Napa Auto Parts 2009 Annual Report Download - page 4

Table of Contents
equipment, lubricating equipment, gauges, cleaning supplies, chemicals and supply items used by repair shops, fleets, farms and
institutions. Balkamp packages many of the 45,000 products, which constitute the “Balkamp” line of products that are distributed to the
members of NAPA. These products are categorized into over 230 different product groups purchased from approximately 600 domestic
suppliers and 100 foreign manufacturers. In addition, Balkamp operates two Redistribution Centers that provide NAPA with over 1,200
SKUs of oils, chemicals and procurement items. BALKAMP®, a federally registered trademark, is important to the sales and marketing
promotions of the Balkamp organization. Balkamp has four distribution centers located in Indianapolis and Plainfield, Indiana,
Greenwood, Mississippi and West Jordan, Utah.
The Company, through its Rayloc division, also operates three facilities where certain small automotive parts are rebuilt or
distributed to the members of NAPA under the NAPA® brand name. Rayloc® is a mark licensed to the Company by NAPA.
The Company’s Heavy Vehicle Parts Group operates as TW Distribution, with one warehouse location in Atlanta, Georgia, which
serves 24 Traction Heavy Duty parts stores, of which 16 are owned and located in the United States. This group distributes heavy
vehicle parts through the NAPA system and direct to small fleet owners and operators.
Segment Data. In the year ended December 31, 2009, sales from the Automotive Parts Group were approximately 52% of the
Company’s net sales, as compared to 48% in 2008 and 49% in 2007. For additional segment information, see Note 11 of Notes to
Consolidated Financial Statements set forth 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, obsolescence protection, parts cataloging (including the use of electronic NAPA AUTO PARTS catalogs) and stock adjustment
through a continuing parts classification system which allows independent retailers (“jobbers”) to return certain merchandise on a
scheduled basis. The Company offers its NAPA AUTO PARTS store customers various management aids, marketing 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.
In association with NAPA, the Company has developed and refined an inventory classification system to determine optimum
distribution center and auto parts store inventory levels for automotive parts stocking based on automotive registrations, 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 10 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.
Competition. The automotive parts distribution business is highly competitive. The Company competes with automobile
manufacturers (some of which sell replacement parts for vehicles built by other manufacturers as well as those that they build
themselves), automobile dealers, warehouse clubs and large automotive parts retail chains. In addition, the Company competes with the
distributing outlets of parts manufacturers, oil companies, mass merchandisers, including national retail chains, and with other parts
distributors and retailers. 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.”
NAPA
. The Company is a member of the National Automotive Parts Association, a voluntary association formed in 1925 to
provide nationwide distribution of automotive replacement parts. NAPA, which neither buys nor sells automotive parts, functions as a
trade association whose members in 2009 operated 64 distribution centers located throughout the United States, 58 of which were owned
and operated by the Company. NAPA develops marketing concepts and programs that may be used by its members. It is not involved in
the chain of distribution.
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