Napa Auto Parts 2010 Annual Report Download - page 7

Table of Contents
Distribution System. In North America, the Industrial Parts Group operated 488 branches, 9 distribution centers and 46 service
centers as of December 31, 2010. The distribution centers stock and distribute more than 92,000 different items purchased from more
than 468 different suppliers. The service centers provide hydraulic, hose and mechanical repairs for customers. Approximately 37% of
2010 total industrial product purchases were made from 10 major suppliers. Sales are generated from the Industrial Parts Group’s
branches located in 47 states, Puerto Rico, nine provinces in Canada, and Mexico. Each branch has warehouse facilities that stock
significant amounts of inventory representative of the products used by customers in the respective market area served.
Products. The Industrial Parts Group distributes a wide variety of parts and products to its customers, primarily industrial
concerns. Products include such items as hoses, belts, bearings, pulleys, pumps, valves, chains, gears, sprockets, speed reducers,
electric motors, and industrial supplies. In recent years, Motion expanded its offering to include systems and automation products in
response to the increasing sophistication of motion control and process automation for full systems integration of plant equipment.
Manufacturing trends and government policies have led to opportunities in the “green” and energy-efficient product markets, leading to
product offerings such as energy-efficient motors and drives, recyclable and environmentally friendly parts and supplies. The nature of
this group’s business demands the maintenance of adequate inventories and the ability to promptly meet demanding delivery
requirements. Virtually all of the products distributed are installed by the customer or used in plant and facility maintenance activities.
Most orders are filled immediately from existing stock and deliveries are normally made within 24 hours of receipt of order. The majority
of all sales are on open account. Motion has ongoing purchase agreements with existing customers that represent approximately 40% of the
annual sales volume.
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. The Company has return privileges
with most of its suppliers, which has protected the Company from inventory obsolescence.
Segment Data. In the year ended December 31, 2010, sales from the Company’s Industrial Parts Group approximated 31% of the
Company’s net sales, as compared to 29% in 2009 and 32% in 2008. For additional segment information, see Note 10 of Notes to
Consolidated Financial Statements set forth 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, service 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.”
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The Office Products Group, operated through S. P. Richards Company (“S. P. Richards”), 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 to business product resellers that are used in the daily operation of businesses, schools, offices and other
institutions. Office products fall into the general categories of computer supplies, imaging products, office furniture, office machines,
general office products, school supplies, cleaning and breakroom supplies, and healthcare products.
The Office Products Group is represented in Canada through S. P. Richards Canada, a wholly-owned subsidiary 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.
Distribution System. The Office Products Group distributes more than 50,000 items to nearly 4,000 business product resellers
throughout the United States and Canada from a network of 43 distribution centers. In 2010, the Company completed the installation of
new pick to voice technology in all U.S. distribution centers. In addition, new conveyors with inline scales and automated sortation were
installed in four distribution centers and energy
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