DISCONTINUED OPERATIONS

On July 9, 2015, the Company announced the signing of a definitive agreement to divest four product categories which will be merged with Coty. The divestiture was initially comprised of 43 of the Company's beauty brands (“Beauty Brands”), including the global salon professional hair care and color, retail hair color, cosmetics and fine fragrance businesses, along with select hair styling brands. Subsequent to signing, the fine fragrance brands of Dolce & Gabbana and Christina Aguilera were excluded from the divestiture. In connection with the decision to exclude these brands, the Company recorded a non-cash, before-tax impairment charge in discontinued operations of approximately $48 ($42 after tax) in fiscal 2016 in order to record the Dolce & Gabbana license intangible asset at its revised estimated net realizable value. On May 11, 2016, the Company entered into a separate transaction to sell the Christina Aguilera brand prior to or concurrent with the expected close date of the Coty transaction. On June 30, 2016, Dolce & Gabbana and the Shiseido Group announced the signing of the worldwide license agreement for the Dolce & Gabbana beauty business. The Company will transition out of the Dolce & Gabbana license upon the effectiveness of the new license, which is expected to occur prior to or concurrent with the expected close of the Coty transaction. In connection with this transition, the Company agreed to pay a termination payment of $83 ($76 after tax). This termination payment charge is included in discontinued operations for the year ended June 30, 2016.

While the ultimate form of the Beauty Brands transaction has not yet been decided, the Company’s current preference is for a Reverse Morris Trust split-off transaction in which P&G shareholders could elect to participate in an exchange offer to exchange their P&G shares for shares of a new corporation that would hold the Beauty Brands (excluding Dolce & Gabbana and Christina Aguilera) and then immediately exchange those shares for Coty shares. The Company expects to close the transaction in October 2016.

Coty’s offer for the Beauty Brands, which was accepted by the Company, was $12.5 billion. The final value of the transaction will be determined at closing. Based on Coty’s stock price and outstanding shares and equity grants as of June 30, 2016, the value of the transaction was approximately $13.1 billion. The value is comprised of approximately 411 million shares, or 54% of the diluted equity of the newly combined company, valued at approximately $10.7 billion and the assumption of debt of $2.4 billion by the entity holding the Beauty Brands (excluding Dolce & Gabbana and Christina Aguilera) immediately prior to close of the transaction. The assumed debt is expected to vary between $3.9 billion and $1.9 billion, depending on a $22.06 to $27.06 per share collar of Coty’s stock based on the trading price prior to the close of the transaction, but will be subject to other contractual valuation adjustments.

In February 2016, the Company completed the divestiture of its Batteries business to Berkshire Hathaway (BH) via a split transaction, in which the Company exchanged the Duracell Company, which the Company had infused with additional cash, to repurchase all 52.5 million shares of P&G stock owned by BH. During the fiscal year ended June 30, 2016, the Company recorded non-cash, before-tax goodwill and indefinite-lived asset impairment charges of $402 ($350 after tax), to reduce the Batteries carrying value to the total estimated proceeds based on the value of BH’s shares in P&G stock at the time of the impairment charges (see Note 4). The Company recorded an after-tax gain on the final transaction of $422 to reflect a subsequent increase in the final value of the BH’s shares in P&G stock. The total value of the transaction was $4.2 billion representing the value of the Duracell business and the cash infusion. The cash infusion of $1.7 billion was reflected as a purchase of treasury stock.

On July 31, 2014, the Company completed the divestiture of its Pet Care operations in North America, Latin America, and other selected countries to Mars, Incorporated (Mars) for $2.9 billion in an all-cash transaction. Under the terms of the agreement, Mars acquired our branded pet care products, our manufacturing sites in the United States and the majority of the employees working in the Pet Care business. The agreement included an option for Mars to acquire the Pet Care business in several additional countries, which was also completed in fiscal 2015. The European Union countries were not included in the agreement with Mars.

In December 2014, the Company completed the divestiture of its Pet Care operations in Western Europe to Spectrum Brands in an all-cash transaction. Under the terms of the agreement, Spectrum Brands acquired our branded pet care products, our manufacturing site in the Netherlands and the majority of the employees working in the Western Europe Pet Care business. The one-time after-tax impact of these transactions is not material.

In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of the Beauty Brands, Batteries and Pet Care businesses are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Additionally, the Beauty Brands, Batteries and Pet Care businesses' balance sheet positions are presented as assets and liabilities held for sale in the Consolidated Balance Sheets. The Beauty Brands were historically part of the Company's Beauty reportable segment. The Batteries business was historically part of the Company's Fabric & Home Care reportable segment. The Pet Care business was historically part of the Company's Health Care reportable segment.

On July 1, 2015, the Company adopted ASU 2014-08, which included new reporting and disclosure requirements for discontinued operations. The new requirements are effective for discontinued operations occurring on or after the adoption date, which includes the Beauty Brands divestiture. All other discontinued operations prior to July 1, 2015 are reported based on the previous disclosure requirements for discontinued operations, including the Batteries and Pet Care divestitures.

The following table summarizes Net earnings/(loss) from discontinued operations and reconciles to the Consolidated Statements of Earnings:



Years ended June 30	2016		2015			2014
Beauty Brands	$	336	$	643		$	660
Batteries	241		(1,835		)	389
Pet Care	—		49			78
Net earnings/(loss) from discontinued operations	$	577	$	(1,143	)	$	1,127

The following table summarizes total assets and liabilities held for sale and reconciles to the Consolidated Balance Sheets:



Years ended June 30	2016		2015
	Beauty Brands		Beauty Brands		Batteries		Total
Current assets held for sale	$	7,185	$	922	$	3,510	$	4,432
Noncurrent assets held for sale	—		5,204		—		5,204
Total assets held for sale	$	7,185	$	6,126	$	3,510	$	9,636

Current liabilities held for sale	$	2,343	$	356	$	1,187	$	1,543
Noncurrent liabilities held for sale	—		717		—		717
Total liabilities held for sale	$	2,343	$	1,073	$	1,187	$	2,260

The following is selected financial information included in Net earnings/(loss) from discontinued operations for the Beauty Brands:



	Beauty Brands
Years ended June 30	2016		2015		2014
Net sales	$	4,910	$	5,530	$	6,109
Cost of products sold	1,621		1,820		1,980
Selling, general and administrative expense	2,763		2,969		3,299
Intangible asset impairment charges	48		—		—
Interest expense	32		—		1
Interest income	2		2		2
Other non-operating income/(loss), net	9		91		(3		)
Earnings from discontinued operations before income taxes	$	457	$	834	$	828
Income taxes on discontinued operations	121		191		168
Net earnings/(loss) from discontinued operations	$	336	$	643	$	660

Included in Net earnings/(loss) from discontinued operations is $112 of transition costs that were incurred for the fiscal year ended June 30, 2016.

The following is selected financial information included in cash flows from discontinued operations for the Beauty Brands:



	Beauty Brands
Years ended June 30	2016		2015		2014
NON-CASH OPERATING ITEMS
Depreciation and amortization	$	106	$	125	$	127
Gain on sale of businesses	8		86		—
Goodwill and intangible asset impairment charges	48		—		—
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	$	114	$	106	$	108

The major components of assets and liabilities of the Beauty Brands held for sale are provided below. The assets and liabilities held for sale will evolve up to the closing date for normal operational changes as well as contractual adjustments including the assumption of debt, pension plan funding and other provisions.



	Beauty Brands
Years ended June 30	2016 ⁽¹⁾			2015
Cash	$	40		$	9
Restricted cash	996		⁽²⁾	—
Accounts receivable	384			293
Inventories	494			476
Prepaid expenses and other current assets	126			144
Property, plant and equipment, net	629			613		⁽³⁾
Goodwill and intangible assets, net	4,411			4,513		⁽³⁾
Other noncurrent assets	105			78		⁽³⁾
Total current assets held for sale	$	7,185		$	922
Total noncurrent assets held for sale	—			5,204
Total assets held for sale	$	7,185		$	6,126

Accounts payable	$	148		$	118
Accrued and other liabilities	384			238
Noncurrent deferred tax liabilities	370			352		⁽³⁾
Long-term debt	996		⁽²⁾	—
Other noncurrent liabilities	445			365		⁽³⁾
Total current liabilities held for sale	$	2,343		$	356
Total noncurrent liabilities held for sale	—			717
Total liabilities held for sale	$	2,343		$	1,073


⁽¹⁾	The Company expects the Beauty Brands transaction to close in October 2016. Therefore, for the period ended June 30, 2016, all assets and liabilities held for sale are reported as current assets and liabilities held for sale on the Consolidated Balance Sheets.


⁽²⁾	On January 26, 2016, Beauty Brands drew on its Term B loan of $1.0 billion. The proceeds will be held in restricted cash in escrow until the anticipated legal integration activities prior to close. Beauty Brands has received additional debt funding commitments with a consortium of lenders of $3.5 billion.


⁽³⁾	Amounts as of June 30, 2015, are reflected as part of the noncurrent assets and liabilities held for sale.

Following is selected financial information included in Net earnings/(loss) from discontinued operations for the Batteries and Pet Care businesses:



		Net Sales		Earnings Before Impairment Charges and Income Taxes		Impairment Charges			Income Tax (Expense)/Benefit			Gain/(Loss) on Sale Before Income Taxes			Income Tax (Expense)/Benefit on Sale				Net Earnings/(Loss) from Discontinued Operations
Batteries	2016	$	1,517	$	266	$	(402	)	$	(45	)	$	(288	)	$	710		⁽¹⁾	$	241
	2015	2,226		479		(2,174		)	(140		)	—			—				(1,835		)
	2014	2,552		548		—			(159		)	—			—				389
Pet Care	2016	—		—		—			—			—			—				—
	2015	251		—		—			(4		)	195			(142		)		49
	2014	1,475		130		—			(52		)	—			—				78
Total	2016	$	1,517	$	266	$	(402	)	$	(45	)	$	(288	)	$	710		⁽¹⁾	$	241
	2015	2,477		479		(2,174		)	(144		)	195			(142		)		(1,786		)
	2014	4,027		678		—			(211		)	—			—				467


⁽¹⁾	The income tax benefit of the Batteries divestiture primarily represents the reversal of underlying deferred tax balances.

The major components of assets and liabilities of the Batteries business held for sale were as follows:



	Batteries
Year ended June 30	2015
Cash	$	25
Accounts receivable	245
Inventories	304
Prepaid expenses and other current assets	28
Property, plant and equipment, net	496
Goodwill and intangible assets, net	2,389
Other noncurrent assets	23
Total assets held for sale	$	3,510

Accounts payable	$	195
Accrued and other liabilities	194
Long-term debt	18
Noncurrent deferred tax liabilities	780
Total liabilities held for sale	$	1,187