We are a leading independent manufacturer and distributor of replacement parts
for motor vehicles in the automotive aftermarket industry with a complementary
focus on heavy duty, industrial equipment and the original equipment service
market. We are organized into two major operating segments, each of which focuses
on specific lines of replacement parts. Our Engine Management Segment manufactures
and remanufactures ignition and emission parts, ignition wires, battery cables,
fuel system parts and sensors for vehicle systems. Our Temperature Control Segment
manufactures and remanufactures air conditioning compressors, air conditioning
and heating parts, engine cooling system parts, power window accessories, and
windshield washer system parts.
We sell our products primarily to warehouse distributors, large retail chains,
original equipment manufacturers and original equipment service part operations
in the United States, Canada, Latin America, and Europe. Our customers consist
of many of the leading warehouse distributors and auto parts retail chains,
such as NAPA Auto Parts (National Automotive Parts Association, Inc.), Advance
Auto Parts, Inc./CARQUEST Auto Parts, AutoZone, Inc., O’Reilly Automotive,
Inc., Canadian Tire Corporation Limited and The Pep Boys Manny, Moe & Jack,
as well as national program distribution groups, such as Auto Value and All
Pro/Bumper to Bumper (Aftermarket Auto Parts Alliance, Inc.), Automotive Distribution
Network LLC, The National Pronto Association (“Pronto”), Federated
Auto Parts Distributors, Inc. (“Federated”), Pronto and Federated’s
newly formed organization, the Automotive Parts Services Group or The Group,
and specialty market distributors. We distribute parts under our own brand names,
such as Standard®, Blue Streak®, BWD®, Select®, Intermotor®,
GP Sorensen®, TechSmart®, Tech Expert®, OEM®, LockSmart®,
Four Seasons®, Factory Air®, EVERCO®, ACi®, Imperial®, COMPRESSORWORKS®,
TORQFLO® and Hayden® and through co-labels and private labels, such
as CARQUEST® BWD®, CARQUEST® Intermotor®, Duralast®, Duralast
Gold®, Import Direct®, Master Pro®, Murray®, NAPA®, NAPA®
Echlin®, NAPA Proformer™ Mileage Plus®, NAPA Temp Products™,
Cold Power®, DriveworksTM, ToughOneTM and NAPA® Belden®.
Maintain Our Strong Competitive Position in the Engine Management
and Temperature Control Businesses. We are one of the leading independent manufacturers
and distributors serving North America and other geographic areas in our core
businesses of Engine Management and Temperature Control. We believe that our
success is attributable to our emphasis on product quality, the breadth and
depth of our product lines for both domestic and import vehicles, and our reputation
for outstanding value-added services.
To maintain our strong competitive position in our markets, we remain committed
to the following:
providing our customers with broad lines of high quality engine management
and temperature control products, supported by the highest level of value-added
services;
continuing to maximize our production, supply chain and distribution
efficiencies;
continuing to improve our cost position through increased global sourcing
and increased manufacturing in low cost regions; and
focusing on our engineering development efforts including a focus on
bringing more product manufacturing in house.
Provide Superior Value-Added Services, Product Availability and Technical
Support. Our goal is to increase sales to existing and new customers by leveraging
our skills in rapidly filling orders, maintaining high levels of product availability,
providing insightful customer category management, and providing technical support
in a cost-effective manner. In addition, our category management and technically
skilled sales force professionals provide product selection, assortment and
application support to our customers.
Expand Our Product Lines. We intend to increase our sales by continuing
to develop internally, or through acquisitions, the range of Engine Management
and Temperature Control products that we offer to our customers. We are committed
to investing the resources necessary to maintain and expand our technical capability
to manufacture multiple product lines that incorporate the latest technologies.
Broaden Our Customer Base. Our goal is to increase our customer base
by (a) continuing to leverage our manufacturing capabilities to secure additional
original equipment business globally with automotive, industrial, marine, military
and heavy duty vehicle and equipment manufacturers and their service part operations
as well as our existing customer base including traditional warehouse distributors,
large retailers, other manufacturers and export customers, and (b) supporting
the service part operations of vehicle and equipment manufacturers with value
added services and product support for the life of the part.
Improve Operating Efficiency and Cost Position. Our management places
significant emphasis on improving our financial performance by achieving operating
efficiencies and improving asset utilization, while maintaining product quality
and high customer order fill rates. We intend to continue to improve our operating
efficiency and cost position by:
increasing cost-effective vertical integration in key product lines
through internal development;
focusing on integrated supply chain management, customer collaboration
and vendor managed inventory initiatives;
evaluating additional opportunities to relocate manufacturing to our
low-cost plants located outside of the U.S.;
maintaining and improving our cost effectiveness and competitive responsiveness
to better serve our customer base, including sourcing certain materials and
products from low cost regions such as those in Asia without compromising product
quality;
enhancing company-wide programs geared toward manufacturing and distribution
efficiency; and
focusing on company-wide overhead and operating expense cost reduction
programs.
Cash Utilization. We intend to apply any excess cash flow from operations
and the management of working capital primarily to reduce our outstanding indebtedness,
pay dividends to our shareholders, repurchase shares of our common stock, expand
our product lines and grow revenues through acquisitions.
The automotive aftermarket industry is comprised of a large number of diverse
manufacturers varying in product specialization and size. In addition to manufacturing,
aftermarket companies allocate resources towards an efficient distribution process
and product engineering in order to maintain the flexibility and responsiveness
on which their customers depend. Aftermarket manufacturers must be efficient
producers of small lot sizes and do not have to provide systems engineering
support. Aftermarket manufacturers also must distribute, with rapid turnaround
times, products for a full range of domestic and import vehicles on the road.
The primary customers of the automotive aftermarket manufacturers are national
and regional warehouse distributors, large retail chains, automotive repair
chains and the dealer service networks of original equipment manufacturers (“OEMs”).
The automotive aftermarket industry differs substantially from the OEM supply
business. Unlike the OEM supply business that primarily follows trends in new
car production, the automotive aftermarket industry’s performance primarily
tends to follow different trends, such as:
growth in number of vehicles on the road;
increase in average vehicle age;
change in total miles driven per year;
new or modified environmental and vehicle safety regulations, including
fuel-efficiency and emissions reduction standards;
increase in pricing of new cars;
economic and financial market conditions;
new car quality and related warranties;
changes in automotive technologies;
change in vehicle scrap rates; and
change in average fuel prices.
Traditionally, the parts manufacturers of OEMs and the independent manufacturers
who supply the original equipment (“OE”) part applications have
supplied a majority of the business to new car dealer networks. However, certain
parts manufacturers have become more independent and are no longer affiliated
with OEMs, which has provided, and may continue to provide, opportunities for
us to supply replacement parts to the dealer service networks of the OEMs, both
for warranty and out-of-warranty repairs.
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