Napa Auto Parts 2002 Annual Report Download - page 39

37
The expected long-term rate of return on assets for measuring the
pension expense or income for the year ending December 31,
2003 will be approximately 8.95%.
The effect of a one-percentage point change in the 2002
assumed health care cost trend is as follows:
(In Thousands) Decrease Increase
Total service and interest cost
components on net periodic
postretirement health care
benefit cost $(2,015) $3,072
Accumulated postretirement benefit
obligation for health care benefits (206) 338
At December 31, 2002, the Company-sponsored pension plan
held 1,619,480 shares of common stock of the Company with a
market value of approximately $49,880,000. Dividend payments
received by the plan on Company stock totaled approximately
$1,867,000 and $1,780,000 in 2002 and 2001, respectively.
Fees paid during the year for services rendered by parties-in-inter-
est were based on customary and reasonable rates for such
services.
The Company has a defined contribution plan which covers sub-
stantially all of its domestic employees. The Company’s
contributions are determined based on 20% of the first 6% of the
covered employee’s salary. Total plan expense was approximately
$6,112,000 in 2002, $5,901,000 in 2001 and $5,751,000 in
2000.
10. Guarantees
Certain operating leases expiring in 2008 contain residual value
guarantee provisions and other guarantees which would become
due in the event of a default under the operating lease agree-
ment, or at the expiration of the operating lease agreement if the
fair value of the lease properties is less than the guaranteed
residual value. The maximum amount of the Company’s potential
guarantee obligation at December 31, 2002 is approximately
$66,000,000. The Company believes the likelihood of funding the
guarantee obligation under any provision of the operating lease
agreements is remote.
The Company also guarantees borrowings of certain independent-
ly controlled automotive parts stores (the “independents”). The
total borrowings of the independents at December 31, 2002 were
approximately $160,000,000. Of the total borrowings, the
Company has guaranteed approximately $61,350,000. These
loans generally mature over periods from one to ten years. In the
event that the Company is required to make payments in connec-
tion with guarantee obligations of the independents, the Company
would obtain and liquidate certain collateral (e.g. accounts receiv-
able and inventory) to recover all or a portion of the amounts paid
under the guarantee. To date, the Company has had no signifi-
cant losses in connection with guarantees of independents’
borrowings.
11. Segment Data
The segment data for the past five years presented on page 17 is
an integral part of these financial statements.
The Company’s automotive segment distributes replacement
parts (other than body parts) for substantially all makes and mod-
els of automobiles, trucks and buses.
The Company’s industrial segment distributes a wide variety of
industrial bearings, mechanical and fluid power transmission equip-
ment, including hydraulic and pneumatic products, material
handling components, and related parts and supplies.
The Company’s office products segment distributes a wide variety
of office products, computer supplies, office furniture and busi-
ness electronics.
The Company’s electrical/electronic materials segment distributes
a wide variety of electrical/electronic materials, including insulat-
ing and conductive materials for use in electronic and electrical
apparatus.
Inter-segment sales are not significant. Operating profit for each
industry segment is calculated as net sales less operating
expenses excluding general corporate expenses, interest expense,
equity in income from investees, goodwill and other amortization
and minority interests. Net property, plant and equipment by
country relate directly to the Company’s operations in the respec-
tive country. Corporate assets are principally cash and cash
equivalents and headquarters’ facilities and equipment.
For the year ended December 31, 2001, Facility Consolidation
and Impairment Charges discussed in Note 3 totaling approxi-
mately $12,900,000 have been classified as a reduction to
operating profit of the office products segment for management
reporting purposes. In connection with a 2000 management
reporting change, certain corporate expenses were reclassified to
the automotive segment for all years presented. Additionally, for
management purposes, net sales by segment excludes the effect
of certain discounts, incentives and freight billed to customers.
The line item “other” represents the net effect of the discounts,
incentives and freight billed to customers which are reported as a
component of net sales in the Company’s consolidated state-
ments of income.