Napa Auto Parts 2004 Annual Report Download - page 36

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notes to consolidated financial statements
(continued)
Exercise prices for options outstanding as of December 31, 2004
ranged from approximately $21 to $36, except for 12,000 options
granted in connection with a 1998 acquisition for which the exer-
cise price is approximately $18. The weighted-average remaining
contractual life of options outstanding is approximately 6 years.
In 1999, the Company entered into restricted stock agreements
with two officers which provide for the award of up to 150,000
and 75,000 shares, respectively, during the period 1999 through
2004 based on the Company achieving certain increases in
net income per common share and stock price levels. Through
December 31, 2004, the two officers have earned 15,000 and
7,500 shares, respectively. The Company recognizes compensa-
tion expense equal to the fair market value of the stock on the
award date over the remaining vesting period which expires in 2009.
In 2002, the Company granted approximately 3,155,000
Non-Qualified options with a ten year life which vest 1/3 per year
beginning on the first anniversary of the grant date. In 2004, the
Company granted approximately 1,146,000 Stock Appreciation
Rights (SARS) and 124,000 Restricted Stock Units (RSUS). SARS
represent a right to receive the excess, if any, of the fair market
value of one share of common stock on the date of exercise over
the grant price. RSUS represent a contingent right to receive one
share of GPC common stock at a future date provided certain
pre-tax profit targets are achieved.
8. Income Taxes
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and amounts used for income
tax purposes. Significant components of the Company’s deferred
tax assets and liabilities are as follows:
The current portion of the deferred tax liability is included in
income taxes payable in the consolidated balance sheets.
The components of income tax expense are as follows:
The reasons for the difference between total tax expense and the
amount computed by applying the statutory Federal income tax
rate to income before income taxes and the cumulative effect of
accounting changes are as follows:
9. Employee Benefit Plans
The Company’s defined benefit pension plans cover substantially
all of its employees in the U.S. and Canada. The plan covering
U.S. employees is noncontributory and benefits are based on
the employees' compensation during the highest five of their last
ten years of credited service. The Canadian plan is contributory
and benefits are based on career average compensation. The
Company’s funding policy is to fund amounts deductible for
income tax purposes.
(in thousands) 2004 2003
Deferred tax assets related to:
Expenses not yet deducted for tax purposes $ 109,602 $101,129
Deferred tax liabilities related to:
Employee and retiree benefits 117,617 112,164
Inventory 80,377 73,446
Property and equipment 28,043 23,731
Other 20,466 24,896
246,503 234,237
Net deferred tax liability 136,901 133,108
Current portion of deferred tax liability 21,218 18,575
Non-current deferred tax liability $ 115,683 $ 114,533
(in thousands) 2004 2003 2002
Current:
Federal $ 189,098 $ 163,878 $ 165,289
State 31,599 26,869 28,952
Deferred 19,670 27,354 43,995
$ 240,367 $ 218,101 $ 238,236
(in thousands) 2004 2003 2002
Statutory rate applied to income
before the cumulative effect of
an accounting change $ 222,572 $ 200,110 $ 212,008
Plus state income taxes,
net of Federal tax benefit 22,370 19,969 23,081
Other (4,575) (1,978) 3,147
$ 240,367 $ 218,101 $ 238,236