Napa Auto Parts 2014 Annual Report Download - page 28

Total share-based compensation expense for the years ended December 31, 2014, 2013 and 2012 was
$16.2 million, $12.6 million and $10.7 million, respectively. Refer to Note 5 of the Consolidated Financial
Statements for further information regarding share-based compensation.
Non-Operating Expenses and Income
Non-operating expenses consist primarily of interest. Interest expense was $25 million in 2014, $27 million
in 2013 and $20 million in 2012. The $2 million decrease in interest expense in 2014 reflects the favorable inter-
est rate on certain debt, which was renewed in November 2013. The $7 million increase in interest expense in
2013 is due to higher debt levels incurred for the GPC Asia Pacific acquisition.
In “Other”, the net benefit of interest income, equity method investment income, investment dividends and
noncontrolling interests in 2014 was $19 million, a decrease of $3 million from the prior year due to lower inter-
est income earned in 2014 relative to 2013. These items were $22 million in 2013, down approximately $2 mil-
lion from 2012, as this line reflected the Company’s equity income recorded in 2012 for its 30% investment
interest in GPC Asia Pacific.
Income Before Income Taxes
Income before income taxes was $1.1 billion in 2014, an increase of 7% from 2013. As a percentage of net
sales, income before income taxes was 7.3% in 2014 compared to 7.4% in 2013. In 2013, income before income
taxes of $1.0 billion was up 2.5% from 2012 and as a percentage of net sales was 7.4% compared to 7.8% in
2012.
Automotive Group
Automotive income before income taxes as a percentage of net sales, which we refer to as operating margin,
increased to 8.7% in 2014, a slight increase from 8.6% in 2013. The change in operating costs as a percentage of
net sales positively impacted operating profit during the year. Looking forward, Automotive’s initiatives to grow
sales and control costs are intended to improve its operating margin in the years ahead.
Automotive’s operating margin of 8.6% in 2013 was steady with the prior year. The changes in gross profit
and operating costs as a percentage of net sales, which related primarily to the acquisition of GPC Asia Pacific,
were relatively neutral to operating profit during the year.
Industrial Group
Industrial’s operating margin improved to 7.8% in 2014 from 7.2% in 2013, as the combination of greater
expense leverage associated with the increase in sales and generally improving gross margins, primarily related
to the increase in volume incentives positively impacted operating profit in 2014. Industrial will continue to
focus on its many sales initiatives and cost control measures to further improve its operating margin in 2015.
Industrial’s operating margin decreased to 7.2% in 2013 from 7.9% in 2012. The decrease in operating
margin in 2013 was due to the combination of reduced expense leverage associated with the slight decrease in
sales relative to the prior year and the decline in volume incentives for the year. These items were partially offset
by effective cost control measures.
Office Group
Office’s operating margin decreased to 7.4% in 2014, down from 7.5% in 2013, primarily related to the
lower operating margin generated by new business with a large primary customer. This was partially offset by
greater expense leverage driven by this group’s overall sales increase in 2014. Office will continue to focus on its
sales initiatives and cost controls to maintain its operating margin in 2015.
Office’s operating margin decreased to 7.5% in 2013 from 8.0% in 2012, primarily related to the reduced
expense leverage associated with the decrease in sales for this segment relative to 2012.
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