Napa Auto Parts 2015 Annual Report Download - page 13

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Supply Agreements. Non-exclusive distributor agreements are in effect with most of the Industrial Parts
Group’s suppliers. The terms of these agreements vary; however, it has been the experience of the Industrial
Parts Group that the custom of the trade is to treat such agreements as continuing until breached by one party or
until terminated by mutual consent. Motion has return privileges with most of its suppliers, which has protected
the Company from inventory obsolescence.
Segment Data. In the year ended December 31, 2015, sales from the Company’s Industrial Parts Group
approximated 30% of the Company’s net sales, as compared to 31% in 2014 and 2013. For additional segment
information, see Note 10 of Notes to Consolidated Financial Statements beginning on page F-1.
Competition. The industrial parts distribution business is highly competitive. The Industrial Parts Group
competes with other distributors specializing in the distribution of such items, general line distributors and others
who provide similar services. To a lesser extent, the Industrial Parts Group competes with manufacturers that sell
directly to the customer. The Industrial Parts Group competes primarily on the breadth of product offerings, serv-
ice and price. Further information regarding competition in the industry is set forth in “Item 1A. Risk Factors —
We Face Substantial Competition in the Industries in Which We Do Business.”
OFFICE PRODUCTS GROUP
The Office Products Group, operated through S. P. Richards Company (“S. P. Richards” or “SPR”), a
wholly-owned subsidiary of the Company, is headquartered in Atlanta, Georgia. S. P. Richards is engaged in the
wholesale distribution of a broad line of office and other business related products through a diverse customer
base of resellers. These products are used in homes, businesses, schools, offices, and other institutions. Office
products fall into the general categories of office furniture, technology products, general office and school sup-
plies, cleaning, janitorial and breakroom supplies, safety and security items, healthcare products and disposable
food service products.
The Office Products Group is represented in Canada through S. P. Richards Canada, a wholly-owned sub-
sidiary of the Company headquartered near Toronto, Ontario. S. P. Richards Canada services office product
resellers throughout Canada from locations in Vancouver, Toronto, Calgary, Edmonton and Winnipeg.
Effective January 2, 2015, S. P. Richards acquired JAL Associates Inc. (“JAL”). JAL is a regional whole-
saler of office furniture with estimated annual revenues of $12 million. This business was consolidated into
SPR’s operations in Baltimore, Maryland; Cranbury, New Jersey; and Richmond, Virginia during 2015.
Effective May 1, 2015, S. P. Richards acquired the commercial products business of Dinesol Plastics,
located in Niles, Ohio. This acquisition further expands SPR’s food service and janitorial product offering and is
expected to generate annual revenues of approximately $3 million.
Effective October 1, 2015, S. P. Richards acquired Malt Industries (“Malt”), a leading wholesale distributor
of protective apparel located in Purvis, Mississippi. Malt is expected to generate annual revenues of approx-
imately $20 million.
Distribution System. The Office Products Group distributes more than 62,000 items to over 6,300 resellers
and distributors throughout the United States and Canada from a network of 45 distribution centers. This group’s
network of strategically located distribution centers provides overnight delivery of the Company’s compre-
hensive product offering. Approximately 41% of the Company’s 2015 total office products purchases were made
from 10 major suppliers.
The Office Products Group sells to a wide variety of resellers. These resellers include independently owned
office product dealers, national office product superstores and mass merchants, large contract stationers, mail
order companies, Internet resellers, college bookstores, military base stores, office furniture dealers, value-added
technology resellers, business machine dealers, janitorial and sanitation supply distributors, safety product
resellers and food service distributors. Resellers are offered comprehensive marketing programs, which include
print and electronic catalogs and flyers, digital content and email campaigns for reseller websites, and education
and training resources. In addition, world class market analytics programs are made available to qualified
resellers.
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