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Table of Contents
Income from operations
The following table presents income from operations by segment, in dollars and as a percentage of net sales, and the year-over-year
percentage change in income from operations for the years ended December 31, 2014 and 2013 :
* Not meaningful
Income from operations was $673.0 million in 2014 , an increase of $164.4 million , or 32.3% , compared to $508.6 million in 2013 .
The increase in income from operations was driven by higher net sales and gross profit and the absence of IPO-related costs. Total operating
margin percentage increased 90 basis points to 5.6% in 2014 , from 4.7% in 2013 . Operating margin percentage benefited from the decrease in
selling and administrative expenses as a percentage of net sales, which was driven by the absence of $74.3 million in costs related to our IPO in
2013, and was partially offset by a decrease in gross profit margin.
Corporate segment income from operations was $439.8 million in 2014 , an increase of $76.5 million , or 21.1% , compared to $363.3
million in 2013 . This increase was primarily driven by higher net sales and gross profit. Corporate segment operating margin percentage
increased 70 basis points to 6.8% in 2014 , from 6.1% in 2013 . Operating margin percentage benefited from the decrease in selling and
administrative expenses as a percentage of net sales, which was driven by the absence of costs related to our IPO in 2013, and was partially
offset by a decrease in gross profit margin.
Public segment income from operations was $313.2 million in 2014 , an increase of $66.7 million , or 27.1% , compared to $246.5
million in 2013 . This increase was primarily driven by higher net sales and gross profit. Public segment operating margin percentage increased
50 basis points to 6.4% in 2014 , from 5.9% in 2013 . Operating margin percentage benefited from the decrease in selling and administrative
expenses as a percentage of net sales, which was driven by the absence of costs related to our IPO in 2013, and was partially offset by a decrease
in gross profit margin.
Interest expense, net
At December 31, 2014 , our outstanding long-term debt totaled $3,190.0 million , compared to $3,251.2 million at December 31, 2013 .
We reduced our long-term debt during 2014 through refinancing activities to redeem our higher interest debt. Net interest expense in 2014 was
$197.3 million , a decrease of $52.8 million compared to $250.1 million in 2013 . This decrease was primarily due to lower debt balances and
effective interest rates for 2014 compared to 2013 as a result of debt repayments and refinancing activities completed during 2014 and 2013
. See
"Liquidity and Capital Resources" below for a description of the significant debt refinancings in 2014.
Net loss on extinguishments of long
-term debt
During 2014, we recorded a net loss on extinguishments of long-term debt of $90.7 million compared to $64.0 million in 2013.
In December 2014, we redeemed $541.4 million aggregate principal amount of the 2019 Senior Notes. We recorded a
loss on extinguishment of debt of $36.9 million , representing the difference between the redemption price and the net carrying
amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs and unamortized premium.
38
Year Ended December 31, 2014
Year Ended December 31, 2013
Dollars in
Millions
Operating
Margin
Percentage
Dollars in
Millions
Operating
Margin
Percentage
Percent Change
in Income
from Operations
Segments:
(1)
Corporate
$
439.8
6.8
%
$
363.3
6.1
%
21.1
%
Public
313.2
6.4
246.5
5.9
27.1
Other
32.9
4.6
27.2
4.2
20.9
Headquarters
(2)
(112.9
)
nm*
(128.4
)
nm*
12.0
Total income from operations
$
673.0
5.6
%
$
508.6
4.7
%
32.3
%
(1) Segment income (loss) from operations includes the segment’s direct operating income (loss) and allocations for Headquarters’ costs,
allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative
advertising from vendors.
(2) Includes certain Headquarters’
function costs that are not allocated to the segments.