Napa Auto Parts 2004 Annual Report Download - page 40

38
notes to consolidated financial statements
(continued)
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 agreement,
or at the expiration of the operating lease agreement if the fair
value of the leased properties is less than the guaranteed residual
value. The maximum amount of the Company’s potential guaran-
tee obligation at December 31, 2004 is approximately $83,880,000.
The Company believes the likelihood of funding the guarantee
obligation under any provision of the operating lease agreements
is remote.
As discussed in Note 1, the Company also guarantees borrowings
of certain independents and affiliates. The total borrowings of the
independents and affiliates subject to guarantee by the Company
at December 31, 2004 were approximately $169,000,000. These
loans generally mature over periods from one to ten years. In
the event that the Company is required to make payments in
connection with guaranteed obligations of the independents or
the affiliates, the Company would obtain and liquidate certain
collateral (e.g. accounts receivable and inventory) to recover all
or a portion of the amounts paid under the guarantee. To date,
the Company has had no significant losses in connection with
guarantees of independents’ and affiliates’ borrowings.
11. Segment Data
The segment data for the past five years presented on page 14
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
models of automobiles, trucks and buses.
The Company’s industrial segment distributes a wide variety of
industrial bearings, mechanical and fluid power transmission
equipment, 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 business
electronics.
The Company’s electrical/electronic materials segment distributes
a wide variety of electrical/electronic materials, including insulating
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 respective 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. 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 statements of income.