Proctor and Gamble 2014 Annual Report Download - page 30

28 The Procter & Gamble Company
portion of SG&A spending in strengthening currencies as
compared to net sales, higher employee wages and benefit
costs and increased merchandising investments.
In fiscal 2013 we incurred impairment charges of $308
million ($290 million after-tax) related to the carrying value
of goodwill in our Appliances business and the related Braun
trade name intangible asset. In fiscal 2012 we incurred
impairment charges of $1.6 billion ($1.5 billion after-tax)
related to the carrying values of goodwill in our Appliances
and Salon Professional businesses and our Koleston Perfect
and Wella indefinite-lived intangible assets, which are part
of our Salon Professional business. See Significant
Accounting Policies and Estimates (Goodwill and Intangible
Assets) and Note 2 to our Consolidated Financial Statements
for more details, including factors leading to the impairment
charges. Since goodwill is included in Corporate for internal
management and segment reporting, the goodwill
impairment charges are included in the Corporate segment.
The indefinite-lived intangible asset impairments are also
included in the Corporate segment for management and
segment reporting.
Non-Operating Items
Fiscal year 2014 compared with fiscal year 2013
Interest expense increased 6% in 2014 to $709 million,
primarily due to an increase in average debt outstanding.
Interest income was $100 million in 2014, an increase of $13
million versus the prior year due to an increase in cash, cash
equivalents and investment securities. Other non-operating
income, net, primarily includes divestiture gains and
investment income. Other non-operating income decreased
$736 million to $206 million, primarily due to acquisition
and divestiture impacts. In 2014, we had approximately
$150 million in divestiture gains, primarily related to the
sale of our bleach businesses in CEEMEA and Latin
America, our Pert hair care business in Latin America and
MDVIP. The prior year acquisition and divestiture activities
included a $631 million holding gain resulting from P&G's
purchase of the balance of its Baby Care and Feminine Care
joint venture in Iberia and an approximate $250 million gain
from the divestiture of our Italy bleach business.
Fiscal year 2013 compared with fiscal year 2012
Interest expense decreased 13% in 2013 to $667 million, due
to lower interest rates on floating-rate debt. Interest income
increased 13% in 2013 to $87 million, due to an increase in
cash, cash equivalents and debt securities. Other non-
operating income increased $757 million to $942 million in
2013 mainly due to net acquisition and divestiture activities.
The $631 million holding gain resulting from the purchase
of the balance of P&G's Baby Care and Feminine Care joint
venture in Iberia and the gain of approximately $250 million
from the sale of our Italian bleach business, both in fiscal
2013, were partially offset by a $130 million divestiture gain
from the PUR water filtration business in 2012.
Income Taxes
Fiscal year 2014 compared with fiscal year 2013
The effective tax rate on continuing operations decreased
170 basis points to 21.4% in 2014. The primary driver of
this rate decline was approximately 320 basis points from
the favorable geographic mix of earnings and approximately
60 basis points due to the non-deductibility of the prior year
impairment charges related to our Appliances business.
These impacts were partially offset by a 50 basis point
increase due to the Venezuela currency policy changes and
devaluation discussed below (which decreased the prior year
rate 20 basis points and increased the current year rate by 30
basis points), a 110 basis point increase due to the tax
impacts of acquisition and divestiture activities (the gains
from the purchase of the balance of the Baby Care and
Feminine Care joint venture in Iberia and the sale of our
Italy bleach business in the prior year), and a 30 basis point
increase is due to the net impact of favorable discrete
adjustments related to uncertain income tax positions. The
net benefit on the current year was $228 million, or 150
basis points, versus 180 basis points of net benefit in the
prior year.
Fiscal year 2013 compared with fiscal year 2012
The effective tax rate on continuing operations decreased
390 basis points to 23.1% in 2013. The primary drivers of
this rate decline were approximately 210 basis points due to
the non-deductibility of impairment charges related to our
Appliances and Salon Professional businesses, which were
higher in the base period versus the current year,
approximately 100 basis points due to the tax impacts from
acquisition and divestiture activity (primarily the non-
taxable gain on the purchase of the balance of the Baby Care
and Feminine Care joint venture in Iberia), approximately 20
basis points from the impact of the Venezuela currency
devaluation, and approximately 50 basis points due to the
net impact of favorable discrete adjustments related to
uncertain income tax positions. The 2013 net benefit was
$275 million, or 180 basis points, versus a net benefit of 130
basis points in 2012.
Net Earnings
Fiscal year 2014 compared with fiscal year 2013
Net earnings from continuing operations increased $406
million or 4% to $11.7 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&A as 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 decreased $23
million in 2014 due to 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.