Napa Auto Parts 2014 Annual Report Download - page 34

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Based on the investment policy for the pension plans, as well as an asset study that was performed based on
the Company’s asset allocations and future expectations, the Company’s expected rate of return on plan assets for
measuring 2015 pension expense or income is 7.84% for the plans. The asset study forecasted expected rates of
return for the approximate duration of the Company’s benefit obligations, using capital market data and historical
relationships.
The discount rate is chosen as the rate at which pension obligations could be effectively settled and is based
on capital market conditions as of the measurement date. We have matched the timing and duration of the
expected cash flows of our pension obligations to a yield curve generated from a broad portfolio of high-quality
fixed income debt instruments to select our discount rate. Based upon this cash flow matching analysis, we
selected a weighted average discount rate for the plans of 4.26% at December 31, 2014.
Net periodic benefit (income) cost for our defined benefit pension plans was ($9.6) million, $51.1 million
and $26.8 million for the years ended December 31, 2014, 2013 and 2012, respectively. The income associated
with the pension plans in 2014 reflects the impact of the 2012 amendment to freeze the U.S. defined benefit pen-
sion plan, effective December 31, 2013. Additionally, the increase in pension cost in 2013 from 2012 was
primarily due to the curtailment gain recorded in connection with the 2012 amendment to the U.S. defined bene-
fit pension plan. The 2012 amendment and related curtailment decreased benefit costs in 2012 and are discussed
further below. Refer to Note 7 of the Consolidated Financial Statements for more information regarding
employee benefit plans.
In December 2012, the Company’s U.S. defined benefit plan was amended to reflect a hard freeze as of
December 31, 2013. No further benefit accruals were provided after that date for additional credited service or
earnings and all participants who are employed after December 31, 2013 became fully vested as of December 31,
2013. The Company recorded a $23.5 million non-cash curtailment gain in December 2012 in connection with
this amendment.
QUARTERLY RESULTS OF OPERATIONS
The following is a summary of the quarterly results of operations for the years ended December 31, 2014
and 2013:
Three Months Ended
March 31, June 30, Sept. 30, Dec. 31,
(In thousands except per share data)
2014
Net Sales ....................................... $3,624,897 $3,908,387 $3,985,909 $3,822,454
Gross Profit ..................................... 1,084,630 1,179,168 1,183,422 1,146,541
Net Income ..................................... 157,484 197,727 190,516 165,559
Earnings Per Share:
Basic ........................................ 1.02 1.29 1.25 1.08
Diluted ....................................... 1.02 1.28 1.24 1.07
2013
Net Sales ....................................... $3,198,802 $3,675,997 $3,685,243 $3,517,801
Gross Profit ..................................... 921,748 1,105,108 1,100,923 1,092,141
Net Income ..................................... 144,389 216,357 173,746 150,467
Earnings Per Share:
Basic ........................................ .93 1.40 1.12 .98
Diluted ....................................... .93 1.39 1.12 .97
We recorded the quarterly earnings per share amounts as if each quarter was a discrete period. As a result,
the sum of the basic and diluted earnings per share will not necessarily total the annual basic and diluted earnings
per share.
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