Net Sales rose $580 million or 3% in 1997, reflecting volume gains, partially offset by the impact of unfavorable currency translation. Net sales rose $1.3 billion or 7% in 1996, reflecting net volume gains and higher effective net pricing (including the effect of product, package and country mix) in both of our business segments. These gains were partially offset by an unfavorable foreign currency translation impact. Volume gains in both years were driven by worldwide Snack Foods and North American Beverages.
Cost of sales as a percent of net sales decreased .8 of a point to 40.8% in 1997, primarily reflecting favorable raw material costs in International Beverages, and the leveraging effect of higher pricing partially offset by increased costs for new plant capacity and the planned introduction of new products in 1998 by North American Snack Foods. Cost of sales as a percent of net sales decreased .6 of a point to 41.6% in 1996 primarily due to lower raw materials costs in North American Beverages coupled with the leveraging effect of the higher effective net pricing.
Selling, general and administrative expenses (SG&A) comprises selling and distribution expenses (S&D), advertising and marketing expenses (A&M), general and administrative expenses (G&A), other income and expense and equity income or loss from investments in unconsolidated affiliates. In 1997, SG&A grew 2%, or at a slower rate than sales. This primarily reflects equity income from our investments in unconsolidated affiliates, compared to losses a year ago, and A&M growing at a significantly slower rate than sales. The change in equity income primarily reflects the absence of losses from our Latin American bottler, Buenos Aires Embotelladora S.A. (BAESA). G&A grew significantly faster than sales, reflecting information systems-related expenses, customer focus leadership training and infrastructure costs related to our new fountain beverage sales team. These increased expenses were partially offset by savings from a prior year restructuring and the consolidation of certain administrative functions.
In 1996, A&M and S&D grew faster than net sales, driving an 11% increase in SG&A, led by International Beverages. Equity losses from our unconsolidated affiliates, compared to equity income in 1995, primarily reflect our share of operating losses from BAESA.
Amortization of intangible assets declined 3% to $199 million and 1% to $206 million in 1997 and 1996, respectively.
Unusual items of $290 million ($239 million after-tax or $0.15 per share) in 1997 and $576 million ($527 million after-tax or $0.33 per share) in 1996 relate to decisions to dispose of and write down assets, improve productivity and strengthen the international bottler structure. See Note 2. The 1995 charge of $66 million ($64 million after-tax or $0.04 per share) is the initial, noncash impairment charge upon adoption of Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." See Note 3.
In 1997, reported operating profit increased $622 million. Ongoing operating profit increased $336 million reflecting segment operating profit growth of $392 million or 14%, partially offset by a $56 million or 32% increase in unallocated expenses. The increase in segment operating profit primarily reflects the volume gains and lower raw material costs in worldwide Beverages. The increase in unallocated expenses relates to higher corporate expenses and foreign exchange losses in 1997 compared to gains in 1996.
In 1996, reported operating profit declined $566 million. Ongoing operating profit decreased $56 million due to a $30 million or 21% increase in unallocated expenses and a combined segment operating profit decrease of $26 million or 1%. The increased unallocated expenses relate to centrally administered benefit plans and higher corporate expenses. The decline in segment operating profit reflects increased costs in excess of higher effective net pricing, partially offset by volume gains. The change in ongoing segment operating profit also includes unfavorable currency translation impacts.
Interest expense, net of interest income declined $121 million or 26%. Interest expense declined $87 million or 15% in 1997, primarily reflecting lower average U.S. debt levels. Debt levels were reduced using a portion of the cash flows provided by discontinued operations and proceeds repatriated from our investments in Puerto Rico. The repatriation of funds resulted from a 1996 change in tax law which eliminated a tax exemption on investment income in Puerto Rico. Interest income increased $34 million or 37% reflecting higher average investment levels, which also benefited from cash flows provided by discontinued operations.
Interest expense, net of interest income in 1996 declined $41 million or 8%, reflecting lower international debt levels and U.S. interest rates.
Our 1997 reported effective tax rate decreased 4.4 points to 35.4%. Our ongoing effective tax rate increased 2.0 points to 33.4%, primarily reflecting the absence of cumulative tax credits recognized in 1996 that related to prior years, lower benefits in 1997 from the current year resolution of prior years' audit issues and other individually immaterial items.
Our 1996 reported effective tax rate increased 7.8 points to 39.8%. Our ongoing effective tax rate remained about even with the prior year as lower benefits from the current year resolution of prior years' audit issues were offset by the cumulative tax credits related to prior years and other individually immaterial items.
*The percentage change in income per share is calculated by using income per share calculated to four decimal places in order to eliminate the effects of rounding.
NM - Not Meaningful
Income from discontinued operations reflects the operating results of TRICON's core restaurant businesses of Pizza Hut, KFC and Taco Bell through the Distribution Date, as well as PFS, the restaurant distribution operation sold in the second quarter, and several non-core U.S. restaurant businesses through their respective disposal dates in 1997. Reported operating results include expenses associated with the spin-off and interest expense directly related to the Restaurants segment. It does not include an allocation of PepsiCo interest expense or G&A. It also includes the 1997 gain from the sale of PFS. (See Note 4.)
* The percentage change in income per share is calculated by using income per share calculated to four decimal places in order to eliminate the effects of rounding.