bolivares fuerte
(EF) per dollar and can be used for the importation of certain
qualifying products and materials. SICAD (Complementary