Disney Q1 Rises 54%
Restructuring and impairment charges include an impairment related to assets that had tax basis significantly in excess of the book value resulting in a $31 million tax benefit on the restructuring and impairment charges. Our book value of Miramax included allocated goodwill totaling $217 million which is not tax deductible. Accordingly, the taxable gain on the sales of businesses exceeded the $75 million book gain resulting in the tax expense of $107 million.
In the prior year quarter, the Company recorded restructuring and impairment charges totaling $105 million and a gain on the sale of an investment in a television service in Europe of $27 million. The charges primarily related to organizational and cost structure initiatives at our Media Networks and Studio Entertainment segments including actions taken in connection with a change in Studio segment leadership. Restructuring charges of $66 million were primarily severance and related costs while impairment charges of $39 million consisted of write-offs of capitalized costs related to abandoned film projects.
Net Interest Expense
Net interest expense was as follows (in millions):
Jan. 1, Jan. 2,
Interest expense $ (100 ) $ (118 )
Interest and investment income 5 15
Net interest expense $ (95 ) $ (103 )
== ==== == == ==== ==
The decrease in interest expense for the quarter was primarily due to higher capitalized interest driven by higher capital spending. The decrease in interest and investment income reflected write downs of investments in the current quarter.
The effective income tax rate for the quarter decreased to 35.4% from 36.2% in the prior-year quarter driven by benefits from the favorable resolution of certain income tax matters and from an increase in the domestic production deduction rate, partially offset by the net tax impact of the impairment charges and sale of businesses discussed above.
Cash provided by operations and free cash flow were as follows (in millions):