Proctor and Gamble 2016 Annual Report Download - page 32

18 The Procter & Gamble Company
Venezuelan subsidiaries. Earnings also declined due to the
impact of the decline in net sales in fiscal 2016, partially offset
by improved gross margin and the reduction in SG&A. Foreign
exchange impacts reduced net earnings by about $880 million
in 2016 due to weakening of certain key currencies against the
U.S. dollar, primarily in Argentina, Brazil, Canada, Mexico
and Russia. This impact includes both transactional charges
as discussed above in Operating Costs and translational
impacts from converting earnings from foreign subsidiaries to
U.S. dollars.
Net earnings from discontinued operations improved $1.7
billion in 2016 to $577 million. Batteries drove a $2.1 billion
improvement due primarily to a $1.8 billion reduction in after-
tax impairment charges in the Batteries business ($350 million
in the current year compared to $2.1 billion in the base period)
and a $422 million after-tax gain in the current period from the
sale of the Batteries business. This was partially offset by a
decrease in the earnings of the Beauty Brands (see Note 4 to
the Consolidated Financial Statements).
Net earnings attributable to Procter & Gamble increased $3.5
billion, or 49% to $10.5 billion.
Diluted net earnings per share from continuing operations
increased $0.65, or 23%, to $3.49 due to the increase in net
earnings and a decline in the average number of shares
outstanding. Diluted net earnings per share from discontinued
operations were $0.20 primarily resulting from the gain on the
sale of the Batteries business. This was an improvement of
$0.60 per share versus the prior year. Diluted net earnings per
share increased $1.25, or 51%, to $3.69.
Core EPS decreased 2% to $3.67. Core EPS in fiscal year 2016
represents diluted net earnings per share from continuing
operations excluding 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 and foreign exchange impacts, partially offset
by gross margin expansion.
Fiscal year 2015 compared with fiscal year 2014
Net earnings from continuing operations decreased $2.4 billion
or 22% to $8.3 billion due to the $2.1 billion after-tax charge
related to the deconsolidation of Venezuelan subsidiaries and
the decline in net sales, partially offset by reduced SG&A.
Foreign exchange impacts negatively affected net earnings by
approximately $1.3 billion in 2015 due to the weakening of
certain key currencies against the U.S. dollar, primarily in
Russia, Ukraine, Venezuela and Argentina, partially offset by
lower after-tax charges related to balance sheet remeasurement
charges in Venezuela.
Net earnings from discontinued operations decreased $2.3
billion in 2015 due primarily to $2.1 billion of after-tax
impairment charges in our Batteries business (see Note 4 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 $0.79, or 22%, to $2.84 due to the decrease in net
earnings. We had a diluted net loss per share from discontinued
operations of $0.40 due primarily to the impairment charges
on the Batteries 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 $3.76. Core EPS represents diluted
net earnings per share from continuing operations excluding
charges for Venezuelan deconsolidation, balance sheet
remeasurement charges from foreign exchange policy changes
and devaluation in Venezuela, 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.
Venezuela Impacts
There are a number of currency and other operating controls
and restrictions in Venezuela, which have evolved over time
and may continue to evolve in the future. These evolving
conditions resulted in an other-than-temporary lack of
exchangeability between the Venezuelan bolivar and U.S.
dollar and restricted our Venezuelan operations’ ability to pay
dividends or pay for certain raw and package materials,
finished goods and services denominated in U.S. dollars. For
accounting purposes, this resulted in a lack of control over our
Venezuelan subsidiaries. Therefore, in accordance with the
applicable accounting standards for consolidation, effective
June 30, 2015, we deconsolidated our Venezuelan subsidiaries
and began accounting for our investment in those subsidiaries
using the cost method of accounting. This resulted in a write-
off of all of the net assets of our Venezuelan subsidiaries, along
with Venezuela related assets held by other subsidiaries.
Beginning with the first quarter of fiscal 2016, our financial
results only include sales of finished goods to our Venezuelan
subsidiaries to the extent we receive payments from Venezuela.
Accordingly, we no longer include the results of our
Venezuelan subsidiaries’ operations in our financial results.