Proctor and Gamble 2014 Annual Report Download - page 31

The Procter & Gamble Company 29
Diluted net earnings per share from continuing operations
increased 4% to $3.98 primarily due to the increase in net
earnings. Diluted net earnings per share from discontinued
operations was $0.03 due to the earnings of the Pet Care
business. Diluted net earnings per share increased 4% to
$4.01.
Core EPS increased 5% to $4.22 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 the current and prior year charge for the balance
sheet impacts from foreign exchange policy changes and the
devaluation of the foreign exchange rates in Venezuela (see
below), the prior year holding gain on the purchase of the
balance of our Iberian joint venture, impairments of
goodwill and indefinite-lived intangible assets in the prior
year and charges in both years for European legal matters
and incremental restructuring related to our productivity and
cost savings plan.
Fiscal year 2013 compared with fiscal year 2012
Net earnings from continuing operations increased $2.2
billion or 24% to $11.3 billion in 2013. The combination of
the net year-over-year impact of acquisition and divestiture
gains and the net year-over-year decline in impairment
charges drove $1.9 billion of the increase. Earnings also
increased due to the increase in net sales and the 40 basis
point gross margin expansion in 2013.
Net earnings from discontinued operations decreased $1.7
billion in 2013 due to the gain on the divestiture of the
Snacks business and the earnings from the Snacks business
prior to the divestiture in the prior year. Net earnings
attributable to Procter & Gamble increased $556 million, or
5% to $11.3 billion.
Diluted net earnings per share from continuing operations
increased 25% to $3.83 in 2013 due to the increase in net
earnings and a reduction in shares outstanding. The number
of shares outstanding decreased due to $6.0 billion of
treasury share repurchases under our publicly announced
share repurchase program, partially offset by shares issued
under share-based compensation plans. Diluted net earnings
per share from discontinued operations was $0.03 due to the
earnings of the Pet Care business. Diluted net earnings per
share from discontinued operations in 2012 was $0.60
primarily due to the gain on the divestiture of the Snacks
business and earnings of the Snacks business prior to
divestiture. Diluted net earnings per share increased 5% to
$3.86.
Core EPS increased 6% to $4.02 in 2013 primarily due to
increased net sales, gross margin expansion and the
reduction in shares outstanding. Core EPS represents diluted
net earnings per share from continuing operations excluding
the 2013 charge for the balance sheet impact from the
devaluation of the official foreign exchange rate in
Venezuela, the 2013 holding gain on the purchase of the
balance of our Iberian joint venture and charges in both
years for European legal matters, incremental restructuring
related to our productivity and cost savings plan and
impairments of goodwill and indefinite-lived intangible
assets.
Venezuela Currency Impacts
Venezuela is a highly inflationary economy under U.S.
GAAP. As a result, the U.S. dollar is the functional currency
for our subsidiaries in Venezuela. Any currency
remeasurement adjustments for non-dollar denominated
monetary assets and liabilities held by these subsidiaries and
other transactional foreign exchange gains and losses are
reflected in earnings. For the current fiscal year, Venezuela
represented approximately 1% of the Company’s
consolidated net sales and operating profit excluding the
impact of the remeasurement charge discussed below.
Through December 31, 2013, the Venezuelan government
had established one official exchange rate for qualifying
dividends and imported goods and services. Transactions at
the official exchange rate are subject to approval by
CENCOEX (National Center for External Commerce),
previously CADIVI (Foreign Exchange Administrative
Commission). Effective February 9, 2013 the Venezuelan
government devalued its currency from 4.3 to 6.3
Venezuelan bolivares fuerte (VEF) per dollar. The
remeasurement of our local balance sheets to reflect this
devaluation in the fiscal year ended 2013 resulted in an after
tax charge of $236 million ($0.08 per share).
In addition to the preferential CENCOEX exchange rate,
there are and have been parallel exchange markets controlled
by the Central Bank of Venezuela as the only legal
intermediary to execute foreign exchange transactions
outside of CENCOEX. Through December 31, 2013, various
regulations and a limited notional amount of transactions
that ran through these programs essentially eliminated the
Company's ability to access any foreign exchange rate other
than the preferential rate to pay for imported goods and/or
manage our local monetary asset balances. Accordingly, all
of our net monetary assets were measured at the preferential
6.3 VEF per dollar exchange rate through December 31,
2013. In addition, through December 31, 2013, our results
in Venezuela were reflected in our Consolidated Financial
Statements at the official CADIVI rate, which was the rate
we expected to be applicable to dividend repatriations.
On January 24, 2014, the government made a number of
announcements affecting currency exchange rate and other
controls. The preferential CENCOEX exchange rate
remains at 6.3 VEF per dollar. In addition, while there is
considerable uncertainty as to the nature of transactions that
will flow through CENCOEX and how CENCOEX will
operate in the future, the Company believes that a significant
portion of its imports will continue to qualify for the
preferential rate. However, the importation of certain
finished goods and raw materials for some product
categories, along with the payment of dividends and