Napa Auto Parts 2014 Annual Report Download - page 10

account for approximately 64% of the Company’s total U.S. Automotive sales and 25% of the Company’s total
sales, with no automotive parts store or group of automotive parts stores with individual or common ownership
accounting for more than 0.25% of the total sales of the Company.
Products. Distribution centers have access to approximately 459,000 different parts and related supply
items. Each item is cataloged and numbered for identification and accessibility. Significant inventories are car-
ried to provide for fast and frequent deliveries to customers. Most orders are filled and shipped the same day as
they are received. The majority of sales are paid from statements with varied terms and conditions. The Company
does not manufacture any of the products it distributes. The majority of products are distributed under the
NAPA®name, a mark licensed to the Company by NAPA, which is important to the sales and marketing of these
products. Traction sales also include products distributed under the HD Plus name, a proprietary line of automo-
tive parts for the heavy duty truck market.
Related Operations. Balkamp, a wholly-owned subsidiary of the Company, distributes a wide variety of
replacement parts and accessory items for passenger cars, heavy-duty vehicles, motorcycles and farm equipment.
In addition, Balkamp distributes service items such as testing equipment, lubricating equipment, gauges, cleaning
supplies, chemicals and supply items used by repair shops, fleets, farms and institutions. Balkamp packages
many of the 40,000 products, which constitute the “Balkamp” line of products that are distributed through the
NAPA system. These products are categorized into over 230 different product categories purchased from approx-
imately 400 domestic suppliers and over 100 foreign manufacturers. Balkamp has two distribution centers
located in Plainfield, Indiana, and West Jordan, Utah. In addition, Balkamp operates two redistribution centers
that provide the NAPA system with over 1,150 SKUs of oils and chemicals. BALKAMP®, a federally registered
trademark, is important to the sales and marketing promotions of the Balkamp organization.
The Company, through its Rayloc division, operates four facilities where certain small automotive parts are
distributed through the NAPA system under the NAPA®brand name. Rayloc®is a mark licensed to the Com-
pany by NAPA.
The Company’s Heavy Vehicle Parts Group operates as TW Distribution, with one warehouse location in
Atlanta, Georgia, which serves 21 Traction Heavy Duty parts stores in the United States, of which 14 are
company-owned and eight are independently owned. This group distributes heavy vehicle parts through the
NAPA system and direct to small fleet owners and operators.
Segment Data. In the years ended December 31, 2014 and 2013, sales from the Automotive Parts Group
were approximately 53% of the Company’s net sales, as compared to 49% in 2012. For additional segment
information, see Note 10 of Notes to Consolidated Financial Statements beginning on page F-1.
Service to NAPA AUTO PARTS Stores. The Company believes that the quality and the range of services
provided to its automotive parts customers constitute a significant advantage for its automotive parts distribution
system. Such services include fast and frequent delivery, parts cataloging (including the use of electronic NAPA
AUTO PARTS catalogs) and stock adjustment through a continuing parts classification system which, as initiated
by the Company from time to time, allows independent retailers (“jobbers”) to return certain merchandise on a
scheduled basis. The Company offers its NAPA AUTO PARTS store customers various management aids, market-
ing aids and service on topics such as inventory control, cost analysis, accounting procedures, group insurance and
retirement benefit plans, as well as marketing conferences and seminars, sales and advertising manuals and training
programs. Point of sale/inventory management is available through TAMS®(Total Automotive Management
Systems), a computer system designed and developed by the Company for the NAPA AUTO PARTS stores.
The Company has developed and refined an inventory classification system to determine optimum dis-
tribution center and auto parts store inventory levels for automotive parts stocking based on automotive registra-
tions, usage rates, production statistics, technological advances and other similar factors. This system, which
undergoes continuous analytical review, is an integral part of the Company’s inventory control procedures and
comprises an important feature of the inventory management services that the Company makes available to its
NAPA AUTO PARTS store customers. Over the last 20 years, losses to the Company from obsolescence have
been insignificant and the Company attributes this to the successful operation of its classification system, which
involves product return privileges with most of its suppliers.
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