Advance Auto Parts
Annual Report 2017

Plain-text annual report

2017 A D V A N C E A U T O P A R T S , I N C . C O M P A N Y H I G H L I G H T S 2017 $9.37 2016 $9.57 2015 $9.74 2017 $601 2016 $523 2015 $690 $601 O P E R AT I N G C A S H F L O W ( I N M I L L I O N S ) 2017 $411 2016 $264 2015 $455 2017 $6.42 2016 $6.20 2015 $6.40 $6.42 2017 $5.37 2016 $7.15 2015 $7.82 D I L U T E D E A R N I N G S P E R S H A R E $9.37 T O TA L N E T S A L E S ( I N B I L L I O N S ) $411 F R E E C A S H F L O W 1 ( I N M I L L I O N S ) $5.37 A D J U S T E D E A R N I N G S P E R S H A R E 2 2017 $9.37 2016 $9.57 2017 $601 2016 $523 2017 $411 2016 $264 2017 $6.42 2016 $6.20 2017 $5.37 2016 $7.15 (1) Free cash flow is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in our “Consolidated Statements of Cash Flows” that can be found on page F-6 in our 2017 Form 10-K included in this annual report. Free cash flow of $411 million can be reconciled to net cash provided by operating activities on a GAAP basis of $601 million by adding back purchases of property and equipment of $190 million. (2) Diluted earnings per share have been reported on an adjusted basis to exclude certain non-operational and non-cash expenses in 2017 and 2016, including General Parts International, Inc. (“GPI”) integration and store consolidation costs, amortization of GPI acquired intangible assets, transformation expenses and the net impact of the Tax Cuts and Jobs Act. A reconciliation of the adjusted financial results to the most comparable GAAP results for 2017 and 2016 can be found on pages 17 and 21 of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2017 Form 10-K included in this annual report. D E A R F E L L O W S H A R E H O L D E R S In 2017, we embarked on the first full year of our five-year transformation plan focused on long- term growth and increasing shareholder value. In this critical first year, we significantly narrowed the comparable sales growth gap versus our peers, and drove a 56 percent increase in free cash flow. The entire team across all banners of Advance Auto Parts, Inc., as well as our network of Carquest Independents, performed with unrelenting focus throughout the year to ensure Customers remained our primary focus. While the competitive landscape is evolving, we have an existing asset base that has been underutilized. Our goal is to dramatically improve execution across our base business while building competitive advantages in growth areas such as rapid delivery of parts to professional shops and ease of online ordering for both Do- It-Yourself (DIY) and Professional Customers. I N V E S T I N G I N L O N G - T E R M G R O W T H Throughout 2017, we made investments in our Customers, Team Members and technology to solidify our Value Proposition and build the foundation for long-term growth for the business and shareholders. This will remain our highest priority as we transform Advance. We are committed to the long-term opportunity ahead for our business and believe these investments are integral to our transformation efforts as we provide the best brands for our Customers and deliver on our Mission: Passion for Customers…Passion for Yes! Financial Highlights for 2017 include: 2017 $9.37 Total Net Sales (in billions) Diluted EPS $6.42 Adjusted EPS $5.37 Free Cash Flow (in millions) $411 2016 $9.57 $6.20 $7.15 $264 PASSION FOR CUSTOMERS... PASSION FOR YES! Throughout 2017, we remained steadfast in our mission to improve our Customer Value Proposition. We recognize that winning long term requires an unwavering commitment to delivering what matters most to our DIY and Professional Customers. More importantly, understanding the demand drivers for different Customers enables us to prioritize key initiatives within our long-term strategic plan. We will be uncompromising in improving the experience for both Professional and DIY Customers. Investments in online and e-commerce capabilities along with new tools and training for our Team Members are important elements of this plan. The increasing use of online search and ordering required necessary improvements across our digital footprint. To better serve our Customers and capture the growing online demand, we launched our improved website in mid-2017, providing a — continued faster and more frictionless experience while increasing the number of SKUs available for online shoppers. Third-party reviews of industry websites have noted our improved online capabilities. We’ve also improved the in-store customer experience from the moment DIYers come through the doors. Independent mystery shoppers have reported progress throughout the year resulting from our diligent efforts to improve the store experience in conjunction with the rollout of our new website. Our Team Members leveraged enhanced training, enabling better execution. In 2017, we began the roll-out of Cross Banner Visibility which enables all Professional Customers, as well as all Advance, Carquest, and WorldPac Team Members, to see our entire catalog, regardless of banner. This capability benefits both DIY and Professional Customers and was completed in the first quarter of 2018. Further, we introduced AdvancePro, our e-commerce engine for Professional Customers. This digital platform provides full access to our common catalog across all four banners, extending our enterprise-wide assortment to all Customers. These are major steps forward that reinforce the importance of our outstanding assortment of brands, fast and consistent delivery and the best parts people in the industry. Most importantly, these initiatives enable us to say “YES” more often! DRIVING CASH FLOW... ACTING LIKE OWNERS Given the substantial margin gap we have with industry peers, we’ve embraced frugality as a tenet of our corporate culture. In 2017, we made progress in productivity improvements, reducing material costs and implementing zero based budgeting. We expect this agenda to continue to advance into 2018 and beyond. We’re strengthening, optimizing and streamlining our supply chain from end to end. Our supply chain strategy is about differentiation, improving the customer experience and structural cost reduction. In order to improve cash flow, we implemented dramatic enhancements to our working capital processes, focused on receivables, payables, and inventory. This is already yielding significant benefits, driving both free cash flow and return on invested capital. We’re confident about the progress we’ll make in each of these areas in 2018 and into the future. Without question, our productivity and cash agenda is well underway and critical to long- term growth. HIRING AND DEVELOPING THE BEST...THROUGHOUT ADVANCE Our Team Members are critical to our success both in the field and in our Customer Support Center. We need the best parts people in the business in our stores and are excited about the substantial reductions in turnover we achieved in 2017. In corporate roles, we are hiring terrific new leaders while promoting and empowering others from within to strengthen our entire organization. People are at the core of all our initiatives, and ultimately, our Team Members’ knowledge, dedication, and focus will set Advance apart from both retail and online competitors. As a result, we have invested, and will continue to invest, in our Team Members. In 2016, we launched Fuel the Frontline, which rewards high-performing store and field Team Members with shares of Advance stock for meeting or exceeding their goals. In 2017, we continued to grow Fuel the Frontline with literally thousands of Team Members earning shares of Advance stock throughout the year. We also launched Be An Owner in 2017 to recognize top performers in our Customer Support Center — continued and Supply Chain teams. Similar to Fuel the Frontline, Be An Owner enables Team Members to earn Advance stock based on outstanding, differentiated performance. Over time, this important initiative drives ownership and will help reduce turnover. Building on the evolution of our Cultural Beliefs that began in 2016, we continued to focus on Inclusion and Diversity throughout 2017. In line with this emphasis across Advance, I am honored to be a part of the CEO Action collective. With more than 400 participating organizations, we are taking an active role to partner with like-minded individuals and companies to improve inclusion and diversity while sharing and leveraging best practices, and ultimately strengthening our focus on our people. During the first full year of focus on the critical Inclusion and Diversity initiative, we made substantial progress. In 2017, the representation of females and minorities in leadership roles increased by 40 percent. This includes an increase in our Executive Committee from 25 percent to nearly 55 percent as well as an increase among our field- based store operations leadership to nearly 42 percent. I am extremely proud of the growth in the first year, but remain committed to further evolution as we continue to advance our cultural beliefs. Our Team Member Networks (TMNs) expanded to nine official groups to further increase our collective focus on inclusion and diversity across our entire organization. TMNs are open to anyone who has an interest and enable Team Members with similar backgrounds, experiences, and/ or interests to come together to create a high- performance and inclusive culture. TMNs enable networking with others across the organization, par ticipation in leadership oppor tunities, engagement with local communities in impactful ways, and create a collective voice to express ideas and concerns. In addition, TMNs inspire innovation and build capabilities we believe increase our competitive advantage. These nine networks embody the Cultural Beliefs of Advance and are an important outlet for leveraging the skills that our Team Members have to offer. GIVING BACK TO OUR COMMUNITIES As a company committed to corporate citizenship, we understand the important role we play in the lives of people and the communities where we live and serve. During 2017, our Team Members dedicated their time and talent to help those in the areas of need as North America was impacted by some of the most severe natural disasters seen in recent memory. We also continued our corporate level partnerships with several national charitable organizations, including JDRF and its fight to improve the lives of those living with type 1 diabetes. We’re also proud of our continued support of Building Homes for Heroes and the brave servicemen and servicewomen they assist who have sacrificed so much. With more than 6,000 military veterans as fellow Team Members and a commitment to hire 10,000 additional veterans over the next five years, supporting our veterans is something very important to all of us at Advance. — continued ENVIRONMENTAL COMMITMENT In addition to supporting the communities where we live and operate, we are acutely aware of the environmental responsibility we have as a leader in our industry. As an organization, we are committed to working with our Customers and suppliers to implement environmental and socially responsible initiatives. As part of these ongoing efforts in 2017, we recycled approximately 130,000 tons of lead acid batteries and nearly six million gallons of motor oil, both of which increased as compared to the previous year. In addition to increased recycling efforts, we continue to focus on overall energy efficiency and are pleased with the progress we have made during the last five years. This includes a 30 percent reduction in energy usage realized at our more than 5,000 stores through a variety of initiatives such as LED lighting systems and signage, centralized energy management systems, and installation of high efficiency HVAC systems. LED LIGHTING SYSTEM IMPLEMENTATIONS ENERGY MANAGEMENT SOLUTIONS HIGH EFFICIENCY HVAC SYSTEMS While we’re proud of our accomplishments to date, we have an obligation to do more. We take this responsibility extremely seriously and are looking at ways to reduce and improve our environmental impact across our entire organization. We are committed to continuing our efforts in this area and look forward to sharing additional improvements in the future. ADVANCING IN 2018 industry. In addition, we are confident the transformational steps we have taken to date have resulted in a stronger Advance and will improve our competitiveness going forward. Notably, our ability to provide Professional Customers access to a robust assortment of brands from both aftermarket and Original Equipment Manufacturers (OEM) is an important differentiator. We’re ensuring that working with us is easy and efficient so that Customers get the parts they need, at the right time, and at a fair price. No matter what DIY Customers desire, we’ve got them covered with high-quality products. Whether in-store or online, we will provide them with the products, service, support and information they need and trust. We are still early in our transformation and remain laser focused on solidifying and expanding our Customer base. We’re also strengthening our value proposition across the entire Customer Demand Journey in both physical and digital assets. We’re investing in technology, improved customer service and in our people to ensure a differentiated experience. We continue to remove unnecessary costs from our system and maintain a relentless focus on cash. In summary, 2017 was an integral first step in our transformation. We move forward into 2018 with increased determination to achieve our short- and long-term goals, and our team is talented, focused and ready to win. Thank you for your continuing support, trust and confidence. Thomas R. Greco President & Chief Executive Officer We’re excited about our plans for 2018 and optimistic about the long-term outlook for the Jeffrey C. Smith Chairman of the Board UNITED€STATES SECURITIES€AND€EXCHANGE€COMMISSION Washington,€D.C.€20549 Form€10-K x ANNUAL€REPORT€PURSUANT€TO€SECTION€13€OR€15(d)€OF€THE€SECURITIES (Mark€One) EXCHANGE€ACT€OF€1934 For€the€fiscal€year€ended€December€30,€2017€ OR o TRANSITION€REPORT€PURSUANT€TO€SECTION€13€OR€15(d)€OF€THE€SECURITIES EXCHANGE€ACT€OF€1934 For€the€transition€period€from€________€to€________. Commission€file€number€001-16797 ________________________ ADVANCE€AUTO€PARTS,€INC. (Exact€name€of€registrant€as€specified€in€its€charter) ________________________ €Delaware (State€or€other€jurisdiction€of incorporation€or€organization) €5008€Airport€Road Roanoke,€VA (Address€of€Principal€Executive€Offices) €€€€54-2049910 (I.R.S.€Employer Identification€No.) €€€€24012 (Zip€Code) (540)€362-4911 (Registrant(cid:129)s€telephone€number,€including€area€code) € Securities€Registered€Pursuant€to€Section€12(b)€of€the€Act Title€of€each€class Common€Stock€($0.0001€par€value) Name€of€each€exchange€on€which€registered New€York€Stock€Exchange Securities€Registered€Pursuant€to€Section€12(g)€of€the€Act:€None Indicate€by€check€mark€if€the€registrant€is€a€well-known€seasoned€issuer,€as€defined€in€Rule€405€of€the€Securities€Act.€Yes€x No€o Indicate€by€check€mark€if€the€registrant€is€not€required€to€file€reports€pursuant€to€Section€13€or€Section€15(d)€of€the€Act.€ Yes€o€No€x Indicate€ by€ check€ mark€ whether€ the€ registrant€ (1)€has€ filed€ all€ reports€ required€ to€ be€ filed€ by€ Section€13€ or€ 15(d)€of€ the Securities€Exchange€Act€of€1934€during€the€preceding€12€months€(or€for€such€shorter€period€that€the€registrant€was€required€to file€such€reports),€and€(2)€has€been€subject€to€such€filing€requirements€for€the€past€90€days.€Yes€x€No€o Indicate€by€check€mark€whether€the€registrant€has€submitted€electronically€and€posted€on€its€corporate€Web€site,€if€any,€every Interactive€Data€File€required€to€be€submitted€and€posted€pursuant€to€Rule€405€of€Registration€S-T€(‚232.405€of€this€chapter) during€the€preceding€12€months€(or€for€such€shorter€period€that€the€registrant€was€required€to€submit€and€post€such€files).€Yes€x No€o Indicate€by€check€mark€if€disclosure€of€delinquent€filers€pursuant€to€Item€405€of€Registration€S-K€(‚229.405€of€this€chapter) is€not€contained€herein,€and€will€not€be€contained,€to€the€best€of€registrant(cid:129)s€knowledge,€in€definitive€proxy€or€information€statements incorporated€by€reference€in€Part€III€of€this€Form€10-K€or€any€amendment€to€the€Form€10-K.€o Indicate€by€check€mark€whether€the€registrant€is€a€large€accelerated€filer,€an€accelerated€filer,€a€non-accelerated€filer,€a€smaller reporting€company€or€an€emerging€growth€company.€See€the€definitions€of€ƒlarge€accelerated€filer,„€ƒaccelerated€filer,„€ƒsmaller reporting€company„€and€ƒemerging€growth€company„€in€Rule€12b-2€of€the€Exchange€Act.€ Large€accelerated€filer€x Non-accelerated€filer€€o€€(Do€not€check€if€a€smaller€reporting€company) Accelerated€filer€o Smaller€reporting€company€o Emerging€growth€company€o If€an€emerging€growth€company,€indicate€by€check€mark€if€the€registrant€has€elected€not€to€use€the€extended€transition period€for€complying€with€any€new€or€revised€financial€accounting€standards€provided€pursuant€to€Section€13(a)€of€the Exchange€Act.€o Indicate€by€check€mark€whether€the€registrant€is€a€shell€company€(as€defined€in€Rule€12b-2€of€the€Exchange€Act).€ Yes€o€No€x As€of€the€last€business€day€of€the€registrant(cid:129)s€most€recently€completed€second€fiscal€quarter,€July€14,€2017,€the€aggregate market€value€of€common€stock€held€by€non-affiliates€of€the€registrant€was€$7,204,158,912,€based€on€the€last€sales€price€on July€14,€2017,€as€reported€by€the€New€York€Stock€Exchange. As€of€February€16,€2018,€the€number€of€shares€of€the€registrant(cid:129)s€common€stock€outstanding€was€73,978,120€shares. Portions€of€the€registrant(cid:129)s€definitive€proxy€statement€for€its€2018€Annual€Meeting€of€Stockholders,€to€be€held€on€May€16, 2018,€are€incorporated€by€reference€into€Part€III€of€this€Form€10-K. Documents€Incorporated€by€Reference: Part€I. Part€II. Part€III. Part€IV. TABLE€OF€CONTENTS €Page Item€1.€ Business ............................................................................................................................ Item€1A. Risk€Factors....................................................................................................................... Item€1B. Unresolved€Staff€Comments ............................................................................................. Item€2. Properties .......................................................................................................................... Item€3. Legal€Proceedings ............................................................................................................. Item€4. Mine€Safety€Disclosures ................................................................................................... Item€5. Market€for€the€Registrant's€Common€Equity,€Related€Stockholder€Matters€and€Issuer Purchases€of€Equity€Securities .......................................................................................... Item€6. Selected€Consolidated€Financial€Data............................................................................... Item€7. Management's€Discussion€and€Analysis€of€Financial€Condition€and€Results€of Operations ......................................................................................................................... Item€7A. Quantitative€and€Qualitative€Disclosures€About€Market€Risks ........................................ Item€8. Financial€Statements€and€Supplementary€Data................................................................. Item€9. Changes€in€and€Disagreements€with€Accountants€on€Accounting€and€Financial Disclosure.......................................................................................................................... Item€9A. Controls€and€Procedures ................................................................................................... Item€9B. Other€Information ............................................................................................................. Item€10. Directors,€Executive€Officers€and€Corporate€Governance................................................ Item€11. Executive€Compensation................................................................................................... Item€12. Security€Ownership€of€Certain€Beneficial€Owners€and€Management€and€Related Stockholder€Matters .......................................................................................................... Item€13. Certain€Relationships€and€Related€Transactions,€and€Director€Independence.................. Item€14. Principal€Accountant€Fees€and€Services ........................................................................... 2 6 12 12 13 13 14 16 17 26 27 27 27 28 29 29 29 29 29 Item€15. Exhibits,€Financial€Statement€Schedules .......................................................................... 30 FORWARD-LOOKING€STATEMENTS This€Annual€Report€on€Form€10-K€contains€ƒforward-looking€statements„€within€the€meaning€of€Section€27A€of€the Securities€Act€of€1933€(the€ƒSecurities€Act„)€and€Section€21E€of€the€Securities€Exchange€Act€of€1934€(the€ƒExchange€Act„). The€Securities€and€Exchange€Commission€(ƒSEC„)€encourages€companies€to€disclose€forward-looking€information€so€that investors€can€better€understand€a€company(cid:129)s€future€prospects€and€make€informed€investment€decisions.€Forward-looking statements€are€usually€identified€by€the€use€of€words€such€as€ƒanticipate,„€ƒbelieve,„€ƒcould,„€ƒestimate,„€ƒexpect,„€ƒforecast,„ ƒintend,„€ƒlikely,„€ƒmay,„€ƒplan,„€ƒposition,„€ƒpossible,„€ƒpotential,„€ƒprobable,„€ƒproject,„€ƒprojection,„€ƒshould,„€ƒstrategy,„ ƒwill,„€or€similar€expressions.€These€statements€are€based€upon€assessments€and€assumptions€of€management€in€light€of historical€results€and€trends,€current€conditions€and€potential€future€developments€that€often€involve€judgment,€estimates, assumptions€and€projections.€Forward-looking€statements€reflect€current€views€about€our€plans,€strategies€and€prospects,€which are€based€on€information€currently€available€as€of€the€date€of€this€report.€Except€as€required€by€law,€we€undertake€no€obligation to€update€any€forward-looking€statements€to€reflect€events€or€circumstances€after€the€date€of€such€statements.€Forward-looking statements€are€subject€to€risks€and€uncertainties,€many€of€which€are€outside€our€control,€which€could€cause€actual€results€to differ€materially€from€these€statements.€Therefore,€you€should€not€place€undue€reliance€on€those€statements.€We€intend€for€any forward-looking€statements€to€be€covered€by,€and€we€claim€the€protection€under,€the€safe€harbor€provisions€for€forward-looking statements€contained€in€the€Private€Securities€Litigation€Reform€Act€of€1995.€ 1 Item€1. Business. PART€I Unless€the€context€otherwise€requires,€ƒAdvance,„€ƒwe,„€ƒus,„€ƒour,„€and€similar€terms€refer€to€Advance€Auto€Parts,€Inc.,€its subsidiaries€and€their€respective€operations.€Our€fiscal€year€consists€of€52€or€53€weeks€ending€on€the€Saturday€closest€to€December 31st€of€each€year.€Our€2017,€2016€and€2015€fiscal€years€included€52€weeks€of€operations. Overview We€are€a€leading€automotive€aftermarket€parts€provider€in€North€America,€serving€both€professional€installers (ƒProfessional„),€and€ƒdo-it-yourself„€(ƒDIY„),€customers€as€well€as€independently€owned€operators.€Our€stores€and€branches offer€a€broad€selection€of€brand€name,€original€equipment€manufacturer€(ƒOEM„)€and€private€label€automotive€replacement parts,€accessories,€batteries€and€maintenance€items€for€domestic€and€imported€cars,€vans,€sport€utility€vehicles€and€light€and heavy€duty€trucks.€As€of€December€30,€2017,€the€end€of€our€2017€fiscal€year€(ƒ2017„),€we€operated€5,054€total€stores€and€129 branches€primarily€under€the€trade€names€ƒAdvance€Auto€Parts„,€ƒAutopart€International„,€ƒCarquest„€and€ƒWorldpac„.€ We€were€founded€in€1929€as€Advance€Stores€Company,€Incorporated€and€operated€as€a€retailer€of€general€merchandise until€the€1980s.€During€the€1980s,€we€began€targeting€the€sale€of€automotive€parts€and€accessories€to€DIY€customers.€We€began our€Professional€delivery€program€in€1996€and€have€steadily€increased€our€sales€to€Professional€customers€since€2000.€We€have grown€significantly€as€a€result€of€comparable€store€sales€growth,€new€store€openings€and€strategic€acquisitions.€Advance€Auto Parts,€Inc.,€a€Delaware€corporation,€was€incorporated€in€2001€in€conjunction€with€the€acquisition€of€Discount€Auto€Parts,€Inc.€In 2014,€we€acquired€General€Parts€International,€Inc.€(ƒGPI„),€a€privately€held€company€that€was€a€leading€distributor€and supplier€of€original€equipment€and€aftermarket€automotive€replacement€products€for€Professional€markets€operating€under€the Carquest€and€Worldpac€names.€ Segment€and€Related€Information During€2017€and€2016€we€aggregated€our€operating€segments€into€a€single€reportable€segment€comprised€of€our€store€and branch€operations.€A€discussion€of€our€segment€structure€is€available€in€Note€2,€SignificantƒAccountingƒPolicies,ƒof€the€Notes€to the€Consolidated€Financial€Statements€included€herein.€ Stores€and€Branches Through€our€integrated€operating€approach,€we€serve€our€Professional€and€DIY€customers€through€a€variety€of€channels ranging€from€traditional€ƒbrick€and€mortar„€store€locations€to€self-service€e-commerce€sites.€We€believe€we€are€better€able€to meet€our€customers(cid:129)€needs€by€operating€under€several€store€names,€which€are€as€follows:€ Advance€Auto€Parts€-€Consists€of€4,432€stores€as€of€December€30,€2017€generally€located€in€freestanding€buildings€with€a heavy€focus€on€both€Professional€and€DIY€customers.€The€average€size€of€an€Advance€Auto€Parts€store€is€approximately 7,500€square€feet€with€the€size€of€our€typical€new€stores€ranging€from€approximately€6,200€to€15,000€square€feet.€These stores€carry€a€wide€variety€of€products€serving€aftermarket€auto€part€needs€for€both€domestic€and€import€vehicles.€Our Advance€Auto€Parts€stores€carry€a€product€offering€of€approximately€22,000€stock€keeping€units€(ƒSKUs„),€generally consisting€of€a€custom€mix€of€product€based€on€each€store(cid:129)s€respective€market.€Supplementing€the€inventory€on-hand€at€our stores,€additional€less€common€SKUs€are€available€in€many€of€our€larger€stores€(known€as€ƒHUB„€stores).€These€additional SKUs€are€available€on€a€same-day€or€next-day€basis.€ Autopart€International€((cid:129)AI‚)€-€Consists€of€185€stores€as€of€December€30,€2017€operating€primarily€in€the€Northeastern and€Mid-Atlantic€regions€of€the€United€States€focusing€on€the€Professional€customer.€These€stores€specialize€in€imported aftermarket€and€private€label€branded€auto€parts.€The€AI€stores€offer€approximately€41,000€SKUs€through€routine replenishment€from€their€supply€chain. Carquest€-€Consists€of€437€stores€as€of€December€30,€2017,€including€138€stores€in€Canada.€Our€Carquest€stores€are generally€located€in€freestanding€buildings€with€a€heavy€focus€on€Professional€customers,€but€also€serving€DIY€customers. The€average€size€of€a€Carquest€store€is€approximately€7,600€square€feet.€These€stores€carry€a€wide€variety€of€products serving€the€aftermarket€auto€part€needs€for€both€domestic€and€import€vehicles€with€a€product€offering€of€approximately 23,000€SKUs.€We€continue€to€convert€or€consolidate€the€U.S.€Carquest€stores€with€our€Advance€Auto€Parts€stores€as€part€of our€multi-year€integration€plan.€As€of€December€30,€2017,€Carquest€also€served€1,218€independently€owned€stores€that operate€under€the€Carquest€name.€ 2 Worldpac€-€Consists€of€129€branches€as€of€December€30,€2017€that€principally€serve€Professional€customers€utilizing€an efficient€and€sophisticated€on-line€ordering€and€fulfillment€system.€The€Worldpac€branches€are€generally€larger€than€our other€store€locations€averaging€approximately€28,000€square€feet€in€size.€Worldpac€specializes€in€imported,€OEM€parts. Worldpac(cid:129)s€complete€product€offering€includes€over€120,000€SKUs€for€over€40€import€and€domestic€vehicle€carlines.€ Our€Products€ The€following€table€shows€some€of€the€types€of€products€that€we€sell€by€major€category€of€items: Parts€&€Batteries Batteries€and€battery€accessories Accessories€&€Chemicals Air€conditioning€chemicals€and€accessories Belts€and€hoses Air€fresheners Engine€Maintenance Air€filters Fuel€and€oil€additives Brakes€and€brake€pads Antifreeze€and€washer€fluid Fuel€filters Chassis€parts Electrical€wire€and€fuses Climate€control€parts Electronics Grease€and€lubricants Motor€oil Clutches€and€drive€shafts Floor€mats,€seat€covers€and€interior€accessories Oil€filters Engines€and€engine€parts Hand€and€specialty€tools Exhaust€systems€and€parts Lighting Hub€assemblies Performance€parts Ignition€components€and€wire Sealants,€adhesives€and€compounds Radiators€and€cooling€parts Tire€repair€accessories Starters€and€alternators Vent€shades,€mirrors€and€exterior€accessories Steering€and€alignment€parts Washes,€waxes€and€cleaning€supplies Wiper€blades Part€cleaners€and€treatments Transmission€fluid We€provide€our€customers€quality€products,€which€many€are€offered€at€a€good,€better€or€best€recommendation€differentiated by€price€and€quality.€ Our€Customers Our€Professional€customers€consist€primarily€of€customers€for€whom€we€deliver€product€from€our€store€or€branch€locations to€their€places€of€business,€including€garages,€service€stations€and€auto€dealers.€Our€Professional€sales€represented approximately€58%,€58%€and€57%€of€our€sales€in€2017,€2016€and€2015.€We€also€serve€1,218€independently€owned€Carquest stores€with€shipments€directly€from€our€distribution€centers.€Our€DIY€customers€are€primarily€served€through€our€stores€and€can also€order€online€to€pick€up€merchandise€at€a€conveniently€located€store€or€have€their€purchases€shipped€directly€to€them. Except€where€prohibited,€we€also€provide€a€variety€of€services€at€our€stores€free€of€charge€to€our€customers,€including: … … … … … … … Battery€and€wiper€installation; Battery€charging; Check€engine€light€reading; Electrical€system€testing,€including€batteries,€starters,€alternators€and€sensors; ƒHow-To„€video€clinics; Oil€and€battery€recycling;€and Loaner€tool€programs. We€also€serve€our€customers€online€at€www.AdvanceAutoParts.com.€Our€Professional€customers€can€conveniently€place their€orders€electronically,€over€the€phone€or€in-store€and€we€deliver€product€from€our€store€or€branch€locations€to€their€places of€business.€Our€online€websites€also€allow€our€DIY€customers€to€pick€up€merchandise€at€a€conveniently€located€store€or€have their€purchases€shipped€directly€to€them. 3 Store€Development Key€factors€in€selecting€sites€and€market€locations€in€which€we€operate€include€population,€demographics,€traffic€count, vehicle€profile,€number€and€strength€of€competitors(cid:129)€stores€and€the€cost€of€real€estate.€Our€5,183€stores€and€branches€were located€in€the€following€states,€territories€and€international€locations€as€of€December€30,€2017:€ Number€of Stores Location Number€of Stores Location Number€of Stores Location U.S.ƒStates: Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana 135 Maine 11 Maryland 20 Massachusetts 24 Michigan 95 Minnesota 88 Mississippi 75 Missouri 19 Montana 535 Nebraska 272 Nevada 9 New€Hampshire 176 New€Jersey 119 New€Mexico 40 New€York 39 North€Carolina 112 North€Dakota 71 39 Ohio 136 Oklahoma 124 Oregon 146 Pennsylvania 44 Rhode€Island 64 South€Carolina 64 South€Dakota 26 Tennessee 30 Texas 14 Utah 29 Vermont 134 Virginia 15 Washington 260 West€Virginia 310 Wisconsin 5 Wyoming U.S.ƒTerritories: Puerto€Rico CanadianƒProvinces: Alberta 27 Virgin€Islands 1 3 New€Brunswick 11 Ontario British€Columbia 4 Newfoundland€and€Labrador 3 Prince€Edward€Island Manitoba 1 Nova€Scotia 13 Quebec We€serve€our€Advance€Auto€Parts€and€Carquest€stores€primarily€from€our€store€support€centers€in€Roanoke,€VA€and Raleigh,€NC.€We€also€maintain€a€store€support€center€in€Newark,€CA€to€support€our€Worldpac€and€e-commerce€operations€and in€Norton,€MA€to€support€our€Autopart€International€stores.€ Supply€Chain Our€supply€chain€consists€of€a€network€of€distribution€centers,€HUBs,€stores€and€branches€that€enable€us€to€provide€same- day€or€next-day€availability€to€our€customers.€As€of€December€30,€2017,€we€operated€54€distribution€centers,€ranging€in€size from€approximately€51,000€to€943,000€square€feet€with€total€square€footage€of€approximately€12.0€million.€Currently,€our smaller€distribution€centers€primarily€service€our€Carquest€stores,€including€those€that€have€converted€to€the€Advance€Auto Parts€format,€while€our€larger€distribution€centers€primarily€service€Advance€Auto€Parts,€Autopart€International€and€Worldpac locations.€In€2017,€we€opened€new€distribution€centers€in€Houston,€TX€and€in€the€greater€Nashville,€TN€area.€ 4 265 29 28 269 22 148 10 156 279 23 12 244 32 80 106 13 60 1 63 Merchandise,€Marketing€and€Advertising In€2017,€we€purchased€merchandise€from€over€600€vendors,€with€no€single€vendor€accounting€for€more€than€9%€of purchases.€Our€purchasing€strategy€involves€negotiating€agreements€with€most€of€our€vendors€to€purchase€merchandise€over€a specified€period€of€time€along€with€other€provisions,€including€pricing,€volume€and€payment€terms. Our€merchandising€strategy€is€to€carry€a€broad€selection€of€high€quality€and€reputable€brand€name€automotive€parts€and accessories€that€we€believe€will€appeal€to€our€Professional€customers€and€also€generate€DIY€customer€traffic.€Some€of€our brands€include€Bosch†,€Castrol†,€Dayco†,€Denso†,€Gates†,€Moog†,€Monroe†,€NGK†,€Prestone†,€Purolator†,€Trico†€and Wagner†.€In€addition€to€these€branded€products,€we€stock€a€wide€selection€of€high€quality€private€label€products€that€appeal€to value-conscious€customers.€These€lines€of€merchandise€include€chemicals,€interior€automotive€accessories,€batteries€and€parts under€various€private€label€names€such€as€Autocraft†,€Autopart€International†,€Driveworks†,€Tough€One†€and€Wearever†as€well as€the€Carquest†€brand. Our€marketing€and€advertising€program€is€designed€to€drive€brand€awareness,€consideration€and€omni-channel€traffic€by positioning€Advance€Auto€Parts€as€the€leader€in€parts€availability,€in-store€parts€and€project€expertise€within€the€aftermarket auto€parts€category.€We€strive€to€exceed€our€customers(cid:129)€expectations€end-to-end€through€a€comprehensive€online€and€pick€up€in- store€experience,€extensive€parts€assortment,€experienced€parts€professionals,€Professional€programs€that€are€designed€to€build loyalty€with€our€customers€and€our€DIY€customer€loyalty€program,€Speed€Perks.€Our€DIY€campaign€was€developed€around€a multi-channel€communications€plan€that€brings€together€radio,€television,€direct€marketing,€social€media,€sponsorships,€store events€and€Speed€Perks. Seasonality Our€business€is€somewhat€seasonal€in€nature,€with€the€highest€sales€usually€occurring€in€the€spring€and€summer€months.€In addition,€our€business€can€be€affected€by€weather€conditions.€While€unusually€heavy€precipitation€tends€to€soften€sales€as elective€maintenance€is€deferred€during€such€periods,€extremely€hot€or€cold€weather€tends€to€enhance€sales€by€causing automotive€parts€to€fail€at€an€accelerated€rate.€Our€fourth€quarter€is€generally€our€most€volatile€as€weather€and€spending€trade- offs€typically€influence€our€Professional€and€DIY€sales. Team€Members€ As€of€December€30,€2017,€we€employed€approximately€40,000€full-time€Team€Members€and€approximately€31,000€part- time€Team€Members.€Our€workforce€consisted€of€86%€of€our€Team€Members€employed€in€store-level€operations,€10% employed€in€distribution€and€4%€employed€in€our€corporate€offices.€As€of€December€30,€2017,€less€than€1%€of€our€Team Members€were€represented€by€labor€unions.€We€have€never€experienced€any€labor€disruption.€ Intellectual€Property€ We€own€a€number€of€trade€names,€service€marks€and€trademarks,€including€ƒAdvance€Auto€Parts„,€ƒAutopart International„,€ƒCarquest„,€ƒCARQUEST€Technical€Institute„,€ƒDriverSide„,€ƒMotoLogic„,€ƒMotoShop„,€ƒWorldpac„, ƒspeedDIAL„€and€ƒTECH-NET€Professional€Auto€Service„€for€use€in€connection€with€the€automotive€parts€business.€In addition,€we€own€and€have€registered€a€number€of€trademarks€for€our€private€label€brands.€We€believe€that€these€trade€names, service€marks€and€trademarks€are€important€to€our€merchandising€strategy.€We€do€not€know€of€any€infringing€uses€that€would materially€affect€the€use€of€these€trade€names€and€marks€and€we€actively€defend€and€enforce€them. Competition€ We€operate€in€both€the€Professional€and€DIY€markets€of€the€automotive€aftermarket€industry.€Our€primary€competitors€are (i)€both€national€and€regional€chains€of€automotive€parts€stores,€including€AutoZone,€Inc.,€NAPA,€O(cid:129)Reilly€Automotive,€Inc., The€Pep€Boys-Manny,€Moe€&€Jack€and€Auto€Plus€(formerly€Uni-Select€USA,€Inc.),€(ii)€discount€stores€and€mass€merchandisers that€carry€automotive€products,€(iii)€wholesalers€or€jobber€stores,€including€those€associated€with€national€parts€distributors€or associations,€(iv)€independently€owned€stores,€(v)€automobile€dealers€that€supply€parts€and€(vi)€internet-based€retailers.€We believe€that€chains€of€automotive€parts€stores€that,€like€us,€have€multiple€locations€in€one€or€more€markets,€have€competitive advantages€in€customer€service,€marketing,€inventory€selection,€purchasing€and€distribution€as€compared€to€independent retailers€and€jobbers€that€are€not€part€of€a€chain€or€associated€with€other€retailers€or€jobbers.€The€principal€methods€of competition€in€our€business€include€customer€service,€product€offerings,€availability,€quality,€price€and€store€location. 5 Environmental€Matters€ We€are€subject€to€various€federal,€state€and€local€laws€and€governmental€regulations€relating€to€the€operation€of€our business,€including€those€governing€collection,€transportation€and€recycling€of€automotive€lead-acid€batteries,€used€automotive oil€and€other€recyclable€items,€and€ownership€and€operation€of€real€property.€We€sell€products€containing€hazardous€materials€as part€of€our€business.€In€addition,€our€customers€may€bring€automotive€lead-acid€batteries,€used€automotive€oil€or€other recyclable€items€onto€our€properties.€We€currently€provide€collection€and€recycling€programs€for€used€lead-acid€batteries,€used oil€and€other€recyclable€items€at€a€majority€of€our€stores€as€a€service€to€our€customers.€Pursuant€to€agreements€with€third€party vendors,€lead-acid€batteries,€used€oil€and€other€recyclable€items€are€collected€by€our€Team€Members,€deposited€onto€pallets€or into€vendor€supplied€containers€and€stored€by€us€until€collected€by€the€third€party€vendors€for€recycling€or€proper€disposal.€The terms€of€our€contracts€with€third€party€vendors€require€that€they€are€in€compliance€with€all€applicable€laws€and€regulations.€Our third€party€vendors€who€arrange€for€the€removal,€disposal,€treatment€or€other€handling€of€hazardous€or€toxic€substances€may€be liable€for€the€costs€of€removal€or€remediation€at€any€affected€disposal,€treatment€or€other€site€affected€by€such€substances. Based€on€our€experience,€we€do€not€believe€that€there€are€any€material€environmental€costs€associated€with€the€current€business practice€of€accepting€lead-acid€batteries,€used€oil€and€other€recyclable€items€as€these€costs€are€borne€by€the€respective€third party€vendors. We€own€and€lease€real€property.€Under€various€environmental€laws€and€regulations,€a€current€or€previous€owner€or€operator of€real€property€may€be€liable€for€the€cost€of€removal€or€remediation€of€hazardous€or€toxic€substances€on,€under€or€in€such property.€These€laws€often€impose€joint€and€several€liability€and€may€be€imposed€without€regard€to€whether€the€owner€or operator€knew€of,€or€was€responsible€for,€the€release€of€such€hazardous€or€toxic€substances.€Other€environmental€laws€and common€law€principles€also€could€be€used€to€impose€liability€for€releases€of€hazardous€materials€into€the€environment€or€work place,€and€third€parties€may€seek€recovery€from€owners€or€operators€of€real€properties€for€personal€injury€or€property€damage associated€with€exposure€to€released€hazardous€substances.€From€time€to€time,€we€receive€notices€from€the€Environmental Protection€Agency€and€state€environmental€authorities€indicating€that€there€may€be€contamination€on€properties€we€own,€lease or€operate€or€may€have€owned,€leased€or€operated€in€the€past€or€on€adjacent€properties€for€which€we€may€be€responsible. Compliance€with€these€laws€and€regulations€and€clean-up€of€released€hazardous€substances€have€not€had€a€material€impact€on our€operations€to€date. Available€Information€ Our€Internet€address€is€www.AdvanceAutoParts.com.€The€information€on€our€website€is€not€part€of€this€Annual€Report€on Form€10-K€for€2017.€We€make€available€free€of€charge€through€our€Internet€website€our€annual€reports€on€Form€10-K,€quarterly reports€on€Form€10-Q,€current€reports€on€Form€8-K€and€amendments€to€those€reports€filed€or€furnished€pursuant€to€the Exchange€Act€as€soon€as€reasonably€practicable€after€we€electronically€file€such€material€with,€or€furnish€them€to€the€SEC.€The SEC€maintains€a€website€that€contains€reports,€proxy€statements€and€other€information€regarding€issuers€that€file€electronically with€the€SEC.€These€materials€may€be€obtained€electronically€by€accessing€the€SEC(cid:129)s€website€atƒwww.sec.gov. Item€1A.€Risk€Factors.€ Our€business€is€subject€to€a€variety€of€risks.€Our€business,€financial€condition,€results€of€operations€and€cash€flows€could€be negatively€impacted€by€the€following€risk€factors.€These€risks€are€not€the€only€risks€that€may€impact€our€business.€ If€overall€demand€for€the€products€we€sell€slows€or€declines,€our€business,€financial€condition,€results€of€operations€and cash€flows€will€suffer.€Decreased€demand€could€also€negatively€impact€our€stock€price. Overall€demand€for€products€sold€by€our€stores€depends€on€many€factors€and€may€slow€or€decrease€due€to€any€number€of reasons,€including: … … … aƒdecreaseƒinƒtheƒnumberƒofƒvehiclesƒorƒinƒtheƒnumberƒofƒannualƒmilesƒdrivenƒorƒsignificantƒincreaseƒinƒtheƒuseƒof mobileƒservices,€because€fewer€vehicles€means€less€maintenance€and€repairs,€and€lower€vehicle€mileage,€which decreases€the€need€for€maintenance€and€repair; theƒeconomy,€because€during€periods€of€declining€economic€conditions,€consumers€may€reduce€their€discretionary spending€by€deferring€vehicle€maintenance€or€repair€and€new€car€purchases,€which€may€impact€the€number€of€cars requiring€repair€in€the€future; theƒweather,ƒbecause€milder€weather€conditions€may€lower€the€failure€rates€of€automobile€parts€while€extended€periods of€rain€and€winter€precipitation€may€cause€our€customers€to€defer€elective€maintenance€and€repair€of€their€vehicles; 6 … … … … theƒaverageƒdurationƒofƒvehicleƒmanufacturerƒwarrantiesƒandƒaverageƒageƒofƒvehiclesƒbeingƒdriven,ƒbecause€newer cars€typically€require€fewer€repairs€and€will€be€repaired€by€the€manufacturers(cid:129)€dealer€networks€using€dealer€parts pursuant€to€warranties€(which€have€gradually€increased€in€duration€and/or€mileage€expiration€over€the€recent€past), while€vehicles€that€are€seven€years€old€and€older€are€generally€no€longer€covered€under€manufacturers(cid:129)€warranties€and tend€to€need€more€maintenance€and€repair€than€newer€vehicles; anƒincreaseƒinƒinternet-basedƒretailers,€because€potentially€favorable€prices€and€ease€of€use€of€purchasing€parts€via€the internet€may€decrease€the€need€for€customers€to€visit€and€purchase€their€aftermarket€parts€from€our€physical€stores;€ technologicalƒadvances,ƒsuchƒasƒbatteryƒelectricƒvehicles,ƒandƒtheƒincreaseƒinƒqualityƒofƒvehiclesƒmanufactured, because€vehicles€that€need€less€frequent€maintenance€and€have€low€part€failure€rates€will€require€less€frequent€repairs using€aftermarket€parts;€and theƒrefusalƒofƒvehicleƒmanufacturersƒtoƒmakeƒavailableƒdiagnostic,ƒrepairƒandƒmaintenanceƒinformation€to€the automotiveƒaftermarketƒindustryƒthatƒourƒProfessionalƒandƒDIYƒcustomersƒrequireƒtoƒdiagnose,ƒrepairƒandƒmaintain theirƒvehicles,€because€this€may€force€consumers€to€have€a€majority€of€diagnostic€work,€repairs€and€maintenance performed€by€the€vehicle€manufacturers(cid:129)€dealer€networks. If€we€are€unable€to€compete€successfully€against€other€companies€in€the€automotive€aftermarket€industry€we€may€lose customers,€our€revenues€may€decline,€and€we€may€be€less€profitable€or€potentially€unprofitable. The€sale€of€automotive€parts,€accessories€and€maintenance€items€is€highly€competitive€in€many€ways,€including€name recognition,€location,€price,€quality,€product€availability€and€customer€service.€We€compete€in€both€the€Professional€and€DIY categories€of€the€automotive€aftermarket€industry,€primarily€with:€(i)€national€and€regional€chains€of€automotive€parts€stores, (ii)€discount€stores€and€mass€merchandisers€that€carry€automotive€products,€(iii)€wholesalers€or€jobbers€stores,€including€those associated€with€national€parts€distributors€or€associations€(iv)€independently€owned€stores,€(v)€automobile€dealers€that€supply parts€and€(vi)€internet-based€retailers.€These€competitors€and€the€level€of€competition€vary€by€market.€Some€of€our€competitors may€possess€advantages€over€us€in€certain€markets€we€share,€including€with€respect€to€the€level€of€marketing€activities,€number of€stores,€store€locations,€store€layouts,€operating€histories,€name€recognition,€established€customer€bases,€vendor€relationships, prices€and€product€warranties.€Internet-based€retailers€may€possess€cost€advantages€over€us€due€to€less€overhead€costs,€time€and travel€savings€and€ability€to€price€competitively.€Consolidation€among€our€competitors€could€enhance€their€market€share€and financial€position,€provide€them€with€the€ability€to€achieve€better€purchasing€terms€and€allow€them€to€provide€more€competitive prices€to€customers€for€whom€we€compete. In€addition,€our€reputation€is€critical€to€our€continued€success.€If€we€fail€to€maintain€high€standards€for,€or€receive€negative publicity€(whether€through€social€media€or€traditional€media€channels)€relating€to,€product€safety€and€quality€or€our€integrity and€reputation,€we€could€lose€customers€to€our€competition.€The€product€we€sell€is€branded€both€in€brands€of€our€vendors€and in€our€own€private€label€brands.€If€the€perceived€quality€or€value€of€the€brands€we€sell€declines€in€the€eyes€of€our€customers,€our results€of€operations€could€be€negatively€affected. Competition€may€require€us€to€reduce€our€prices€below€our€normal€selling€prices€or€increase€our€promotional€spending, which€could€lower€our€revenue€and€profitability.€Competitive€disadvantages€may€also€prevent€us€from€introducing€new€product lines,€require€us€to€discontinue€current€product€offerings,€or€change€some€of€our€current€operating€strategies.€If€we€do€not€have the€resources,€expertise€and€consistent€execution,€or€otherwise€fail€to€develop€successful€strategies,€to€address€these€potential competitive€disadvantages,€we€may€lose€customers,€our€revenues€and€profit€margins€may€decline€and€we€may€be€less€profitable or€potentially€unprofitable. If€we€are€unable€to€successfully€implement€our€business€strategy,€including€increasing€sales€to€Professional€and€DIY customers,€expanding€our€margins€and€increasing€our€return€on€invested€capital,€our€business,€financial€condition, results€of€operations€and€cash€flows€could€be€adversely€affected.€ We€have€identified€numerous€initiatives€as€part€of€our€business€strategy€to€increase€sales€to€both€Professional€and€DIY customers€and€expand€our€margins€in€order€to€increase€our€earnings€and€cash€flows.€If€we€are€unable€to€implement€these initiatives€efficiently€and€effectively,€or€if€these€initiatives€are€unsuccessful,€our€business,€financial€condition,€results€of operations€and€cash€flows€could€be€adversely€affected.€Successful€implementation€of€our€business€strategy€also€depends€on factors€specific€to€the€automotive€aftermarket€industry€and€numerous€other€factors€that€may€be€beyond€our€control.€ 7 Our€inventory€and€ability€to€meet€customer€expectations€may€be€adversely€impacted€by€factors€out€or€our€control.€ For€that€portion€of€our€inventory€manufactured€and/or€sourced€outside€the€United€States,€geopolitical€changes,€changes€in trade€regulations,€currency€fluctuations,€shipping€related€issues,€natural€disasters,€pandemics€and€other€factors€beyond€our control€may€increase€the€cost€of€items€we€purchase€or€create€shortages€that€could€have€a€material€adverse€effect€on€our€sales and€profitability.€In€addition,€unanticipated€changes€in€consumer€preferences€and/or€any€unforeseen€hurdles€to€meeting€our customers(cid:129)€needs€for€automotive€products€(particularly€parts€availability)€in€a€timely€manner€could€undermine€our€business strategy. If€we€are€unable€to€successfully€implement€our€growth€strategy,€keep€existing€store€locations€or€open€new€locations€in desirable€places€on€favorable€terms,€it€could€adversely€affect€our€business,€financial€condition,€results€of€operations€and cash€flows. We€intend€to€continue€to€expand€the€markets€we€serve€as€part€of€our€growth€strategy,€which€may€include€opening€new stores€or€branches,€as€well€as€expansion€of€our€online€business.€We€may€also€grow€our€business€through€strategic€acquisitions. We€do€not€know€whether€the€implementation€of€our€growth€strategy€will€be€successful.€As€we€expand€our€market€presence through€various€means,€it€becomes€more€critical€that€we€have€consistent€and€effective€execution€across€our€entire€Company(cid:129)s locations€and€brands.€We€are€unsure€whether€we€will€be€able€to€open€and€operate€new€locations€on€a€timely€or€sufficiently profitable€basis,€or€that€opening€new€locations€in€markets€we€already€serve€will€not€harm€the€profitability€or€comparable€store sales€of€existing€locations.€The€newly€opened€and€existing€locations(cid:129)€profitability€will€depend€on€the€competition€we€face€as well€as€our€ability€to€properly€stock,€market€and€price€the€products€desired€by€customers€in€these€markets.€The€actual€number and€format€of€any€new€locations€to€be€opened€and€the€success€of€our€growth€strategy€will€depend€on€a€number€of€factors, including,€among€other€things: … … … … … the€availability€of€desirable€locations;€ the€negotiation€of€acceptable€lease€or€purchase€terms€for€new€locations; the€availability€of€financial€resources,€including€access€to€capital€at€cost-effective€interest€rates; our€ability€to€expand€our€on-line€offerings€and€sales;€and our€ability€to€manage€the€expansion€and€to€hire,€train€and€retain€qualified€Team€Members. We€compete€with€other€retailers€and€businesses€for€suitable€locations€for€our€stores.€Local€land€use€and€zoning€regulations, environmental€regulations€and€other€regulatory€requirements€may€impact€our€ability€to€find€suitable€locations€and€influence€the cost€of€constructing,€renovating€and€operating€our€stores.€In€addition,€real€estate,€zoning,€construction€and€other€delays€may adversely€affect€store€openings€and€renovations€and€increase€our€costs.€Further,€changing€local€demographics€at€existing€store locations€may€adversely€affect€revenue€and€profitability€levels€at€those€stores.€The€termination€or€expiration€of€leases€at€existing store€locations€may€adversely€affect€us€if€the€renewal€terms€of€those€leases€are€unacceptable€to€us€and€we€are€forced€to€close€or relocate€stores.€If€we€determine€to€close€or€relocate€a€store€subject€to€a€lease,€we€may€remain€obligated€under€the€applicable lease€for€the€balance€of€the€lease€term.€ We€also€expect€to€continue€to€make€strategic€acquisitions€an€element€of€our€growth€strategy.€Acquisitions€involve€certain risks€that€could€cause€our€growth€and€profitability€to€differ€from€our€expectations.€The€success€of€our€acquisitions€depends€on€a number€of€factors,€including€among€other€things: … … … … … … … our€ability€to€continue€to€identify€and€acquire€suitable€targets€or€to€acquire€additional€companies€at€favorable€prices and€on€other€favorable€terms; our€ability€to€obtain€the€full€benefits€envisioned€by€strategic€relationships; the€risk€that€management(cid:129)s€attention€may€be€distracted; our€ability€to€retain€key€personnel€from€acquired€businesses;€ our€ability€to€successfully€integrate€the€operations€and€systems€of€the€acquired€companies€and€achieve€the€strategic, operational,€financial€or€other€anticipated€synergies€of€the€acquisition; we€may€incur€significant€transaction€and€integration€costs€in€connection€with€acquisitions€that€may€not€be€offset€by€the synergies€achieved€from€the€acquisition€in€the€near€term,€or€at€all;€and we€may€assume€or€become€subject€to€loss€contingencies,€known€or€unknown,€of€the€acquired€companies,€which€could relate€to€past,€present€or€future€facts,€events,€circumstances€or€occurrences. € 8 If€we€are€unable€to€maintain€adequate€supply€chain€capacity€and€improve€supply€chain€efficiency,€we€will€not€be€able€to expand€our€business,€which€could€adversely€affect€our€business,€financial€condition,€results€of€operations€and€cash€flows. Our€store€inventories€are€primarily€replenished€by€shipments€from€our€network€of€distribution€centers,€warehouses€and HUB€stores.€As€we€expand€our€market€presence,€we€will€need€to€increase€the€efficiency€and€maintain€adequate€capacity€of€our supply€chain€network€in€order€to€achieve€the€business€goal€of€reducing€inventory€costs€while€improving€availability€and movement€of€goods€throughout€our€supply€chain€to€meet€consumer€product€needs€and€channel€preferences.€We€continue€to streamline€and€optimize€our€supply€chain€network€and€systems€and€cannot€be€assured€of€our€ability€to€increase€the€productivity and€efficiency€of€our€overall€supply€chain€network€to€desired€levels.€If€we€fail€to€effectively€utilize€our€existing€supply€chain€or if€our€investments€in€our€supply€chain€do€not€provide€the€anticipated€benefits,€we€could€experience€sub-optimal€inventory€levels or€increases€in€our€costs,€which€could€adversely€affect€our€business,€financial€condition,€results€of€operations€and€cash€flows. We€are€dependent€on€our€suppliers€to€supply€us€with€products€that€comply€with€safety€and€quality€standards€at competitive€prices. We€are€dependent€on€our€vendors€continuing€to€supply€us€quality€products€on€terms€that€are€favorable€to€us.€If€our merchandise€offerings€do€not€meet€our€customers(cid:129)€expectations€regarding€safety€and€quality,€we€could€experience€lost€sales, increased€costs€and€exposure€to€legal€and€reputational€risk.€All€of€our€suppliers€must€comply€with€applicable€product€safety laws,€and€we€are€dependent€on€them€to€ensure€that€the€products€we€buy€comply€with€all€safety€and€quality€standards.€Events that€give€rise€to€actual,€potential€or€perceived€product€safety€concerns€could€expose€us€to€government€enforcement€action€and/ or€private€litigation€and€result€in€costly€product€recalls€and€other€liabilities.€To€the€extent€our€suppliers€are€subject€to€additional government€regulation€of€their€product€design€and/or€manufacturing€processes,€the€cost€of€the€merchandise€we€purchase€may rise.€In€addition,€negative€customer€perceptions€regarding€the€safety€or€quality€of€the€products€we€sell€could€cause€our customers€to€seek€alternative€sources€for€their€needs,€resulting€in€lost€sales.€In€those€circumstances,€it€may€be€difficult€and costly€for€us€to€regain€the€confidence€of€our€customers. We€depend€on€the€services€of€many€qualified€executives€and€other€Team€Members,€whom€we€may€not€be€able€to€attract, develop€and€retain.€ Our€success€depends€to€a€significant€extent€on€the€continued€services€and€experience€of€our€executives€and€other€Team Members.€We€may€not€be€able€to€retain€our€current€executives€and€other€key€Team€Members€or€attract€and€retain€additional qualified€executives€and€Team€Members€who€may€be€needed€in€the€future.€We€must€also€continue€to€motivate€employees€and keep€them€focused€on€our€strategies€and€goals.€Our€ability€to€maintain€an€adequate€number€of€executive€and€other€qualified Team€Members€is€highly€dependent€on€an€attractive€and€competitive€compensation€and€benefits€package.€In€addition,€less€than one€percent€of€our€team€members€are€represented€by€unions.€If€these€team€members€were€to€engage€in€a€strike,€work€stoppage, or€other€slowdown,€or€if€the€terms€and€conditions€in€labor€agreements€were€renegotiated,€we€could€experience€a€disruption€in our€operations€and€higher€ongoing€labor€costs.€If€we€fail€or€are€unable€to€maintain€competitive€compensation,€our€customer service€and€execution€levels€could€suffer€by€reason€of€a€declining€quality€of€our€workforce,€which€could€adversely€affect€our business,€financial€condition,€results€of€operations€and€cash€flows.€ The€market€price€of€our€common€stock€may€be€volatile€and€could€expose€us€to€securities€class€action€litigation. The€stock€market€and€the€price€of€our€common€stock€may€be€subject€to€wide€fluctuations€based€upon€general€economic€and market€conditions.€Downturns€in€the€stock€market€may€cause€the€price€of€our€common€stock€to€decline.€The€market€price€of€our stock€may€also€be€affected€by€our€ability€to€meet€analysts(cid:129)€expectations.€Failure€to€meet€such€expectations,€even€slightly,€could have€an€adverse€effect€on€the€price€of€our€common€stock.€In€the€past,€following€periods€of€volatility€in€the€market€price€of€a company(cid:129)s€securities,€securities€class€action€litigation€has€often€been€instituted€against€such€a€company.€If€similar€litigation were€instituted€against€us,€it€could€result€in€substantial€costs€and€a€diversion€of€our€attention€and€resources,€which€could€have€an adverse€effect€on€our€business. 9 Our€level€of€indebtedness,€a€downgrade€in€our€credit€ratings€or€a€deterioration€in€global€credit€markets€could€limit€the cash€flow€available€for€operations€and€could€adversely€affect€our€ability€to€service€our€debt€or€obtain€additional financing.€ Our€level€of€indebtedness€could€restrict€our€operations€and€make€it€more€difficult€for€us€to€satisfy€our€debt€obligations.€For example,€our€level€of€indebtedness€could,€among€other€things: … … … affect€our€liquidity€by€limiting€our€ability€to€obtain€additional€financing€for€working€capital; limit€our€ability€to€obtain€financing€for€capital€expenditures€and€acquisitions€or€make€any€available€financing€more costly; require€us€to€dedicate€all€or€a€substantial€portion€of€our€cash€flow€to€service€our€debt,€which€would€reduce€funds available€for€other€business€purposes,€such€as€capital€expenditures,€dividends€or€acquisitions; limit€our€flexibility€in€planning€for€or€reacting€to€changes€in€the€markets€in€which€we€compete; place€us€at€a€competitive€disadvantage€relative€to€our€competitors€who€may€have€less€indebtedness; render€us€more€vulnerable€to€general€adverse€economic€and€industry€conditions;€and … … … … make€it€more€difficult€for€us€to€satisfy€our€financial€obligations. The€indenture€governing€our€notes€and€credit€agreement€governing€our€credit€facilities€contain€financial€and€other restrictive€covenants.€Our€failure€to€comply€with€those€covenants€could€result€in€an€event€of€default€which,€if€not€cured€or waived,€could€result€in€the€acceleration€of€all€of€our€debt,€including€such€notes. In€addition,€our€overall€credit€rating€may€be€negatively€impacted€by€deteriorating€and€uncertain€credit€markets€or€other factors€that€may€or€may€not€be€within€our€control.€The€interest€rates€on€our€publicly€issued€debt€and€revolving€credit€facility€are linked€directly€to€our€credit€ratings.€Accordingly,€any€negative€impact€on€our€credit€ratings€would€likely€result€in€higher€interest rates€and€interest€expense€on€any€borrowings€under€our€revolving€credit€facility€or€future€issuances€of€public€debt€and€less favorable€terms€on€other€operating€and€financing€arrangements.€In€addition,€it€could€reduce€the€attractiveness€of€certain€vendor payment€programs€whereby€third-party€institutions€finance€arrangements€to€our€vendors€based€on€our€credit€rating,€which€could result€in€increased€working€capital€requirements.€ Conditions€and€events€in€the€global€credit€market€could€have€a€material€adverse€effect€on€our€access€to€short€and€long-term borrowings€to€finance€our€operations€and€the€terms€and€cost€of€that€debt.€It€is€possible€that€one€or€more€of€the€banks€that provide€us€with€financing€under€our€revolving€credit€facility€may€fail€to€honor€the€terms€of€our€existing€credit€facility€or€be financially€unable€to€provide€the€unused€credit€as€a€result€of€significant€deterioration€in€such€bank(cid:129)s€financial€condition.€An inability€to€obtain€sufficient€financing€at€cost-effective€rates€could€have€a€material€adverse€effect€on€our€business,€financial condition,€results€of€operations€and€cash€flows.€ Deterioration€of€general€macro-economic€conditions,€including€unemployment,€inflation€or€deflation,€consumer€debt levels,€high€fuel€and€energy€costs,€could€have€a€negative€impact€on€our€business,€financial€condition,€results€of€operations and€cash€flows€due€to€impacts€on€our€suppliers,€customers€and€operating€costs.€ Our€business€depends€on€developing€and€maintaining€close€relationships€with€our€suppliers€and€on€our€suppliers(cid:129)€ability and€willingness€to€sell€quality€products€to€us€at€favorable€prices€and€terms.€Many€factors€outside€our€control€may€harm€these relationships€and€the€ability€or€willingness€of€these€suppliers€to€sell€us€products€on€favorable€terms.€Such€factors€include€a general€decline€in€the€economy€and€economic€conditions€and€prolonged€recessionary€conditions.€These€events€could€negatively affect€our€suppliers(cid:129)€operations€and€make€it€difficult€for€them€to€obtain€the€credit€lines€or€loans€necessary€to€finance€their operations€in€the€short-term€or€long-term€and€meet€our€product€requirements.€Financial€or€operational€difficulties€that€some€of our€suppliers€may€face€could€also€increase€the€cost€of€the€products€we€purchase€from€them€or€our€ability€to€source€product€from them.€We€might€not€be€able€to€pass€our€increased€costs€onto€our€customers.€If€our€suppliers€fail€to€develop€new€products€we may€not€be€able€to€meet€the€demands€of€our€customers€and€our€results€of€operations€could€be€negatively€affected. In€addition,€the€trend€towards€consolidation€among€automotive€parts€suppliers€as€well€as€the€off-shoring€of€manufacturing capacity€to€foreign€countries€may€disrupt€or€end€our€relationship€with€some€suppliers,€and€could€lead€to€less€competition€and result€in€higher€prices.€We€could€also€be€negatively€impacted€by€suppliers€who€might€experience€bankruptcies,€work€stoppages, labor€strikes,€changes€in€foreign€or€domestic€trade€policies,€or€other€interruptions€to€or€difficulties€in€the€manufacture€or€supply of€the€products€we€purchase€from€them. 10 Deterioration€in€macro-economic€conditions€or€an€increase€in€fuel€costs€may€have€a€negative€impact€on€our€customers(cid:129)€net worth,€financial€resources€and€disposable€income.€This€impact€could€reduce€our€customers(cid:129)€willingness€or€ability€to€pay€for accessories,€maintenance€or€repair€for€their€vehicles,€which€results€in€lower€sales€in€our€stores.€An€increase€in€fuel€costs€may also€reduce€the€overall€number€of€miles€driven€by€our€customers€resulting€in€fewer€parts€failures€and€a€reduced€need€for elective€maintenance. Rising€energy€prices€could€directly€impact€our€operating€and€product€costs,€including€our€store,€supply€chain,€Professional delivery,€utility€and€product€acquisition€costs. Because€we€are€involved€in€litigation€from€time€to€time,€and€are€subject€to€numerous€laws€and€governmental regulations,€we€could€incur€substantial€judgments,€fines,€legal€fees€and€other€costs. We€are€sometimes€the€subject€of€complaints€or€litigation,€which€may€include€class€action€litigation€from€customers,€Team Members€or€others€for€various€actions.€From€time€to€time,€we€are€involved€in€litigation€involving€claims€related€to,€among other€things,€breach€of€contract,€tortious€conduct,€employment,€labor€discrimination,€breach€of€laws€or€regulations€(including The€Americans€With€Disabilities€Act),€payment€of€wages,€exposure€to€asbestos€or€potentially€hazardous€product,€real€estate€and product€defects.€The€damages€sought€against€us€in€some€of€these€litigation€proceedings€are€substantial.€Although€we€maintain liability€insurance€for€some€litigation€claims,€if€one€or€more€of€the€claims€were€to€greatly€exceed€our€insurance€coverage€limits or€if€our€insurance€policies€do€not€cover€a€claim,€this€could€have€a€material€adverse€effect€on€our€business,€financial€condition, results€of€operations€and€cash€flows. We€are€subject€to€numerous€federal,€state€and€local€laws€and€governmental€regulations€relating€to,€among€other€things, environmental€protection,€product€quality€and€safety€standards,€building€and€zoning€requirements,€labor€and€employment, discrimination€and€income€taxes.€Compliance€with€existing€and€future€laws€and€regulations€could€increase€the€cost€of€doing business€and€adversely€affect€our€results€of€operations.€If€we€fail€to€comply€with€existing€or€future€laws€or€regulations,€we€may be€subject€to€governmental€or€judicial€fines€or€sanctions,€while€incurring€substantial€legal€fees€and€costs,€as€well€as€reputational risk.€In€addition,€our€capital€and€operating€expenses€could€increase€due€to€remediation€measures€that€may€be€required€if€we€are found€to€be€noncompliant€with€any€existing€or€future€laws€or€regulations. We€work€diligently€to€maintain€the€privacy€and€security€of€our€customer,€supplier,€Team€Member€and€business information€and€the€functioning€of€our€computer€systems,€website€and€other€on-line€offerings.€In€the€event€of€a€security breach€or€other€cyber€security€incident,€we€could€experience€adverse€operational€effects€or€interruptions€and/or€become subject€to€legal€or€regulatory€proceedings,€any€of€which€could€lead€to€damage€to€our€reputation€in€the€marketplace€and substantial€costs. The€nature€of€our€business€requires€us€to€receive,€retain€and€transmit€certain€personally€identifiable€information€about€our customers,€suppliers€and€Team€Members,€some€of€which€is€entrusted€to€third-party€service€providers.€While€we€have€taken€and continue€to€undertake€significant€steps€to€protect€such€personally€identifiable€information€and€other€confidential€information and€to€protect€the€functioning€of€our€computer€systems,€website€and€other€online€offerings,€a€compromise€of€our€data€security systems€or€those€of€businesses€we€interact€with€could€result€in€information€related€to€our€customers,€suppliers,€Team€Members or€business€being€obtained€by€unauthorized€persons€or€adverse€operational€effects€or€interruptions,€which€could€have€a€material adverse€effect€on€our€business,€financial€condition,€results€of€operations€and€cash€flows.€We€develop,€maintain€and€update processes€and€systems€in€an€effort€to€try€to€prevent€this€from€occurring,€but€these€actions€are€costly€and€require€constant, ongoing€attention€as€technologies€change,€privacy€and€information€security€regulations€change,€and€efforts€to€overcome security€measures€by€bad€actors€continue€to€become€ever€more€sophisticated. Despite€our€efforts,€our€security€measures€may€be€breached€in€the€future€due€to€a€cyber-attack,€computer€malware€and/or viruses,€exploitation€of€hardware€and€software€vulnerabilities,€Team€Member€error,€malfeasance,€fraudulent€inducement (including€so-called€ƒsocial€engineering„€attacks€and€ƒphishing„€scams)€or€other€acts.€Unauthorized€parties€may€in€the€future obtain€access€to€our€data€or€the€data€of€our€customers,€suppliers€or€Team€Members€or€may€otherwise€cause€damage€to€or interfere€with€our€equipment€and/or€network.€Any€breach,€damage€to€or€interference€with€our€equipment€or€network,€or unauthorized€access€in€the€future€could€result€in€significant€legal€and€financial€exposure€and€damage€to€our€reputation€that could€potentially€have€an€adverse€effect€on€our€business.€While€we€also€seek€to€obtain€assurances€that€others€we€interact€with will€protect€confidential€information,€there€is€always€the€risk€that€the€confidentiality€or€accessibility€of€data€held€or€utilized€by others€may€be€compromised.€If€a€compromise€of€our€data€security€or€function€of€our€computer€systems€or€website€were€to occur,€it€could€have€a€material€adverse€effect€on€our€operating€results€and€financial€condition€and€possibly€subject€us€to additional€legal,€regulatory€and€operating€costs€and€damage€our€reputation€in€the€marketplace. 11 Business€interruptions€may€negatively€impact€our€store€hours,€operability€of€our€computer€systems€and€the€availability and€cost€of€merchandise,€which€may€adversely€impact€our€sales€and€profitability. €Hurricanes,€tornadoes,€earthquakes€or€other€natural€disasters,€war€or€acts€of€terrorism,€or€the€threat€of€any€of€these calamities€or€others,€may€have€a€negative€impact€on€our€ability€to€obtain€merchandise€to€sell€in€our€stores,€result€in€certain€of our€stores€being€closed€for€an€extended€period€of€time,€negatively€affect€the€lives€of€our€customers€or€Team€Members,€or otherwise€negatively€impact€our€operations.€Some€of€our€merchandise€is€imported€from€other€countries.€If€imported€goods become€difficult€or€impossible€to€import€into€the€United€States€due€to€business€interruption€(including€regulation€of€exporting or€importing),€and€if€we€cannot€obtain€such€merchandise€from€other€sources€at€similar€costs€and€without€an€adverse€delay,€our sales€and€profit€margins€may€be€negatively€affected. In€the€event€that€commercial€transportation,€including€the€global€shipping€industry,€is€curtailed€or€substantially€delayed,€our business€may€be€adversely€impacted€as€we€may€have€difficulty€receiving€merchandise€from€our€suppliers€and/or€transporting€it to€our€stores. Terrorist€attacks,€war€in€the€Middle€East,€or€insurrection€involving€any€oil€producing€country€could€result€in€an€abrupt increase€in€the€price€of€crude€oil,€gasoline€and€diesel€fuel.€Such€price€increases€would€increase€the€cost€of€doing€business€for€us and€our€suppliers,€and€also€negatively€impact€our€customers(cid:129)€disposable€income,€causing€an€adverse€impact€on€our€business, sales,€profit€margins€and€results€of€operations. We€rely€extensively€on€our€computer€systems€and€the€systems€of€our€business€partners€to€manage€inventory,€process transactions€and€report€results.€These€systems€are€subject€to€damage€or€interruption€from€power€outages,€telecommunication failures,€computer€viruses,€security€breaches€and€catastrophic€events€or€occasional€system€breakdowns€related€to€ordinary€use or€wear€and€tear.€If€our€computer€systems€or€those€of€our€business€partners€fail€we€may€experience€loss€of€critical€data€and interruptions€or€delays€in€our€ability€to€process€transactions€and€manage€inventory.€Any€such€failure,€including€plans€for disaster€recovery,€if€widespread€or€extended,€could€adversely€affect€the€operation€of€our€business€and€our€results€of€operations. We€may€be€affected€by€global€climate€change€or€by€legal,€regulatory,€or€market€responses€to€such€change. The€concern€over€climate€change€has€led€to€legislative€and€regulatory€initiatives€aimed€at€reducing€greenhouse€gas emissions€(ƒGHG„).€For€example,€proposals€that€would€impose€mandatory€requirements€related€to€GHG€continue€to€be considered€by€policy€makers€in€the€United€States€and€elsewhere.€Laws€enacted€to€reduce€GHG€that€directly€or€indirectly€affect our€suppliers€(through€an€increase€in€their€cost€of€production)€or€our€business€(through€an€impact€on€our€inventory€availability, cost€of€sales,€operations€or€demand€for€the€products€we€sell)€could€adversely€affect€our€business,€financial€condition,€results€of operations€and€cash€flows.€Changes€in€automotive€technology€and€compliance€with€any€new€or€more€stringent€laws€or regulations,€or€stricter€interpretations€of€existing€laws,€could€require€additional€expenditures€by€us€or€our€suppliers€all€of€which could€adversely€impact€the€demand€for€our€products€and€our€business,€financial€condition,€results€of€operations€or€cash€flows. Item€1B.€Unresolved€Staff€Comments.€ None. Item€2.€Properties.€ The€following€table€summarizes€the€location,€ownership€status€and€total€square€footage€of€space€utilized€for€distribution centers,€principal€corporate€offices€and€retail€stores€and€branches€at€the€end€of€2017:€ Distribution€Centers Store€Support€Centers: Roanoke,€VA Raleigh,€NC Stores€and€branches Location 54€locations€in€34€states€and€4 Canadian€provinces Square€Footage€(in thousands) Leased Owned 7,408 4,589 Roanoke,€VA Raleigh,€NC 5,183€stores€in€49€states,€2€U.S. territories€and€9€Canadian€provinces 328 251 ‡ ‡ 36,042 6,231 12 Item€3.€Legal€Proceedings.€ Refer€to€discussion€in€Note€14,€Contingencies,€of€the€Notes€to€the€Consolidated€Financial€Statements€included€herein€for information€relating€to€legal€proceedings. Item€4.€Mine€Safety€Disclosures.€ Not€applicable. 13 PART€II Item€5. Market€for€Registrant(cid:129)s€Common€Equity,€Related€Stockholder€Matters€and€Issuer€Purchases€of€Equity€Securities. Our€common€stock€is€listed€on€the€New€York€Stock€Exchange,€or€NYSE,€under€the€symbol€ƒAAP„.€The€table€below€sets forth€the€high€and€low€sale€prices€per€share€for€our€common€stock,€as€reported€by€the€NYSE,€for€the€periods€indicated:€ First€Quarter Second€Quarter Third€Quarter Fourth€Quarter Year€Ended December€30,€2017 High Low December€31,€2016 High Low $ $ $ $ 177.50 $ 151.72 $ 115.40 $ 107.79 $ 140.15 99.13 82.21 78.81 $ $ $ $ 165.99 $ 166.32 $ 172.87 $ 177.83 $ 131.59 132.98 145.15 134.08 At€February€16,€2018,€there€were€378€holders€of€record€of€our€common€stock,€which€does€not€include€the€number€of beneficial€owners€whose€shares€were€represented€by€security€position€listings. Our€Board€of€Directors€has€declared€a€$0.06€per€share€quarterly€cash€dividend€since€2006.€Any€payments€of€dividends€in the€future€will€be€at€the€discretion€of€our€Board€of€Directors€and€will€depend€upon€our€results€of€operations,€cash€flows,€capital requirements€and€other€factors€deemed€relevant€by€our€Board€of€Directors.€On€February€6,€2018,€our€Board€of€Directors declared€a€quarterly€dividend€of€$0.06€per€share€to€be€paid€on€April€6,€2018€to€all€common€stockholders€of€record€as€of March€23,€2018. The€following€table€sets€forth€information€with€respect€to€repurchases€of€our€common€stock€for€the€fourth€quarter€ended December€30,€2017: Period October€8,€2017€to€November€4,€2017 November€5,€2017€to€December€2,€2017 December€3,€2017€to€December€30,€2017 Total € Total€Number of€Shares Purchased€(1) 13,601 12,972 7,584 34,157 Average Price€Paid per€Share€(1) 81.85 $ 95.91 100.31 91.29 $ Total€Number€of Shares€Purchased€as Part€of€Publicly Announced€Plans€or Programs€(2) Maximum€Dollar Value€that€May€Yet Be€Purchased Under€the€Plans€or Programs€(2) (In€thousands) ‡ $ ‡ ‡ ‡ $ 415,092 415,092 415,092 415,092 (1) The€aggregate€cost€of€repurchasing€shares€in€connection€with€the€net€settlement€of€shares€issued€as€a€result€of€the€vesting of€restricted€stock€units€was€$3.1€million€during€the€fourth€quarter€ended€December€30,€2017.€ (2) Our€stock€repurchase€program€authorizing€the€repurchase€of€up€to€$500.0€million€in€common€stock€was€authorized€by our€Board€of€Directors€and€publicly€announced€on€May€14,€2012.€ 14 Stock€Price€Performance The€following€graph€shows€a€comparison€of€the€cumulative€total€return€on€our€common€stock,€the€Standard€&€Poor(cid:129)s€500 Index€and€the€Standard€&€Poor(cid:129)s€Retail€Index.€The€graph€assumes€that€the€value€of€an€investment€in€our€common€stock€and€in each€such€index€was€$100€on€December€29,€2012,€and€that€any€dividends€have€been€reinvested.€The€comparison€in€the€graph below€is€based€solely€on€historical€data€and€is€not€intended€to€forecast€the€possible€future€performance€of€our€common€stock.€ COMPARISON€OF€CUMULATIVE€TOTAL€RETURN€AMONG ADVANCE€AUTO€PARTS,€INC.,€S&P€500€INDEX AND€S&P€RETAIL€INDEX $300.00 $250.00 $200.00 $150.00 $100.00 $50.00 $0.00 2 9 / 1 2 / 2 1 3 8 / 1 2 / 2 1 5 3 / 1 1 / 0 0 6 2 / 1 1 / 0 0 6 1 / 1 2 / 3 1 7 0 / 1 2 / 3 1 Advance Auto Parts S&P 500 Index S&P Retail Index Company/Index Advance€Auto€Parts S&P€500€Index S&P€Retail€Index December€29, 2012 December€28, 2013 January€3, 2015 January€2, 2016 December€31, 2016 December€30, 2017 $ $ $ 100.00 100.00 100.00 $ $ $ 154.04 134.11 146.08 $ $ $ 222.51 153.03 160.40 $ $ $ 211.44 155.18 200.69 $ $ $ 237.85 173.74 210.00 $ $ $ 140.40 211.67 271.10 15 Item€6. Selected€Consolidated€Financial€Data. The€following€table€sets€forth€our€selected€historical€consolidated€statements€of€operations,€balance€sheets€and€other operating€data.€Included€in€this€table€are€key€metrics€and€operating€results€used€to€measure€our€financial€progress.€The€selected historical€consolidated€financial€and€other€data€(excluding€the€Selected€Store€Data€and€Performance€Measures)€as€of December€30,€2017€and€December€31,€2016€and€for€the€three€years€ended€December€30,€2017,€December€31,€2016€and January€2,€2016€have€been€derived€from€our€audited€consolidated€financial€statements€and€the€related€notes€included€elsewhere in€this€report.€The€historical€consolidated€financial€and€other€data€as€of€January€2,€2016,€January€3,€2015€and€December€28, 2013€and€for€the€years€ended€January€3,€2015€and€December€28,€2013€have€been€derived€from€our€audited€consolidated financial€statements€and€the€related€notes€that€have€not€been€included€in€this€report.€You€should€read€this€data€along€with ƒManagement(cid:129)s€Discussion€and€Analysis€of€Financial€Condition€and€Results€of€Operations„€and€our€consolidated€financial statements€and€the€related€notes€included€elsewhere€in€this€report.€ (inƒthousands,ƒexceptƒperƒshareƒdata, storeƒdataƒandƒratios) Statement€of€Operations€Data: Net€sales Gross€profit Operating€income Net€income€(3) Basic€earnings€per€common€share Diluted€earnings€per€common€share Cash€dividends€declared€per€basic€share Balance€Sheet€and€Other€Financial€Data: 2017 2016 Year€(1) 2015 2014€(2) 2013 $ 9,373,784 $ 9,567,679 $ 9,737,018 $ 9,843,861 $ 6,493,814 $ 4,085,049 $ 4,255,915 $ 4,422,772 $ 4,453,613 $ 3,252,146 $ $ $ $ $ 570,212 475,505 6.44 6.42 0.24 $ $ $ $ $ 787,598 459,622 6.22 6.20 0.24 $ $ $ $ $ 825,780 473,398 6.45 6.40 0.24 $ $ $ $ $ 851,710 493,825 6.75 6.71 0.24 $ $ $ $ $ 660,318 391,758 5.36 5.32 0.24 Total€assets Total€debt $ 8,482,301 $ 8,315,033 $ 8,127,701 $ 7,954,392 $ 5,556,054 $ 1,044,677 $ 1,043,255 $ 1,206,895 $ 1,628,927 $ 1,044,864 Total€stockholders(cid:129)€equity $ 3,415,196 $ 2,916,192 $ 2,460,648 $ 2,002,912 $ 1,516,205 Selected€Store€Data€and€Performance Measures: Comparable€store€sales€growth€(4) Number€of€stores,€beginning€of€year New€stores€(5) Closed€stores Number€of€stores,€end€of€year (2.0%) 5,189 60 (66) 5,183 (1.4%) 0.0% 2.0% (1.5%) 5,293 78 (182) 5,189 5,372 121 (200) 5,293 4,049 1,487 (164) 5,372 3,794 296 (41) 4,049 (1) All€fiscal€years€presented€are€52€weeks,€with€the€exception€of€2014,€which€consisted€of€53€weeks.€The€impact€of€week€53 included€in€sales,€gross€profit€and€selling,€general€and€administrative€expenses€for€2014€was€$150.4€million,€$67.8€million€and $46.7€million. (2) We€have€included€the€financial€results€of€GPI€in€our€consolidated€financial€statements€commencing€with€its€acquisition€in 2014. (3) Net€income€for€2017€includes€a€$143.8€million€net€benefit€related€to€the€Tax€Cuts€and€Jobs€Act€that€the€President€signed€into law€on€December€22,€2017.€Refer€to€discussion€in€Note€12,€IncomeƒTaxes,€of€the€Notes€to€the€Consolidated€Financial Statements€included€herein€for€further€information. (4) Comparable€store€sales€include€net€sales€from€our€stores,€branches€and€e-commerce€websites.€Sales€to€independently€owned Carquest€branded€stores€are€excluded€from€our€comparable€store€sales.€The€change€in€store€sales€is€calculated€based€on€the change€in€net€sales€starting€once€a€store€or€branch€has€been€open€for€13€complete€accounting€periods€(each€period€represents four€weeks).€Relocations€are€included€in€comparable€store€sales€from€the€original€date€of€opening.€Acquired€stores€are included€in€our€comparable€store€sales€once€the€stores€have€completed€13€complete€accounting€periods€following€the acquisition€date€(approximately€one€year).€Comparable€store€sales€growth€for€2014€and€2015€excludes€sales€from€the€53rd week€of€2014. Includes€1,336€stores€resulting€from€our€acquisition€of€GPI€during€2014€and€124€stores€resulting€from€our€acquisition€of B.W.P.€Distributors,€Inc.€during€2013. (5) 16 Item€7.€Management(cid:129)s€Discussion€and€Analysis€of€Financial€Condition€and€Results€of€Operations. Theƒfollowingƒdiscussionƒandƒanalysisƒofƒfinancialƒconditionƒandƒresultsƒofƒoperationsƒshouldƒbeƒreadƒinƒconjunctionƒwith ourƒconsolidatedƒhistoricalƒfinancialƒstatementsƒandƒtheƒnotesƒtoƒthoseƒstatementsƒthatƒappearƒelsewhereƒinƒthisƒreport.ƒOur discussionƒcontainsƒforward-lookingƒstatementsƒbasedƒuponƒcurrentƒexpectationsƒthatƒinvolveƒrisksƒandƒuncertainties,ƒsuchƒas ourƒplans,ƒobjectives,ƒexpectationsƒandƒintentions.ƒActualƒresultsƒandƒtheƒtimingƒofƒeventsƒcouldƒdifferƒmateriallyƒfromƒthose anticipatedƒinƒtheseƒforward-lookingƒstatementsƒasƒaƒresultƒofƒaƒnumberƒofƒfactors,ƒincludingƒthoseƒsetƒforthƒunderƒtheƒsection entitledƒ€RiskƒFactors(cid:129)ƒelsewhereƒinƒthisƒreport. Management€Overview€ We€generated€diluted€earnings€per€share€(ƒdiluted€EPS„)€of€$6.42€during€2017€compared€to€$6.20€for€2016.€Comparable store€sales€were€down€2.0%€in€2017.€The€lower€than€expected€sales€performance€was€driven€by€the€following€factors: Short-term€disruptions€resulting€from€our€transformation€actions€taken€in€2017; … … Macroeconomic€pressures€on€the€automotive€aftermarket€industry;€and … Weather-related€impacts€in€our€Northeast,€Mid-Atlantic,€Midwest€and€North€Central€markets.€ The€softness€in€the€industry€over€the€last€year€resulted€from€higher€gas€prices€and€a€significantly€lower€number€of€new€cars sold€during€2008€and€2009€resulting€in€an€abnormal€trough€of€vehicles€of€that€age€and€their€typical€parts,€maintenance€items and€accessories€needs.€Our€analysis€shows€that€short-term€volatility€is€not€unusual€in€the€industry.€We€have€completed€a€number of€transformation€actions€in€2017,€including€the€restructuring€and€reduction€in€the€number€of€Advance€Auto€Parts€(ƒAAP„)€and Carquest€US€(ƒCQUS„)€store€regions,€implementation€of€improved€pricing€discipline€in€our€stores€and€reduction€in€inventory. While€we€believe€these€actions€are€needed€for€the€long€term,€there€were€some€short-term€disruption€impacts€during€the€third and€fourth€quarters€of€2017.€Despite€stronger€performance€in€our€Western€and€Southern€markets,€we€experienced€softness€in our€cooling€parts€and€chemicals€category€sales€across€many€of€our€other€markets€as€a€result€of€the€milder€summer€weather. Partially€offsetting€the€softness€in€our€AAP/CQUS€business€was€the€performance€of€certain€aspects€of€our€Professional€and Canadian€businesses,€which€grew€their€sales€during€the€year,€as€well€as€an€increased€demand€in€the€fourth€quarter€of€2017 resulting€from€more€favorable€winter€weather.€ Our€operating€profit€margin€reflects€deliberate€choices€to€invest€in€our€business€and€improve€productivity€over€the€long term€despite€the€sales€softness.€We€believe€these€investments€are€necessary€as€we€build€a€foundation€for€sustainable,€long-term performance€improvement.€ When€adjusted€for€the€following€non-operational€items,€our€adjusted€diluted€earnings€per€share€(ƒAdjusted€EPS„)€in€2017 was€$5.37€compared€to€$7.15€during€2016: GPI€integration€and€store€consolidation€costs GPI€amortization€of€acquired€intangible Transformation€expenses Other€income€adjustment Impact€of€the€Act,€net Year€Ended December€30,€ €2017 December€31,€ €2016 $ $ $ $ $ 0.22 $ $ 0.33 0.41 $ (0.07) $ (1.94) $ 0.61 0.34 ‡ ‡ ‡ Refer€to€€ReconciliationƒofƒNon-GAAPƒFinancialƒMeasures(cid:129)ƒfor€further€details€of€our€comparable€adjustments€and€the usefulness€of€such€measures€to€investors. Summary of 2017 Financial Results A€high-level€summary€of€our€financial€results€and€other€highlights€from€2017€includes: … Total€sales€during€2017€were€$9,373.8€million,€a€decrease€of€2.0%€as€compared€to€2016,€which€primarily€related€to€a comparable€store€sales€decline€of€2.0%. 17 … … Operating€income€for€2017€was€$570.2€million,€a€decrease€of€$217.4€million€from€2016.€As€a€percentage€of€total€sales, operating€income€was€6.1%,€a€decrease€of€215€basis€points€as€compared€to€2016,€due€to€a€decrease€in€comparable€store sales€and€an€increase€in€selling,€general€and€administrative€expenses€(ƒSG&A„).€ Inventories€as€of€December€30,€2017€decreased€$157.4€million,€or€3.6%,€from€inventories€as€of€December€31,€2016. This€decrease€was€driven€by€our€inventory€optimization€efforts. … We€generated€operating€cash€flow€of€$600.8€million€during€2017,€an€increase€of€14.8%€compared€to€2016, … a to in € € decrease € € inventory € due focus € € Provision€for€income€taxes€decreased€$234.5€million€to€$44.8€million€in€2017€as€compared€to€$279.2€million€in€2016 primarily€due€to€a€net€$143.8€million€of€one-time€benefits€associated€with€the€Tax€Cuts€and€Jobs€Act€(the€ƒAct„)€that was€signed€into€law€on€December€22,€2017. optimization inventory € € generated € across levels the € the by on € € € € primarily € Company. € Refer€to€€ResultsƒofƒOperations(cid:129)ƒand€€LiquidityƒandƒCapitalƒResources(cid:129)€for€further€details€of€our€income€statement€and cash€flow€results.€ Business Update We€continue€to€make€progress€on€the€various€elements€of€our€strategic€business€plan,€which€is€focused€on€improving€the customer€experience€and€driving€consistent€execution€for€both€Professional€and€DIY€customers.€To€achieve€these improvements,€we€have€undertaken€planned€transformation€actions€to€help€build€a€foundation€for€long-term€success€across€the entire€company.€These€transformation€actions€initiated€during€2017€include:€ … … … … … … … A€continued€roll-out€of€our€common€catalog€across€all€four€banners€-€Advance€Auto€Parts,€Carquest,€Worldpac€and Autopart€International.€This€expanded€catalog€leverages€our€enterprise-wide€assortment€to€all€of€our€customers€and will€be€fully€enabled€through€each€banner(cid:129)s€point-of-sale€system.€This€capability€also€provides€the€customer€more flexibility€in€originating€orders€across€banners. Development€of€a€demand-driven€assortment,€leveraging€purchase€history€and€look-ups€from€the€common€catalog, versus€our€existing€push-down€supply€approach.€This€technology€is€a€first€step€in€moving€from€a€supply-driven€to€a demand-driven€assortment. Progression€in€the€early€development€of€a€more€efficient€end-to-end€supply€chain€to€deliver€our€broad€assortment. Expanded€use€of€Telematics,€a€fleet€management€and€tracking€platform,€that€is€critical€for€real-time€fleet€management and€accurate€measurement€and€management€of€customer€order€and€delivery€commitments. Creation€of€new€DIY€omni-channel€capabilities€to€reach€our€customers€in€the€manner€that€is€most€desirable€for€them, including€the€launch€of€our€enhanced€website€during€the€third€quarter€and€eventual€launch€of€a€mobile€app. Entered€into€a€strategic€partnership€with€Interstate€Batteries€where€Advance€Auto€Parts€and€Carquest€stores€will€be€the only€retailer€in€the€nation€to€carry€a€complete€range€of€Interstate€Batteries€in€store€and€online. Acceleration€of€Worldpac€branch€openings€to€drive€Professional€growth€while€investing€in€online€and€digital€to€drive DIY€improvements. Industry Update Operating€within€the€automotive€aftermarket€industry,€we€are€influenced€by€a€number€of€general€macroeconomic€factors, many€of€which€are€similar€to€those€affecting€the€overall€retail€industry.€These€factors€include,€but€are€not€limited€to: Fuel€costs Unemployment€rates Consumer€confidence Competition Reduction€in€new€car€sales€in€2008€and€2009 … … … … … … Miles€driven … … … … Vehicle€manufacturer€warranties Increasing€number€of€vehicles€11€years€and€older Economic€and€political€uncertainty Deferral€of€elective€automotive€maintenance€and€improvements€in€new€car€quality While€these€factors€tend€to€fluctuate,€we€remain€confident€in€the€long-term€growth€prospects€for€the€automotive€parts industry. 18 Results€of€Operations€ The€following€table€sets€forth€certain€of€our€operating€data€expressed€as€a€percentage€of€net€sales€for€the€periods€indicated.€ Year€Ended January€2,€2016 2017€vs. 2016 December€30,€2017 December€31,€2016 $€Change $ 9,373.8 100.0% $ 9,567.7 100.0% $ 9,737.0 100.0% $ (193.9) (23.0) 55.5 (170.9) 44.5 46.5 36.3 (217.4) 8.2 1.1 (0.6) (2.3) 0.1 (234.5) 2.9 15.9 4.8% $ 56.4 43.6 37.5 6.1 (0.6) 0.1 0.5 5.1% $ 54.6 45.4 36.9 8.5 (0.7) (0.1) 2.9 4.9% $ 5,314.2 4,422.8 3,597.0 825.8 (65.4) (7.5) 279.5 473.4 5,288.7 4,085.1 3,514.8 570.3 (58.8) 8.8 44.8 475.6 5,311.8 4,255.9 3,468.3 787.6 (59.9) 11.1 279.2 459.6 $ Basis Points 2016€vs. 2015 $€Change ‡ $ (169.3) (2.5) 90 (166.9) (90) (128.7) 125 (38.2) (215) 5.5 ‡ 18.6 (2) (244) (0.3) $ (13.8) 27 Basis Points ‡ 94 (94) (69) (25) 5 19 5 (6) (inƒmillions) Net€sales Cost€of€sales Gross€profit SG&A Operating€income Interest€expense Other€income,€net Provision€for€income€taxes Net€income 2017€Compared€to€2016 Net Sales Net€sales€for€2017€were€$9,373.8€million,€a€decline€of€$193.9€million,€or€2.0%,€from€net€sales€in€2016.€This€decrease€was primarily€due€to€our€comparable€store€sales€decline€of€2.0%.€During€2017,€we€consolidated€16€stores€and€closed€50€stores, which€was€partially€offset€by€the€opening€of€60€new€stores.€Our€decline€in€comparable€store€sales€was€driven€by€a€decrease€in overall€transactions€in€2017€and€mild€summer€weather€conditions,€which€was€partially€offset€by€an€increase€in€the€average transaction€value€and€favorable€weather€in€the€fourth€quarter€of€the€year€that€drove€a€stronger€demand€across€the€business. Gross Profit Gross€profit€for€2017€was€$4,085.0€million,€or€43.6%€of€net€sales,€as€compared€to€$4,255.9€million,€or€44.5%€of€net€sales, in€2016,€a€decrease€of€90€basis€points.€The€decrease€in€gross€profit€as€a€percentage€of€net€sales€was€primarily€the€result€of higher€supply€chain€costs€driven€by€unfavorable€commodity€prices€and€the€negative€impact€related€to€the€continued€inventory optimization€efforts,€partially€offset€by€continued€material€cost€improvement. SG&A SG&A€for€2017€were€$3,514.8€million,€or€37.5%€of€net€sales,€as€compared€to€$3,468.3€million,€or€36.3%€of€net€sales,€for 2016,€an€increase€of€125€basis€points.€This€increase€as€a€percentage€of€net€sales€was€primarily€due€to€costs€incurred€in connection€with€the€continued€transformation€plan€and€higher€customer€facing€costs€including€store€labor€and€incentives€and higher€medical€costs.€Partially€offsetting€these€costs€were€lower€GPI€integration,€store€closure€and€consolidation€costs€and expenses€in€2017€compared€to€the€prior€year€and€continued€focus€on€expense€management€throughout€the€year.€ Interest Expense Interest€expense€for€2017€was€$58.8€million,€as€compared€to€$59.9€million€in€2016.€The€decrease€in€interest€expense€was due€to€lower€outstanding€balances€of€our€credit€facilities€during€2017,€as€compared€to€2016. Income Taxes Income€tax€expense€for€2017€was€$44.8€million,€as€compared€to€$279.2€million€for€2016.€Our€effective€income€tax€rate was€8.6%€and€37.8%€for€2017€and€2016.€The€decrease€in€our€effective€tax€rate€for€2017€compared€to€2016€is€primarily€due€to€a net€$143.8€million€benefit€related€to€the€Act.€Refer€to€discussion€in€Note€12,€IncomeƒTaxes,€of€the€Notes€to€the€Consolidated Financial€Statements€included€herein€for€further€information€relating€to€impact€of€the€Act€in€2017. 19 2016€Compared€to€2015 Net Sales Net€sales€for€2016€were€$9,567.7€million,€a€decline€of€$169.3€million,€or€1.7%,€over€net€sales€for€2015.€This€decrease€was primarily€due€to€our€comparable€store€sales€decline€of€1.4%€and€the€portion€of€sales€that€did€not€transfer€from€stores€that€were consolidated.€During€2016,€we€consolidated€159€stores€and€closed€23€stores,€which€was€partially€offset€by€the€opening€of€78 new€stores.€Our€decline€in€comparable€store€sales€was€driven€by€a€decline€in€overall€transactions,€partially€offset€by€an€increase in€the€average€transaction€value.€While€the€number€of€comparable€store€transactions€decreased€from€the€comparable€period€in all€four€quarters€of€2016,€we€saw€improving€trends€in€the€second€half€of€the€year. Our€comparable€store€sales€for€the€year€were€negatively€impacted€by€challenges€with€product€availability€and€service levels,€particularly€in€our€Northeast€and€Great€Lakes€markets.€On€a€quarterly€basis€our€comparable€store€sales€decreased€1.9%, 4.1%€and€1.0%€in€the€first,€second€and€third€quarters€of€2016€and€increased€3.1%€in€the€fourth€quarter€of€2016.€We€attribute€the improvement€in€our€comparable€store€sales€in€the€last€half€of€the€year€to€our€efforts€to€improve€our€focus€on€the€customer, including€sustained€investments€in€availability,€customer€service€and€incentives€for€front€line€employees,€as€well€as€improved levels€of€execution€throughout€our€supply€chain.€We€also€benefited€in€the€fourth€quarter€of€2016€from€the€timing€of€the Christmas€and€New€Years€holidays. Gross Profit Gross€profit€for€2016€was€$4,255.9€million,€or€44.5%€of€net€sales,€as€compared€to€$4,422.8€million,€or€45.4%€of€net€sales, in€2015,€a€decrease€of€94€basis€points.€The€decrease€in€gross€profit€as€a€percentage€of€net€sales€was€primarily€the€result€of higher€supply€chain€costs€driven€by€significantly€higher€inventory€levels€in€the€first€half€of€2016€and€disruption€in€our distributions€centers€located€in€our€Northeast€and€Great€Lakes€markets€resulting€from€changes€in€delivery€frequency. SG&A SG&A€for€2016€was€$3,468.3€million,€or€36.3%€of€net€sales,€as€compared€to€$3,597.0€million,€or€36.9%€of€net€sales,€for 2015,€a€decrease€of€69€basis€points.€This€decrease€as€a€percentage€of€net€sales€was€primarily€due€to€lower€GPI€integration,€store closure€and€consolidation€and€support€center€restructuring€costs€in€2016€compared€to€the€prior€year.€Excluding€these€costs, SG&A€decreased€14€basis€points€as€a€percentage€of€sales€compared€to€the€prior€year€driven€by€lower€administrative€costs partially€offset€by€higher€customer€facing€costs,€including€store€labor€and€incentives€and€inventory€availability€support€costs. Operating Income Operating€income€for€2016€was€$787.6€million,€representing€8.2%€of€net€sales,€as€compared€to€$825.8€million,€or€8.5%€of net€sales,€for€2015,€a€decrease€of€25€basis€points.€This€decrease€was€due€to€a€lower€gross€profit€rate,€partially€offset€by€a decrease€in€our€SG&A€rate.€These€changes€on€a€rate€basis€were€due€to€the€gross€profit€and€SG&A€drivers€previously€discussed. Interest Expense Interest€expense€for€2016€was€$59.9€million,€as€compared€to€$65.4€million€in€2015.€The€decrease€in€interest€expense€was due€to€repayments€made€on€our€credit€facility€over€the€last€year. Income Taxes Income€tax€expense€for€2016€was€$279.2€million,€as€compared€to€$279.5€million€for€2015.€Our€effective€income€tax€rate was€37.8%€and€37.1%€for€2016€and€2015.€Our€income€tax€rate€in€both€2016€and€2015€reflect€favorable€income€tax€settlements and€statute€of€limitation€expirations.€The€increase€in€our€effective€tax€rate€for€2016€compared€to€2015€is€primarily€due€to€$7.8 million€of€settlements€recorded€in€2016€related€to€income€tax€audits€of€GPI€for€time€periods€prior€to€our€acquisition€of€GPI. These€settlements€were€largely€recoverable€under€the€escrow€for€indemnification€claims€in€our€purchase€agreement€with€GPI and€therefore€recorded€corresponding€income€of€$7.3€million€in€Other€Income,€net. 20 Net Income Net€income€was€$459.6€million,€or€$6.20€per€diluted€share,€for€2016€as€compared€to€$473.4€million,€or€$6.40€per€diluted share,€for€2015.€As€a€percentage€of€net€sales,€net€income€for€2016€was€4.8%,€as€compared€to€4.9%€for€2015.€The€decrease€in diluted€EPS€was€driven€primarily€by€the€decrease€in€net€income. Reconciliation€of€Non-GAAP€Financial€Measures €Management‚sƒDiscussionƒandƒAnalysisƒofƒFinancialƒConditionƒandƒResultsƒofƒOperations(cid:129)ƒincludes€certain€financial measures€not€derived€in€accordance€with€accounting€principles€generally€accepted€in€the€United€States€of€America (ƒGAAP„).€Non-GAAP€financial€measures€should€not€be€used€as€a€substitute€for€GAAP€financial€measures,€or€considered€in isolation,€for€the€purpose€of€analyzing€our€operating€performance,€financial€position€or€cash€flows.€We€have€presented€these non-GAAP€financial€measures€as€we€believe€that€the€presentation€of€our€financial€results€that€exclude€(1)€non-operational expenses€associated€with€the€integration€of€GPI€and€store€closure€and€consolidation€costs;€(2)€non-cash€charges€related€to€the acquired€GPI€intangibles;€(3)€transformation€expenses€under€our€strategic€business€plan;€and€(4)€nonrecurring€impact€of€the Act,€is€useful€and€indicative€of€our€base€operations€because€the€expenses€vary€from€period€to€period€in€terms€of€size,€nature€and significance€and/or€relate€to€the€integration€of€GPI€and€store€closure€and€consolidation€activity€in€excess€of€historical€levels. These€measures€assist€in€comparing€our€current€operating€results€with€past€periods€and€with€the€operational€performance€of other€companies€in€our€industry.€The€disclosure€of€these€measures€allows€investors€to€evaluate€our€performance€using€the€same measures€management€uses€in€developing€internal€budgets€and€forecasts€and€in€evaluating€management(cid:129)s€compensation. Included€below€is€a€description€of€the€expenses€we€have€determined€are€not€normal,€recurring€cash€operating€expenses necessary€to€operate€our€business€and€the€rationale€for€why€providing€these€measures€is€useful€to€investors€as€a€supplement€to the€GAAP€measures. GPI€Integration€Expenses‡ We€acquired€GPI€for€$2.08€billion€in€2014€and€are€in€the€midst€of€a€multi-year€plan€to€integrate the€operations€of€GPI€with€AAP.€This€includes€the€integration€of€product€brands€and€assortments,€supply€chain€and€information technology.€The€integration€is€being€completed€in€phases€and€the€nature€and€timing€of€expenses€will€vary€from€quarter€to quarter€over€several€years.€The€integration€of€product€brands€and€assortments€was€primarily€completed€in€2015,€which€our focus€then€shifted€to€integrating€the€supply€chain€and€information€technology€systems.€Due€to€the€size€of€the€acquisition,€we consider€these€expenses€to€be€outside€of€our€base€business.€Therefore,€we€believe€providing€additional€information€in€the€form of€non-GAAP€measures€that€exclude€these€costs€is€beneficial€to€the€users€of€our€financial€statements€in€evaluating€the€operating performance€of€our€base€business€and€our€sustainability€once€the€integration€is€complete. Store€Closure€and€Consolidation€Expenses‡ Store€closure€and€consolidation€expenses€consist€of€expenses€associated€with our€plans€to€convert€and€consolidate€the€Carquest€stores€acquired€from€GPI.€The€conversion€and€consolidation€of€the€Carquest stores€is€a€multi-year€process€that€began€in€2014.€As€of€December€30,€2017,€346€Carquest€stores€acquired€from€GPI€had€been consolidated€into€existing€AAP€stores€and€422€stores€had€been€converted€to€the€AAP€format.€While€periodic€store€closures€are common,€these€closures€represent€a€major€program€outside€of€our€typical€market€evaluation€process.€We€believe€it€is€useful€to provide€additional€non-GAAP€measures€that€exclude€these€costs€to€provide€investors€greater€comparability€of€our€base€business and€core€operating€performance.€We€also€continue€to€have€store€closures€that€occur€as€part€of€our€normal€market€evaluation process€and€have€not€excluded€the€expenses€associated€with€these€store€closures€in€computing€our€non-GAAP€measures.€ Transformation€Expenses‡ We€expect€to€recognize€a€significant€amount€of€transformation€expenses€over€the€next€several years€as€we€transition€from€integration€of€our€AAP/CQUS€businesses€to€a€plan€that€involves€a€more€holistic€and€integrated transformation€of€the€entire€Company€across€all€four€banners,€including€Worldpac€and€AI.€These€expenses€will€include,€but€not be€limited€to,€restructuring€costs,€third-party€professional€services€and€other€significant€costs€to€integrate€and€streamline€our operating€structure€across€the€enterprise.€We€focused€our€initial€transformation€efforts€on€our€AAP/CQUS€field€structure€in€the second€quarter€and€are€reviewing€other€areas€throughout€the€Company,€such€as€supply€chain€and€information€technology.€ U.S.€Tax€Reform‡ On€December€22,€2017,€the€Act€was€signed€into€law.€The€Act€amends€the€Internal€Revenue€Code€by, among€other€things,€permanently€lowering€the€corporate€tax€rate€to€21%€from€the€existing€maximum€rate€of€35%, implementing€a€territorial€tax€system€and€imposing€a€one-time€repatriation€tax€on€deemed€repatriated€earnings€of€foreign subsidiaries.€As€a€result€of€the€reduction€to€the€corporate€tax€rate,€which€is€effective€on€January€1,€2018,€the€Company€is required€to€re-value€deferred€income€tax€assets€and€liabilities€in€the€reporting€period€of€enactment.€The€Company€also€recorded an€estimated€charge€to€income€tax€expense€for€the€nonrecurring€repatriation€tax€on€accumulated€earnings€of€foreign€subsidiaries and€it€is€the€Company(cid:129)s€intention€to€bring€back€the€accumulated€foreign€earnings€held€as€cash€in€the€near€term. 21 We€have€included€a€reconciliation€of€this€information€to€the€most€comparable€GAAP€measures€in€the€following€table. (inƒthousands,ƒexceptƒperƒshareƒdata) Net€income€(GAAP) SG&A€adjustments: GPI€integration€and€store€consolidation€costs GPI€amortization€of€acquired€intangible€assets Transformation€expenses Other€income€adjustment€(1) Provision€for€income€taxes€on€adjustments€(2) Impact€of€the€Act,€net Adjusted€net€income€(Non-GAAP) Diluted€earnings€per€share€(GAAP) Adjustments,€net€of€tax Adjusted€EPS€(Non-GAAP) Year€Ended December€30,€ €2017 December€31,€ €2016 $ 475,505 $ 459,622 26,207 39,477 50,425 (8,878) (40,748) (143,756) 398,232 6.42 (1.05) 5.37 $ $ $ $ $ $ 72,828 40,940 ‡ ‡ (43,232) ‡ 530,158 6.20 0.95 7.15 (1) The€adjustment€to€Other€income€for€2017€relates€to€income€recognized€from€an€indemnification€agreement€associated with€the€acquisition€of€GPI. (2) The€income€tax€impact€of€non-GAAP€adjustments€is€calculated€using€the€estimated€tax€rate€in€effect€for€the€respective non-GAAP€adjustments.€ Liquidity€and€Capital€Resources€ Overview Our€primary€cash€requirements€necessary€to€maintain€our€current€operations€include€payroll€and€benefits,€inventory purchases,€contractual€obligations,€capital€expenditures,€payment€of€income€taxes€and€funding€of€initiatives€under€our€strategic business€plan.€In€addition,€we€may€use€available€funds€for€acquisitions,€to€repay€borrowings€under€our€credit€agreement,€to periodically€repurchase€shares€of€our€common€stock€under€our€stock€repurchase€programs€and€for€the€payment€of€quarterly cash€dividends.€Historically,€we€have€funded€these€requirements€primarily€through€cash€generated€from€operations, supplemented€by€borrowings€under€our€credit€facilities€and€notes€offerings€as€needed.€We€believe€funds€generated€from€our expected€results€of€operations,€available€cash€and€cash€equivalents,€and€available€borrowings€under€our€credit€facility€will€be sufficient€to€fund€our€primary€obligations€for€the€next€year. Capital Expenditures Our€primary€capital€requirements€have€been€the€funding€of€our€new€store€development€(leased€and€owned€locations), maintenance€of€existing€stores,€and€investments€in€supply€chain€and€information€technology.€We€lease€approximately€84%€of our€stores.€Our€capital€expenditures€were€$189.8€million€in€2017,€a€decrease€of€$69.8€million€from€2016.€This€decrease€in capital€expenditures€was€due€to€disciplined€capital€spending€by€the€Company€to€focus€on€priority€projects€in€an€effort€to optimize€cash€flow€for€2017. Our€future€capital€requirements€will€depend€in€large€part€on€the€number€and€timing€of€new€store€development€(leased€and owned€locations)€within€a€given€year€and€the€investments€we€make€in€existing€stores,€information€technology€and€supply€chain network.€In€2018,€we€anticipate€that€our€capital€expenditures€related€to€such€investments€will€be€up€to€$250€million,€but€may vary€with€business€conditions.€ 22 Analysis of Cash Flows The€following€table€summarizes€our€cash€flows€from€operating,€investing€and€financing€activities: (inƒmillions) Cash€flows€from€operating€activities Cash€flows€from€investing€activities Cash€flows€from€financing€activities Effect€of€exchange€rate€changes€on€cash Net€increase€(decrease)€in€cash€and€cash€equivalents OperatingƒActivities Year€Ended December€30,€ €2017 December€31,€ €2016 January€2,€ €2016 $ $ 600.8 (178.6) (14.9) 4.5 411.8 $ $ 523.3 (262.0) (217.1) 0.3 44.4 $ $ 702.6 (253.4) (459.0) (4.2) (13.9) For€2017,€net€cash€provided€by€operating€activities€increased€$77.5€million€to€$600.8€million.€This€net€increase€in operating€cash€flow€was€primarily€driven€by€the€timing€of€payments€within€working€capital.€Our€inventory€balance€as€of December€30,€2017€decreased€$157.4€million,€or€3.6%,€over€the€prior€year€primarily€driven€by€the€focus€on€inventory optimization€across€the€Company. For€2016,€net€cash€provided€by€operating€activities€decreased€$179.3€million€to€$523.3€million.€This€net€decrease€in operating€cash€flow€was€primarily€driven€by€a€decrease€in€accounts€payable,€lower€net€income€and€the€timing€of€payments within€working€capital,€partially€offset€by€the€timing€of€income€tax€deductions.€Our€inventory€balance€as€of€December€31,€2016 increased€$151.1€million,€or€3.6%,€over€the€prior€year€driven€mainly€by€the€build-up€of€transitional€inventory€associated€with our€Carquest€product€and€store€integration€and€the€opening€of€new€locations,€including€a€new€Worldpac€distribution€center.€ InvestingƒActivities For€2017,€net€cash€used€in€investing€activities€decreased€by€$83.4€million€to€$178.6€million€compared€to€2016.€The decrease€in€cash€used€in€investing€activities€was€primarily€driven€by€the€decrease€in€cash€used€for€purchases€of€property€and equipment. For€2016,€net€cash€used€in€investing€activities€increased€by€$8.7€million€to€$262.0€million€compared€to€2015.€The€increase in€cash€used€in€investing€activities€was€primarily€driven€by€cash€used€for€purchases€of€property€and€equipment. FinancingƒActivities For€2017,€net€cash€used€in€financing€activities€decreased€by€$202.2€million€to€$14.9€million.€This€decrease€was€primarily€a result€of€lower€net€repayments€on€the€revolving€credit€facility€and€term€loan€than€in€the€prior€year. For€2016,€net€cash€used€in€financing€activities€decreased€by€$241.9€million€to€$217.1€million.€This€decrease€was€primarily a€result€of€lower€net€repayments€on€the€revolving€credit€facility€and€term€loan€than€in€the€prior€year. Long-Term Debt For€detailed€information€refer€to€Note€7,€Long-termƒDebtƒandƒFairƒValueƒofƒFinancialƒInstruments,€of€the€Notes€to€the Consolidated€Financial€Statements€included€herein. As€of€December€30,€2017,€we€had€a€credit€rating€from€Standard€&€Poor(cid:129)s€of€BBB-€and€from€Moody(cid:129)s€Investor€Service€of Baa2.€The€current€outlooks€by€Standard€&€Poor(cid:129)s€and€Moody(cid:129)s€are€both€stable.€The€current€pricing€grid€used€to€determine€our borrowing€rate€under€our€revolving€credit€facility€is€based€on€our€credit€ratings.€If€these€credit€ratings€decline,€our€interest€rate on€outstanding€balances€may€increase€and€our€access€to€additional€financing€on€favorable€terms€may€become€more€limited.€In addition,€it€could€reduce€the€attractiveness€of€certain€vendor€payment€programs€whereby€third-party€institutions€finance arrangements€to€our€vendors€based€on€our€credit€rating,€which€could€result€in€increased€working€capital€requirements. Conversely,€if€these€credit€ratings€improve,€our€interest€rate€may€decrease. 23 Off-Balance-Sheet Arrangements As€of€December€30,€2017,€other€than€as€disclosed€in€Note€7,€Long-termƒDebtƒandƒFairƒValueƒofƒFinancialƒInstruments,€of the€Notes€to€the€Consolidated€Financial€Statements€included€herein,€we€had€no€other€off-balance-sheet€arrangements.€We include€other€off-balance-sheet€arrangements€in€our€Contractual€Obligations€table€including€operating€lease€payments€and interest€payments€on€our€Notes,€revolving€credit€facility€and€letters€of€credit€outstanding. Contractual Obligations In€addition€to€our€Notes€and€revolving€credit€facility,€we€utilize€operating€leases€as€another€source€of€financing.€The amounts€payable€under€these€operating€leases€are€included€in€our€Contractual€Obligations€table.€Our€future€contractual obligations€related€to€long-term€debt,€operating€leases€and€other€contractual€obligations€as€of€December€30,€2017€were€as follows: (inƒthousands) Payments€Due€by€Period Contractual€Obligations Long-term€debt€(1) €Interest€payments Operating€leases€(2) Other€long-term€liabilities€(3) Purchase€obligations€(4) Total 1,050,350 227,769 2,959,853 542,681 25,809 4,806,462 $ $ $ $ Less€than€1 Year 1€-€3€Years 3€-€5€Years More€than€5 Years 350 $ 300,000 $ 300,000 $ 51,000 484,427 ‡ 96,029 846,829 ‡ 61,269 620,090 ‡ 450,000 19,471 1,008,507 ‡ 10,948 546,725 $ 9,086 1,251,944 $ 3,600 984,959 $ 2,175 1,480,153 Note:€For€additional€information€refer€to€Note€7,€Long-termƒDebtƒandƒFairƒValueƒofƒFinancialƒInstruments;€Note€12, IncomeƒTaxes;€Note€13,€LeaseƒCommitments;€Note€14,€Contingencies;€and€Note€15,€BenefitƒPlans,€of€the€Notes€to€the Consolidated€Financial€Statements€included€herein.€ (1) Long-term€debt€represents€the€principal€amount€of€our€2020€Notes,€2022€Notes€and€2023€Notes,€which€become€due€in 2020,€2022€and€2023.€ (2) We€lease€certain€store€locations,€distribution€centers,€office€space,€equipment€and€vehicles.€Our€property€leases generally€contain€renewal€and€escalation€clauses€and€other€concessions.€These€provisions€are€considered€in€our calculation€of€our€minimum€lease€payments€that€are€recognized€as€expense€on€a€straight-line€basis€over€the€applicable lease€term.€Any€lease€payments€that€are€based€upon€an€existing€index€or€rate€are€included€in€our€minimum€lease payment€calculations.€ Includes€the€long-term€portion€of€deferred€income€taxes€and€other€liabilities,€including€self-insurance€reserves€for which€no€contractual€payment€schedule€exists.€As€we€expect€the€payments€to€occur€beyond€12€months€from December€30,€2017,€the€related€balances€have€not€been€reflected€in€the€ƒPayments€Due€by€Period„€section€of€the€table.€ (3) (4) Purchase€obligations€include€agreements€to€purchase€goods€or€services€that€are€enforceable,€legally€binding€and specify€all€significant€terms,€including€fixed€or€minimum€quantities€to€be€purchased;€fixed,€minimum€or€variable€price provisions;€and€the€approximate€timing€of€the€transaction.€Included€in€the€table€above€is€the€lesser€of€the€remaining obligation€or€the€cancellation€penalty€under€the€agreement.€ Critical€Accounting€Policies Our€financial€statements€have€been€prepared€in€accordance€with€GAAP.€Our€discussion€and€analysis€of€the€financial condition€and€results€of€operations€are€based€on€these€financial€statements.€The€preparation€of€these€financial€statements requires€the€application€of€accounting€policies€in€addition€to€certain€estimates€and€judgments€by€our€management.€Our estimates€and€judgments€are€based€on€currently€available€information,€historical€results€and€other€assumptions€we€believe€are reasonable.€Actual€results€could€differ€materially€from€these€estimates.€ The€preparation€of€our€financial€statements€included€the€following€significant€estimates€and€exercise€of€judgment.€ 24 GoodwillƒandƒIndefinite-LivedƒIntangibleƒAssets We€evaluate€goodwill€and€indefinite-lived€intangibles€for€impairment€annually€as€of€the€first€day€of€our€fourth€quarter€or whenever€events€or€changes€in€circumstances€indicate€the€carrying€value€of€the€goodwill€or€other€intangible€asset€may€not€be recoverable.€We€test€goodwill€for€impairment€at€the€reporting€unit€level.€Effective€in€the€third€quarter€of€2017,€the€Company realigned€its€three€geographic€divisions,€which€included€the€operations€of€the€stores€operating€under€the€Advance€Auto€Parts, Carquest€and€Autopart€International€trade€names,€into€two€U.S.€geographic€divisions.€As€a€result€of€this€realignment€and€change in€the€operating€structure€of€its€Carquest€Independent€and€Carquest€Canada€businesses,€the€Company€has€increased€its€number of€operating€segments€from€four€to€five.€As€each€operating€segment€represents€a€reporting€unit,€goodwill€was€reassigned€to€the affected€reporting€units€using€a€relative€fair€value€approach. Our€detailed€impairment€testing€involves€comparing€the€fair€value€of€each€reporting€unit€to€its€carrying€value,€including goodwill.€If€a€reporting€unit(cid:129)s€fair€value€has€historically€significantly€exceeded€its€carrying€value,€then€a€risk-based€market approach€of€determining€the€reporting€unit(cid:129)s€fair€value€is€utilized.€The€Company€uses€a€valuation€specialist€to€determine€the€fair value€for€the€remaining€reporting€units.€If€the€fair€value€exceeds€carrying€value,€we€conclude€that€no€goodwill€impairment€has occurred.€If€the€carrying€value€of€the€reporting€unit€exceeds€its€fair€value,€a€second€step€is€required€to€measure€possible goodwill€impairment€loss.€ Our€indefinite-lived€intangible€assets€primarily€consist€of€the€Carquest€and€Worldpac€brands€acquired€in€the€acquisition€of GPI€in€2014€and€are€tested€for€impairment€at€the€asset€group€level.€Indefinite-lived€intangibles€are€evaluated€by€comparing€the carrying€amount€of€the€asset€to€the€future€discounted€cash€flows€that€the€asset€is€expected€to€generate.€If€the€fair€value€based€on the€future€discounted€cash€flows€exceeds€the€carrying€value,€we€conclude€that€no€intangible€asset€impairment€has€occurred.€If the€carrying€value€of€the€indefinite-lived€intangible€asset€exceeds€the€fair€value,€we€recognize€an€impairment€loss. We€complete€our€impairment€evaluations€by€combining€information€from€our€internal€valuation€analyses,€considering€other publicly€available€market€information€and€using€an€independent€valuation€firm.€We€determine€fair€value€using€widely€accepted valuation€techniques,€including€discounted€cash€flows€and€market€multiple€analyses.€These€types€of€analyses€require management€to€make€assumptions€as€a€marketplace€participant€would€and€to€apply€judgment€to€estimate€industry€economic factors€and€the€profitability€of€future€business€strategies€of€our€Company€and€our€reporting€units.€These€assumptions€and estimates€are€a€major€component€of€the€derived€fair€value€of€our€reporting€units.€Critical€assumptions€include€projected€sales growth,€gross€profit€rates,€SG&A€rates,€working€capital€fluctuations,€capital€expenditures,€discount€rates,€royalty€rates€and terminal€growth€rates.€If€actual€results€are€not€consistent€with€our€estimates€or€assumptions,€we€may€be€exposed€to€an impairment€charge€that€could€be€material.€ InventoryƒReservesƒ Our€inventory€consists€primarily€of€parts,€batteries,€accessories€and€other€products€used€on€vehicles€that€have€reasonably long€shelf€lives.€Although€the€risk€of€obsolescence€is€minimal,€we€consider€whether€we€may€have€excess€inventory€based€on our€current€approach€for€managing€slower€moving€inventory.€We€establish€reserves€when€the€expected€net€proceeds€are€less than€carrying€value.€ Future€changes€by€vendors€in€their€policies€or€willingness€to€accept€returns€of€excess€inventory,€changes€in€our€inventory management€approach€for€excess€and€obsolete€inventory€or€failure€by€us€to€effectively€manage€the€life€cycle€of€our€inventory could€require€us€to€revise€our€estimates€of€required€reserves€and€result€in€a€negative€impact€on€our€consolidated€statement€of operations.€A€10%€difference€in€actual€inventory€reserves€at€December€30,€2017€would€result€in€a€change€in€expense€of approximately€$11.1€million€for€2017.€ Self-InsuranceƒReserves Our€self-insurance€reserves€consist€of€the€estimated€exposure€for€claims€filed,€claims€incurred€but€not€yet€reported€and projected€future€claims,€and€are€established€using€actuarial€methods€followed€in€the€insurance€industry€and€our€historical€claims experience.€Specific€factors€include,€but€are€not€limited€to,€assumptions€about€health€care€costs,€the€severity€of€accidents€and the€incidence€of€illness€and€the€average€size€of€claims.€Generally,€claims€for€automobile€and€general€liability€and€workers(cid:129) compensation€take€several€years€to€settle.€We€classify€the€portion€of€our€self-insurance€reserves€that€is€not€expected€to€be€settled within€one€year€in€long-term€liabilities. 25 While€we€do€not€expect€the€amounts€ultimately€paid€to€differ€significantly€from€our€estimates,€our€self-insurance€reserves and€corresponding€SG&A€could€be€affected€if€future€claim€experience€differs€significantly€from€historical€trends€and€actuarial assumptions.€A€10%€change€in€our€self-insurance€liabilities€at€December€30,€2017€would€result€in€a€change€in€expense€of approximately€$15.3€million€for€2017. VendorƒIncentivesƒ We€receive€incentives€in€the€form€of€reductions€to€amounts€owed€and/or€payments€from€vendors€related€to€volume€rebates and€other€promotional€considerations.€Many€of€these€incentives€are€under€agreements€with€terms€in€excess€of€one€year,€while others€are€negotiated€on€an€annual€basis€or€less.€Volume€rebates€and€vendor€promotional€allowances€not€offsetting€in€SG&A€are earned€based€on€inventory€purchases€and€initially€recorded€as€a€reduction€to€inventory.€These€deferred€amounts€are€included€as a€reduction€to€cost€of€sales€as€the€inventory€is€sold. Vendor€promotional€allowances€provided€as€a€reimbursement€of€specific,€incremental€and€identifiable€costs€incurred€to promote€a€vendor(cid:129)s€products€are€included€as€an€offset€to€SG&A€when€the€cost€is€incurred€if€the€fair€value€of€that€benefit€can€be reasonably€estimated.€Certain€of€our€vendor€agreements€contain€purchase€volume€incentives€that€provide€for€increased€funding when€graduated€purchase€volumes€are€met.€Amounts€accrued€throughout€the€year€could€be€impacted€if€actual€purchase€volumes differ€from€projected€annual€purchase€volumes.€ Similarly,€we€recognize€other€promotional€incentives€earned€under€long-term€agreements€as€a€reduction€to€cost€of€sales. However,€these€incentives€are€recognized€based€on€the€cumulative€net€purchases€as€a€percentage€of€total€estimated€net purchases€over€the€life€of€the€agreement.€Short-term€incentives€with€terms€less€than€one€year€are€generally€recognized€as€a reduction€to€cost€of€sales€over€the€duration€of€the€agreements. Amounts€received€or€receivable€from€vendors€that€are€not€yet€earned€are€reflected€as€deferred€revenue.€Management(cid:129)s estimate€of€the€portion€of€deferred€revenue€that€will€be€realized€within€one€year€of€the€balance€sheet€date€is€included€in€Other current€liabilities.€Earned€amounts€that€are€receivable€from€vendors€are€included€in€Receivables,€net€except€for€that€portion expected€to€be€received€after€one€year,€which€is€included€in€Other€assets,€net.€We€regularly€review€the€receivables€from€vendors to€ensure€they€are€able€to€meet€their€obligations.€Historically,€the€change€in€our€reserve€for€receivables€related€to€vendor funding€has€not€been€significant.€A€10%€difference€in€our€vendor€incentives€deferred€in€inventory€at€December€30,€2017€would result€in€a€change€in€deferred€incentives€of€approximately€$17.9€million€for€2017. New€Accounting€Pronouncements For€a€description€of€recently€adopted€and€issued€accounting€standards,€including€the€expected€dates€of€adoption€and estimated€effects,€if€any,€on€our€consolidated€financial€statements,€see€ƒRecentlyƒIssuedƒAccountingƒPronouncements(cid:129)€in€Note 2,€SignificantƒAccountingƒPolicies,ƒof€the€Notes€to€the€Consolidated€Financial€Statements€included€herein. Item€7A.€Quantitative€and€Qualitative€Disclosures€about€Market€Risks.€ We€are€subject€to€interest€rate€risk€to€the€extent€we€borrow€against€our€revolving€credit€facility€as€it€is€based,€at€our€option, on€adjusted€LIBOR,€plus€a€margin,€or€an€alternate€base€rate,€plus€a€margin.€As€of€December€30,€2017€and€December€31,€2016, we€had€no€borrowings€outstanding€under€our€revolving€credit€facility. Our€financial€assets€that€are€exposed€to€credit€risk€consist€primarily€of€trade€accounts€receivable€and€vendor€receivables. We€are€exposed€to€normal€credit€risk€from€customers.€Our€concentration€of€credit€risk€is€limited€because€our€customer€base consists€of€a€large€number€of€customers€with€relatively€small€balances,€which€allows€the€credit€risk€to€be€spread€across€a€broad base.€We€have€not€historically€had€significant€credit€losses. We€are€exposed€to€foreign€currency€exchange€rate€fluctuations€for€the€portion€of€the€Company(cid:129)s€inventory€purchases denominated€in€foreign€currencies.€We€believe€that€the€price€volatility€relating€to€foreign€currency€exchange€rates€is€partially mitigated€by€our€ability€to€adjust€selling€prices.€During€2017€and€2016,€foreign€currency€transactions€did€not€significantly impact€net€income. 26 Item€8.€Financial€Statements€and€Supplementary€Data.€ See€financial€statements€included€in€Item€15€ƒExhibits,ƒFinancialƒStatementƒSchedules„€of€this€annual€report.€ Item€9.€Changes€in€and€Disagreements€with€Accountants€on€Accounting€and€Financial€Disclosure.€ None. Item€9A.€Controls€and€Procedures. DisclosureƒControlsƒandƒProcedures Disclosure€controls€and€procedures€are€our€controls€and€other€procedures€that€are€designed€to€ensure€that€information required€to€be€disclosed€by€us€in€our€reports€that€we€file€or€submit€under€the€Exchange€Act€is€recorded,€processed,€summarized and€reported€within€the€time€periods€specified€in€the€SEC(cid:129)s€rules€and€forms.€Disclosure€controls€and€procedures€include, without€limitation,€controls€and€procedures€designed€to€ensure€that€information€required€to€be€disclosed€by€us€in€our€reports that€we€file€or€submit€under€the€Securities€Exchange€Act€of€1934€is€accumulated€and€communicated€to€our€management, including€our€principal€executive€officer€and€principal€financial€officer,€as€appropriate€to€allow€timely€decisions€regarding required€disclosure.€Internal€controls€over€financial€reporting,€no€matter€how€well€designed,€have€inherent€limitations,€including the€possibility€of€human€error€and€the€override€of€controls.€Therefore,€even€those€systems€determined€to€be€effective€can provide€only€ƒreasonable€assurance„€with€respect€to€the€reliability€of€financial€reporting€and€financial€statement€preparation€and presentation.€Further,€because€of€changes€in€conditions,€the€effectiveness€may€vary€over€time.€ EvaluationƒofƒDisclosureƒControlsƒandƒProcedures Our€management€evaluated,€with€the€participation€of€our€principal€executive€officer€and€principal€financial€officer,€the effectiveness€of€our€disclosure€controls€and€procedures€as€of€December€30,€2017€in€accordance€with€Rule€13a-15(b)€under€the Exchange€Act.€Based€on€this€evaluation,€our€principal€executive€officer€and€our€principal€financial€officer€have€concluded€that, as€of€the€end€of€the€period€covered€by€this€report,€our€disclosure€controls€and€procedures€were€effective. Management‚sƒReportƒonƒInternalƒControlƒoverƒFinancialƒReporting Our€management€is€responsible€for€establishing€and€maintaining€adequate€internal€control€over€financial€reporting€as defined€in€Rule€13(a)€-€15(f)€under€the€Exchange€Act.€The€Company(cid:129)s€internal€control€over€financial€reporting€is€a€process designed€under€the€supervision€of€the€Company(cid:129)s€principal€executive€officer€and€principal€financial€officer,€and€effected€by€the Company(cid:129)s€Board€of€Directors,€management€and€other€personnel,€to€provide€ƒreasonable€assurance„€regarding€the€reliability€of financial€reporting€and€the€preparation€of€the€Company(cid:129)s€financial€statements€for€external€purposes€in€accordance€with€GAAP. Our€internal€control€over€financial€reporting€includes€policies€and€procedures€that€(1)€pertain€to€the€maintenance€of€records€that, in€reasonable€detail,€accurately€and€fairly€reflect€the€transactions€and€dispositions€of€the€assets€of€the€Company;€(2)€provide reasonable€assurance€that€transactions€are€recorded€as€necessary€to€permit€preparation€of€financial€statements€in€accordance with€GAAP,€and€that€receipts€and€expenditures€of€the€Company€are€being€made€only€in€accordance€with€authorizations€of management€and€directors€of€the€Company;€and€(3)€provide€ƒreasonable€assurance„€regarding€prevention€or€timely€detection€of unauthorized€acquisition,€use,€or€disposition€of€the€Company(cid:129)s€assets€that€could€have€a€material€effect€on€the€financial statements. As€of€December€30,€2017,€management,€including€the€Company(cid:129)s€principal€executive€officer€and€principal€financial officer,€assessed€the€effectiveness€of€the€Company(cid:129)s€internal€control€over€financial€reporting€based€on€the€criteria€established€in InternalƒControlƒ-ƒIntegratedƒFrameworkƒ(2013)€issued€by€the€Committee€of€Sponsoring€Organizations€of€the€Treadway Commission€(COSO).€Based€on€this€assessment,€management€has€determined€that€the€Company(cid:129)s€internal€control€over financial€reporting€as€of€December€30,€2017€is€effective.€ ChangesƒinƒInternalƒControlƒOverƒFinancialƒReporting There€were€no€changes€in€our€internal€control€over€financial€reporting€that€occurred€during€the€quarter€ended€December€30, 2017€that€have€materially€affected,€or€are€reasonably€likely€to€materially€affect,€our€internal€control€over€financial€reporting. 27 AttestationƒReportƒofƒRegisteredƒPublicƒAccountingƒFirm Our€internal€control€over€financial€reporting€as€of€December€30,€2017€has€been€audited€by€Deloitte€&€Touche€LLP,€an independent€registered€public€accounting€firm,€which€also€audited€our€Consolidated€Financial€Statements€for€the€year€ended December€30,€2017,€as€stated€in€their€report€included€herein,€which€expresses€an€unqualified€opinion€on€the€effectiveness€of€our internal€control€over€financial€reporting€as€of€December€30,€2017. Item€9B.€Other€Information. Refer€to€discussion€in€Note€4,€ExitƒActivitiesƒandƒOtherƒInitiatives,€of€the€Notes€to€the€Consolidated€Financial€Statements included€herein. 28 PART€III Item€10. Directors,€Executive€Officers€and€Corporate€Governance. For€a€discussion€of€our€directors,€executive€officers€and€corporate€governance,€see€the€information€set€forth€in€the€sections entitled€ƒProposal€No.€1€-€Election€of€Directors,„€ƒCorporate€Governance,„€ƒMeetings€and€Committees€of€the€Board,„ ƒInformation€Concerning€Our€Executive€Officers,„€ƒAudit€Committee€Report,„€and€ƒSection€16(a)€Beneficial€Ownership Reporting€Compliance„€in€our€proxy€statement€for€the€2018€annual€meeting€of€stockholders€to€be€filed€with€the€SEC€within€120 days€after€the€end€of€the€year€ended€December€30,€2017€(the€ƒ2018€Proxy€Statement„),€which€is€incorporated€herein€by reference. Item€11.€Executive€Compensation.€ See€the€information€set€forth€in€the€sections€entitled€ƒMeetings€and€Committees€of€the€Board,„€ƒCompensation€Committee Report,„€ƒCompensation€Discussion€and€Analysis,„€ƒAdditional€Information€Regarding€Executive€Compensation„€and ƒDirector€Compensation„€in€the€2018€Proxy€Statement,€which€is€incorporated€herein€by€reference. Item€12.€Security€Ownership€of€Certain€Beneficial€Owners€and€Management€and€Related€Stockholder€Matters.€ See€the€information€set€forth€in€the€sections€entitled€ƒEquity€Compensation€Plan€Information€Table„€and€ƒSecurity Ownership€of€Certain€Beneficial€Owners€and€Management„€in€the€2018€Proxy€Statement,€which€is€incorporated€herein€by reference. Item€13.€Certain€Relationships€and€Related€Transactions,€and€Director€Independence.€ See€the€information€set€forth€in€the€sections€entitled€ƒCorporate€Governance„€and€ƒMeetings€and€Committees€of€the Board„€in€the€2018€Proxy€Statement,€which€is€incorporated€herein€by€reference. Item€14.€Principal€Accountant€Fees€and€Services.€ See€the€information€set€forth€in€the€section€entitled€ƒ2017€and€2016€Audit€Fees„€in€the€2018€Proxy€Statement,€which€is incorporated€herein€by€reference. 29 PART€IV Item€15. €Exhibits,€Financial€Statement€Schedules. (a)(1)€Financial€Statements Audited€Consolidated€Financial€Statements€of€Advance€Auto€Parts,€Inc.€and€Subsidiaries€for the€years€ended€December€30,€2017,€December€31,€2016€and€January€2,€2016: Reports€of€Independent€Registered€Public€Accounting€Firm................................................................. Consolidated€Balance€Sheets ................................................................................................................. Consolidated€Statements€of€Operations ................................................................................................. Consolidated€Statements€of€Comprehensive€Income............................................................................. Consolidated€Statements€of€Changes€in€Stockholders'€Equity............................................................... Consolidated€Statements€of€Cash€Flows ................................................................................................ Notes€to€the€Consolidated€Financial€Statements .................................................................................... F-1 F-3 F-4 F-4 F-5 F-6 F-7 (2)€Financial€Statement€Schedule Schedule€II€-€Valuation€and€Qualifying€Accounts .................................................................................. F-39 (3)€Exhibits The€Exhibit€Index€preceding€the€signatures€for€this€report€is€incorporated€herein€by€reference. 30 This page intentionally left blank. REPORT€OF€INDEPENDENT€REGISTERED€PUBLIC€ACCOUNTING€FIRM To€the€shareholders€and€the€Board€of€Directors€of€Advance€Auto€Parts,€Inc. Opinion€on€the€Financial€Statements We€have€audited€the€accompanying€consolidated€balance€sheets€of€Advance€Auto€Parts,€Inc.€and€subsidiaries€(the€ƒCompany„) as€of€December€30,€2017€and€December€31,€2016,€the€related€consolidated€statements€of€operations,€comprehensive€income, changes€in€stockholders(cid:129)€equity,€and€cash€flows€for€each€of€the€three€years€in€the€period€ended€December€30,€2017,€and€the related€notes€and€the€schedule€listed€in€the€Index€at€Item€15€(collectively€referred€to€as€the€ƒfinancial€statements„).€In€our opinion,€the€financial€statements€present€fairly,€in€all€material€respects,€the€financial€position€of€the€Company€as€of December€30,€2017€and€December€31,€2016,€and€the€results€of€its€operations€and€its€cash€flows€for€each€of€the€three€years€in the€period€ended€December€30,€2017,€in€conformity€with€accounting€principles€generally€accepted€in€the€United€States€of America. We€have€also€audited,€in€accordance€with€the€standards€of€the€Public€Company€Accounting€Oversight€Board€(United€States) (PCAOB),€the€Company(cid:129)s€internal€control€over€financial€reporting€as€of€December€30,€2017,€based€on€criteria€established€in InternalƒControlƒ-ƒIntegratedƒFrameworkƒ(2013)€issued€by€the€Committee€of€Sponsoring€Organizations€of€the€Treadway Commission€and€our€report€dated€February€21,€2018,€expressed€an€unqualified€opinion€on€the€Company(cid:129)s€internal€control€over financial€reporting. Basis€for€Opinion These€financial€statements€are€the€responsibility€of€the€Company(cid:129)s€management.€Our€responsibility€is€to€express€an€opinion€on the€Company(cid:129)s€financial€statements€based€on€our€audits.€We€are€a€public€accounting€firm€registered€with€the€PCAOB€and€are required€to€be€independent€with€respect€to€the€Company€in€accordance€with€the€U.S.€federal€securities€laws€and€the€applicable rules€and€regulations€of€the€Securities€and€Exchange€Commission€and€the€PCAOB. We€conducted€our€audits€in€accordance€with€the€standards€of€the€PCAOB.€Those€standards€require€that€we€plan€and€perform the€audit€to€obtain€reasonable€assurance€about€whether€the€financial€statements€are€free€of€material€misstatement,€whether€due to€error€or€fraud.€Our€audits€included€performing€procedures€to€assess€the€risks€of€material€misstatement€of€the€financial statements,€whether€due€to€error€or€fraud,€and€performing€procedures€that€respond€to€those€risks.€Such€procedures€included examining,€on€a€test€basis,€evidence€regarding€the€amounts€and€disclosures€in€the€financial€statements.€Our€audits€also included€evaluating€the€accounting€principles€used€and€significant€estimates€made€by€management,€as€well€as€evaluating€the overall€presentation€of€the€financial€statements.€We€believe€that€our€audits€provide€a€reasonable€basis€for€our€opinion. Charlotte,€North€Carolina February€21,€2018 We€have€served€as€the€Company(cid:129)s€auditor€since€2002. F-1 REPORT€OF€INDEPENDENT€REGISTERED€PUBLIC€ACCOUNTING€FIRM€ To€the€shareholders€and€the€Board€of€Directors€of€Advance€Auto€Parts,€Inc. Opinion€on€Internal€Control€over€Financial€Reporting€ We€have€audited€the€internal€control€over€financial€reporting€of€Advance€Auto€Parts,€Inc.€and€subsidiaries€(the€ƒCompany„)€as of€December€30,€2017,€based€on€criteria€established€in€InternalƒControlƒ-ƒIntegratedƒFrameworkƒ(2013)€issued€by€the Committee€of€Sponsoring€Organizations€of€the€Treadway€Commission€(COSO).€In€our€opinion,€the€Company€maintained,€in all€material€respects,€effective€internal€control€over€financial€reporting€as€of€December€30,€2017,€based€on€criteria€established in€InternalƒControlƒ-ƒIntegratedƒFrameworkƒ(2013)€issued€by€COSO. We€have€also€audited,€in€accordance€with€the€standards€of€the€Public€Company€Accounting€Oversight€Board€(United€States) (PCAOB),€the€consolidated€financial€statements€and€financial€statement€schedule€as€of€and€for€the€year€ended€December€30, 2017,€of€the€Company€and€our€report€dated€February€21,€2018,€expressed€an€unqualified€opinion€on€those€consolidated financial€statements€and€financial€statement€schedule.€ Basis€for€Opinion€ The€Company(cid:129)s€management€is€responsible€for€maintaining€effective€internal€control€over€financial€reporting€and€for€its assessment€of€the€effectiveness€of€internal€control€over€financial€reporting,€included€in€the€accompanying€Management‚s ReportƒonƒInternalƒControlƒoverƒFinancialƒReporting.€Our€responsibility€is€to€express€an€opinion€on€the€Company(cid:129)s€internal control€over€financial€reporting€based€on€our€audit.€We€are€a€public€accounting€firm€registered€with€the€PCAOB€and€are required€to€be€independent€with€respect€to€the€Company€in€accordance€with€the€U.S.€federal€securities€laws€and€the€applicable rules€and€regulations€of€the€Securities€and€Exchange€Commission€and€the€PCAOB. We€conducted€our€audit€in€accordance€with€the€standards€of€the€PCAOB.€Those€standards€require€that€we€plan€and€perform€the audit€to€obtain€reasonable€assurance€about€whether€effective€internal€control€over€financial€reporting€was€maintained€in€all material€respects.€Our€audit€included€obtaining€an€understanding€of€internal€control€over€financial€reporting,€assessing€the€risk that€a€material€weakness€exists,€testing€and€evaluating€the€design€and€operating€effectiveness€of€internal€control€based€on€the assessed€risk,€and€performing€such€other€procedures€as€we€considered€necessary€in€the€circumstances.€We€believe€that€our audit€provides€a€reasonable€basis€for€our€opinion.€ Definition€and€Limitations€of€Internal€Control€over€Financial€Reporting€ A€company(cid:129)s€internal€control€over€financial€reporting€is€a€process€designed€to€provide€reasonable€assurance€regarding€the reliability€of€financial€reporting€and€the€preparation€of€financial€statements€for€external€purposes€in€accordance€with€generally accepted€accounting€principles.€A€company(cid:129)s€internal€control€over€financial€reporting€includes€those€policies€and€procedures that€(1)€pertain€to€the€maintenance€of€records€that,€in€reasonable€detail,€accurately€and€fairly€reflect€the€transactions€and dispositions€of€the€assets€of€the€company;€(2)€provide€reasonable€assurance€that€transactions€are€recorded€as€necessary€to permit€preparation€of€financial€statements€in€accordance€with€generally€accepted€accounting€principles,€and€that€receipts€and expenditures€of€the€company€are€being€made€only€in€accordance€with€authorizations€of€management€and€directors€of€the company;€and€(3)€provide€reasonable€assurance€regarding€prevention€or€timely€detection€of€unauthorized€acquisition,€use,€or disposition€of€the€company(cid:129)s€assets€that€could€have€a€material€effect€on€the€financial€statements.€ Because€of€its€inherent€limitations,€internal€control€over€financial€reporting€may€not€prevent€or€detect€misstatements.€Also, projections€of€any€evaluation€of€effectiveness€to€future€periods€are€subject€to€the€risk€that€controls€may€become€inadequate because€of€changes€in€conditions,€or€that€the€degree€of€compliance€with€the€policies€or€procedures€may€deteriorate. Charlotte,€North€Carolina February€21,€2018 F-2 Advance€Auto€Parts,€Inc.€and€Subsidiaries Consolidated€Balance€Sheets (inƒthousands,ƒexceptƒperƒshareƒdata) Assets December€30,€ €2017 December€31,€ €2016 Current€assets: Cash€and€cash€equivalents Receivables,€net Inventories Other€current€assets Total€current€assets Property€and€equipment,€net€of€accumulated€depreciation€of€$1,783,383 and€$1,660,648 Goodwill Intangible€assets,€net Other€assets,€net Liabilities€and€Stockholdersƒ€Equity Current€liabilities: Accounts€payable Accrued€expenses Other€current€liabilities Total€current€liabilities Long-term€debt Deferred€income€taxes Other€long-term€liabilities Commitments€and€contingencies Stockholdersƒ€equity: Preferred€stock,€nonvoting,€$0.0001€par€value, 10,000€shares€authorized;€no€shares€issued€or€outstanding Common€stock,€voting,€$0.0001€par€value,€200,000€shares€authorized; 75,569€shares€issued€and€73,936€outstanding€at€December€30,€2017 75,326€shares€issued€and€73,749€outstanding€at€December€31,€2016 Additional€paid-in€capital Treasury€stock,€at€cost,€1,633€and€1,577€shares Accumulated€other€comprehensive€loss Retained€earnings Total€stockholders(cid:129)€equity $ $ $ $ $ $ $ 546,937 606,357 4,168,492 105,106 5,426,892 1,394,138 994,293 597,674 69,304 8,482,301 2,894,582 533,548 51,967 3,480,097 1,044,327 303,620 239,061 135,178 641,252 4,325,868 70,466 5,172,764 1,446,340 990,877 640,903 64,149 8,315,033 3,086,177 554,397 35,472 3,676,046 1,042,949 454,282 225,564 ‡ ‡ 8 664,646 (144,600) (24,954) 2,920,096 3,415,196 8,482,301 $ 8 631,052 (138,102) (39,701) 2,462,935 2,916,192 8,315,033 The€accompanying€notes€to€the€consolidated€financial€statements are€an€integral€part€of€these€statements. F-3 Advance€Auto€Parts,€Inc.€and€Subsidiaries Consolidated€Statements€of€Operations (inƒthousands,ƒexceptƒperƒshareƒdata) Net€sales Cost€of€sales,€including€purchasing€and€warehousing€costs Gross€profit Selling,€general€and€administrative€expenses Operating€income Other,€net: Interest€expense Other€income€(expense),€net Total€other,€net Income€before€provision€for€income€taxes Provision€for€income€taxes Net€income Basic€earnings€per€common€share Weighted€average€common€shares€outstanding Diluted€earnings€per€common€share Weighted€average€common€shares€outstanding Dividends€declared€per€common€share € December€30,€ €2017 9,373,784 $ Year€Ended December€31,€ €2016 9,567,679 $ January€2,€ €2016 9,737,018 $ 5,288,735 4,085,049 3,514,837 570,212 5,311,764 4,255,915 3,468,317 787,598 5,314,246 4,422,772 3,596,992 825,780 (58,801) 8,848 (49,953) 520,259 44,754 475,505 6.44 73,846 $ $ (59,910) 11,147 (48,763) 738,835 279,213 459,622 6.22 73,562 $ $ 6.42 $ 6.20 $ 74,110 73,856 (65,408) (7,484) (72,892) 752,888 279,490 473,398 6.45 73,190 6.40 73,733 0.24 $ 0.24 $ 0.24 $ $ $ $ Consolidated€Statements€of€Comprehensive€Income (inƒthousands) Net€income Other€comprehensive€income€(loss): Changes€in€net€unrecognized€other€postretirement€benefit€costs, net€of€tax€of€$126,€$346€and€$289 Currency€translation€adjustments Total€other€comprehensive€income€(loss) Comprehensive€income December€30,€ €2017 Year€Ended December€31,€ €2016 January€2,€ €2016 $ 475,505 $ 459,622 $ 473,398 (194) 14,941 (534) 4,892 14,747 490,252 $ 4,358 463,980 $ $ (445) (31,277) (31,722) 441,676 The€accompanying€notes€to€the€consolidated€financial€statements are€an€integral€part€of€these€statements. F-4 Advance€Auto€Parts,€Inc.€and€Subsidiaries Consolidated€Statements€of€Changes€in€Stockholdersƒ€Equity (inƒthousands) Common€Stock Shares Amount Balance,€January€3,€2015 Net€income Total€other€comprehensive€loss Issuance€of€shares€upon€the€exercise€of€stock options€and€stock€appreciation€rights Tax€withholdings€related€to€the€exercise€of€stock appreciation€rights Tax€benefit€from€share-based€compensation,€net Restricted€stock€and€restricted€stock€units€vested Share-based€compensation Stock€issued€under€employee€stock€purchase€plan Repurchase€of€common€stock Cash€dividends€declared€($0.24€per€common€share) Other Balance,€January€2,€2016 Net€income Total€other€comprehensive€loss Issuance€of€shares€upon€the€exercise€of€stock appreciation€rights Tax€withholdings€related€to€the€exercise€of€stock appreciation€rights Tax€benefit€from€share-based€compensation,€net Restricted€stock€and€restricted€stock€units€vested Share-based€compensation Stock€issued€under€employee€stock€purchase€plan Repurchase€of€common€stock Cash€dividends€declared€($0.24€per€common€share) Other Balance,€December€31,€2016 Net€income Cumulative€effect€of€accounting€change€from adoption€of€ASU€2016-09 Total€other€comprehensive€income Issuance€of€shares€upon€the€exercise€of€stock appreciation€rights Tax€withholdings€related€to€the€exercise€of€stock appreciation€rights Restricted€stock€units€vested Share-based€compensation Stock€issued€under€employee€stock€purchase€plan Repurchase€of€common€stock Cash€dividends€declared€($0.24€per€common€share) Other $ 73,074 ‡ ‡ 138 ‡ ‡ 109 ‡ 35 (42) ‡ ‡ 73,314 ‡ ‡ 149 ‡ ‡ 372 ‡ 30 (116) ‡ ‡ 73,749 ‡ ‡ ‡ 67 ‡ 147 ‡ 29 (56) ‡ ‡ 7 ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ 7 ‡ ‡ 1 ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ 8 ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Additional Paid-in Capital $ 562,945 ‡ ‡ ‡ (13,112) 12,989 ‡ 35,336 5,139 ‡ ‡ 35 603,332 ‡ ‡ ‡ (19,558) 22,325 ‡ 20,422 4,369 ‡ ‡ 162 631,052 ‡ 782 ‡ ‡ (6,531) ‡ 35,267 4,053 ‡ ‡ 23 Treasury Stock,€at cost Accumulated Other Comprehensive Loss Retained Earnings (12,337) $ 1,565,341 473,398 ‡ (31,722) ‡ $ (113,044) $ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ (6,665) ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ (119,709) (44,059) ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ (18,393) ‡ ‡ ‡ 4,358 ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ (138,102) (39,701) ‡ ‡ ‡ ‡ ‡ ‡ ‡ (6,498) ‡ ‡ ‡ ‡ 14,747 ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Total Stockholdersƒ Equity $ 2,002,912 473,398 (31,722) ‡ (13,112) 12,989 ‡ 35,336 5,139 (6,665) (17,662) 35 2,460,648 459,622 4,358 1 (19,558) 22,325 ‡ 20,422 4,369 (18,393) (17,764) 162 2,916,192 475,505 292 14,747 ‡ (6,531) ‡ 35,267 4,053 (6,498) (17,854) 23 ‡ ‡ ‡ ‡ ‡ ‡ ‡ (17,662) ‡ 2,021,077 459,622 ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ (17,764) ‡ 2,462,935 475,505 (490) ‡ ‡ ‡ ‡ ‡ ‡ ‡ (17,854) ‡ Balance,€December€30,€2017 73,936 $ 8 $ 664,646 $ (144,600) $ (24,954) $ 2,920,096 $ 3,415,196 The€accompanying€notes€to€the€consolidated€financial€statements are€an€integral€part€of€these€statements. F-5 Advance€Auto€Parts,€Inc.€and€Subsidiaries Consolidated€Statements€of€Cash€Flows (inƒthousands) Cash€flows€from€operating€activities: Net€income Adjustments€to€reconcile€net€income€to€net€cash€provided€by€operating€activities: Depreciation€and€amortization Share-based€compensation Loss€and€impairment€of€property€and€equipment Other,€net (Benefit)€provision€for€deferred€income€taxes Net€change€in: Receivables,€net Inventories Accounts€payable Accrued€expenses Other€assets€and€liabilities,€net Net€cash€provided€by€operating€activities Cash€flows€from€investing€activities: Purchases€of€property€and€equipment Proceeds€from€sales€of€property€and€equipment Other,€net Net€cash€used€in€investing€activities Cash€flows€from€financing€activities: Increase€(decrease)€in€bank€overdrafts Borrowings€under€credit€facilities Payments€on€credit€facilities Dividends€paid Proceeds€from€the€issuance€of€common€stock Tax€withholdings€related€to€the€exercise€of€stock€appreciation€rights Repurchase€of€common€stock Other,€net Net€cash€used€in€financing€activities Effect€of€exchange€rate€changes€on€cash Net€increase€(decrease)€in€cash€and€cash€equivalents Cash€and€cash€equivalents,€beginning€of€period Cash€and€cash€equivalents,€end€of€period Supplemental€cash€flow€information: Interest€paid Income€tax€payments Non-cash€transactions: Accrued€purchases€of€property€and€equipment Year€Ended December€30,€ €2017 December€31,€ €2016 January€2,€ €2016 $ 475,505 $ 459,622 $ 473,398 249,260 35,267 17,106 3,123 (151,263) 36,047 167,548 (197,168) (13,295) (21,325) 600,805 258,387 269,476 20,452 5,999 (2,039) 20,213 (41,642) (144,603) (119,325) 49,341 16,898 523,303 36,929 12,882 2,660 (9,219) (21,476) (244,096) 119,164 35,103 27,823 702,644 (189,758) (259,559) (234,747) 11,099 20 2,212 (4,697) (178,639) (262,044) 14,004 534,400 (534,400) (17,854) 4,076 (6,531) (6,498) (2,069) (14,872) 4,465 411,759 135,178 (5,573) 799,600 (959,600) (17,738) 4,532 (19,558) (18,393) (390) (217,120) 257 44,396 90,782 546,937 $ 135,178 $ 270 (18,889) (253,366) (2,922) 618,300 (1,041,700) (17,649) 5,174 (13,112) (6,665) (380) (458,954) (4,213) (13,889) 104,671 90,782 53,509 192,116 14,335 $ $ $ 55,457 225,327 21,176 $ $ $ 62,371 254,408 44,038 $ $ $ $ The€accompanying€notes€to€the€consolidated€financial€statements are€an€integral€part€of€these€statements. F-6 1. Nature€of€Operations€and€Basis€of€Presentation: Description€of€Business€ Advance€Auto€Parts,€Inc.€and€subsidiaries€is€a€leading€automotive€aftermarket€parts€provider€in€North€America,€serving both€ƒdo-it-for-me„,€or€Professional,€and€ƒdo-it-yourself,„€or€DIY€customers.€The€accompanying€consolidated€financial statements€have€been€prepared€by€the€Company€and€include€the€accounts€of€Advance€Auto€Parts,€Inc.€(ƒAdvance„),€its€wholly owned€subsidiary,€Advance€Stores€Company,€Incorporated€(ƒAdvance€Stores„),€and€its€subsidiaries€(collectively€referred€to€as ƒAdvance,„€ƒwe,„€ƒus,„€ƒour„€or€ƒthe€Company„).€ As€of€December€30,€2017,€the€Company(cid:129)s€operations€are€comprised€of€5,054€stores€and€129€distribution€branches€primarily within€the€United€States,€with€additional€locations€in€Canada,€Puerto€Rico€and€the€U.S.€Virgin€Islands.€The€Company(cid:129)s€stores operate€primarily€under€the€trade€names€ƒAdvance€Auto€Parts,„€ƒCarquest„€and€ƒAutopart€International,„€and€our€distribution branches€operate€under€the€ƒWorldpac„€trade€name.€In€addition,€we€served€1,218€independently€owned€Carquest€branded€stores (ƒindependent€stores„)€across€the€same€geographic€locations€served€by€the€Company(cid:129)s€stores€in€addition€to€Mexico,€the Bahamas,€Turks€and€Caicos,€the€British€Virgin€Islands€and€the€Pacific€Islands.€ Accounting€Period€ The€Company(cid:129)s€fiscal€year€ends€on€the€Saturday€nearest€the€end€of€December.€All€references€herein€for€the€years€2017, 2016€and€2015€represent€the€fiscal€years€ended€December€30,€2017,€December€31,€2016€and€January€2,€2016,€which€were€all€52 weeks. Basis€of€Presentation€ The€consolidated€financial€statements€include€the€accounts€of€Advance€and€its€wholly€owned€subsidiaries€prepared€in accordance€with€accounting€principles€generally€accepted€in€the€United€States€of€America€(ƒGAAP„).€All€intercompany balances€and€transactions€have€been€eliminated€in€consolidation.€Certain€amounts€in€the€prior€years(cid:129)€Consolidated€Balance Sheets€and€Statements€of€Changes€in€Stockholders(cid:129)€Equity€have€been€reclassified€to€conform€to€the€current€year€presentation. Use€of€Estimates The€preparation€of€financial€statements€in€conformity€with€GAAP€requires€management€to€make€estimates€and€assumptions that€affect€the€reported€amounts€of€assets€and€liabilities€and€the€disclosure€of€contingent€assets€and€liabilities€at€the€date€of€the financial€statements€and€the€reported€amounts€of€revenues€and€expenses€during€the€reporting€period.€Actual€results€could€differ materially€from€those€estimates. 2. Significant€Accounting€Policies: Cash€and€Cash€Equivalents€ Cash€and€cash€equivalents€consist€of€cash€in€banks€and€money€market€funds€with€original€maturities€of€three€months€or less.€Also€included€in€cash€equivalents€are€credit€card€and€debit€card€receivables€from€banks,€which€generally€settle€in€less€than four€business€days.€ Inventory The€Company(cid:129)s€inventory€consists€primarily€of€parts,€batteries,€accessories€and€other€products€used€on€vehicles€that€have reasonably€long€shelf€lives€and€is€stated€at€the€lower€of€cost€or€market.€The€cost€of€the€Company(cid:129)s€merchandise€inventory€is primarily€determined€using€the€last-in,€first-out€(ƒLIFO„)€method.€Under€the€LIFO€method,€the€Company(cid:129)s€cost€of€sales€reflects the€costs€of€the€most€recently€purchased€inventories,€while€the€inventory€carrying€balance€represents€the€costs€relating€to€prices paid€in€2017€and€prior€years.€The€Company€regularly€reviews€inventory€quantities€on-hand,€considers€whether€it€may€have excess€inventory€based€on€the€Company(cid:129)s€current€approach€for€managing€slower€moving€inventory€and€adjusts€the€carrying value€as€necessary. F-7 Vendor€Incentives€ The€Company€receives€incentives€in€the€form€of€reductions€to€amounts€owed€to€and/or€payments€from€vendors€related€to volume€rebates€and€other€promotional€considerations.€Many€of€these€incentives€are€under€long-term€agreements€in€excess€of one€year,€while€others€are€negotiated€on€an€annual€basis€or€shorter.€Advertising€allowances€provided€as€a€reimbursement€of specific,€incremental€and€identifiable€costs€incurred€to€promote€a€vendor(cid:129)s€products€are€included€as€an€offset€to€selling,€general and€administrative€expenses€(ƒSG&A„)€when€the€cost€is€incurred.€Volume€rebates€and€allowances€that€do€not€meet€the requirements€for€offsetting€in€SG&A€are€recorded€as€a€reduction€to€inventory€as€they€are€earned€based€on€inventory€purchases. Total€deferred€vendor€incentives€included€as€a€reduction€of€Inventory€were€$179.2€million€and€$211.1€million€as€of December€30,€2017€and€December€31,€2016. The€Company€recognizes€other€promotional€incentives€earned€under€long-term€agreements€not€specifically€related€to volume€of€purchases€as€a€reduction€to€cost€of€sales.€However,€these€incentives€are€not€deferred€as€a€reduction€of€inventory€and are€recognized€based€on€the€cumulative€net€purchases€as€a€percentage€of€total€estimated€net€purchases€over€the€life€of€the agreement.€Short-term€incentives€with€terms€less€than€one€year€are€generally€recognized€as€a€reduction€to€cost€of€sales€over€the duration€of€the€agreements.€Amounts€received€or€receivable€from€vendors€that€are€not€yet€earned€are€reflected€as€deferred revenue€in€the€accompanying€consolidated€balance€sheets.€ Property€and€Equipment Property€and€equipment€are€stated€at€cost€less€accumulated€depreciation.€Expenditures€for€maintenance€and€repairs€are charged€directly€to€expense€when€incurred;€major€improvements€are€capitalized.€When€items€are€sold€or€retired,€the€related€cost and€accumulated€depreciation€are€removed€from€the€account€balances,€with€any€gain€or€loss€reflected€in€the€consolidated statements€of€operations.€ Depreciation€of€land€improvements,€buildings,€furniture,€fixtures€and€equipment,€and€vehicles€is€provided€over€the estimated€useful€lives€of€the€respective€assets€using€the€straight-line€method.€Depreciation€of€building€and€leasehold improvements€is€provided€over€the€shorter€of€the€original€useful€lives€of€the€respective€assets€or€the€term€of€the€lease€using€the straight-line€method.€ Goodwill€and€Indefinite-Lived€Intangible€Assets The€Company€performs€its€evaluation€for€the€impairment€of€goodwill€and€indefinite-lived€intangible€assets€for€its€reporting units€annually€as€of€the€first€day€of€the€fourth€quarter,€or€when€indications€of€potential€impairment€exist.€These€indicators€would include€a€significant€change€in€operating€performance,€the€business€climate,€legal€factors,€competition,€or€a€planned€sale€or disposition€of€a€significant€portion€of€the€business,€among€other€factors.€The€Company€assesses€qualitative€factors€such€as current€company€performance€and€overall€economic€factors€to€determine€if€it€is€more-likely-than-not€that€the€goodwill€might€be impaired€and€whether€it€is€necessary€to€perform€the€step€one€quantitative€goodwill€impairment€test.€In€the€quantitative€goodwill test,€the€Company€compares€the€carrying€value€of€a€reporting€unit€to€its€fair€value.€If€the€carrying€value€of€the€reporting€unit exceeds€the€estimated€fair€value,€a€second€step€is€performed,€which€compares€the€implied€fair€value€of€goodwill€to€the€carrying value,€to€determine€the€amount€of€impairment.€The€Company(cid:129)s€indefinite-lived€intangible€assets€are€tested€for€impairment€at€the asset€group€level.€Indefinite-lived€intangibles€are€evaluated€by€comparing€the€carrying€amount€of€the€asset€to€the€future discounted€cash€flows€that€the€asset€is€expected€to€generate.€If€the€fair€value€based€on€the€future€discounted€cash€flows€exceeds the€carrying€value,€we€conclude€that€no€intangible€asset€impairment€has€occurred.€If€the€carrying€value€of€the€indefinite-lived intangible€asset€exceeds€the€fair€value,€we€recognize€an€impairment€loss. Effective€in€the€third€quarter€of€2017,€the€Company€realigned€its€three€geographic€divisions,€which€included€the€operations of€the€stores€operating€under€the€Advance€Auto€Parts,€Carquest€and€Autopart€International€trade€names,€into€two€U.S. geographic€divisions.€As€a€result€of€this€realignment€and€change€in€the€operating€structure€of€its€Carquest€Independent€and Carquest€Canada€businesses,€the€Company€has€increased€its€number€of€operating€segments€from€four€to€five,€and€defined€them as€ƒNorthern€Division,„€ƒSouthern€Division,„€ƒCarquest€Canada,„€ƒIndependents„€and€ƒWorldpac.„€As€each€operating€segment represents€a€reporting€unit,€goodwill€was€reassigned€to€the€affected€reporting€units€using€a€relative€fair€value€approach.€ F-8 Valuation€of€Long-Lived€Assets The€Company€evaluates€the€recoverability€of€its€long-lived€assets,€including€finite-lived€intangible€assets,€whenever€events or€changes€in€circumstances€indicate€that€the€carrying€amount€of€an€asset€might€not€be€recoverable€and€exceeds€its€fair€value. When€such€an€event€occurs,€the€Company€estimates€the€undiscounted€future€cash€flows€expected€to€result€from€the€use€of€the long-lived€asset€or€asset€group€and€its€eventual€disposition.€These€impairment€evaluations€involve€estimates€of€asset€useful€lives and€future€cash€flows.€If€the€undiscounted€expected€future€cash€flows€are€less€than€the€carrying€amount€of€the€asset€and€the carrying€amount€of€the€asset€exceeds€its€fair€value,€an€impairment€loss€is€recognized.€When€an€impairment€loss€is€recognized, the€carrying€amount€of€the€asset€is€reduced€to€its€estimated€fair€value€based€on€quoted€market€prices€or€other€valuation techniques€(e.g.,€discounted€cash€flow€analysis).€ Self-Insurance The€Company€is€self-insured€for€general€and€automobile€liability,€workers(cid:129)€compensation€and€health€care€claims€of€its employees,€or€Team€Members,€while€maintaining€stop-loss€coverage€with€third-party€insurers€to€limit€its€total€liability exposure.€Expenses€associated€with€these€liabilities€are€calculated€for€(i)€claims€filed,€(ii)€claims€incurred€but€not€yet€reported and€(iii)€projected€future€claims€using€actuarial€methods€followed€in€the€insurance€industry€as€well€as€the€Company(cid:129)s€historical claims€experience.€The€Company€includes€the€current€and€long-term€portions€of€its€self-insurance€reserves€in€Accrued€expenses and€Other€long-term€liabilities.€ Warranty€Liabilities€ The€warranty€obligation€on€the€majority€of€merchandise€sold€by€the€Company€with€a€manufacturer(cid:129)s€warranty€is€the responsibility€of€the€Company(cid:129)s€vendors.€However,€the€Company€has€an€obligation€to€provide€customers€replacement€of€certain merchandise€at€no€cost€or€merchandise€at€a€prorated€cost€if€under€a€warranty€and€not€covered€by€the€manufacturer.€Merchandise sold€with€warranty€coverage€by€the€Company€primarily€includes€batteries,€but€may€also€include€other€parts€such€as€brakes€and shocks.€The€Company€estimates€its€warranty€obligation€at€the€time€of€sale€based€on€the€historical€return€experience,€sales€level and€cost€of€the€respective€product€sold.€To€the€extent€vendors€provide€upfront€allowances€in€lieu€of€accepting€the€obligation€for warranty€claims€and€the€allowance€is€in€excess€of€the€related€warranty€expense,€the€excess€is€recorded€as€a€reduction€to€cost€of sales. Leases The€Company€leases€certain€store€locations,€distribution€centers,€office€spaces,€equipment€and€vehicles.€The€total€amount of€minimum€rent€is€expensed€on€a€straight-line€basis€over€the€initial€term€of€the€lease€unless€external€economic€factors€exist such€that€renewals€are€reasonably€assured.€In€those€instances,€the€renewal€period€would€be€included€in€the€lease€term€for purposes€of€establishing€an€amortization€period€and€determining€if€such€lease€qualified€as€a€capital€or€operating€lease. Differences€between€the€calculated€rent€expense€and€cash€payments€are€recorded€as€a€liability€within€the€Accrued€expenses€and Other€long-term€liabilities€captions€in€the€accompanying€consolidated€balance€sheets,€based€on€the€terms€of€the€lease.€Most leases€require€the€Company€pay€taxes,€maintenance,€insurance€and€certain€other€expenses€applicable€to€the€leased€premises. Management€expects€that€in€the€normal€course€of€business€leases€that€expire€will€be€renewed€or€replaced€by€other€leases. Fair€Value€Measurements€ A€three-level€valuation€hierarchy,€based€upon€observable€and€unobservable€inputs,€is€used€for€fair€value€measurements. Observable€inputs€reflect€market€data€obtained€from€independent€sources,€while€unobservable€inputs€reflect€market€assumptions based€on€the€best€evidence€available.€These€two€types€of€inputs€create€the€following€fair€value€hierarchy:€Level€1€-€Quoted prices€for€identical€instruments€in€active€markets;€Level€2€-€Quoted€prices€for€similar€instruments€in€active€markets,€quoted prices€for€identical€or€similar€instruments€in€markets€that€are€not€active€and€model-derived€valuations€whose€significant€inputs are€observable;€and€Level€3€-€Instruments€whose€significant€inputs€are€unobservable.€Financial€instruments€are€transferred€in and/or€out€of€Level€1,€2€or€3€at€the€beginning€of€the€accounting€period€in€which€there€is€a€change€in€the€valuation€inputs.€ F-9 Closed€Facility€Liabilities€and€Exit€Activities The€Company€continually€reviews€the€operating€performance€of€its€existing€store€locations€and€closes€or€relocates€certain stores€identified€as€underperforming.€In€addition,€the€Company€is€consolidating€certain€locations€as€part€of€its€planned integration€of€General€Parts€International,€Inc.€(ƒGPI„).€Expenses€accrued€pertaining€to€closed€facility€exit€activities€are included€in€the€Company(cid:129)s€closed€facility€liabilities,€within€Accrued€expenses€and€Other€long-term€liabilities€in€the accompanying€consolidated€balance€sheets,€and€recognized€in€SG&A€in€the€accompanying€consolidated€statements€of operations€at€the€time€of€facility€closure.€Closed€facility€liabilities€include€the€present€value€of€the€remaining€lease€obligations and€management(cid:129)s€estimate€of€future€costs€of€insurance,€property€tax€and€common€area€maintenance€expenses,€reduced€by€the present€value€of€estimated€revenues€from€subleases€and€lease€buyouts.€ Employees€receiving€severance€benefits€as€the€result€of€a€store€closing€or€other€restructuring€activity€are€required€to€render service€until€they€are€terminated€in€order€to€receive€benefits.€Severance€benefits€are€recognized€over€the€related€service€period. Other€restructuring€costs,€including€costs€to€relocate€employees,€are€recognized€in€the€period€in€which€the€liability€is€incurred. Share-Based€Payments The€Company€provides€share-based€compensation€to€its€eligible€Team€Members€and€Board€of€Directors.€The€Company€is required€to€exercise€judgment€and€make€estimates€when€determining€the€(i)€fair€value€of€each€award€granted€and€(ii)€projected number€of€awards€expected€to€vest.€The€Company€calculates€the€fair€value€of€all€share-based€awards€at€the€date€of€grant€and uses€the€straight-line€method€to€amortize€this€fair€value€as€compensation€cost€over€the€requisite€service€period.€ Revenue€Recognition€ The€Company€recognizes€revenue€at€the€time€the€sale€is€made,€at€which€time€the€Company(cid:129)s€walk-in€customers€take immediate€possession€of€the€merchandise€or€same-day€delivery€is€made€to€the€Company(cid:129)s€Professional€delivery€customers, which€include€certain€independently€owned€store€locations.€For€e-commerce€sales,€revenue€is€recognized€either€at€the€time€of pick-up€at€one€of€the€Company(cid:129)s€store€locations€or€at€the€time€of€shipment€depending€on€the€customer(cid:129)s€order€designation.€Sales are€recorded€net€of€discounts,€sales€incentives€and€rebates,€sales€taxes€and€estimated€returns€and€allowances.€The€Company estimates€the€reduction€to€sales€and€cost€of€sales€for€returns€based€on€current€sales€levels€and€the€Company(cid:129)s€historical€return experience.€ The€following€table€summarizes€financial€information€for€each€of€the€Company(cid:129)s€product€groups.€ Percentage€of€Sales,€by€Product€Group Parts€and€Batteries Accessories€and€Chemicals Engine€Maintenance Other Total December€30, 2017 Year€Ended December€31, 2016 January€2, 2016 65% 20% 14% 1% 100% 66% 19% 14% 1% 100% 66% 19% 14% 1% 100% Receivables,€net€consist€primarily€of€receivables€from€Professional€customers.€The€Company€grants€credit€to€certain Professional€customers€who€meet€the€Company(cid:129)s€pre-established€credit€requirements.€Accounts€receivable€is€stated€at€net realizable€value.€The€Company€regularly€reviews€accounts€receivable€balances€and€maintains€allowances€for€doubtful€accounts for€estimated€losses€whenever€events€or€circumstances€indicate€the€carrying€value€may€not€be€recoverable.€The€Company considers€the€following€factors€when€determining€if€collection€is€reasonably€assured:€customer€creditworthiness,€past transaction€history€with€the€customer,€current€economic€and€industry€trends€and€changes€in€customer€payment€terms.€The Company€controls€credit€risk€through€credit€approvals,€credit€limits€and€accounts€receivable€and€credit€monitoring€procedures. F-10 Cost€of€Sales€ Cost€of€sales€includes€actual€product€cost,€warranty€costs,€vendor€incentives,€cash€discounts€on€payments€to€vendors,€costs associated€with€operating€our€distribution€network,€including€payroll€and€benefits€costs,€occupancy€costs€and€depreciation,€in- bound€freight-related€costs€from€our€vendors€and€costs€associated€with€moving€merchandise€inventories€from€our€distribution centers€to€stores,€branch€locations€and€customers. € Selling,€General€and€Administrative€Expenses € SG&A€includes€payroll€and€benefits€costs€for€store€and€corporate€Team€Members,€occupancy€costs€of€store€and€corporate facilities,€depreciation€and€amortization€related€to€store€and€corporate€assets,€share-based€compensation€expense,€advertising, self-insurance,€costs€of€consolidating,€converting€or€closing€facilities,€including€early€termination€of€lease€obligations, severance€and€impairment€charges,€professional€services€and€costs€associated€with€our€Professional€delivery€program,€including payroll€and€benefit€costs,€and€transportation€expenses€associated€with€moving€merchandise€inventories€from€stores€and branches€to€customer€locations.€€ Advertising€Costs€ The€Company€expenses€advertising€costs€as€incurred.€Advertising€expense,€net€of€qualifying€vendor€promotional€funds, was€$102.8€million,€$97.0€million€and€$108.8€million€in€2017,€2016€and€2015.€Vendor€promotional€funds,€which€reduced advertising€expense,€amounted€to€$33.3€million€and€$29.3€million€and€$17.5€million€in€2017,€2016€and€2015. Foreign€Currency€Translation The€assets€and€liabilities€of€the€Company(cid:129)s€foreign€operations€are€translated€into€U.S.€dollars€at€current€exchange€rates,€and revenues,€expenses€and€cash€flows€are€translated€at€average€exchange€rates€for€the€year.€Resulting€translation€adjustments€are reflected€as€a€separate€component€in€the€Consolidated€Statements€of€Comprehensive€Income.€Losses€from€foreign€currency transactions,€which€are€included€in€Other€income,€net,€were€$4.0€million€during€2017€and€$7.4€million€during€2015.€Gains€and losses€from€foreign€currency€transactions€were€not€significant€in€2016. Income€Taxes€ The€Company€accounts€for€income€taxes€under€the€asset€and€liability€method,€which€requires€the€recognition€of€deferred tax€assets€and€liabilities€for€the€expected€future€tax€consequences€of€events€that€have€been€included€in€the€financial€statements. Under€the€asset€and€liability€method,€deferred€tax€assets€and€liabilities€are€determined€based€on€the€differences€between€the financial€statements€and€tax€basis€of€assets€and€liabilities€using€enacted€tax€rates€in€effect€for€the€year€in€which€the€differences are€expected€to€reverse.€Deferred€income€taxes€reflect€the€net€income€tax€effect€of€temporary€differences€between€the€basis€of assets€and€liabilities€for€financial€reporting€purposes€and€for€income€tax€reporting€purposes.€The€effect€of€a€change€in€tax€rates on€deferred€tax€assets€and€liabilities€is€recognized€in€income€in€the€period€of€the€enactment€date. The€Company€recognizes€tax€benefits€and/or€tax€liabilities€for€uncertain€income€tax€positions€based€on€a€two-step€process. The€first€step€is€to€evaluate€the€tax€position€for€recognition€by€determining€if€the€weight€of€available€evidence€indicates€that€it€is more€likely€than€not€that€the€position€will€be€sustained€on€audit,€including€resolution€of€related€appeals€or€litigation€processes,€if any.€The€second€step€requires€the€Company€to€estimate€and€measure€the€tax€benefit€as€the€largest€amount€that€is€more€than€50% likely€to€be€realized€upon€ultimate€settlement.€It€is€inherently€difficult€and€subjective€to€estimate€such€amounts€as€the€Company must€determine€the€probability€of€various€possible€outcomes.€ The€Company€reevaluates€these€uncertain€tax€positions€on€a€quarterly€basis€or€when€new€information€becomes€available€to management.€The€reevaluations€are€based€on€many€factors,€including€but€not€limited€to,€changes€in€facts€or€circumstances, changes€in€tax€law,€successfully€settled€issues€under€audit,€expirations€due€to€statutes€of€limitations€and€new€federal€or€state audit€activity.€Any€change€in€either€the€Company(cid:129)s€recognition€or€measurement€could€result€in€the€recognition€of€a€tax€benefit or€an€increase€to€the€tax€accrual.€€ F-11 Earnings€per€Share€ Basic€earnings€per€share€of€common€stock€has€been€computed€based€on€the€weighted-average€number€of€common€shares outstanding€during€the€period,€which€is€reduced€by€stock€held€in€treasury€and€shares€of€nonvested€restricted€stock€units.€Diluted earnings€per€share€is€calculated€by€including€the€effect€of€dilutive€securities.€Diluted€earnings€per€share€of€common€stock reflects€the€weighted-average€number€of€shares€of€common€stock€outstanding,€outstanding€deferred€stock€units€and€the€impact of€outstanding€stock€options€and€stock€appreciation€rights€(collectively€ƒshare-based€awards„).€Share-based€awards€containing performance€conditions€are€included€in€the€dilution€impact€as€those€conditions€are€met.€ Segment€Information Operating€segments€are€defined€as€components€of€an€enterprise€for€which€discrete€financial€information€is€available€that€is evaluated€regularly€by€the€chief€operating€decision€maker€(ƒCODM„)€for€purposes€of€allocating€resources€and€evaluating financial€performance.€The€Company(cid:129)s€CODM,€the€Chief€Executive€Officer,€reviews€financial€information€presented€on€a consolidated€basis,€accompanied€by€information€about€the€Company(cid:129)s€five€operating€segments,€for€purposes€of€allocating resources€and€evaluating€financial€performance. For€2017€and€2016,€the€Company€has€one€reportable€segment€as€the€five€operating€segments€are€aggregated€due€primarily to€the€economic€and€operational€similarities€of€each€operating€segment€as€the€stores€and€branches€have€similar€characteristics, including€the€nature€of€the€products€and€services,€customer€base€and€the€methods€used€to€distribute€products€and€provide service€to€its€customers.€ Recently€Issued€Accounting€Pronouncements In€January€2017,€the€Financial€Accounting€Standards€Board€(ƒFASB„)€issued€ASU€2017-04,€ƒIntangibles€-€Goodwill€and Other€(Topic€350):€Simplifying€the€Test€for€Goodwill€Impairment„€to€simplify€the€accounting€for€goodwill€impairment.€The guidance€removes€Step€2€of€the€goodwill€impairment€test,€which€required€a€hypothetical€purchase€price€allocation.€A€goodwill impairment€will€now€be€the€amount€by€which€a€reporting€unit(cid:129)s€carrying€value€exceeds€its€fair€value,€not€to€exceed€the€carrying amount€of€goodwill.€The€ASU€is€effective€for€fiscal€years,€and€for€interim€periods€within€those€years,€beginning€after€December 15,€2019,€with€early€adoption€permitted€after€January€1,€2017.€The€Company€elected€to€early€adopt€ASU€2017-04€in€2017€and applied€the€new€guidance€in€completion€of€its€annual€goodwill€impairment€test€performed€in€the€fourth€quarter€of€2017. In€March€2016,€the€FASB€issued€ASU€2016-09,€ƒCompensation‡ Stock€Compensation€(Topic€718):€Improvements€to Employee€Share-Based€Payment€Accounting„€aimed€at€simplifying€certain€aspects€of€accounting€for€share-based€payment transactions.€The€areas€for€simplification€include€the€accounting€for€income€taxes,€forfeitures,€and€statutory€tax€withholding requirements,€as€well€as€classification€in€the€statement€of€cash€flows.€The€Company€adopted€ASU€2016-09€in€the€first€quarter€of 2017€and€recorded€a€cumulative€net€increase€in€stockholders(cid:129)€equity€of€$0.3€million€related€to€the€Company(cid:129)s€election€to€record forfeitures€as€they€occur.€In€addition,€the€Company€elected€to€retrospectively€adopt€the€provision€regarding€the€presentation€of excess€tax€benefits€in€the€statement€of€cash€flows,€which€resulted€in€an€increase€in€our€net€cash€provided€by€operating€activities and€a€decrease€in€our€net€cash€provided€by€financing€activities€of€$22.4€million€and€$13.0€million€for€2016€and€2015.€The provision€requiring€the€inclusion€of€excess€tax€benefits€(deficits)€as€a€component€of€the€Provision€for€income€taxes€in€the consolidated€results€of€operations€is€being€applied€prospectively.€The€Company€recorded€excess€tax€benefits€of€$2.3€million€as€a reduction€in€Provision€for€income€taxes€during€2017.€ F-12 In€February€2016,€the€FASB€issued€ASU€2016-02,€ƒLeases€(Topic€842).„€This€ASU€is€a€comprehensive€new€leases€standard that€amends€various€aspects€of€existing€guidance€for€leases€and€requires€additional€disclosures€about€leasing€arrangements.€It will€require€lessees€to€recognize€lease€assets€and€lease€liabilities€for€most€leases,€including€those€leases€previously€classified€as operating€leases€under€current€GAAP.€Topic€842€retains€a€distinction€between€finance€leases€and€operating€leases.€The classification€criteria€for€distinguishing€between€finance€leases€and€operating€leases€are€substantially€similar€to€the€classification criteria€for€distinguishing€between€capital€leases€and€operating€leases€in€the€previous€leases€guidance.€The€ASU€is€effective€for annual€periods€beginning€after€December€15,€2018,€including€interim€periods€within€those€years;€earlier€adoption€is€permitted. The€FASB€issued€an€exposure€draft€to€amend€Topic€842€to€provide€entities€with€an€additional€transition€method€with€which€to adopt€Topic€842.€The€proposed€transition€method€would€enable€entities€to€apply€the€transition€requirements€in€Topic€842€at€the effective€date€of€that€Topic€(rather€than€at€the€beginning€of€the€earliest€comparative€period€presented€as€currently€required)€with the€effects€of€initially€applying€Topic€842€recognized€as€a€cumulative-effect€adjustment€to€retained€earnings€in€the€period€of adoption.€Consequently,€an€entity(cid:129)s€reporting€for€the€comparative€periods€presented€in€the€year€of€adoption€would€continue€to be€in€accordance€with€Topic€840,€including€the€disclosure€requirements€of€that€Topic.€Practical€expedients€are€available€for election€as€a€package€and€if€applied€consistently€to€all€leases. The€Company€has€selected€its€leasing€software€solution€and€is€in€the€process€of€identifying€changes€to€its€business processes,€systems€and€controls€to€support€adoption€of€the€new€standard€in€2019.€The€Company€is€evaluating€the€impact€that€the new€standard€will€have€on€the€consolidated€financial€statements.€While€the€Company€is€unable€to€quantify€the€impact€at€this time,€it€expects€the€adoption€of€the€new€standard€to€result€in€a€material€increase€in€the€assets€and€liabilities€in€the€consolidated financial€statements.€At€this€time,€the€Company€does€not€expect€adoption€of€ASU€2016-02€to€have€a€material€impact€on€its consolidated€statements€of€operations€as€the€majority€of€its€leases€will€remain€operating€in€nature.€As€such,€the€expense recognition€will€be€similar€to€previously€required€straight-line€expense€treatment. In€May€2014,€the€FASB€issued€ASU€No.€2014-09,€ƒRevenue€from€Contracts€with€Customers€(Topic€606)„€as€modified€by subsequently€issued€ASUs€2015-14,€2016-08,€2016-10,€2016-12€and€2016-20€(collectively,€ƒTopic€606„).€Topic€606€superseded existing€revenue€recognition€standards€with€a€single€model.€The€revenue€recognition€principle€in€Topic€606€is€that€an€entity should€recognize€revenue€to€depict€the€transfer€of€goods€or€services€to€customers€in€an€amount€that€reflects€the€consideration€to which€the€entity€expects€to€be€entitled€in€exchange€for€those€goods€or€services.€The€Company€plans€to€adopt€Topic€606€in€the first€quarter€of€2018€by€applying€the€modified€retrospective€approach.€Results€for€reporting€periods€beginning€after€December 30,€2017€will€be€presented€under€Topic€606,€while€prior€period€amounts€are€not€adjusted€and€continue€to€be€reported€under€the accounting€standards€in€effect€for€the€prior€period.€Generally€the€Company(cid:129)s€performance€obligations€are€satisfied€the€same€day contracts€with€customers€are€initiated.€As€such,€the€adoption€of€the€new€standard€will€not€have€a€material€impact€on€the Company(cid:129)s€consolidated€financial€condition,€results€of€operations,€cash€flows,€business€process,€controls€or€systems. Additionally,€we€expect€the€impact€of€the€adoption€of€the€new€standard€to€be€immaterial€to€our€net€income€on€an€ongoing€basis. € 3. Inventories: The€Company€used€the€LIFO€method€of€accounting€for€approximately€88%€and€89%€of€inventories€at€December€30,€2017 and€December€31,€2016.€As€a€result€of€changes€in€the€LIFO€reserve,€the€Company€recorded€an€increase€to€cost€of€sales€of€$2.7 million€in€2017€and€a€reduction€to€cost€of€sales€of€$40.7€million€and€$42.3€million€in€2016€and€2015.€ Purchasing€and€warehousing€costs€included€in€inventory€as€of€December€30,€2017€and€December€31,€2016,€were€$429.8 million€and€$395.2€million. Inventory€balances€were€as€follows: (inƒthousands) Inventories€at€FIFO Adjustments€to€state€inventories€at€LIFO Inventories€at€LIFO $ December€30,€ €2017 3,965,370 203,122 4,168,492 $ F-13 $ December€31,€ €2016 4,120,030 205,838 4,325,868 $ 4. Exit€Activities€and€Other€Initiatives: IntegrationƒofƒCarquestƒstores The€Company€is€in€the€process€of€a€multi-year€integration,€which€includes€the€consolidation€and€conversion€of€its€Carquest stores€acquired€with€GPI€in€2014.€As€of€December€30,€2017,€346€Carquest€stores€acquired€with€GPI€had€been€consolidated€into existing€Advance€Auto€Parts€stores€and€422€stores€had€been€converted€to€the€Advance€Auto€Parts€format.€During€2017,€a€total€of 13€Carquest€stores€were€consolidated€and€140€stores€were€converted.€During€2016,€a€total€of€156€Carquest€stores€were consolidated€and€123€stores€were€converted.€We€expect€to€consolidate€or€convert€the€remaining€U.S.€Carquest€stores€over€the next€few€years.€As€of€December€30,€2017,€the€Company€had€437€stores,€including€138€stores€in€Canada,€still€operating€under the€Carquest€name.€ The€Company€incurred€$1.0€million,€$18.9€million€and€$7.3€million€of€exit€costs€related€to€the€consolidations€and conversions€during€2017,€2016€and€2015,€primarily€related€to€closed€store€lease€obligations.€ 2017ƒFieldƒandƒSupportƒCenterƒRestructuringƒ In€June€2017,€the€Company€restructured€its€field€organization€and€streamlined€its€operating€structure.€The€restructuring activity€was€substantially€complete€as€of€December€30,€2017€and€resulted€in€the€recognition€of€$7.9€million€of€severance expense. 2017ƒStoreƒandƒSupplyƒChainƒRationalizationƒ During€the€fourth€quarter€2017,€the€Board€of€Directors€approved€a€plan€to€close€certain€underperforming€stores€and€begin to€rationalize€the€Company's€supply€chain€costs€as€part€of€the€Company(cid:129)s€strategy€to€transform€the€enterprise.€The€Company expects€these€actions€will€result€in€estimated€charges€of€up€to€$70€million€in€2018.€These€charges€consist€of€$35€million€related to€the€early€termination€of€lease€obligations,€$15€million€of€inventory€and€supply€chain€asset€impairment€charges,€$15€million€of other€facility€closure€costs,€and€$5€million€of€severance.€At€December€30,€2017,€no€stores€or€distribution€centers€had€been closed€in€connection€with€this€activity;€however,€the€Company€recorded€an€impairment€charge€of€$6.9€million€as€part€of€this plan€to€close€certain€underperforming€stores.€ TotalƒExitƒLiabilities The€Company(cid:129)s€total€exit€liabilities€include€liabilities€recorded€in€connection€with€the€consolidation€of€Carquest€stores€and restructuring€activities€described€above,€along€with€liabilities€associated€with€facility€closures€that€have€occurred€as€part€of€our normal€market€evaluation€process.€Cash€payments€on€the€closed€facility€lease€obligations€are€expected€to€be€made€through€2028 and€the€remaining€severance€payments€are€expected€to€be€made€in€2018.€Of€the€Company(cid:129)s€total€exit€liabilities€as€of December€30,€2017,€$19.8€million€is€included€in€Other€long-term€liabilities€and€the€remainder€is€included€in€Accrued€expenses in€the€accompanying€condensed€consolidated€balance€sheets.€A€summary€of€the€Company(cid:129)s€exit€liabilities€are€presented€in€the following€table: (inƒthousands) Balance,€January€2,€2016 Reserves€established Change€in€estimates Cash€payments Balance,€December€31,€2016 Reserves€established Change€in€estimates Cash€payments Balance,€December€30,€2017 Severance 6,255 988 (410) (5,874) 959 7,927 (699) (6,542) 1,645 $ $ $ $ Total 48,745 24,240 (3,483) (24,278) 45,224 15,867 (1,815) (26,061) 33,215 Closed€Facility Lease Obligations $ $ 42,490 23,252 (3,073) (18,404) 44,265 7,940 (1,116) (19,519) 31,570 F-14 5. Goodwill€and€Intangible€Assets: Goodwill At€December€30,€2017€and€December€31,€2016,€the€carrying€amount€of€goodwill€was€$994.3€million€and€$990.9€million. The€change€in€goodwill€during€2017€and€2016€was€$3.4€million€and€$1.4€million€related€to€foreign€currency€translation. IntangibleƒAssetsƒOtherƒThanƒGoodwill Amortization€expense€was€$47.4€million,€$48.0€million€and€$53.1€million€for€2017,€2016€and€2015.€A€summary€of€the composition€of€the€gross€carrying€amounts€and€accumulated€amortization€of€acquired€intangible€assets€are€presented€in€the following€table: (inƒthousands) Amortized€intangible€assets: Customer€relationships Favorable€leases Non-compete€and€other December€30,€2017 December€31,€2016 Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net (116,909) $ 234,294 17,553 $ 349,615 48,693 $ $ 351,203 32,512 $ 54,929 438,644 (14,959) (46,389) (178,257) 8,540 54,130 260,387 452,438 (89,420) $ 260,195 (24,864) 23,829 (32,708) (146,992) 305,446 21,422 Indefinite-lived€intangible€assets: Brands,€trademark€and€tradenames Total€intangible€assets 337,287 $ 775,931 $ ‡ 337,287 (178,257) $ 597,674 335,457 $ 787,895 $ ‡ 335,457 (146,992) $ 640,903 During€2017,€the€Company€retired€$16.1€million€of€fully€amortized€intangible€assets,€impacting€both€the€gross€carrying amount€and€accumulated€amortization€by€this€amount. FutureƒAmortizationƒExpense The€table€below€shows€expected€amortization€expense€for€the€next€five€years€and€thereafter€for€acquired€intangible€assets recorded€as€of€December€30,€2017: Year (inƒthousands) Amount 2018 2019 2020 2021 2022 Thereafter $ $ 42,795 32,358 31,707 31,066 30,947 91,514 260,387 F-15 6.€ Receivables,€net: Receivables,€net€consist€of€the€following: (inƒthousands) December€30,€ €2017 December€31,€ €2016 Trade Vendor Other Total€receivables Less:€Allowance€for€doubtful€accounts Receivables,€net $ $ 389,963 $ 220,510 14,103 624,576 (18,219) 606,357 $ 407,301 239,770 23,345 670,416 (29,164) 641,252 7. Long-term€Debt€and€Fair€Value€of€Financial€Instruments:€ Long-term€debt€consists€of€the€following:€ (inƒthousands) December€30, 2017 December€31, 2016 5.75%€Senior€Unsecured€Notes€(net€of€unamortized€discount€and€debt€issuance costs€of€$1,403€and€$1,994€at€December€30,€2017€and€December€31,€2016)€due May€1,€2020 4.50%€Senior€Unsecured€Notes€(net€of€unamortized€discount€and€debt€issuance costs€of€$1,108€and€$1,384€at€December€30,€2017€and€December€31,€2016)€due January€15,€2022 4.50%€Senior€Unsecured€Notes€(net€of€unamortized€discount€and€debt€issuance costs€of€$3,162€and€$3,673€at€December€30,€2017€and€December€31,€2016)€due December€1,€2023 Other Less:€Current€portion€of€long-term€debt Long-term€debt,€excluding€current€portion Fair€value€of€long-term€debt FairƒValueƒofƒFinancialƒAssetsƒandƒLiabilities $ 298,597 $ 298,006 298,892 298,616 446,838 350 1,044,677 (350) 1,044,327 1,109,000 $ $ 446,327 306 1,043,255 (306) 1,042,949 1,118,000 $ $ The€fair€value€of€the€Company(cid:129)s€senior€unsecured€notes€was€determined€using€Level€2€inputs€based€on€quoted€market prices.€The€Company€believes€the€carrying€value€of€its€other€long-term€debt€approximates€fair€value.€The€carrying€amounts€of the€Company(cid:129)s€cash€and€cash€equivalents,€receivables,€accounts€payable€and€accrued€expenses€approximate€their€fair€values due€to€the€relatively€short-term€nature€of€these€instruments. BankƒDebt On€January€31,€2017,€the€Company€entered€into€a€new€credit€agreement€that€provides€a€$1.0€billion€unsecured€revolving credit€facility€(the€ƒ2017€Credit€Agreement„)€with€Advance€Stores,€as€Borrower,€the€lenders€party€thereto,€and€Bank€of America,€N.A.,€as€the€administrative€agent€and€replaces€a€prior€credit€agreement€entered€into€in€2013.€The€2017€Credit Agreement€provides€for€the€issuance€of€letters€of€credit€with€a€sublimit€of€$200.0€million.€The€Company€may€request€that€the total€revolving€commitment€be€increased€by€an€amount€not€exceeding€$250.0€million€during€the€term€of€the€2017€Credit Agreement.€Voluntary€prepayments€and€voluntary€reductions€of€the€revolving€loan€balance,€if€any,€are€permitted€in€whole€or€in part,€at€the€Company(cid:129)s€option,€in€minimum€principal€amounts€as€specified€in€the€2017€Credit€Agreement.€The€2017€Credit Agreement€terminates€in€January€2022;€however,€the€Company€may€request€one€or€two€one-year€extensions€of€the€termination date€prior€to€the€first€or€second€anniversary€of€the€closing€date. F-16 As€of€December€30,€2017,€the€Company€had€no€outstanding€borrowings€under€the€revolver€and€borrowing€availability€was $517.6€million€based€on€the€Company(cid:129)s€leverage€ratio.€As€of€December€30,€2017,€the€Company€had€letters€of€credit€outstanding of€$111.7€million,€which€generally€have€a€term€of€one€year€or€less€and€primarily€serve€as€collateral€for€the€Company(cid:129)s€self- insurance€policies. Interest€on€any€borrowings€on€the€revolver€will€be€based,€at€the€Company(cid:129)s€option,€on€an€adjusted€LIBOR,€plus€a€margin, or€an€alternate€base€rate,€plus€a€margin.€After€an€initial€interest€period,€the€Company€may€elect€to€convert€a€particular€borrowing to€a€different€type.€The€initial€margins€per€annum€for€the€revolving€loan€are€1.10%€for€the€adjusted€LIBOR€and€0.10%€for alternate€base€rate€borrowings.€A€facility€fee€of€0.15%€per€annum€is€charged€on€the€total€revolving€facility€commitment,€payable quarterly€in€arrears.€Under€the€terms€of€the€2017€Credit€Agreement,€the€interest€rate€spread€and€facility€fee€are€based€on€the Company(cid:129)s€credit€rating.€The€interest€rate€spread€ranges€from€0.91%€to€1.50%€for€adjusted€LIBOR€borrowings€and€0.00%€to 0.50%€for€alternate€base€rate€borrowings.€ The€2017€Credit€Agreement€contains€customary€covenants€restricting€the€ability€of:€(a)€Advance€Stores€and€its€subsidiaries to,€among€other€things,€(i)€create,€incur€or€assume€additional€debt€(only€with€respect€to€subsidiaries€of€Advance€Stores),€(ii) incur€liens,€(iii)€guarantee€obligations,€and€(iv)€change€the€nature€of€its€business€conducted€by€itself€and€its€subsidiaries;€(b) Advance,€Advance€Stores€and€their€subsidiaries€to,€among€other€things€(i)€enter€into€certain€hedging€arrangements,€(ii)€enter into€restrictive€agreements€limiting€their€ability€to€incur€liens€on€any€of€their€property€or€assets,€pay€distributions,€repay€loans, or€guarantee€indebtedness€of€their€subsidiaries;€and€(c)€Advance,€among€other€things,€to€change€the€holding€company€status€of Advance.€Advance€Stores€is€required€to€comply€with€financial€covenants€with€respect€to€a€maximum€leverage€ratio€and€a minimum€coverage€ratio.€The€2017€Credit€Agreement€also€provides€for€customary€events€of€default,€including€non-payment defaults,€covenant€defaults€and€cross-defaults€of€Advance€Stores(cid:129)€other€material€indebtedness.€The€Company€was€in€compliance with€its€financial€covenants€with€respect€to€the€2017€Credit€Agreement€as€of€December€30,€2017. On€January€31,€2018,€the€Company,€entered€into€Amendment€No.€1€to€the€Credit€Agreement€dated€as€of€January€31,€2017 (the€ƒAmendment„),€among€Advance€Stores,€as€Borrower,€the€lenders€party€thereto,€and€Bank€of€America,€N.A.,€Administrative Agent.€The€Amendment:€(i)€provided€for€LIBOR€replacement€rates€in€the€event€that€LIBOR€is€unavailable€in€the€future;€(ii) modified€the€definitions€of€the€financial€covenants€(and€the€testing€level€relating€thereto)€with€respect€to€a€maximum€leverage ratio€and€a€minimum€coverage€ratio€that€the€Company€is€required€to€comply€with;€and€(iii)€extended€the€termination€date€of€the 2017€Credit€Agreement€from€January€31,€2022€until€January€31,€2023.€The€Company€has€the€option€to€make€one€additional written€request€of€the€lenders€to€extend€the€termination€date€then€in€effect€for€one€additional€year. SeniorƒUnsecuredƒNotes The€Company(cid:129)s€4.50%€senior€unsecured€notes€were€issued€in€December€2013€at€99.69%€of€the€principal€amount€of€$450.0 million€and€are€due€December€1,€2023€(the€ƒ2023€Notes„).€The€2023€Notes€bear€interest€at€a€rate€of€4.50%€per€year€payable semi-annually€in€arrears€on€June€1€and€December€1€of€each€year.€The€Company(cid:129)s€4.50%€senior€unsecured€notes€were€issued€in January€2012€at€99.968%€of€the€principal€amount€of€$300.0€million€and€are€due€January€15,€2022€(the€ƒ2022€Notes„).€The€2022 Notes€bear€interest€at€a€rate€of€4.50%€per€year€payable€semi-annually€in€arrears€on€January€15€and€July€15€of€each€year.€The Company(cid:129)s€5.75%€senior€unsecured€notes€were€issued€in€April€2010€at€99.587%€of€the€principal€amount€of€$300.0€million€and are€due€May€1,€2020€(the€ƒ2020€Notes„€or€collectively€with€the€2023€Notes€and€the€2022€Notes,€ƒthe€Notes„).€The€2020€Notes bear€interest€at€a€rate€of€5.75%€per€year€payable€semi-annually€in€arrears€on€May€1€and€November€1€of€each€year.€Advance served€as€the€issuer€of€the€Notes€with€certain€of€Advance(cid:129)s€domestic€subsidiaries€currently€serving€as€subsidiary€guarantors.€The terms€of€the€Notes€are€governed€by€an€indenture€(as€amended,€supplemented,€waived€or€otherwise€modified,€the€ƒIndenture„) among€the€Company,€the€subsidiary€guarantors€from€time€to€time€party€thereto€and€Wells€Fargo€Bank,€National€Association,€as Trustee. The€Company€may€redeem€some€or€all€of€the€Notes€at€any€time€or€from€time€to€time,€at€the€redemption€price€described€in the€Indenture.€In€addition,€in€the€event€of€a€Change€of€Control€Triggering€Event€(as€defined€in€the€Indenture€for€the€Notes),€the Company€will€be€required€to€offer€to€repurchase€the€Notes€at€a€price€equal€to€101%€of€the€principal€amount€thereof,€plus accrued€and€unpaid€interest€to€the€repurchase€date.€The€Notes€are€currently€fully€and€unconditionally€guaranteed,€jointly€and severally,€on€an€unsubordinated€and€unsecured€basis€by€each€of€the€subsidiary€guarantors.€The€Company€will€be€permitted€to release€guarantees€without€the€consent€of€holders€of€the€Notes€under€the€circumstances€described€in€the€Indenture:€(i)€upon€the release€of€the€guarantee€of€the€Company(cid:129)s€other€debt€that€resulted€in€the€affected€subsidiary€becoming€a€guarantor€of€this€debt; (ii)€upon€the€sale€or€other€disposition€of€all€or€substantially€all€of€the€stock€or€assets€of€the€subsidiary€guarantor;€or€(iii)€upon€the Company(cid:129)s€exercise€of€its€legal€or€covenant€defeasance€option.€ F-17 The€Indenture€contains€customary€provisions€for€events€of€default€including€for:€(i)€failure€to€pay€principal€or€interest€when due€and€payable;€(ii)€failure€to€comply€with€covenants€or€agreements€in€the€Indenture€or€the€Notes€and€failure€to€cure€or€obtain a€waiver€of€such€default€upon€notice;€(iii)€a€default€under€any€debt€for€money€borrowed€by€the€Company€or€any€of€its subsidiaries€that€results€in€acceleration€of€the€maturity€of€such€debt,€or€failure€to€pay€any€such€debt€within€any€applicable€grace period€after€final€stated€maturity,€in€an€aggregate€amount€greater€than€$25.0€million€without€such€debt€having€been€discharged or€acceleration€having€been€rescinded€or€annulled€within€10€days€after€receipt€by€the€Company€of€notice€of€the€default€by€the Trustee€or€holders€of€not€less€than€25%€in€aggregate€principal€amount€of€the€Notes€then€outstanding;€and€(iv)€events€of bankruptcy,€insolvency€or€reorganization€affecting€the€Company€and€certain€of€its€subsidiaries.€In€the€case€of€an€event€of default,€the€principal€amount€of€the€Notes€plus€accrued€and€unpaid€interest€may€be€accelerated.€The€Indenture€also€contains covenants€limiting€the€ability€of€the€Company€and€its€subsidiaries€to€incur€debt€secured€by€liens€and€to€enter€into€sale€and€lease- back€transactions. FutureƒPayments As€of€December€30,€2017,€the€aggregate€future€annual€maturities€of€long-term€debt€instruments€are€as€follows: Year (inƒthousands) Amount $ 2018 2019 2020 2021 2022 Thereafter 350 ‡ 300,000 ‡ 300,000 450,000 $ 1,050,350 DebtƒGuaranteesƒ The€Company€is€a€guarantor€of€loans€made€by€banks€to€various€independently€owned€Carquest-branded€stores€that€are customers€of€the€Company€totaling€$24.8€million€as€of€December€30,€2017.€These€loans€are€collateralized€by€security agreements€on€merchandise€inventory€and€other€assets€of€the€borrowers.€The€approximate€value€of€the€inventory€collateralized by€these€agreements€is€$62.8€million€as€of€December€30,€2017.€The€Company€believes€that€the€likelihood€of€performance€under these€guarantees€is€remote. 8. Property€and€Equipment: € Property€and€equipment€consists€of€the€following: (inƒthousands) Land€and€land€improvements Buildings Building€and€leasehold€improvements Furniture,€fixtures€and€equipment Vehicles Construction€in€progress Less€-€Accumulated€depreciation Property€and€equipment,€net Useful€Lives December€30,€ €2017 December€31,€ €2016 0€-€10€years $ 451,261 $ 478,235 490,635 444,262 471,740 451,979 1,675,522 1,583,096 16,587 65,281 3,177,521 (1,783,383) 1,394,138 $ $ 35,133 120,778 3,106,988 (1,660,648) 1,446,340 30€-€40€years 3€-€30€years 3€-€20€years 2€-€13€years F-18 Depreciation€expense€was€$206.9€million,€$216.0€million€and€$223.7€million€for€2017,€2016€and€2015.€The€Company capitalized€$11.2€million,€$13.0€million€and€$13.5€million€incurred€for€the€development€of€internal€use€computer€software during€2017,€2016€and€2015.€These€costs€are€included€in€the€furniture,€fixtures€and€equipment€category€above€and€are depreciated€on€the€straight-line€method€over€three€to€ten€years. In€2017,€2016€and€2015,€the€Company€recognized€impairment€losses€of€$13.3€million,€$2.8€million€and€$11.0€million,€on various€store€and€corporate€assets. 9. Accrued€Expenses: € Accrued€expenses€consist€of€the€following: (inƒthousands) December€30,€ €2017 December€31,€ €2016 Payroll€and€related€benefits $ 92,106 $ Taxes€payable Self-insurance€reserves Warranty€reserves Capital€expenditures Other 112,930 65,463 49,024 14,335 199,690 Total€accrued€expenses $ 533,548 $ 97,496 121,860 58,743 47,243 21,176 207,879 554,397 The€following€table€presents€changes€in€the€Company(cid:129)s€warranty€reserves: (inƒthousands) Warranty€reserves,€beginning€of€period Additions€to€warranty€reserves Reserves€utilized Warranty€reserves,€end€of€period 10. Stock€Repurchases: December€30,€ €2017 Year€Ended December€31,€ €2016 January€2,€ €2016 $ $ 47,243 $ 44,479 $ 50,895 (49,114) 49,024 $ 46,903 (44,139) 47,243 $ 47,972 44,367 (47,860) 44,479 The€Company(cid:129)s€stock€repurchase€program€allows€it€to€repurchase€its€common€stock€on€the€open€market€or€in€privately negotiated€transactions€from€time€to€time.€The€Company(cid:129)s€$500€million€stock€repurchase€program€in€place€as€of€December€30, 2017€was€authorized€by€its€Board€of€Directors€on€May€14,€2012.€During€2017€and€2016,€the€Company€repurchased€no€shares€of its€common€stock€under€its€stock€repurchase€program.€The€Company€had€$415.1€million€remaining€under€its€stock€repurchase program€as€of€December€30,€2017.€ The€Company€repurchased€57€thousand€and€116€thousand€shares€of€its€common€stock€at€an€aggregate€cost€of€$6.5€million and€$18.4€million,€or€an€average€price€of€$114.23€and€$158.84€per€share,€in€connection€with€the€net€settlement€of€shares€issued as€a€result€of€the€vesting€of€restricted€stock€units€in€2017€and€2016.€ F-19 11. Earnings€per€Share: € The€computation€of€basic€and€diluted€earnings€per€share€is€as€follows:ƒ (inƒthousands,ƒexceptƒperƒshareƒdata) Numerator Net€income€applicable€to€common€shares Denominator Basic€weighted€average€common€shares Dilutive€impact€of€share-based€awards Diluted€weighted€average€common€shares Basic€earnings€per€common€share Net€income€applicable€to€common€stockholders Diluted€earnings€per€common€share Net€income€applicable€to€common€stockholders € 12. Income€Taxes: € U.S.ƒTaxƒReform December€30,€ €2017 Year€Ended December€31,€ €2016 January€2,€ €2016 $ 475,505 $ 459,622 $ 473,398 73,846 264 74,110 73,562 294 73,856 $ $ 6.44 6.42 $ $ 6.22 6.20 $ $ 73,190 543 73,733 6.45 6.40 On€December€22,€2017,€the€Tax€Cuts€and€Jobs€Act€(the€ƒAct„)€was€signed€into€law.€The€Act€amends€the€Internal€Revenue Code€by,€among€other€things,€permanently€lowering€the€corporate€tax€rate€to€21%€from€the€existing€maximum€rate€of€35%, implementing€a€territorial€tax€system€and€imposing€a€transition€tax€on€deemed€repatriated€earnings€of€foreign€subsidiaries.€The Company€is€required€to€remeasure€deferred€income€tax€assets€and€liabilities€in€the€reporting€period€of€enactment.€The remeasurement€of€the€Company(cid:129)s€net€deferred€income€tax€liability€resulted€in€a€$155.1€million€income€tax€benefit€in€2017. The€Company€recorded€an€estimated€charge€of€$11.3€million€to€income€tax€expense€primarily€for€the€nonrecurring repatriation€tax€on€accumulated€earnings€of€foreign€subsidiaries€and€it€is€the€Company(cid:129)s€intention€to€bring€back€the€accumulated foreign€earnings€held€as€cash€in€the€near€term.€Prospectively,€any€future€foreign€earnings€will€be€utilized€to€grow€and€support the€Company(cid:129)s€foreign€operations€and€will€be€treated€as€being€indefinitely€reinvested€outside€the€U.S.€The€estimated€charge€and the€benefit€from€the€remeasurement€of€the€net€deferred€tax€liability€were€recorded€based€on€the€Company's€initial€evaluation€of the€impact€of€the€Act€and€are€subject€to€change€in€2018€as€the€Company€continues€to€refine,€analyze€and€update€the€underlying data,€computations€and€assumptions€used€to€prepare€these€provisional€amounts€during€the€measurement€period. F-20 ProvisionƒforƒIncomeƒTaxes Provision€for€income€taxes€consists€of€the€following: (inƒthousands) Current Deferred Total 2017 Federal State Foreign 2016 Federal State Foreign 2015 Federal State Foreign $ $ $ $ $ $ 146,855 $ 31,352 17,810 196,017 209,499 29,345 20,156 259,000 242,801 33,023 12,885 288,709 $ $ $ $ $ (146,741) $ (3,437) (1,085) (151,263) $ 114 27,915 16,725 44,754 17,989 $ 227,488 1,366 858 20,213 $ (6,564) $ (1,797) (858) (9,219) $ 30,711 21,014 279,213 236,237 31,226 12,027 279,490 The€provision€for€income€taxes€differed€from€the€amount€computed€by€applying€the€federal€statutory€income€tax€rate€due to: (inƒthousands) Income€before€provision€for€income€taxes€at€statutory U.S.€federal€income€tax€rate€(35%) State€income€taxes,€net€of€federal€income€tax€benefit Impact€of€the€Act,€net Other,€net December€30, 2017 Year€Ended December€31, 2016 January€2, 2016 $ 182,091 $ 258,592 $ 263,511 18,145 (143,756) (11,726) 44,754 $ 19,962 ‡ 659 $ 279,213 $ 20,297 ‡ (4,318) 279,490 F-21 DeferredƒIncomeƒTaxƒAssetsƒ(Liabilities) Temporary€differences€that€give€rise€to€significant€deferred€income€tax€assets€(liabilities)€are€as€follows:€ Deferred€income€tax€assets: (inƒthousands) December€30,€ €2017 December€31,€ €2016 Accrued€expenses€not€currently€deductible€for€tax $ 38,200 $ Share-based€compensation Accrued€medical€and€workers€compensation Net€operating€loss€carryforwards Straight-line€rent Other,€net Total€deferred€income€tax€assets€before€valuation€allowances Less:€Valuation€allowance Total€deferred€income€tax€assets Deferred€income€tax€liabilities: Property€and€equipment Inventories Intangible€assets Total€deferred€income€tax€liabilities Net€deferred€income€tax€liabilities 9,556 33,697 6,701 21,733 2,973 112,860 (3,778) 109,082 (98,186) (169,478) (145,038) (412,702) (303,620) $ $ 63,992 11,752 46,116 5,093 31,631 6,274 164,858 (2,437) 162,421 (168,906) (222,301) (225,496) (616,703) (454,282) As€of€December€30,€2017€and€December€31,€2016,€the€Company(cid:129)s€net€operating€loss€(ƒNOL„)€carryforwards€related€to state€NOLs€of€$177.8€million€and€$153.0€million.€These€NOLs€may€be€used€to€reduce€future€taxable€income€and€expire periodically€through€2036.€Due€to€uncertainties€related€to€the€realization€of€these€NOLs€in€certain€jurisdictions,€the€Company recorded€a€valuation€allowance€of€$3.8€million€and€$2.4€million€as€of€December€30,€2017€and€December€31,€2016.€The€amount of€deferred€income€tax€assets€realizable,€however,€could€change€in€the€future€if€projections€of€future€taxable€income€change.€ UnrecognizedƒTaxƒBenefits The€following€table€summarizes€the€activity€of€the€Company(cid:129)s€gross€unrecognized€tax€benefits: (inƒthousands) December€30,€ €2017 December€31,€ €2016 January€2,€ €2016 Unrecognized€tax€benefits,€beginning€of€period $ 13,946 $ 13,841 $ Increases€related€to€prior€period€tax€positions Decreases€related€to€prior€period€tax€positions Increases€related€to€current€period€tax€positions Settlements Expiration€of€statute€of€limitations Unrecognized€tax€benefits,€end€of€period $ 8,077 (2,331) 5,644 (1,496) (1,175) 22,665 $ 8,274 (1,600) 2,105 (6,894) (1,780) 13,946 $ 14,033 412 (2,120) 3,137 (582) (1,039) 13,841 F-22 As€of€December€30,€2017,€December€31,€2016€and€January€2,€2016,€the€entire€amount€of€unrecognized€tax€benefits,€if recognized,€would€reduce€the€Company(cid:129)s€annual€effective€tax€rate.€During€2017,€2016€and€2015,€the€Company€recorded€income tax-related€interest€and€penalties€of€$1.7€million,€$1.9€million€and€$0.1€million€related€to€uncertain€tax€positions€included€in Provision€for€income€taxes€in€the€accompanying€consolidated€statements€of€operations.€As€of€December€30,€2017€and December€31,€2016,€the€Company€had€recorded€a€liability€for€potential€interest€of€$4.2€million€and€$2.7€million€and€for potential€penalties€of€$0.1€million€and€$0.2€million.€The€Company€has€not€provided€for€any€penalties€associated€with€tax contingencies€unless€considered€probable€of€assessment.€The€Company€does€not€expect€its€unrecognized€tax€benefits€to€change significantly€over€the€next€12€months.€With€few€exceptions,€the€Company€is€no€longer€subject€to€U.S.€federal,€state€and€local€or non-U.S.€income€tax€examinations€by€tax€authorities€for€years€before€2013. 13. Lease€Commitments: € Initial€terms€for€facility€leases€are€typically€10€to€15€years,€with€renewal€options€at€five€year€intervals,€and€may€include€rent escalation€clauses.€As€of€December€30,€2017,€future€minimum€lease€payments€due€under€non-cancelable€operating€leases€with lease€terms€extending€through€the€year€2059€are€as€follows: Year (inƒthousands) Amount 2018 2019 2020 2021 2022 Thereafter $ $ 484,427 445,143 401,686 340,356 279,734 1,008,507 2,959,853 NetƒRentƒExpense The€following€table€summarizes€net€rent€expense:€ (inƒthousands) December€30, 2017 Year€Ended December€31, 2016 January€2, 2016 Minimum€facility€rentals $ 483,178 $ 473,596 $ Equipment€rentals Vehicle€rentals Less:€Sub-lease€income 14. Contingencies:€ 24,786 32,670 540,634 (7,144) 533,490 $ 26,897 47,251 547,744 (7,379) 540,365 $ $ 471,364 24,860 47,919 544,143 (7,569) 536,574 The€Company€is€currently€and€from€time€to€time€subject€to€litigation,€claims€and€other€disputes,€including€legal€and regulatory€proceedings,€arising€in€the€normal€course€of€business.€The€Company€records€a€loss€contingency€liability€when€a€loss is€considered€probable€and€the€amount€can€be€reasonably€estimated.€Although€the€final€outcome€of€these€legal€matters€cannot€be determined,€based€on€the€facts€presently€known,€it€is€management(cid:129)s€opinion€that€the€final€outcome€of€any€pending€matters€will not€have€a€material€adverse€effect€on€the€Company(cid:129)s€consolidated€financial€position,€results€of€operations€or€cash€flows. F-23 The€Company(cid:129)s€Western€Auto€subsidiary,€together€with€other€defendants€(including€the€Company€and€other€of€its subsidiaries),€has€been€named€as€a€defendant€in€lawsuits€alleging€injury€as€a€result€of€exposure€to€asbestos-containing€products. The€plaintiffs€have€alleged€that€certain€products€contained€asbestos€and€were€manufactured,€distributed€and/or€sold€by€the various€defendants.€Many€of€the€cases€pending€against€the€Company€are€in€the€early€stages€of€litigation.€While€the€damages claimed€against€the€defendants€in€some€of€these€proceedings€are€substantial,€the€Company€believes€many€of€these€claims€are€at least€partially€covered€by€insurance€and€historically€asbestos€claims€against€the€Company€have€been€inconsistent€in€fact€patterns alleged€and€immaterial.€The€Company€does€not€believe€the€cases€currently€pending€will€have€a€material€adverse€effect€on€the Company(cid:129)s€financial€position,€results€of€operations€or€cash€flows.€ 15. Benefit€Plans: 401(k)ƒPlan€ The€Company€maintains€a€defined€contribution€benefit€plan,€which€covers€substantially€all€Team€Members€after€one€year of€service€and€who€have€attained€the€age€of€21.€The€plan€allows€for€Team€Member€salary€deferrals,€which€are€matched€at€the Company(cid:129)s€discretion.€Company€contributions€to€these€plans€were€$14.2€million,€$13.9€million€and€$14.6€million€in€2017,€2016 and€2015.€ DeferredƒCompensationƒ The€Company€maintains€a€non-qualified€deferred€compensation€plan€for€certain€Team€Members.€This€plan€provides€for€a minimum€and€maximum€deferral€percentage€of€the€Team€Member(cid:129)s€base€salary€and€bonus,€as€determined€by€the€Retirement Plan€Committee.€The€Company€establishes€and€maintains€a€deferred€compensation€liability€for€this€plan.€As€of€December€30, 2017€and€December€31,€2016,€these€liabilities€were€$16.8€million€and€$17.3€million. € 16. Share-Based€Compensation: Overview The€Company€grants€share-based€compensation€awards€to€its€Team€Members€and€members€of€its€Board€of€Directors€as provided€for€under€the€Company(cid:129)s€2014€Long-Term€Incentive€Plan€(ƒ2014€LTIP„),€which€was€approved€by€the€Company(cid:129)s shareholders€on€May€14,€2014.€The€Company€currently€grants€share-based€compensation€in€the€form€of€stock€appreciation rights€(ƒSARs„),€restricted€stock€units€(ƒRSUs„)€and€deferred€stock€units€(ƒDSUs„).€All€remaining€restricted€shares,€which€were granted€prior€to€the€transition€to€RSUs€in€2012,€vested€during€2015.€The€Company(cid:129)s€grants,€which€have€three€methods€of measuring€fair€value,€generally€include€a€time-based€service€portion,€a€performance-based€portion€and€a€market-based€portion, which€collectively€represent€the€target€award. At€December€30,€2017,€there€were€5.0€million€shares€of€common€stock€available€for€future€issuance€under€the€2014€LTIP based€on€management(cid:129)s€current€estimate€of€the€probable€vesting€outcome€for€performance-based€awards.€The€Company€issues new€shares€of€common€stock€upon€exercise€of€stock€options€and€SARs.€Shares€forfeited€and€shares€withheld€for€payment€of taxes€due€become€available€for€reissuance€and€are€included€in€availability.€Availability€also€includes€shares€that€became available€for€reissuance€in€connection€with€the€exercise€of€SARs.€ The€fair€value€of€each€SAR€granted€was€estimated€on€the€date€of€grant€using€the€Black-Scholes€option-pricing€model€with the€following€weighted€average€assumptions: Black-Scholes€Option€Valuation€Assumptions Risk-free€interest€rate€(1) Expected€dividend€yield Expected€stock€price€volatility€(2) Expected€life€of€awards€(in€months)€(3) 2016 2015 1.2% 0.2% 27.7% 55 1.3% 0.1% 27.3% 44 € (1) (2) The€risk-free€interest€rate€is€based€on€the€U.S.€Treasury€constant€maturity€interest€rate€ having€term€consistent€with€the€expected€life€of€the€award.€ Expected€volatility€is€determined€using€a€blend€of€historical€and€implied€volatility. F-24 (3) The€expected€life€of€the€Company(cid:129)s€awards€represents€the€estimated€period€of€time€until€ exercise€and€is€based€on€historical€experience€of€previously€granted€awards. As€no€SARs€were€granted€in€2017,€the€Black-Scholes€model€was€not€utilized€and€no€assumptions€were€created. For€time-based€and€performance-based€RSUs,€the€fair€value€of€each€award€was€determined€based€on€the€market€price€of€the Company(cid:129)s€stock€on€the€date€of€grant€adjusted€for€expected€dividends€during€the€vesting€period,€as€applicable.€ The€fair€value€of€each€market-based€RSU€was€determined€using€a€Monte€Carlo€simulation€model.€The€model€uses€multiple input€variables€that€determined€the€probability€of€satisfying€the€market€condition€requirements€as€follows: Monte€Carlo€Model€Assumptions Risk-free€interest€rate€(1) Expected€dividend€yield Expected€stock€price€volatility€(2) 2017 1.6% 0.2% 26.2% € (1) (2) The€risk-free€interest€rate€is€based€on€the€U.S.€Treasury€constant€maturity interest€rate€having€term€consistent€with€the€vesting€period€of€€the€award.€ Expected€volatility€is€determined€based€on€historical€volatility€over€a€ matching€look-back€period€and€is€consistent€with€the€correlation€ coefficients€between€the€stock€prices€of€the€Company€and€its€peer€group. Additionally,€the€Company€estimated€a€liquidity€discount€of€9.29%€using€the€Chaffe€Protective€Put€Method€to€adjust€the fair€value€for€the€post-vest€restrictions. Time-BasedƒAwards The€Company(cid:129)s€outstanding€time-vested€awards€consist€of€SARs€and€RSUs.€The€SARs€generally€vest€over€a€three-year period€in€equal€annual€installments€beginning€on€the€first€anniversary€of€the€grant€date.€The€SARs€granted€are€non-qualified, terminate€on€the€seventh€anniversary€of€the€grant€date€and€contain€no€post-vesting€restrictions€other€than€normal€trading€black- out€periods€prescribed€by€the€Company(cid:129)s€corporate€governance€policies.€The€RSUs€generally€vest€over€a€three-year€period€in equal€annual€installments€beginning€on€the€first€anniversary€of€the€grant€date.€During€the€vesting€period,€holders€of€RSUs€are entitled€to€receive€dividend€equivalents,€but€are€not€entitled€to€voting€rights.€ The€following€table€summarizes€activity€for€time-vested€SARs€and€RSUs€in€2017:€ (inƒthousands,ƒexceptƒperƒshareƒdata) Outstanding€SARs€/€Nonvested RSUs€at€December€31,€2016 Granted Exercised Vested Forfeited Outstanding€SARs€/€Nonvested RSUs€at€December€30,€2017 Vested€and€expected€to€vest Outstanding€and€exercisable SARs RSUs Weighted- Average Exercise Price Number€of Awards Weighted- Average Remaining Contractual Term€(in years) Aggregate Intrinsic Value Number€of Awards Weighted- Average Grant€Date Fair€Value 275 $ 93.89 ‡ (157) ‡ (5) ‡ 71.57 ‡ 63.86 113 113 45 $ $ $ 126.07 126.07 72.27 F-25 $ 211 287 ‡ (91) (61) 151.70 131.01 ‡ 149.26 149.31 3.77 3.77 $ $ 1,222 346 $ 135.58 ‡ 1.43 $ 1,222 The€aggregate€intrinsic€value€of€time-vested€SARs€reflected€in€the€table€above€and€performance-based€SARs€reflected€in the€table€below€is€based€on€the€Company(cid:129)s€closing€stock€price€of€$99.69€as€of€the€last€trading€day€of€2017.€The€fair€value€of time-based€RSUs€reflected€in€the€table€above€and€performance-based€RSUs€reflected€in€the€table€below€is€determined€based€on the€market€price€of€the€Company(cid:129)s€common€stock€on€the€date€of€grant.€ The€following€table€summarizes€certain€information€concerning€activity€for€time-vested€SARs,€RSUs€and€restricted€shares: (inƒthousands,ƒexceptƒperƒshareƒdata) SARs: Weighted€average€fair€value€of€grants Aggregate€intrinsic€value€of€SARs€exercised RSUs€and€restricted€shares: Weighted€average€fair€value€of€grants Total€grant€date€fair€value€of€RSUs€and€restricted€shares€vested There€were€no€time-vested€SARs€granted€in€2017€or€2015. Performance-BasedƒAwards December€30,€ €2017 Year€Ended December€31,€ €2016 January€2,€ €2016 $ $ $ $ ‡ $ $ 11,455 43.64 31,450 131.01 13,578 $ $ 155.51 16,089 $ $ $ $ ‡ 26,060 153.61 15,268 The€Company(cid:129)s€outstanding€performance-based€awards€consist€of€SARs€and€RSUs.€Performance€awards€generally€may vest€following€a€three-year€period€subject€to€the€Company(cid:129)s€achievement€of€certain€financial€goals€as€specified€in€the€grant agreements.€Depending€on€the€Company(cid:129)s€results€during€the€three-year€performance€period,€the€actual€number€of€awards vesting€at€the€end€of€the€period€generally€ranges€from€0%€to€200%€of€the€performance€award.€The€performance€RSUs€generally do€not€have€dividend€equivalent€rights€and€do€not€have€voting€rights€until€the€shares€are€earned€and€issued€following€the applicable€performance€period.€During€2016,€the€Company€also€granted€broad-based€incentive€awards€to€store€and€field€team members€that€will€vest€over€a€one-year€service€period€based€on€the€achievement€of€performance€goals€during€2016. The€number€of€performance-based€awards€outstanding€is€reflected€in€the€following€tables€based€on€the€number€of€awards that€the€Company€believed€were€probable€of€vesting€at€December€30,€2017.€Performance-based€SARs€and€performance-based RSU(cid:129)s€granted€during€2017€are€presented€as€grants€in€the€table€at€their€respective€target€levels.€The€change€in€units€based€on performance€represents€the€change€in€the€number€of€granted€awards€expected€to€vest€based€on€the€Company(cid:129)s€updated probability€assessment€as€of€December€30,€2017.€ Compensation€expense€for€performance-based€awards€of€$13.6€million,€$0.8€million,€and€$14.7€million€in€2017,€2016€and 2015,€was€determined€based€on€management(cid:129)s€estimate€of€the€probable€vesting€outcome.€ € F-26 The€following€table€summarizes€activity€for€performance-based€SARs€and€RSUs€in€2017: (inƒthousands,ƒexceptƒperƒshareƒdata) Outstanding€SARs€/€Nonvested RSUs€at€December€31,€2016 Granted Change€in€units€based€on performance Exercised Vested Forfeited Outstanding€SARs€/€Nonvested RSUs€at€December€30,€2017 Vested€and€expected€to€vest Outstanding€and€exercisable Weighted- Average Exercise Price Number of€Awards 114 $ 86.95 ‡ 5 (81) ‡ (9) 29 29 29 $ $ $ ‡ 108.36 85.14 ‡ 101.63 90.90 90.90 90.90 SARs RSUs Weighted- Average Remaining Contractual Term€(in years) Aggregate Intrinsic Value Number of€Awards Weighted- Average Grant€Date Fair€Value 138 $ 53 ‡ ‡ (48) (18) 162.71 146.42 ‡ ‡ 162.02 160.79 2.16 $ 423 125 $ 156.36 2.16 $ ‡ 2.16 $ 423 The€following€table€summarizes€certain€information€concerning€activity€for€performance-based€SARs€and€RSUs: (inƒthousands,ƒexceptƒperƒshareƒdata) SARs: Weighted€average€fair€value€of€grants Aggregate€intrinsic€value€of€SARs€exercised RSUs: Weighted€average€fair€value€of€grants Total€grant€date€fair€value€of€RSUs€vested December€30,€ €2017 Year€Ended December€31,€ €2016 January€2,€ €2016 $ $ $ $ ‡ $ $ 5,221 36.78 11,556 146.42 7,823 $ $ 163.76 13,512 $ $ $ $ 43.38 8,475 ‡ 1,763 There€were€no€performance-based€SARs€granted€in€2017€or€performance€based€RSUs€granted€in€2015.€As€of€December€30, 2017,€the€maximum€potential€payout€under€the€Company(cid:129)s€currently€outstanding€performance-based€SARs€and€RSUs€was€663 thousand€and€173€thousand€units.€ Market-BasedƒAwards The€Company(cid:129)s€outstanding€market-based€awards€consist€of€RSUs.€Market-based€RSU(cid:129)s€vesting€depends€on€the Company(cid:129)s€relative€total€shareholder€return€among€a€designated€group€of€peer€companies€during€a€three-year€period€and€will€be subject€to€a€one-year€holding€period€after€vesting. At€the€beginning€of€2017,€zero€market-based€RSUs€were€outstanding.€During€2017,€a€total€of€27€thousand€market-based RSUs€were€granted€at€a€weighted€average€fair€value€of€$139.33€per€unit€and€3€thousand€market-based€RSUs€were€forfeited€at€a weighted€average€fair€value€of€$145.83.€ F-27 OtherƒConsiderations Total€income€tax€benefit€related€to€share-based€compensation€expense€for€2017,€2016€and€2015€was€$15.3€million,€$7.5 million€and€$13.6€million. As€of€December€30,€2017,€there€was€$44.3€million€of€unrecognized€compensation€expense€related€to€all€share-based awards€that€was€expected€to€be€recognized€over€a€weighted€average€period€of€1.8€years. The€Company€modified€selected€awards€for€certain€terminated€employees€during€2015€such€that€the€employees€would€vest in€awards€that€would€have€otherwise€been€forfeited,€which€resulted€in€incremental€expense€recognized€in€2015€of€$6.6€million. As€four€of€these€modified€awards€were€cash€settled€in€March€2016,€they€were€accounted€for€as€liability€awards€as€of€January€2, 2016.€The€value€of€the€liability€awards€was€insignificant€as€of€January€2,€2016.€No€such€modification€occurred€in€2017€or€2016. DeferredƒStockƒUnits The€Company€grants€share-based€awards€annually€to€its€Board€of€Directors€in€connection€with€its€annual€meeting€of stockholders.€These€awards€are€granted€in€the€form€of€DSUs€as€provided€for€in€the€Advance€Auto€Parts,€Inc.€Deferred€Stock Unit€Plan€for€Non-Employee€Directors€and€Selected€Executives€(ƒDSU€Plan„).€Each€DSU€is€equivalent€to€one€share€of common€stock€of€the€Company€and€will€be€distributed€in€common€shares€after€the€director(cid:129)s€service€on€the€Board€ends.€DSUs granted€in€2017€and€2016€vest€over€a€one€year€service€period,€while€DSUs€granted€in€2015€were€fully€vested€on€the€grant date.€Additionally,€the€DSU€Plan€provides€for€the€deferral€of€compensation€earned€in€the€form€of€(i)€an€annual€retainer€for directors,€and€(ii)€wages€for€certain€highly€compensated€Team€Members€of€the€Company.€These€DSUs€are€settled€in€common stock€with€the€participants€at€a€future€date,€or€over€a€specified€time€period,€as€elected€by€the€participants€in€accordance€with€the DSU€Plan. The€Company€granted€12€thousand€DSUs€in€2017.€The€weighted€average€fair€value€of€DSUs€granted€during€2017,€2016 and€2015€was€$125.34,€$146.30,€and€$156.83.€The€DSUs€are€awarded€at€a€price€equal€to€the€market€price€of€the€Company(cid:129)s underlying€stock€on€the€date€of€the€grant.€For€2017,€2016€and€2015,€the€Company€recognized€$1.5€million,€$0.9€million€and $2.1€million€of€share-based€compensation€expense€for€these€DSU€grants.€ EmployeeƒStockƒPurchaseƒPlan The€Company€also€offers€an€employee€stock€purchase€plan€(ƒESPP„).€Under€the€ESPP,€eligible€Team€Members€may€elect salary€deferrals€to€purchase€the€Company(cid:129)s€common€stock€at€a€discount€of€10%€from€its€fair€market€value€on€the€date€of purchase.€There€are€annual€limitations€on€the€amounts€a€Team€Member€may€elect€of€either€$25€thousand€per€Team€Member€or 10%€of€compensation,€whichever€is€less.€As€of€December€30,€2017,€there€were€1.0€million€shares€available€to€be€issued€under the€ESPP. 17. Accumulated€Other€Comprehensive€Loss: Accumulated€other€comprehensive€loss,€net€of€tax,€consisted€of€the€following:€ (inƒthousands) Balance,€January€3,€2015 2015€activity Balance,€January€2,€2016 2016€activity Balance,€December€31,€2016 2017€activity Balance,€December€30,€2017 $ $ Unrealized€Gain (Loss) on€Postretirement Plan Foreign€Currency Translation Accumulated Other Comprehensive Income€(Loss) (15,268) $ (31,277) (46,545) 4,892 (41,653) 14,941 (26,712) $ (12,337) (31,722) (44,059) 4,358 (39,701) 14,747 (24,954) 2,931 (445) 2,486 (534) 1,952 (194) 1,758 $ $ F-28 18. Condensed€Consolidating€Financial€Statements: Certain€100%€wholly€owned€domestic€subsidiaries€of€Advance,€including€its€Material€Subsidiaries€(as€defined€in€the€2017 Credit€Agreement)€serve€as€guarantors€of€Advance(cid:129)s€senior€unsecured€notes€(ƒGuarantor€Subsidiaries„).€The€subsidiary guarantees€related€to€Advance(cid:129)s€senior€unsecured€notes€are€full€and€unconditional,€joint€and€several€and€there€are€no€restrictions on€the€ability€of€Advance€to€obtain€funds€from€its€Guarantor€Subsidiaries.€Certain€of€Advance(cid:129)s€wholly€owned€subsidiaries, including€all€of€its€foreign€subsidiaries,€do€not€serve€as€guarantors€of€Advance(cid:129)s€senior€unsecured€notes€(ƒNon-Guarantor Subsidiaries„).€ Set€forth€below€are€condensed€consolidating€financial€statements€presenting€the€financial€position,€results€of€operations, and€cash€flows€of€(i)€Advance,€(ii)€the€Guarantor€Subsidiaries,€(iii)€the€Non-Guarantor€Subsidiaries,€and€(iv)€the€eliminations necessary€to€arrive€at€consolidated€information€for€the€Company.€Investments€in€subsidiaries€of€the€Company€are€presented under€the€equity€method.€The€statement€of€operations€eliminations€relate€primarily€to€the€sale€of€inventory€from€a€Non- Guarantor€Subsidiary€to€a€Guarantor€Subsidiary.€The€balance€sheet€eliminations€relate€primarily€to€the€elimination€of intercompany€receivables€and€payables€and€subsidiary€investment€accounts.€ F-29 The€following€tables€present€condensed€consolidating€balance€sheets,€condensed€consolidating€statements€of€operations, comprehensive€income€and€cash€flows,€and€should€be€read€in€conjunction€with€the€consolidated€financial€statements€herein.€ Condensed€Consolidating€Balance€Sheet As€of€December€30,€2017 (inƒthousands) Assets Current€assets: Advance Auto€Parts, Inc. Guarantor Subsidiaries Non- Guarantor Subsidiaries Eliminations Consolidated Cash€and€cash€equivalents $ 23 $ 482,620 $ 64,317 $ Receivables,€net Inventories Other€current€assets Total€current€assets Property€and€equipment,€net€of accumulated€depreciation Goodwill Intangible€assets,€net Other€assets,€net Investment€in€subsidiaries Intercompany€note€receivable Due€from€intercompany,€net Liabilities€and€Stockholders'€Equity Current€liabilities: Accounts€payable Accrued€expenses Other€current€liabilities Total€current€liabilities Long-term€debt Deferred€income€taxes Other€long-term€liabilities Intercompany€note€payable Due€to€intercompany,€net Commitments€and€contingencies Stockholders'€equity ‡ ‡ ‡ 23 567,460 3,986,724 103,118 5,139,922 103 1,384,115 ‡ ‡ 3,224 943,359 551,781 68,749 3,521,330 1,048,700 ‡ $ 4,573,380 448,462 ‡ ‡ $ 8,536,388 38,897 181,768 2,063 287,045 9,920 50,934 45,893 554 ‡ ‡ 332,467 $ 726,813 (23) $ ‡ ‡ (75) (98) ‡ ‡ ‡ (3,223) (3,969,792) (1,048,700) (332,467) $ (5,354,280) $ $ ‡ $ 2,657,792 511,841 1,134 ‡ 1,134 1,044,327 ‡ ‡ ‡ 112,723 50,963 3,220,596 ‡ 288,999 237,019 1,048,700 219,744 $ 236,790 $ 20,648 1,027 258,465 ‡ 17,844 2,042 ‡ $ (75) (23) (98) ‡ (3,223) ‡ ‡ ‡ (1,048,700) (332,467) 546,937 606,357 4,168,492 105,106 5,426,892 1,394,138 994,293 597,674 69,304 ‡ ‡ ‡ 8,482,301 2,894,582 533,548 51,967 3,480,097 1,044,327 303,620 239,061 ‡ ‡ 3,415,196 $ 4,573,380 3,521,330 $ 8,536,388 $ 448,462 726,813 (3,969,792) $ (5,354,280) $ 3,415,196 8,482,301 F-30 Condensed€Consolidating€Balance€Sheet As€of€December€31,€2016€ (inƒthousands) Assets Current€assets: Advance Auto€Parts, Inc. Guarantor Subsidiaries Non- Guarantor Subsidiaries Eliminations Consolidated Cash€and€cash€equivalents $ 22 $ 78,543 $ 56,635 $ Receivables,€net Inventories Other€current€assets Total€current€assets Property€and€equipment,€net€of accumulated€depreciation Goodwill Intangible€assets,€net Other€assets,€net Investment€in€subsidiaries Intercompany€note€receivable Due€from€intercompany,€net Liabilities€and€Stockholders'€Equity Current€liabilities: Accounts€payable Accrued€expenses Other€current€liabilities Total€current€liabilities Long-term€debt Deferred€income€taxes Other€long-term€liabilities Intercompany€note€payable Due€to€intercompany,€net Commitments€and€contingencies Stockholders'€equity ‡ ‡ ‡ 22 128 ‡ 619,229 4,126,465 69,385 4,893,622 1,436,459 943,359 ‡ 4,634 3,008,856 1,048,424 ‡ $ 4,062,064 595,596 63,376 375,420 ‡ ‡ $ 8,307,832 $ ‡ $ 2,813,937 526,652 1,505 ‡ 1,505 1,042,949 ‡ ‡ ‡ 101,418 32,508 3,373,097 ‡ 439,283 223,481 1,048,424 214,691 22,023 199,403 1,153 279,214 9,753 47,518 45,307 773 ‡ ‡ 316,109 $ 698,674 (22) $ ‡ ‡ (72) (94) ‡ ‡ ‡ (4,634) (3,384,276) (1,048,424) (316,109) $ (4,753,537) $ $ 272,240 $ 26,312 2,986 301,538 ‡ 19,633 2,083 ‡ ‡ ‡ $ (72) (22) (94) ‡ (4,634) ‡ (1,048,424) (316,109) 135,178 641,252 4,325,868 70,466 5,172,764 1,446,340 990,877 640,903 64,149 ‡ ‡ ‡ 8,315,033 3,086,177 554,397 35,472 3,676,046 1,042,949 454,282 225,564 ‡ ‡ 2,916,192 $ 4,062,064 3,008,856 $ 8,307,832 375,420 $ 698,674 (3,384,276) $ (4,753,537) $ 2,916,192 8,315,033 F-31 Condensed€Consolidating€Statement€of€Operations For€the€Year€Ended€December€30,€2017€ (inƒthousands) Net€sales Cost€of€sales,€including€purchasing€and $ warehousing€costs Gross€profit Selling,€general€and€administrative€expenses Operating€(loss)€income Other,€net: Interest€(expense)€income Other€income€(expense),€net Total€other,€net Income€before€provision€for€income€taxes Provision€for€income€taxes Income€before€equity€in€earnings€of subsidiaries Advance Auto€Parts, Inc. Guarantor Subsidiaries ‡ $ 9,034,790 Non- Guarantor Subsidiaries Eliminations Consolidated 9,373,784 $ (211,456) $ 550,450 $ ‡ ‡ 30,478 (30,478) (52,305) 83,840 31,535 1,057 641 416 5,107,063 3,927,727 3,453,406 474,321 (6,496) (17,729) (24,225) 450,096 32,623 417,473 57,616 393,128 157,322 82,155 75,167 ‡ (6,061) (6,061) 69,106 11,490 57,616 ‡ (211,456) ‡ (51,202) 51,202 ‡ (51,202) (51,202) ‡ ‡ ‡ (532,705) (532,705) $ 5,288,735 4,085,049 3,514,837 570,212 (58,801) 8,848 (49,953) 520,259 44,754 475,505 ‡ 475,505 Equity€in€earnings€of€subsidiaries 475,089 Net€income $ 475,505 $ 475,089 $ 57,616 $ Condensed€Consolidating€Statement€of€Operations For€the€Year€Ended€December€31,€2016€ Advance Auto€Parts, Inc. Guarantor Subsidiaries ‡ $ 9,254,477 Non- Guarantor Subsidiaries Eliminations Consolidated 9,567,679 $ (243,545) $ 556,747 $ (inƒthousands) Net€sales Cost€of€sales,€including€purchasing€and $ warehousing€costs Gross€profit Selling,€general€and€administrative€expenses Operating€(loss)€income Other,€net: Interest€(expense)€income Other€income€(expense),€net Total€other,€net Income€before€provision€for€income€taxes Provision€for€income€taxes (Loss)€income€before€equity€in€earnings€of subsidiaries Equity€in€earnings€of€subsidiaries Net€income 383,356 173,391 92,287 81,104 68 4,010 4,078 85,182 17,470 67,712 ‡ 67,712 (243,545) ‡ (54,988) 54,988 ‡ (54,988) (54,988) ‡ ‡ ‡ (528,015) (528,015) $ $ 5,311,764 4,255,915 3,468,317 787,598 (59,910) 11,147 (48,763) 738,835 279,213 459,622 ‡ 459,622 ‡ ‡ 28,695 (28,695) (52,081) 81,683 29,602 907 1,588 5,171,953 4,082,524 3,402,323 680,201 (7,897) (19,558) (27,455) 652,746 260,155 (681) 460,303 459,622 $ 392,591 67,712 460,303 $ $ F-32 Condensed€Consolidating€Statement€of€Operations For€the€Year€Ended€January€2,€2016€ (inƒthousands) Net€sales Cost€of€sales,€including€purchasing€and $ warehousing€costs Gross€profit Selling,€general€and€administrative€expenses Operating€(loss)€income Other,€net: Interest€expense Other€income€(expense),€net Total€other,€net Income€before€provision€for€income€taxes Provision€for€income€taxes (Loss)€income€before€equity€in€earnings€of subsidiaries Equity€in€earnings€of€subsidiaries Advance Auto€Parts, Inc. Guarantor Subsidiaries ‡ $ 9,432,116 Non- Guarantor Subsidiaries Eliminations Consolidated 9,737,018 $ (288,704) $ 593,606 $ ‡ ‡ 24,186 (24,186) (52,210) 76,987 24,777 591 1,220 (629) 474,027 5,172,938 4,259,178 3,536,697 722,481 (13,378) (19,699) (33,077) 689,404 268,571 420,833 53,194 430,012 163,594 93,852 69,742 180 (7,029) (6,849) 62,893 9,699 53,194 ‡ (288,704) ‡ (57,743) 57,743 ‡ (57,743) (57,743) ‡ ‡ ‡ (527,221) (527,221) $ 5,314,246 4,422,772 3,596,992 825,780 (65,408) (7,484) (72,892) 752,888 279,490 473,398 ‡ 473,398 Net€income $ 473,398 $ 474,027 $ 53,194 $ Non- Guarantor Subsidiaries Eliminations Consolidated 475,505 $ (532,705) $ 57,616 $ ‡ 14,941 ‡ 14,941 72,557 ‡ ‡ (194) 14,941 (29,688) (29,688) (562,393) $ $ ‡ 14,747 490,252 Condensed€Consolidating€Statement€of€Comprehensive€Income For€the€Year€Ended€December€30,€2017 (inƒthousands) Net€income Other€comprehensive€income: Changes€in€net€unrecognized€other postretirement€benefit€costs Currency€translation€adjustments Advance Auto€Parts, Inc. 475,505 $ Guarantor Subsidiaries 475,089 $ ‡ ‡ (194) ‡ Equity€in€other€comprehensive€income€of subsidiaries Total€other€comprehensive€income Comprehensive€income 14,747 14,747 490,252 $ 14,941 14,747 489,836 $ $ F-33 Condensed€Consolidating€Statement€of€Comprehensive€Income For€the€Year€Ended€December€31,€2016€ (inƒthousands) Net€income Other€comprehensive€income: Changes€in€net€unrecognized€other postretirement€benefit€costs Currency€translation€adjustments Advance Auto€Parts, Inc. 459,622 $ Guarantor Subsidiaries 460,303 $ ‡ ‡ (534) ‡ Equity€in€other€comprehensive€income€of subsidiaries Total€other€comprehensive€income Comprehensive€income 4,358 4,358 463,980 $ 4,892 4,358 464,661 $ $ Condensed€Consolidating€Statement€of€Comprehensive€Income For€the€Year€Ended€January€2,€2016€ Non- Guarantor Subsidiaries Eliminations Consolidated 459,622 $ (528,015) $ 67,712 $ ‡ 4,892 ‡ 4,892 72,604 ‡ ‡ (534) 4,892 (9,250) (9,250) (537,265) $ $ ‡ 4,358 463,980 (inƒthousands) Net€income Other€comprehensive€loss: Changes€in€net€unrecognized€other postretirement€benefit€costs Currency€translation€adjustments Equity€in€other€comprehensive€loss€of subsidiaries Other€comprehensive€loss Comprehensive€income Advance Auto€Parts, Inc. 473,398 $ Guarantor Subsidiaries 474,027 $ Non- Guarantor Subsidiaries Eliminations Consolidated 473,398 $ (527,221) $ 53,194 $ ‡ ‡ (445) ‡ ‡ (31,277) ‡ ‡ (31,722) (31,722) 441,676 $ (31,277) (31,722) 442,305 $ $ ‡ 62,999 (31,277) 21,917 $ 62,999 (464,222) $ (445) (31,277) ‡ (31,722) 441,676 F-34 Condensed€Consolidating€Statement€of€Cash€Flows For€the€Year€Ended€December€30,€2017 (inƒthousands) Advance Auto€Parts, Inc. Net€cash€provided€by€operating€activities Cash€flows€from€investing€activities: Purchases€of€property€and€equipment $ Proceeds€from€sales€of€property€and equipment Other,€net Net€cash€used€in€investing€activities Cash€flows€from€financing€activities: Increase€(decrease)€in€bank€overdrafts Borrowings€under€credit€facilities Payments€on€credit€facilities Dividends€paid Proceeds€from€the€issuance€of€common stock Tax€withholdings€related€to€the€exercise€of stock€appreciation€rights Repurchase€of€common€stock Other,€net Net€cash€provided€by€(used€in) financing€activities Effect€of€exchange€rate€changes€on€cash Net€increase€in€cash€and€cash€equivalents Cash€and€cash€equivalents,€beginning€of period Cash€and€cash€equivalents,€end€of€period $ Guarantor Subsidiaries 593,091 ‡ $ Non- Guarantor Subsidiaries Eliminations Consolidated 600,805 $ ‡ $ 7,714 $ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ 1 1 ‡ 1 22 23 (187,993) (1,765) 11,085 480 (176,428) 16,290 534,400 (534,400) (17,854) 4,076 (6,531) (6,498) (2,069) (12,586) ‡ 404,077 14 (460) (2,211) (2,286) ‡ ‡ ‡ ‡ ‡ ‡ ‡ (2,286) 4,465 7,682 ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ (1) (1) ‡ (1) (189,758) 11,099 20 (178,639) 14,004 534,400 (534,400) (17,854) 4,076 (6,531) (6,498) (2,069) (14,872) 4,465 411,759 78,543 56,635 $ 482,620 $ 64,317 $ (22) (23) $ 135,178 546,937 F-35 Condensed€Consolidating€Statement€of€Cash€Flows For€the€Year€Ended€December€31,€2016€ (inƒthousands) Net€cash€provided€by€operating€activities Cash€flows€from€investing€activities: Purchases€of€property€and€equipment Proceeds€from€sales€of€property€and equipment Other,€net Net€cash€used€in€investing€activities Cash€flows€from€financing€activities: Decrease€in€bank€overdrafts Borrowings€under€credit€facilities Payments€on€credit€facilities Dividends€paid Proceeds€from€the€issuance€of€common stock Tax€withholdings€related€to€the€exercise€of stock€appreciation€rights Repurchase€of€common€stock Other,€net Net€cash€used€in€financing€activities Effect€of€exchange€rate€changes€on€cash Net€increase€in€cash€and€cash€equivalents Cash€and€cash€equivalents,€beginning€of period Cash€and€cash€equivalents,€end€of€period $ Advance Auto€Parts, Inc. $ 14 Guarantor Subsidiaries 491,180 $ Non- Guarantor Subsidiaries Eliminations Consolidated 523,303 $ 32,109 ‡ $ $ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ 14 8 22 (257,159) (2,400) 2,210 (4,697) (259,646) (4,902) 799,600 (959,600) (17,738) 4,532 (19,558) (18,393) (390) (216,449) ‡ 15,085 2 ‡ (2,398) (657) ‡ ‡ ‡ ‡ ‡ ‡ ‡ (657) 257 29,311 ‡ ‡ ‡ ‡ (14) ‡ ‡ ‡ ‡ ‡ ‡ ‡ (14) ‡ (14) (259,559) 2,212 (4,697) (262,044) (5,573) 799,600 (959,600) (17,738) 4,532 (19,558) (18,393) (390) (217,120) 257 44,396 63,458 27,324 $ 78,543 $ 56,635 $ (8) (22) $ 90,782 135,178 F-36 Condensed€Consolidating€Statement€of€Cash€Flows For€the€Year€Ended€January€2,€2016€ (inƒthousands) Net€cash€(used€in)€provided€by€operating activities Cash€flows€from€investing€activities: Purchases€of€property€and€equipment Proceeds€from€sales€of€property€and equipment Other,€net Net€cash€used€in€investing€activities Cash€flows€from€financing€activities: (Decrease)€increase€in€bank€overdrafts Borrowings€under€credit€facilities Payments€on€credit€facilities Dividends€paid Proceeds€from€the€issuance€of€common stock Tax€withholdings€related€to€the€exercise€of stock€appreciation€rights Repurchase€of€common€stock Other,€net Net€cash€(used€in)€provided€by financing€activities Effect€of€exchange€rate€changes€on€cash Net€decrease€in€cash€and€cash€equivalents Cash€and€cash€equivalents,€beginning€of period Cash€and€cash€equivalents,€end€of€period $ Advance Auto€Parts, Inc. Guarantor Subsidiaries Non- Guarantor Subsidiaries Eliminations Consolidated $ (1) $ 709,582 $ (6,937) $ ‡ $ 702,644 ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ (1) 9 8 (232,591) (2,156) 266 (18,583) (250,908) (4,529) 618,300 (1,041,700) (17,649) 5,174 (13,112) (6,665) (380) 4 (306) (2,458) 1,606 ‡ ‡ ‡ ‡ ‡ ‡ ‡ (460,561) ‡ 1,606 (4,213) (1,887) (12,002) ‡ ‡ ‡ ‡ 1 ‡ ‡ ‡ ‡ ‡ ‡ ‡ 1 ‡ 1 (234,747) 270 (18,889) (253,366) (2,922) 618,300 (1,041,700) (17,649) 5,174 (13,112) (6,665) (380) (458,954) (4,213) (13,889) 65,345 39,326 $ 63,458 $ 27,324 $ (9) (8) $ 104,671 90,782 F-37 19. Quarterly€Financial€Data€(unaudited): The€following€table€summarizes€quarterly€financial€data€for€2017€and€2016: 2017 First Second Third Fourth (inƒthousands,ƒexceptƒperƒshareƒdata) (16ƒweeks) (12ƒweeks) (12ƒweeks) (12ƒweeks) Net€sales Gross€profit Net€income Basic€earnings€per€common€share Diluted€earnings€per€common€share 2016 (inƒthousands,ƒexceptƒperƒshareƒdata) Net€sales Gross€profit Net€income Basic€earnings€per€common€share Diluted€earnings€per€common€share $ $ $ $ $ $ $ $ $ $ 2,890,838 1,270,684 107,960 1.46 1.46 First (16ƒweeks) 2,979,778 1,349,889 158,813 2.16 2.14 $ $ $ $ $ $ $ $ $ $ 2,263,727 993,088 87,049 1.18 1.17 Second (12ƒweeks) 2,256,155 1,010,257 124,600 1.69 1.68 $ $ $ $ $ $ $ $ $ $ 2,182,233 947,708 95,996 1.30 1.30 Third (12ƒweeks) 2,248,855 988,205 113,844 1.54 1.53 $ $ $ $ $ $ $ $ $ $ 2,036,986 873,569 184,500 2.50 2.49 Fourth (12ƒweeks) 2,082,891 907,564 62,365 0.84 0.84 Quarterly€and€year-to-date€computations€of€per€share€amounts€are€made€independently.€Therefore,€the€sum€of€per€share amounts€for€the€quarters€may€not€be€equal€to€the€per€share€amount€for€the€year.€ F-38 Advance€Auto€Parts,€Inc. Schedule€II€-€Valuation€and€Qualifying€Accounts (inƒthousands) Allowance€for€doubtful€accounts€receivable January€2,€2016 December€31,€2016 December€30,€2017 Balance€at Beginning of€Period Charges€to Expenses Deductions Balance€at End€of Period $ $ $ 16,152 25,758 29,164 $ $ $ 22,067 24,597 20,110 $ $ $ (12,461) (1) $ (21,191) (1) $ (31,055) (1) $ 25,758 29,164 18,219 (1) Accounts€written€off€during€the€period.€These€amounts€did€not€impact€the€Company(cid:129)s€statement€of€operations€for€any year€presented. Other€valuation€and€qualifying€accounts€have€not€been€reported€in€this€schedule€because€they€are€either€not€applicable€or because€the€information€has€been€included€elsewhere€in€this€report. F-39 Exhibit€No. Exhibit€Description EXHIBITS€INDEX 2.1 3.1 3.2 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 10.1 10.2 Agreement€and€Plan€of€Merger€by€and€among€Advance Auto€Parts,€Inc.,€Generator€Purchase,€Inc.,€General€Parts International,€Inc.€and€Shareholder€Representative Services€LLC€(as€the€Shareholder€Representative),€Dated as€of€October€15,€2013 Restated€Certificate€of€Incorporation€of€Advance€Auto Parts,€Inc.€(ƒAdvance€Auto„)€(as€amended€effective€as€of May€24,€2017). Amended€and€Restated€Bylaws€of€Advance€Auto., effective€May€24,€2017 Indenture,€dated€as€of€April€29,€2010,€among€Advance Auto€Parts,€Inc.,€each€of€the€Subsidiary€Guarantors€from time€to€time€party€thereto€and€Wells€Fargo€Bank,€National Association,€as€Trustee. First€Supplemental€Indenture,€dated€as€of€April€29,€2010, among€Advance€Auto€Parts,€Inc.,€each€of€the€Subsidiary Guarantors€from€time€to€time€party€thereto€and€Wells Fargo€Bank,€National€Association,€as€Trustee. Second€Supplemental€Indenture€dated€as€of€May€27,€2011 to€the€Indenture€dated€as€of€April€29,€2010€among€Advance Auto€Parts,€Inc.€as€Issuer,€each€of€the€Subsidiary Guarantors€from€time€to€time€party€thereto€and€Wells Fargo€Bank,€National€Association,€as€Trustee. Third€Supplemental€Indenture€dated€as€of€January€17, 2012€among€Advance€Auto€Parts,€Inc.,€each€of€the Subsidiary€Guarantors€from€time€to€time€party€thereto€and Wells€Fargo€Bank,€National€Association,€as€Trustee. Fourth€Supplemental€Indenture,€dated€as€of€December€21, 2012€among€Advance€Auto€Parts,€Inc.,€each€of€the Subsidiary€Guarantors€from€time€to€time€party€thereto€and Wells€Fargo€Bank,€National€Association,€as€Trustee. Fifth€Supplemental€Indenture,€dated€as€of€April€19,€2013 among€Advance€Auto€Parts,€Inc.,€each€of€the€Subsidiary Guarantors€from€time€to€time€party€thereto€and€Wells Fargo€Bank,€National€Association,€as€Trustee. Sixth€Supplemental€Indenture,€dated€as€of€December€3, 2013,€among€Advance€Auto€Parts,€Inc.,€each€of€the Subsidiary€Guarantors€from€time€to€time€party€thereto€and Wells€Fargo€Bank,€National€Association,€as€Trustee. Form€of€5.750%€Note€due€2020. Form€of€4.500%€Note€due€2022. Form€of€4.500%€Note€due€2023. Seventh€Supplemental€Indenture,€dated€as€of€February€28, 2014,€among€Advance€Auto€Parts,€Inc.,€each€of€the Subsidiary€Guarantors€from€time€to€time€party€thereto€and Wells€Fargo€Bank,€National€Association,€as€Trustee. Form€of€Indemnification€Agreement€between€Advance Auto€Parts€and€each€of€its€Directors. Advance€Auto€Parts,€Inc.€2004€Long-Term€Incentive€Plan (amended€as€of€April€17,€2008). Incorporated€by€Reference Filed Form Exhibit Filing€Date Herewith 10-K 2.1 2/25/2014 8-K 8-K 8-K 3.1 5/31/2017 3.2 5/31/2017 4.1 4/29/2010 8-K 4.2 4/29/2010 8-K 10.45 6/3/2011 8-K 4.4 1/17/2012 8-K 4.5 12/21/2012 8-K 4.6 4/19/2013 8-K 4.7 12/9/2013 8-K 8-K 8-K 10-Q 8-K 10-Q 4.3 4.5 4.7 4.11 4/29/2010 1/17/2012 12/9/2013 5/28/2014 10.19 5/20/2004 10.19 5/29/2008 Exhibit€No. Exhibit€Description Advance€Auto€Parts,€Inc.€Deferred€Stock€Unit€Plan€for Non-Employee€Directors€and€Selected€Executives€(as amended€January€1,€2008),€including€First€Amendment€to the€Advance€Auto€Parts,€Inc.€Deferred€Stock€Unit€Plan€for Non-Employee€Directors€and€Selected€Executives€(as amended€and€restated€effective€as€of€January€1,€2009)€and Second€Amendment€to€the€Advance€Auto€Parts,€Inc. Deferred€Stock€Unit€Plan€for€Non-Employee€Directors€and Selected€Executives€(as€amended€and€restated€effective€as of€January€1,€2010). Amended€and€Restated€Advance€Auto€Parts,€Inc. Employee€Stock€Purchase€Plan. Advance€Auto€Parts,€Inc.€Deferred€Compensation€Plan€(as amended€January€1,€2008),€including€First€Amendment€to the€Advance€Auto€Parts,€Inc.€Deferred€Compensation€Plan (as€amended€and€restated€effective€as€of€January€1,€2009) and€Second€Amendment€to€the€Advance€Auto€Parts,€Inc. Deferred€Compensation€Plan€(as€amended€and€restated effective€as€of€January€1,€2010). Incorporated€by€Reference Filed Form Exhibit Filing€Date Herewith 10-K 10.17 3/1/2011 DEF€14A Appendix€C 4/16/2012 10-K 10.19 3/1/2011 Advance€Auto€Parts,€Inc.€Executive€Incentive€Plan. DEF€14A Appendix€B 4/11/2007 Employment€Agreement€effective€June€4,€2008€between Advance€Auto€Parts,€Inc.€and€Michael€A.€Norona. Attachment€C€to€Employment€Agreement€effective€June€4, 2008€between€Advance€Auto€Parts,€Inc.€and€Michael€A. Norona. Form€of€Advance€Auto€Parts,€Inc.€Restricted€Stock€Award Agreement€dated€November€17,€2008. First€Amendment€to€Employment€Agreement€effective January€1,€2010€between€Advance€Auto€Parts,€Inc.€and Michael€A.€Norona. Form€of€Advance€Auto€Parts,€Inc.€SAR€Award€Agreement under€2004€Long-Term€Incentive€Plan. Form€of€Advance€Auto€Parts,€Inc.€Restricted€Stock€Award Agreement€under€2004€Long-Term€Incentive€Plan. Second€Amendment€to€Employment€Agreement€effective December€31,€2012€between€Advance€Auto€Parts,€Inc.€and Michael€A.€Norona. Supplement€No.€1€to€Guarantee€Agreement. Third€Amendment€to€the€Advance€Auto€Parts,€Inc. Deferred€Compensation€Plan€(Effective€as€of€January€1, 2013). Third€Amendment€to€the€Advance€Auto€Parts,€Inc. Deferred€Stock€Unit€Plan€for€Non-Employee€Directors€and Selected€Executives€(Effective€as€of€January€1,€2013). Form€of€Advance€Auto€Parts,€Inc.€SARs€Award€Agreement and€Restricted€Stock€Unit€Award€Agreement€under€2004 Long-Term€Incentive€Plan. Form€of€Advance€Auto,€Inc.€Restricted€Stock€Unit Agreement€dated€March€1,€2013. Form€of€Employment€Agreement€effective€April€21,€2013 between€Advance€Auto€Parts,€Inc.€and€George€E.€Sherman and€Charles€E.€Tyson. Third€Amendment€to€Employment€Agreement€between Advance€Auto€Parts,€Inc.€and€Michael€A.€Norona,€effective June€4,€2013. 8-K 8-K 8-K 10-Q 10-K 10-K 10-Q 8-K 10-K 10.33 6/4/2008 10.35 6/4/2008 10.39 11/21/2008 10.44 6/2/2010 10.33 2/28/2012 10.34 2/28/2012 10.37 11/13/2012 10.1 12/21/2012 2/25/2013 10.33 10-K 10.34 2/25/2013 10-K 10.36 2/25/2013 8-K 8-K 10.38 3/7/2013 10.39 4/30/2013 8-K 10.40 6/6/2013 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 Exhibit€No. Exhibit€Description 10.21 10.22 10.23 10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 10.36 10.37 10.38 10.39 Credit€Agreement,€dated€as€of€December€5,€2013,€among Advance€Auto€Parts,€Inc.€Advance€Stores€Company, Incorporated,€the€lenders€party€thereto,€and€JPMorgan Chase€Bank,€N.A.,€as€Administrative€Agent. Guarantee€Agreement,€dated€as€of€December€5,€2013, among€Advance€Auto€Parts,€Inc.€Advance€Stores Company,€Incorporated,€the€other€lenders€from€time€to time€party€lenders€party€thereto€and€JPMorgan€Chase Bank,€N.A.,€as€Administrative€Agent€for€the€lenders. Supplement€No.€1€to€Guarantee€Agreement. First€Amendment€to€the€Advance€Auto€Parts,€Inc. Employee€Stock€Purchase€Plan€(As€amended€and€Restated Effective€as€of€May€15,€2012). Form€of€Advance€Auto€Parts,€Inc.€SARs€Award€Agreement and€Restricted€Stock€Unit€Award€Agreement. First€Amendment€to€Employment€Agreement€between Advance€Auto€Parts,€Inc.€and€George€E.€Sherman€and Charles€E.€Tyson. Fourth€Amendment€to€Employment€Agreement€between Advance€Auto€Parts,€Inc.€and€Michael€A.€Norona. Second€Amendment€to€the€Advance€Auto€Parts,€Inc. Employee€Stock€Purchase€Plan€(As€amended€and€Restated Effective€as€of€May€15,€2012). Fourth€Amendment€to€the€Advance€Auto€Parts,€Inc. Deferred€Compensation€Plan€(As€Amended€and€Restated Effective€as€of€January€1,€2008). Fourth€Amendment€to€the€Advance€Auto€Parts,€Inc. Deferred€Stock€Unit€Plan€for€Non-Employee€Directors€and Selected€Executives€(As€Amended€and€Restated€Effective as€of€January€1,€2008). Fifth€Amendment€to€the€Advance€Auto€Parts,€Inc.€Deferred Compensation€Plan€(As€Amended€and€Restated€Effective as€of€January€1,€2008). Fifth€Amendment€to€the€Advance€Auto€Parts,€Inc.€Deferred Stock€Unit€Plan€for€Non-Employee€Directors€and€Selected Executives€(As€Amended€and€Restated€Effective€as€of January€1,€2008). Agreement,€dated€as€of€November€11,€2015,€by€and€among Advance€Auto€Parts,€Inc.€and€Starboard. Restricted€Stock€Unit€Award€Agreement€between€Advance Auto€Parts,€Inc.€and€John€C.€Brouillard€dated€December€1, 2015. Employment€Agreement€effective€March€28,€2016 between€Advance€Auto€Parts,€Inc.€and€Thomas€Greco. First€Amendment€to€Employment€Agreement€effective April€2,€2016€between€Advance€Auto€Parts,€Inc.€and Thomas€R.€Greco. 2016€Restricted€Stock€Unit€Award€Agreement€(Sign-On Award€-€Performance-Based)€between€Advance€Auto Parts,€Inc.€and€Thomas€Greco€dated€April€14,€2016. 2016€Restricted€Stock€Unit€Award€Agreement€(Sign-on Award€-€Time-Based)€between€Advance€Auto€Parts,€Inc. and€Thomas€Greco€dated€April€14,€2016. 2016€time-Based€SARs€Award€Agreement€(Stock€Settled€- Inducement€Award)€between€Advance€Auto€Parts,€Inc.€and Thomas€Greco€dated€April€14,€2016. Incorporated€by€Reference Filed Form Exhibit Filing€Date Herewith 8-K 10.1 12/9/2013 8-K 10.2 12/9/2013 10-K 10-K 10-K 10-Q 10-Q 10-K 10.45 10.46 2/25/2014 2/25/2014 10.48 2/25/2014 10.51 11/12/2014 10.52 11/12/2014 10.50 3/3/2015 10-K 10.51 3/3/2015 10-K 10.52 3/3/2015 10-K 10.53 3/3/2015 10-K 10.54 3/3/2015 8-K 10-K 10.1 11/13/2015 10.58 3/1/2016 10-Q 10.1 5/31/2016 10-Q 10.2 5/31/2016 10-Q 10.3 5/31/2016 10-Q 10-Q 10.4 10.5 5/31/2016 5/31/2016 Exhibit€No. Exhibit€Description Incorporated€by€Reference Filed Form Exhibit Filing€Date Herewith 10-Q 10-Q 10-Q 8-K 10.6 5/31/2016 10.7 5/31/2016 10.1 11/15/2016 10.1 2/6/2017 8-K 10.2 2/6/2017 10-K 10-K 10-K 10.5 2/28/2017 10.51 2/28/2017 10.52 2/28/2017 10-K 10.53 2/28/2017 10-K 10.54 2/28/2017 10-K 10.55 2/28/2017 10-K 10.56 2/28/2017 10-K 10-K 10.57 2/28/2017 10.58 2/28/2017 DEF14A Appendix€A 4/6/2017 €10-Q 10.1 5/24/2017 8-K 10.1 2/6/2018 10.40 10.41 10.42 10.43 10.44 10.45 10.46 10.47 10.48 10.49 10.50 10.51 10.52 10.53 10.54 10.55 10.56 10.57 10.58 Form€of€Performance-Based€SARs€Award€Agreement between€Advance€Auto€Parts,€Inc.€and€Thomas€Greco. Form€of€Restricted€Stock€Unit€Award€Agreement€between Advance€Auto€Parts,€Inc.€and€Thomas€Greco. Employment€Agreement€effective€October€3,€2016 between€Advance€Auto€Parts,€Inc.€and€Thomas€B.€Okray. Credit€Agreement,€dated€as€January€31,€2017,€among Advance€Auto€Parts,€Inc.,€Advance€Stores€Company, Incorporated,€the€lenders€party€thereto,€and€Bank€of America,€N.A.,€as€Administrative€Agent. Guarantee€Agreement,€dated€as€of€January€31,€2017, among€Advance€Auto€Parts,€Inc.,€Advance€Stores Company,€Incorporated,€the€other€guarantors€from€time€to time€party€thereto€and€Bank€of€America,€N.A.,€as administrative€agent€for€the€lenders. Employment€Agreement€effective€August€21,€2016 between€Advance€Auto€Parts,€Inc.€and€Robert€B.€Cushing. Form€of€Senior€Vice€President€Loyalty€Agreement between€Natalie€Schechtman€and€Advance€Auto€Parts,€Inc. 2016€Restricted€Stock€Unit€Award€Agreement€(Time- Based)€between€Advance€Auto€Parts,€Inc.€and€Thomas€B. Okray€dated€November€21,€2016. 2016€Restricted€Stock€Unit€Award€Agreement (Performance-Based)€between€Advance€Auto€Parts,€Inc. and€Robert€B.€Cushing€dated€September€7,€2016. Sixth€Amendment€to€the€Advance€Auto€Parts,€Inc. Deferred€Compensation€Plan€(As€Amended€and€Restated Effective€as€of€January€1,€2008). Sixth€Amendment€to€the€Advance€Auto€Parts,€Inc. Deferred€Stock€Unit€Plan€for€Non-Employee€Directors€and Selected€Executives€(As€Amended€and€Restated€Effective as€of€January€1,€2008). Seventh€Amendment€to€the€Advance€Auto€Parts,€Inc. Deferred€Stock€Unit€Plan€for€Non-Employee€Directors€and Selected€Executives€(As€Amended€and€Restated€Effective as€of€January€1,€2008). Form€of€2015€Advance€Auto€Parts,€Inc.€Restricted€Stock Unit€Award€Agreement. Form€of€2015€Advance€Auto€Parts,€Inc.€SARs€Award Agreement. Advance€Auto€Parts,€Inc.€2017€Amended€and€Restated Executive€Incentive€Plan Form€of€2017€Advance€Auto€Parts,€Inc.€Performance- Based€Restricted€Stock€Unit€Award€Agreement. Amendment€No.€1€to€Credit€Agreement,€dated€as€of January€31,€2018,€among€Advance€Auto€Parts,€Inc., Advance€Stores€Company,€Incorporated,€the€lenders€party thereto,€and€Bank€of€America,€N.A.,€as€Administrative Agent. 7th€Amendment€to€Advance€Auto€Parts,€Inc.€Deferred Compensation€Plan€(As€Amended€and€Restated€Effective as€of€January€1,€2008). 8th€Amendment€to€Advance€Auto€Parts,€Inc.€Deferred Stock€Unit€Plan€for€Non-Employee€Directors€and€Selected Executives€(As€Amended€and€Restated€Effective€as€of January€1,€2008). X X Incorporated€by€Reference Filed Form Exhibit Filing€Date Herewith X X X X X X Exhibit€No. Exhibit€Description 12.1 21.1 23.1 31.1 31.2 32.1 Statement€Regarding€Computation€of€Ratio€of€Earnings€to Fixed€Charges. Subsidiaries€of€Advance€Auto. Consent€of€Deloitte€&€Touche€LLP. Certification€of€Chief€Executive€Officer€Pursuant€to Section€302€of€the€Sarbanes-Oxley€Act€of€2002. Certification€of€Chief€Financial€Officer€Pursuant€to Section€302€of€the€Sarbanes-Oxley€Act€of€2002. Certifications€of€Chief€Executive€Officer€and€Chief Financial€Officer€Pursuant€to€Section€906€of€the€Sarbanes- Oxley€Act€of€2002. 101.INS XBRL€Instance€Document 101.SCH XBRL€Taxonomy€Extension€Schema€Document 101.CAL 101.DEF XBRL€Taxonomy€Extension€Calculation€Linkbase Document XBRL€Taxonomy€Extension€Definition€Linkbase Document 101.LAB XBRL€Taxonomy€Extension€Labels€Linkbase€Document 101.PRE XBRL€Taxonomy€Extension€Presentation€Linkbase Document Pursuant€to€the€requirements€of€Section€13€or€15(d)€of€the€Securities€Exchange€Act€of€1934,€the€registrant€has€duly€caused this€report€to€be€signed€on€its€behalf€by€the€undersigned,€thereunto€duly€authorized.€ Signatures Dated: February€21,€2018 ADVANCE€AUTO€PARTS,€INC. By: /s/€Thomas€B.€Okray Thomas€B.€Okray ExecutiveƒViceƒPresidentƒandƒChiefƒFinancialƒOfficer Pursuant€to€the€requirements€of€the€Securities€Exchange€Act€of€1934,€this€report€has€been€signed€below€by€the€following persons€on€behalf€of€the€registrant€and€in€the€capacities€and€on€the€dates€indicated.€ Signature Title Date /s/€Thomas€R.€Greco President€and€Chief€Executive€Officer€and€Director February€21,€2018 Thomas€R.€Greco (Principal€Executive€Officer) /s/€Thomas€B.€Okray Thomas€B.€Okray /s/€Jeffrey€W.€Shepherd Jeffrey€W.€Shepherd Executive€Vice€President€and€Chief€Financial€Officer February€21,€2018 (Principal€Financial€Officer) Senior€Vice€President,€Controller€and€Chief€€Accounting€Officer February€21,€2018 (Principal€Accounting€Officer) /s/€Jeffrey€C.€Smith Chairman€and€Director February€21,€2018 Jeffrey€C.€Smith /s/€John€F.€Bergstrom Director John€F.€Bergstrom /s/€John€C.€Brouillard Director John€C.€Brouillard /s/€Brad€W.€Buss Brad€W.€Buss /s/€Fiona€P.€Dias Fiona€P.€Dias /s/€John€F.€Ferraro John€F.€Ferraro Director Director Director /s/€Adriana€Karaboutis Director Adriana€Karaboutis /s/€Eugene€I.€Lee,€Jr. Director Eugene€I.€Lee,€Jr. /s/€William€S.€Oglesby Director William€S.€Oglesby /s/€Reuben€E.€Slone Director Reuben€E.€Slone S-1 February€21,€2018 February€21,€2018 February€21,€2018 February€21,€2018 February€21,€2018 February€21,€2018 February€21,€2018 February€21,€2018 February€21,€2018 S H A R E H O L D E R I N F O R M A T I O N Corporate Office: 5008 Airport Road Roanoke, Virginia 24012 877-238 -2623 Internet Site: www.AdvanceAutoParts.com Annual Meeting: May 16, 2018 at 8:30 a.m. ET Advance Auto Parts Customer Support Center University Building 4709 Hargrove Road Raleigh, North Carolina 27616 Registrar and Transfer Agent: Computershare P.O. Box 505000 Louisville, Kentucky 40233-5000 or 462 South 4th Street, Suite 1600 Louisville, Kentucky 40202 866-865-6327 Foreign Shareholders: 201-680-6578 TDD for Hearing Impaired: 800-490-1493 Internet Site: www.computershare.com/investor Common Stock: Ticker Symbol: AAP Listing: New York Stock Exchange Independent Registered Public Accounting Firm: Deloitte & Touche LLP Duke Energy Building 550 South Tryon Street, Suite 2500 Charlotte, North Carolina 28202 SEC FORM 10-K: Shareholders may obtain free of charge a copy of the Advance Auto Parts Annual Report on Form 10-K as filed with the Securities and Exchange Commission by writing to the Investor Relations Department, 2635 E. Millbrook Road, Raleigh, North Carolina 27604 or by accessing the Company’s website at www.AdvanceAutoParts.com. The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov. E X E C U T I V E T E A M S E N I O R L E A D E R S H I P T E A M * Executive Officers Thomas R. Greco* President and Chief Executive Officer Michael T. Broderick* Executive Vice President, Merchandising and Store Operations Robert B. Cushing* Executive Vice President, Professional Tammy M. Finley* Executive Vice President, General Counsel and Corporate Secretary Natalie S. Schechtman* Executive Vice President, Human Resources Jeffrey W. Shepherd* Senior Vice President, Controller, Chief Accounting Officer, and Interim Chief Financial Officer** Maria R. Ayres Division President, Southern Division Michael C. Creedon, Jr. Division President, Northern Division Sri Donthi Executive Vice President, Chief Technology Officer Yogesh Jashnani Senior Vice President, Marketing, Insights and Analytics Leslie Starr Keating Executive Vice President, Supply Chain, Strategy and Transformation David L. McCartney Division President, Carquest North America **Mr. Okray, who served as Chief Financial Officer through the end of 2017, departed the company and Mr. Shepherd assumed the role of Interim Chief Financial Officer, effective April 13, 2018. B O A R D O F D I R E C T O R S ‡Committee Chair Jeffrey C. Smith Chair, Advance Auto Parts, Inc. Managing Member, Chief Executive Officer and Chief Investment Officer, Starboard Value LP John F. Bergstrom (2‡) Chairman and Chief Executive Officer, Bergstrom Corporation John C. Brouillard (3) Retired Chief Administration and Financial Officer, H.E. Butt Grocery Company Brad W. Buss (1‡, 3) Retired Chief Financial Officer, Solar City Corporation Adriana Karaboutis (1, 4) Chief Information and Digital Officer, National Grid plc Fiona P. Dias (2, 3) Principal Digital Partner, Ryan Retail Consulting John F. Ferraro (1, 4‡) Retired Global Chief Operating Officer, Ernst & Young Thomas R. Greco President and Chief Executive Officer, Advance Auto Parts, Inc. Eugene I. Lee, Jr. (2, 4) President and Chief Executive Officer, Darden Restaurants, Inc. William S. Oglesby (2, 3‡) Senior Advisor, PJT Partners Reuben E. Slone (1, 3) Senior Vice President, Supply Chain Management, Walgreen Co. Committee Membership: 1 – Audit 2 – Compensation 3 – Finance 4 – Nominating and Corporate Governance 5 0 0 8 A I R P O R T RO A D | RO A N O K E , VA 2 4 0 1 2 | 8 7 7. 2 3 8 . 2 6 2 3 | A DVA N C E A U T O PA R T S . C O M 

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