Napa Auto Parts 2010 Annual Report Download - page 19

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Table of Contents
Industrial Group
Net sales for Motion Industries, our Industrial Group (“Industrial”), were $3.5 billion in 2010, an increase of 22% compared to
2009. Several factors contributed to the sales increase for this group, including the positive impact of their internal sales initiatives and
the strong rebound in the manufacturing sector of the economy served by Industrial. This was evidenced by the ongoing improvement in
the manufacturing industrial production and capacity utilization indices, which this group tends to track. Also in 2010, sales were
positively impacted by acquisitions, which accounted for approximately 5% of Industrial’s sales growth for the year. As a result of these
several factors, Industrial revenues were up 9% in the first quarter of 2010, up 26% in the second quarter, then up 29% and 24% in the
third and fourth quarters, respectively.
Net sales were $2.9 billion in 2009, a decrease of 18% compared to 2008. Through the first three quarters of the year, sales were
especially weak for this group due to the effects of very low manufacturing activity, as evidenced by the reported levels of manufacturing
industrial production and capacity utilization and its negative impact on demand for industrial products. This weakness was
widespread, as we experienced sales declines in nearly all of our major customer categories. The industrial indices we follow showed some
early signs of stabilization in the third quarter and we observed a slight strengthening in these indicators as we entered the fourth quarter.
Industrial sales were down 11% in the fourth quarter, which marked a significant improvement from the declines of the first three
quarters of the year. In 2009, sales were positively impacted by several acquisitions, which contributed approximately 3% to sales for the
year.
Office Group
Net sales for S.P. Richards, our Office Products Group (“Office”), were $1.6 billion in 2010, up slightly compared to the prior year.
Office revenues stabilized in 2010 relative to prior year trends, although the office products industry continued to experience soft market
conditions throughout the year as a result of reduced business spending and the ongoing impact of elevated unemployment levels. Sales
decreased approximately 1% in the first and second quarters, were flat in the third quarter and were up by 3% in the fourth quarter of
2010. The fourth quarter increase is significant, as the industry-wide slowdown in office products consumption has pressured this group
for several years and the fourth quarter of 2010 marks the first positive sales comparison for Office since the second quarter of 2007.
Net sales were $1.6 billion in 2009, down 5% compared to 2008 and the third consecutive year of decreased revenues for Office.
This three year sales trend reflects the negative impact of higher white collar and service unemployment on office products consumption,
which has affected the office products industry since 2007. In 2009, sales improved sequentially, with decreases of 7%, 6%, 5% and 4%
in the first, second, third and fourth quarters, respectively. For the year, sales were positively impacted by three acquisitions completed in
2008, which contributed nearly 3% to sales in Office. The increase in net sales due to acquisitions, as well as our sales initiatives, was
more than offset by the prevailing poor conditions in the office products industry.
Electrical Group
Net sales for EIS, our Electrical and Electronic Group (“Electrical”), increased to $450 million in 2010, up 30% from 2009.
Electrical sales increased by 16% in the first quarter, and this was followed by increases of 32% in the second quarter, 31% in the third
quarter and 40% in the fourth quarter. The revenue growth in 2010 was driven by our sales initiatives, which were strongly supported by
manufacturing expansion during the year, as measured by the Institute for Supply Management’s Purchasing Managers Index. In
addition, acquisitions in 2010 contributed approximately 9% to Electrical’s sales growth for the year.
Net sales decreased to $346 million in 2009, down 26% from 2008. Electrical sales declined by 25% in the first quarter, 34% in the
second quarter and 30% in the third quarter. For the fourth quarter, sales were down 12%. Manufacturing contraction, as measured by the
Institute for Supply Management’s Purchasing Managers Index, was evident through June and then began to stabilize and improve over
the last half of the year. This factor explains the quarterly sales trends at Electrical in 2009. Acquisitions had less than a 1% positive
impact on Electrical sales in 2009.
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