Advance Auto Parts

2 0 1 8  A N N U A L   R E P O R T
2018 ANNUAL REPORT

Advance has supported JDRF 
by raising more than
$44 million
over the past 24 years, 
including $400,000 in 2018

SOCIAL RESPONSIBILITY

Advance is proud to have 
helped raise more than  
$11 million since 2011 
for Building Home for Heroes, 
including $2 million in 2018

Advance began our national 
support of the American Heart 
Association in 2018 and raised 
more than $500,000
during the first year

INVESTING IN OUR TEAM MEMBERS

Through the Fuel the Frontline and Be an Owner 
programs,  Advance  has  granted  more  than 
16,000 equity awards valued at more than $40 
million to nearly 10,000 Team Members since 
2016,  which  has  contributed  to  the  reduction  of 
turnover over the past two years.  

“Fuel the Frontline is enabling us to attract the very Best Parts 
People in the business. When we take care of our 
People,  they  in  turn  take  care  of  our  Customers, 
and when we take care of our Customers, we drive 
long term shareholder value.”

– Tom Greco, President and Chief Executive Officer

ENVIRONMENTAL
SUSTAINABILITY

Advance  published  it’s  inaugural 
Corporate Sustainability and Social 
Report  focusing  on  our  people,  our 
planet and our community.

*Includes Carquest  
independently owned  
locations

DIVERSITY & 
INCLUSION   

Advance was recognized with 
the “Leaders in Diversity” 
award  from  the  Triangle 
Business  Journal  in  2018  
in recognition of the impact 
of  Advance’s  strategic  focus 
on Diversity and Inclusion.

 
 
 
D E A R   F E L L O W   A D V A N C E   A U T O   P A R T S   S H A R E H O L D E R S

2018  was  an  exciting  year  for  Advance  Auto 
Parts during which we made significant progress 
in  nearly  every  aspect  of  our  business.  We 
delivered our highest comparable store sales in 
eight years of 2.3 percent, significantly narrowed 
the competitive growth gap, expanded margins  
and produced record cash flow. 

improvement  we  saw  
The  continuous 
throughout  2018  would  not  have  been  
p o s s i b l e   w i t h o u t   t h e   h a r d   w o r k   a n d 
dedication  of  our  more  than  70,000  Team 
Members  across  Advance,  as  well  as  our  
network  of  Carquest  Independent  Partners.  
We  delivered  operational 
improvements  
against  many  key  metrics  in  2018,  which 
enabled meaningful, top line growth. This is 
a testament of our commitment to Our Mission:  
“Passion for Customers…Passion for Yes!” 

As  we  begin  2019,  we  are  encouraged  by  the 
macro  indicators  and  forecasted  improvement 
to  key  demand  drivers  for  the  aftermarket 
auto  parts  industry.  Our  team  is  focused  on 
serving  our  Customers  better  than  ever,  and 
we are confident that we will continue to build 
momentum  throughout  the  year  and  deliver 
further  progress  on  our  long  term  goals. 

 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

In  2018,  we  began  to  ramp-up  capital 
investments  to  drive  long  term  sustainable 
improvements  in  our  operational  and  financial 
performance.  As  we  solidified  our  foundation 
for  growth  and  enhanced  our  Customer 
Value  Proposition,  we  invested  nearly  $200 
million  in  both  the  business  infrastructure 
and  tools  for  our  Team  Members  in  2018. 
Our  2018  investments  were  concentrated 
in  information  technology  and  supply  chain 

initiatives  that  will  address  long  standing 
integration  oppor tunities  and  unlock  new 
capabilities to build competitive advantage and 
expand margins. In other areas, our investments 
will  eliminate  costly  and  redundant  back 
office  systems that add unnecessary costs and 
create  significant  inefficiencies.  Albeit  early 
in  implementation,  the  strategic  efforts  we 
made during the past 12 months are becoming 
evident  in  our  improving  performance  results. 

EXPANDING MARGINS AND 
DRIVING FREE CASH FLOW 

Advance  is  uniquely  positioned 
within the automotive aftermarket 
industry,  and  for  that  matter, 
broader retail, to deliver sustained  
margin  expansion  and  generate  significant  
Free  cash  flow  over  the  next  several  years. 
In  2018,  we  focused  on  key  areas  of  cost 
savings to drive margin improvement including 
our  material  cost  optimization  efforts,  which 
resulted  in  product  margin  expansion  across 
several  major  categories.  Within  our  supply 
chain,  we  saw  continuous  improvement 
through  the  year  as  we  began  to  standardize 
operations  throughout  our  network  to  enable 
meaningful  improvements  in  safety,  fill  rates 
and  order  accuracy.  In  addition,  our  footprint 
optimization efforts included the closure of two 
distribution centers in the back half of the year, 
and  the  announcement  of  a  third  distribution 
center  that  will  be  closed  in  the  first  half  of 
2019. Finally, through a disciplined approach to  
controlling  costs  across  the  enterprise,  we 
delivered meaningful cost reductions in several  
key  areas  of  our  P&L  including  lower  shrink 
and  defectives,  as  well  as  liability  and  claims 
insurance as a direct result of improved safety 

— continued 

 
   
 
 
 
performance  across  Advance.  Additionally, 
we  leveraged  store  labor  on  a  rate  basis 
throughout  the  year,  despite  wage  inflation 
pressures  experienced  nationwide,  as  we 
remain  focused  on  delivering  productivity 
improvements  in  our  frontline  operations.

Further,  our  disciplined  approach  to  managing 
cash  and  delivering  on  our  capital  allocation 
priorities  enabled  meaningful  improvement 
in  2018,  incl udi ng   a  n ea r ly  3 3 0   b as is  
point  improvement  in  our  AP  ratio.  Finally, 
our  working  capital  management  resulted 
in  record  Free  cash  flow  of  $617  million(1)  in 
2018, an increase of 50 percent year over year. 

PASSION FOR CUSTOMERS… 
PASSION FOR YES!  

Across  Advance,  we  are  focused  on  our 
commitment  to  a  Customer  first  approach 
in  every  decision  and  every  investment  we 
make.  Whether  it  is  a  Do-It-Yourself  (DIY) 
or  Professional  Customer,  we  are  working  
each  and  every  day  to  ensure  we  improve  our 
fundamental  Customer  Value  Proposition.  We 
recognize  that  Customer  needs  continue  to 
evolve,  and  we  must  develop  capabilities 
to  ensure  we  can  ser ve  the  Customer 
in  an  evolving  landscape.  This  includes 
innovative  digital  platforms  that  make  it 
easier  for  our  Customers  to  do  business  with 
us  as  their  trusted  partner  for  all  of  their  
automotive needs.

Our  Customer  focused  transformation  efforts 
in 2018 included the roll out of Cross Banner 
Visibility,  which  enables  our  Team  Members,  
as  well  as  our  Professional  Customers,  to 
view the entire breadth of our parts catalog, 
regardless  of  banner,  in  one  place.  This 
was  completed  during  the  first  quarter  and  
was  a  meaningful  driver  of  our  comparable  
store sales growth throughout the year.  

Additionally,  our  Professional  Customers  also 
benefitted from the introduction of MyAdvance, 
our consolidated professional front-end portal, 
in  the  second  half  of  2018,  which  includes 
the  AdvancePro  platform  and  provides  access 
to  the  full  assortment  of  parts  across  the 
Advance  family.  MyAdvance  combines  nearly 
30  different  tools  in  one  place,  providing 
Professional  Customers  a  unique  experience 
with best in class shop services and solutions, 
including an “Expert Corner” in areas such as  
shop management. 

We are excited to further enhance our Customer 
Value  Proposition  and  grow  market  share  in 
2019.  With  several  investments  planned  this 
year  to  better  serve  our  Customers,  including 
the roll out of our omnichannel partnership with  
Walmar t.com,  Dynamic  Assor tment  and  a 
mobile  app,  we  are  focused  on  delivering  
sales growth and margin expansion. 

 CORPORATE SUSTAINABILITY  
AND SOCIAL RESPONSIBILITY

In  line  with  our  commitment  
to  provide  our  stakeholders 
fur ther  transparency  to  all 
that  we  are  doing  at  Advance  
to  deliver  Our  Vision: Advancing  a  World  in 
Motion, we published our    inaugural Corporate 
Sustainability and Social Report in December 
2018.  We  recognize  the  impor tance  of 
delivering  winning  results  while  advancing 
the  professional  development  and  growth  of 
our Team Members. In addition, we believe it 
is  our  responsibility  to  help  leave  the  world 
a  better  place  for  future  generations  and 
operate  as  a  trusted  par tner  to  our  Team 
Members  and  communities  where  we  live 
and  serve.  Consistent  with  these  priorities, 
our  report  includes  a  concentrated  focus  on 
three  key  areas: our  people,  our  planet  and 
our community.

— continued 

 
 
  
Our People 

Our  cultural  beliefs  are  the 
foundation of how we work and 
live  and  are  essential  to  our 
long term success. These beliefs are highlighted 
throughout  our  field  operations  and  corporate 
offices, and are engrained in everything we do: 

Speak Up 

Be Accountable   

Take Action 

Grow Talent 

Move Forward 

Champion Inclusion 

We  recognize  the  knowledge,  dedication 
and  unrelenting  focus  by  our  Team  Members 
will  continue  to  be  a  differentiating  factor 
in the transformation of Advance.  

f o c u s   o n  

Throughout 2018, we continued 
o u r  
i n c r e a s i n g 
Diversity & Inclusion across the 
enterprise.  We  are  incredibly 
proud  of  our  progress  during  2018  where  we 
increased representation of females and people 
of  color  in  leadership  roles  by  25  percent.  
Our  continued  progress  in  this  critical  area  
was  recognized  by  the  Triangle  Business  
Journal,  a  leading  business  publication  
ser ving  the  Raleigh,  Durham  and  Chapel  
their  
Hill,  Nor th  Carolina  areas,  with 
“Leaders  in  Diver sity”  award  for  2018.  
T h e   awa r d   recognizes  our  commitment 
to  D i v e r s i t y   &   I n c l u s i o n   t h r o u g h   o u r 
“Champion  Inclusion”  Cultural  Belief:  I 
embrace  the  diversity  of  people,  thoughts, 
skills and styles to deliver results. 

to  meaningful  progress 
In  addition 
enhancing  our  diverse  and 
inclusive 
workforce,  we  are  committed  to  continuous 
expansion  of  our  learning  and  development 
oppor tunities  for  Team  Members  at  all  
levels  of  our  organization.  In  2018  alone, 

we  invested  significantly  in  new  capabilities 
and  increased  our  training  courses  by  40 
percent!  With  an  extensive  and  robust  
training  platform,  we  are  creating  a 
learning  where  
culture  of  continuous 
our  Team  Member s  have 
tools 
the 
necessar y  to  achieve  the  personal  and  
professional growth they desire.   

It is critical that we continue 
investing  in  not  only  the 
development  of  our  Team 
Member s,  but  also  in  the 
long  term  financial  opportunities  we  provide 
them  to  help  strengthen  both  their  current 
earnings  and  future  savings  opportunities. 
As  such,  we  continued  our  investments  in  key 
incentive programs in 2018, including our Fuel 
the  Frontline  and  Be  An  Owner  recognition 
programs.  Since  the  initial  roll  out  in  2016, 
we  have  now  granted  more  than  16,000 
equity awards valued at more than $40 million 
to  nearly  10,000  Team  Members.  We  are  
confident  our  Fuel  the  Frontline  investments 
have  been  a  key  driver  in  the  dramatic  
reduction  in  frontline  turnover  over  the  past 
two  years.  In  addition,  we  recently  announced  
significant  improvements  to  our  retirement 
savings,  including  a  material  increase  to  the 
company  match  for  our  401(k)  participants.  

T h r o u g h o u t   A d v a n c e ,  w e 
recognize  our  Team  Members 
are our best part and investing 
in  their  success  underscores 
our  commitment  to  them.  Increasingly  over 
the  past  several  years,  our  Team  Members 
are taking notice of our investments in both 
their  development  and  the  tools  needed 
to  do  their  job  better,  which  is  improving  
the  overall  culture  and  health  of  our  
organization.  We  saw  marked  improvement  
in  our  2018  Organizational  Health  Survey, 
including  areas  such  as  “Supervisors  inspire  
high  performance  through  their  leadership,”

— continued 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
“Team  Member s  have  clear ly  defined 
objectives  and  know  how  to  help  the 
company  meet  its  objectives”  and  “Support 
for diversity is strong in all levels.” 

As we begin the third year of our transformation 
journey,  we  are  excited  with  the  progress  
we have made with Team Member engagement 
and  look  forward  to  what  lies  ahead  to 
further enhance the Advance culture. 

Our Planet 

 At  Advance,  we  are  dedicated  
to  reducing  our  environmental 
impact  while  ensuring  we  leave 
the world a better place for future 
generations.  These  effor ts  include  waste 
reduction  through  our  increased  recycling 
programs  where  we  have  delivered  consistent 
improvement  during  the  last  several  years. 
Nearly  all  of  our  stores  and  branches  include 
robust  programs  for  motor  oil,  lead  acid 
batteries and antifreeze recycling.   Additionally, 
we continue to make notable improvements in 
our overall energy efficiency.  This includes the 
installation of LED lighting, high efficiency HVAC 
systems and a centralized energy management 
system.  Further,  the  ongoing  conversion  of 
our  15,000+  store  delivery  fleet  from  V6 
pickup  trucks  to  more  economical  hybrid 
and  four  cylinder  automobiles  is  enabling  a 
reduction in both emissions and fuel costs. 

Our commitment to reducing our environmental 
impact  is  an  ongoing  effort,  and  while  we 
have  made  progress,  we  are  committed  to  
doing  more  in  the  years  to  come.  We  will  
continue  to  invest  in  meaningful  systems  and 
processes  to  enable  fur ther  improvement  
and  look  forward  to  sharing  updates  on  our  
progress  as  we  execute  on  our  long  term 
strategic objectives.

Our Community 

In  2018,  Advance  focused 
on  three  major  charitable 
partnerships  at  a  corporate 
level.  We  continued  our  24 
year  relationship  with  JDRF  and  their  mission 
to find a cure for Type 1 Diabetes - helping raise 
more than $44 million during our partnership.   

At Advance, we are dedicated to our veterans, 
and  continued  our  suppor t  of  Building  
Homes  for  Heroes.  This  organization  builds 
and  modifies  homes  for  men  and  women  who  
were  injured  while  serving  our  country,  and  
then  gifts  them,  mortgage  free,  to  veterans  
and  their  families.  In  2018,  Advance  helped 
by raising $2 million, bringing our total amount 
raised since 2011 to more than $11 million.   

This  year,  we  also  began  our  national  support 
of the American Heart Association (AHA) where 
we  served  as  chair  of  the  Triangle  Heart  Walk 
in  2018.  Unfortunately,  heart  disease  and 
stroke  is  the  number  one  killer  in  America 
and has a significant impact on our own Team 
Members.  This  makes  supporting  the  AHA  an 
important cause for all of us at Advance. This 
was a record year for the North Carolina event 
with nearly $2 million in total contributions, of 
which  Advance  raised  more  than  $500,000  
to help fight heart disease and stroke.

THINK AHEAD. 
THINK ADVANCE.

T h i n k   A h e a d .   T h i n k   A d v a n c e ,  o u r   n e w 
marketing  campaign  is  a  multi-platform 
digital  and  audio  campaign  launched  in  
the  third  quarter  of  2018.  Through  early  
tracking  of  engagement  and  customer 
perception,  we  are  seeing  the  highest  level 

— continued 

 
 
  
 
 
 
 
 
 
 
 
 
 
of  brand  awareness  since  we  began  tracking  
these  metrics  in  early  2017.  We  know  our 
Customers  are  passionate  about  their  cars 
and this campaign focuses on our commitment  
to them. At Advance, we are creating value and 
true  partnerships  in  order  to  be  the  trusted 
partner for all Customer’s auto part needs.  

ADVANCING IN 2019

On behalf of our entire leadership 
team,  we  are  extremely  proud 
of  our  2018  accomplishments,  
but  we  are  even  more  excited 
about the road ahead. We recently updated our 
Strategic  Business  Plan  and  are  confident  in  
our  ability  to  successfully  deliver  on  our  
2019 objectives.  

Through the combination of improving underlying 
industry  fundamentals  and,  importantly,  our 
ability to drive further execution improvements 
throughout  Advance,  we  will  continue  to  build 
on  our  momentum  throughout  2019  and 
beyond.  We  are  committed  to  delivering  top 
line  growth,  margin  expansion  and  strong 
cash  flow  as  we  continue  to  invest  in  our  
transformation objectives. 

In  summary,  we  are  confident  we  are  on  the 
right  path,  with  the  right  plan  and  have  the 
absolute  best  Team  Members  in  the  industry 
to  help  us  capitalize  on  the  significant  
opportunities ahead. 

Thank  you  for  your  continued  support  as  we 
remain  focused  on  delivering  sustainable 
value and growth for all of our Team Members, 
Customers and shareholders.  

Respectfully, 

Tom Greco 
President and Chief Executive Officer 

Jeffrey C. Smith   
Chairman of the Board

(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 35 in our 2018 Form 10-K included in this 
annual report. Free cash flow of $617 million can be reconciled 
to  net  cash  provided  by  operating  activities  on  a  GAAP  basis  of 
$811 million by adding back purchases of property and equipment 
of $194 million.

 
 
 
 
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

EXCHANGE€ACT€OF€1934

For€the€fiscal€year€ended€December€29,€2018€

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)

2635€East€Millbrook€Road
Raleigh,€North€Carolina
(Address€of€principal€executive€offices)

€€€€54-2049910
(I.R.S.€Employer
Identification€No.)

€€€€27604
(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€every€Interactive€Data€File€required€to€be€submitted
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€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€

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€13,€2018,€the€aggregate

market€value€of€common€stock€held€by€non-affiliates€of€the€registrant€was€$9,863,346,448,€based€on€the€last€sales€price€on
July€13,€2018,€as€reported€by€the€New€York€Stock€Exchange.

As€of€February€15,€2019,€the€number€of€shares€of€the€registrant(cid:129)s€common€stock€outstanding€was€71,670,134€shares.

Portions€of€the€registrant(cid:129)s€definitive€proxy€statement€for€its€2019€Annual€Meeting€of€Stockholders,€to€be€held€on€May€15,
2019,€are€incorporated€by€reference€into€Part€III€of€this€Form€10-K.

Documents€Incorporated€by€Reference:

TABLE€OF€CONTENTS

€Page

Part€I.

Part€II.

Part€III.

Part€IV.

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 ...........................................................................

Item€15.

Exhibits,€Financial€Statement€Schedules ..........................................................................

Item€16.

Form€10-K€Summary ........................................................................................................

Signatures.............................................................................................................................................................................

2

6

12

12

13

13

14

16

17

26

26

26

27

27

28

28

28

28

28

29

74

75

FORWARD-LOOKING€STATEMENTS

Certain€statements€in€this€Annual€Report€on€Form€10-K€are€ƒforward-looking€statements„€within€the€meaning€of€the
Private€Securities€Litigation€Reform€Act€of€1995.€All€statements,€other€than€statements€of€historical€facts,€may€be€forward-
looking€statements.€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.€Please€refer€to€other€filings€made€by€the€Company€with€the€Securities€and€Exchange€Commission
for€additional€risk€factors€that€could€materially€affect€the€Company(cid:129)s€actual€results.€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.

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€on€a€consolidated€basis.€Our€fiscal€year€consists€of€52€or€53€weeks€ending€on€the
Saturday€closest€to€December€31st€of€each€year.€Our€fiscal€year€ended€December€29,€2018€(ƒ2018„),€fiscal€year€ended€December€30,
2017€(ƒ2017„)€and€fiscal€year€ended€December€31,€2016€(ƒ2016„)€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€29,€2018,€we€operated€4,966€total€stores€and€143€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
initiated€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.€

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€…€Our€4,380€stores€as€of€December€29,€2018€are€generally€located€in€freestanding€buildings€with€a
focus€on€both€Professional€and€DIY€customers.€The€average€size€of€an€Advance€Auto€Parts€store€is€approximately€7,600
square€feet€with€the€size€of€our€typical€new€stores€ranging€from€approximately€6,600€to€22,900€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€21,000€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€…€Our€185€stores€as€of€December€29,€2018€operate€primarily€in€the€Northeastern€and€Mid-
Atlantic€regions€of€the€United€States€with€a€focus€on€Professional€customers.€These€stores€specialize€in€imported
aftermarket€and€private€label€branded€auto€parts.€Autopart€International€stores€offer€approximately€54,000€SKUs€through
routine€replenishment€from€their€supply€chain.

Carquest€…€Our€401€stores€as€of€December€29,€2018,€including€140€stores€in€Canada,€are€generally€located€in
freestanding€buildings€with€a€primary€focus€on€Professional€customers,€but€also€serving€DIY€customers.€The€average€size
of€a€Carquest€store€is€approximately€7,300€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€21,000€SKUs.
As€of€December€29,€2018,€Carquest€also€served€1,231€independently€owned€stores€that€operate€under€the€ƒCarquest„€name.€

Worldpac€…€Our€143€branches€as€of€December€29,€2018€that€principally€serve€Professional€customers€utilizing€an
efficient€and€sophisticated€on-line€ordering€and€fulfillment€system. Worldpac€ branches€ are€ generally€ larger€ than€ our€ other
store€locations€averaging€approximately€26,400€square€feet€in€size.€Worldpac€specializes€in€imported,€OEM€parts.
Worldpac(cid:129)s€complete€product€offering€includes€over€165,000€SKUs€for€import€and€domestic€vehicle€carlines.€

2

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€with€quality€products,€that€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%€of€our€sales€in€2018,€2017€and€2016.€We€also€serve€1,231€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:

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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,€including€through€MyAdvance.com,€by€phone€or€in-store€and€we€deliver€product€from€our€store€or
branch€locations€to€their€places€of€business.

Store€Development

The€key€factors€used€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.€As€of€December€29,€2018,€4,948
stores€and€branches€were€located€in€49€U.S.€states€and€2€U.S.€territories€and€161€stores€and€branches€were€located€in€9€Canadian
provinces.

We€serve€our€Advance€Auto€Parts€and€Carquest€stores€primarily€from€our€customer€support€centers€in€Raleigh,€NC€and
Roanoke,€VA.€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.€

3

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€29,€2018,€we€operated€51€distribution€centers,€ranging€in€size
from€approximately€51,000€to€943,000€square€feet€with€total€square€footage€of€approximately€11.5€million.€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€2018,€we€closed€distribution€centers€in€Gallman,€MS€and€San€Antonio,€TX.

Merchandise,€Marketing€and€Advertising

In€2018,€we€purchased€merchandise€from€over€1,100€vendors,€with€no€single€vendor€accounting€for€more€than€9%€of
purchases.€Our€purchasing€strategy€involves€negotiating€agreements€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€with€a€goal€of
appealing€to€ va€ lue-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.

to

Our€marketing€and€advertising€program€is€designed€to€drive€brand€awareness,€consideration€by€consumers€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€in-store€pick€up€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€29,€2018,€we€employed€approximately€40,000€full-time€Team€Members€and€approximately€31,000€part-

time€Team€Members.€Our€workforce€consisted€of€85%€of€our€Team€Members€employed€in€store-level€operations,€11%
employed€in€distribution€and€4%€employed€in€our€corporate€offices.€As€of€December€29,€2018,€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.

4

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.

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€motor€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€motor€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€motor€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€U.S.€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.€Our€website€and€the€information€contained€therein€or€linked€thereto
are€not€part€of€this€Annual€Report€on€Form€10-K€for€2018.€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,€proxy€statements,€registration
statements€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€at€www.sec.gov.

5

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€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€decrease€due€to€any€number€of€reasons,

including:

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aƒdecreaseƒinƒtheƒtotalƒnumberƒofƒvehiclesƒonƒtheƒroadƒorƒinƒtheƒnumberƒofƒannualƒmilesƒdrivenƒorƒsignificantƒincrease
inƒtheƒuseƒofƒridesharingƒservices,€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€and€rising€interest€rates,€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;
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
other€websites€on€the€internet€may€decrease€the€need€for€customers€to€visit€and€purchase€their€aftermarket€parts€from
our€physical€stores€and€may€cause€fewer€customers€to€order€aftermarket€parts€on€our€website;€
technologicalƒadvances,ƒsuchƒasƒbatteryƒelectricƒvehicles,ƒandƒtheƒincreaseƒinƒqualityƒofƒvehiclesƒmanufactured,
because€vehicles€that€need€less€frequent€maintenance€or€have€lower€part€failure€rates€will€require€less€frequent€repairs
using€aftermarket€parts€and,€in€the€case€of€battery€electric€vehicles,€do€not€require€oil€changes;€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€and€our€revenues€may€decline.

The€sale€of€automotive€parts,€accessories€and€maintenance€items€is€highly€competitive€and€influenced€by€a€number€of
factors,€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)€internet-based€retailers,€(iii)€discount€stores€and€mass€merchandisers€that€carry€automotive
products,€(iv)€wholesalers€or€jobbers€stores,€including€those€associated€with€national€parts€distributors€or€associations€(v)
independently€owned€stores€and€(vi)€automobile€dealers€that€supply€parts.€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€lower€overhead€costs,€time€and€travel€savings€and€ability€to€price€competitively.€In€order€to€compete€favorably,€we
may€need€to€increase€delivery€speeds€and€incur€higher€shipping€costs.€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.€Customers€are€increasingly€shopping,€reading€reviews€and

comparing€products€and€prices€on-line.€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.

6

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,€our€business,€financial€condition,€results€of€operations€and€cash€flows€could€be€adversely
affected.€For€a€description€of€select€initiatives,€see€Note€4,€ExitƒActivitiesƒandƒOtherƒInitiatives,ƒof€the€Notes€to€the€Consolidated
Financial€Statements€included€herein.

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€or€tariff€rates,€currency€fluctuations,€work€stoppages,€labor€strikes,€port€delays,€civil€unrest,€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€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€all€of€our€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:

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†
†
†

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.€In€addition€to€potentially€incurring€costs€related€to€lease€obligations,€we€may€also€incur
severance€or€other€facility€closure€costs€for€stores€that€are€closed€or€relocated.

7

If€we€are€unable€to€successfully€integrate€future€acquisitions€into€our€existing€operations,€it€could€adversely€affect€our
business,€financial€condition,€results€of€operations€and€cash€flows.

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:

†

†
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†

†

†

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.

€
If€we€experience€difficulties€implementing€various€information€systems,€including€our€new€enterprise€resource€planning
system€((cid:129)ERP‚),€our€ability€to€conduct€or€business€could€be€negatively€impacted.

We€are€dependent€on€information€systems€to€facilitate€the€day-to-day€operations€of€the€business€and€to€produce€timely,
accurate€and€reliable€information€on€financial€and€operational€results.€We€are€in€process€of€implementing€various€information
systems,€including€a€new€ERP.€These€implementations€will€require€significant€investment€of€human€and€financial€resources,
and€we€may€experience€significant€delays,€increased€costs€and€other€difficulties€with€these€projects.€Any€significant€disruption
or€deficiency€in€the€design€and€implementation€of€these€information€systems€could€adversely€affect€our€ability€to€process
orders,€ship€product,€send€invoices€and€track€payments,€fulfill€contractual€obligations€or€otherwise€operate€our€business.€While
we€have€invested€meaningful€resources€in€planning,€project€management€and€training,€additional€and€serious€implementation
issues€may€arise€as€we€integrate€onto€these€new€information€systems€that€may€disrupt€our€operations€and€negatively€impact€our
business,€financial€condition,€results€of€operations€and€cash€flows.

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€payment€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
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.

8

Our€reliance€on€suppliers€subjects€us€to€various€risks€and€uncertainties€which€could€affect€our€financial€results.

We€source€the€products€we€sell€from€a€wide€variety€of€domestic€and€international€suppliers.€Our€financial€results€depend€on

us€securing€acceptable€terms€with€our€suppliers€for,€among€other€things,€the€price€of€merchandise€we€purchase€from€them,
funding€for€various€forms€of€promotional€programs,€payment€terms€and€terms€covering€returns€and€factory€warranties.€To
varying€degrees,€our€suppliers€may€be€able€to€leverage€their€competitive€advantages€-€for€example,€their€financial€strength,€the
strength€of€their€brand€with€customers,€their€own€stores€or€online€channels€or€their€relationships€with€other€retailers€-€to€our
commercial€disadvantage.€Generally,€our€ability€to€negotiate€favorable€terms€with€our€suppliers€is€more€difficult€with€suppliers
for€whom€our€purchases€represent€a€smaller€proportion€of€their€total€revenues,€consequently€impacting€our€profitability€from
such€vendor€relationships.€We€have€established€standards€for€product€safety€and€quality€and€workplace€standards€that€we
require€all€our€suppliers€to€meet.€We€do€not€condone€human€trafficking,€forced€labor,€child€labor,€harassment€or€abuse€of€any
kind,€and€we€expect€our€suppliers€to€operate€within€these€same€principles.€Our€ability€to€find€qualified€suppliers€who€can
supply€products€in€a€timely€and€efficient€manner€that€meet€our€standards€can€be€challenging.€Suppliers€may€also€fail€to€invest
adequately€in€design,€production€or€distribution€facilities,€may€reduce€their€customer€incentives,€advertising€and€promotional
activities€or€change€their€pricing€policies.€If€we€encounter€any€of€these€issues€with€our€suppliers,€our€business,€financial
condition,€results€of€operations€and€cash€flows€could€be€adversely€impacted.

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,€changes€in€tariff€rates€or€other€interruptions€to€or€difficulties€in€the
manufacture€or€supply€of€the€products€we€purchase€from€them.

Deterioration€in€macro-economic€conditions€or€an€increase€in€fuel€costs€or€proposed€or€additional€tariffs€may€have€a

negative€impact€on€our€customers(cid:129)€net€worth,€financial€resources,€disposable€income€or€willingness€or€ability€to€pay€for
accessories,€maintenance€or€repair€for€their€vehicles,€resulting€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€also€directly€impact€our€operating€and€product€costs,€including€our€store,€supply€chain,€Professional

delivery,€utility€and€product€acquisition€costs.

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.€

9

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.

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.€

10

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.€For€instance,€we€are€currently€subject€to€a€putative€securities€class€action€regarding€past
public€disclosures€(see€Item€3,€"Legal€Proceedings"€of€this€annual€report)€and€to€several€lawsuits€alleging€injury€as€a€result€of
exposure€to€asbestos-containing€products€(see€Note€14,€Contingencies,€of€the€Notes€to€the€Consolidated€Financial€Statements
included€herein).

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€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.€While€we€have€experienced€threats€to€our€data€and
systems,€including€phishing€attacks,€to€date€we€are€not€aware€that€we€have€experienced€a€material€cyber-security€breach€that
has€in€any€manner€hindered€our€operational€capabilities.€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,€our€data
and/or€our€network€including€our€supply€chain.€Any€breach,€damage€to€or€interference€with€our€equipment€or€our€network,€or
unauthorized€access€in€the€future€could€result€in€significant€operational€difficulties€including€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€2018:€

Distribution€Centers

Customer€Support€Centers:

Raleigh,€NC

Roanoke,€VA

Stores€and€branches

Location
51€locations€in€33€U.S.€states€and€4€Canadian€provinces

Square€Footage€(in thousands)

Leased

Owned

7,298

4,183

Raleigh,€NC

Roanoke,€VA
4,948€stores€and€branches€in€49€U.S.€states€and€2€U.S.
territories€and€161€stores€and€branches€in€9€Canadian
provinces

177

253

…

…

35,525

6,210

12

Item€3.€Legal€Proceedings.€

On€February€6,€2018,€a€putative€class€action€on€behalf€of€purchasers€of€our€securities€who€purchased€or€otherwise€acquired

their€securities€between€November€14,€2016€and€August€15,€2017,€inclusive€(the€ƒClass€Period„),€was€commenced€against€us
and€certain€of€our€current€and€former€officers€in€the€U.S.€District€Court€for€the€District€of€Delaware.€The€plaintiff€alleges€that
the€defendants€failed€to€disclose€material€adverse€facts€about€our€financial€well-being,€business€relationships,€and€prospects
during€the€alleged€Class€Period€in€violation€of€Section€10(b)€of€the€Securities€Exchange€Act€of€1934€and€Rule€10b-5
promulgated€thereunder.€The€case€is€still€in€its€preliminary€stages.€We€strongly€dispute€the€allegations€of€the€complaint€and
intend€to€defend€the€case€vigorously.€

Refer€to€discussion€in€Note€14,€Contingencies,€of€the€Notes€to€the€Consolidated€Financial€Statements€included€herein€for

information€relating€to€additional€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€(ƒNYSE„)€under€the€symbol€ƒAAP„.€

At€February€15,€2019,€there€were€348€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€stock€repurchase€program€authorizing€the€repurchase€of€up€to€$600.0€million€in€common€stock€was€authorized€by€our
Board€of€Directors€on€August€8,€2018€and€publicly€announced€on€August€14,€2018.€The€following€table€sets€forth€information
with€respect€to€repurchases€of€our€common€stock€for€the€fourth€quarter€ended€December€29,€2018:

Period

October€7,€2018€to€November€3,€2018
November€4,€2018€to€December€1,€2018
December€2,€2018€to€December€29,€2018
Total

€

Total€Number
of€Shares
Purchased€(1)
486,728
6,215
470,834
963,777

Average
Price€Paid
per€Share€(1)
164.53
$
169.44
156.61
160.69

$

Total€Number€of
Shares€Purchased€as
Part€of€Publicly
Announced€Plans€or
Programs

Maximum€Dollar
Value€that€May€Yet
Be€Purchased
Under€the€Plans€or
Programs
(In€thousands)

486,723
…
465,085
951,808

$

$

400,000
400,000
327,218
327,218

(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€$2.0€million,€or€an€average€price€of€$167.87€per€share,€during€the€twelve€weeks€ended
December€29,€2018.

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€28,€2013,€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

$250.00

$200.00

$150.00

$100.00

$50.00

$0.00

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

8

9 / 1

2 / 2

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€28,
2013

January€3,
2015

January€2,
2016

December€31,
2016

December€30,
2017

December€29,
2018

$

$
$

100.00
100.00
100.00

$

$
$

144.25
114.11
109.80

$

$
$

136.93
115.71
137.39

$

$
$

153.86
129.55
143.76

$

$
$

90.69
157.84
185.59

$

$
$

141.43
149.63
206.28

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€29,€2018€and€December€30,€2017€and€for€the€years€ended€December€29,€2018,€December€30,€2017€and
December€31,€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€December€31,€2016,€January€2,€2016€and
January€3,€2015€and€for€the€fiscal€years€ended€January€2,€2016€(ƒ2015„)€and€January€3,€2015€(ƒ2014„)€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€(2)
Basic€earnings€per€common€share

Diluted€earnings€per€common€share

Cash€dividends€declared€per€basic€share

Balance€Sheet€and€Other€Financial€Data:

2018

2017

Year€(1)
2016

2015

2014

$ 9,580,554

$ 9,373,784

$ 9,567,679

$ 9,737,018

$ 9,843,861

$ 4,219,413

$ 4,085,049

$ 4,255,915

$ 4,422,772

$ 4,453,613

$

$

$

$

$

604,275

423,847

5.75

5.73

0.24

$

$

$

$

$

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

Total€assets

Total€debt

$ 9,040,648

$ 8,482,301

$ 8,315,033

$ 8,127,701

$ 7,954,392

$ 1,045,930

$ 1,044,677

$10,433,255

$ 1,206,895

$ 1,628,927

Total€stockholders(cid:129)€equity

$ 3,550,813

$ 3,415,196

$ 2,916,192

$ 2,460,648

$ 2,002,912

Selected€Store€Data€and€Performance

Measures:

Comparable€store€sales€growth€(3)
Number€of€stores,€beginning€of€year

New€stores

Closed€stores

Number€of€stores,€end€of€year

2.3%

5,183

27

(101)

5,109

(2.0%)

5,189

60

(66)

5,183

(1.4%)

0.0%

2.0%

5,293

78

(182)

5,189

5,372

121

(200)

5,293

4,049

1,487

(164)

5,372

(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) Net€income€for€2018€and€2017€includes€an€income€tax€benefit€of€$5.7€million€and€$143.8€million€related€to€the€U.S.€Tax€Cuts
and€Jobs€Act€(the€ƒAct„)€that€was€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.

(3) 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€excludes€sales€from€the€53rd€week€of€2014.

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€

Net€sales€increased€2.2%€in€2018,€primarily€driven€by€an€increase€in€comparable€store€sales.€We€experienced€improvement

across€all€regions€with€stronger€sales€growth€in€our€Mid-Atlantic,€Midwest€and€Northeast€regions,€growth€in€our€Professional
and€Canadian€businesses,€as€well€as€increased€sales€in€several€product€categories.

Our€gross€margin€expansion€for€2018€was€primarily€driven€by€our€increase€in€comparable€sales,€an€improvement€in

inventory€management€related€to€utilizing€inventory€on€hand€and€continued€material€cost€optimization€efforts.€These
improvements€in€margin€were€partially€offset€by€increased€supply€chain€costs€due€to€higher€fuel€prices€and€transportation€costs.

Our€diluted€earnings€per€share€in€2018€was€$5.73€compared€to€$6.42€in€2017.€When€adjusted€for€the€following€non-
operational€items,€our€adjusted€diluted€earnings€per€share€(ƒadjusted€EPS„)€in€2018€was€$7.13€compared€to€$5.37€during€2017:

GPI€integration€and€store€closure€and€consolidation€expenses
GPI€amortization€of€acquired€intangible€assets
Transformation€expenses

Other€income€adjustment

Impact€of€the€Act

Year€Ended

December€29,
2018

December€30,
2017

$
$
$
$

$

0.07
0.39
1.02

$
$
$
… $
(0.08) $

0.22
0.33
0.41
(0.07)
(1.94)

Refer€to€€ReconciliationƒofƒNon-GAAPƒFinancialƒMeasures(cid:129)ƒfor€further€details€of€our€comparable€adjustments€and€the

usefulness€of€such€measures€to€investors.

Summary of 2018 Financial Results

A€high-level€summary€of€our€financial€results€and€other€highlights€from€2018€includes:

†

†

†

Net€sales€during€2018€were€$9,580.6€million,€an€increase€of€2.2%€as€compared€to€2017,€which€primarily€related€to€a
comparable€store€sales€growth€of€2.3%.
Operating€income€for€2018€was€$604.3€million,€an€increase€of€$34.1€million€from€2017.€As€a€percentage€of€total€sales,
operating€income€was€6.3%,€an€increase€of€22€basis€points€as€compared€to€2017,€due€to€an€increase€in€comparable
store€sales,€continued€material€cost€improvement€and€lower€GPI€integration€and€store€closure€and€consolidation€costs.
Partially€offsetting€these€improvements,€we€incurred€an€increase€in€supply€chain€costs,€higher€bonus,€an€increase€in
costs€relating€to€our€transformation€plan€and€an€increase€in€spending€related€to€our€new€marketing€campaign.
Inventories€as€of€December€29,€2018€increased€$194.1€million,€or€4.7%,€as€compared€to€2017.€This€increase€was
driven€by€our€implementation€of€demand-based€assortment,€higher€purchases€to€ensure€future€replenishment
capabilities€throughout€our€supply€chain€and€the€additional€Worlpac€ branches€ we€ opened€ in€ 2018.

† We€generated€cash€flow€from€operations€of€$811.0€million€during€2018,€an€increase€of€35.0%€compared€to€2017,

†

primarily€due€to€improvements€to€working€capital.
Provision€for€income€taxes€increased€$86.7€million€to€$131.4€million€in€2018€as€compared€to€$44.8€million€in€2017
primarily€due€to€a€net€$143.8€million€one-time€tax€benefit€associated€with€the€Act€that€was€recorded€in€2017,€which
was€partially€offset€by€the€reduction€of€the€federal€tax€rate€from€35%€to€21%€due€to€the€enactment€of€the€Act.

Refer€to€€ResultsƒofƒOperations(cid:129)ƒand€€LiquidityƒandƒCapitalƒResources(cid:129)€for€further€details€on€our€results.

17

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€include:

†

†

†
†

†

†

†

Improvement€of€our€common€catalog€of€products€across€our€Professional€and€DIY€businesses€…€AAP,€Carquest
(ƒCQ„),€Worldpac€(ƒWP„)€and€Autopart€International€(ƒAI„)€that€was€completed€in€the€first€half€of€2018.
Development€of€a€demand-based€assortment,€leveraging€purchase€and€search€history€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.
Progress€in€the€early€development€of€a€more€efficient€end-to-end€supply€chain€to€deliver€our€broad€assortment.
Continued€movement€towards€optimizing€our€footprint€by€market€to€drive€share,€repurposing€of€our€in-market€store
and€asset€base€and€optimizing€our€distribution€centers.€
Creation€of€new€Professional€omni-channel€capabilities€to€reach€our€customers€in€the€manner€that€is€most€desirable€for
them,€including€the€launch€of€MyAdvance.com,€an€interactive,€easy-to-use,€mobile-friendly€platform€where€we€have
combined€multiple€online€tools€and€capabilities€into€one€place.€
Entered€into€strategic€partnership€with€Walmart.com€that€we€expect€to€enable€us€to€reach€a€much€broader€group€of€DIY
customers€and€help€drive€our€DIY€market€share€growth.
Continued€focus€on€Worldpac€branch€openings€in€2018€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
Changes€in€new€car€sales

†
†
†
†
†
† Miles€driven
†
†
†
†

Vehicle€manufacturer€warranties
Average€age€of€vehicles€in€operation
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.€

(inƒmillions)

Net€sales

Cost€of€sales

Gross€profit

SG&A

Operating€income

Interest€expense

Other€income,€net

Provision€for€income€taxes

Net€income

Year€Ended

2018€vs.
2017
December€29,€2018 December€30,€2017 December€31,€2016
$€Change
$ 9,580.6 100.0% $ 9,373.8 100.0% $ 9,567.7 100.0% $ 206.8
72.4
56.4
55.5
134.4
43.6
44.5
100.3
37.5
36.3
34.1
6.1
8.2
2.2
(0.6)
(0.6)
(1.3)
0.1
0.1
2.9
0.5
86.7
4.8% $ (51.7)
5.1% $

56.0
44.0
37.7
6.3
(0.6)
0.1
1.4
4.4% $

5,311.8
4,255.9
3,468.3
787.6
(59.9)
11.1
279.2
459.6

5,288.7
4,085.0
3,514.8
570.2
(58.8)
8.8
44.8
475.5

5,361.1
4,219.4
3,615.1
604.3
(56.6)
7.6
131.4
423.8

$

Basis
Points

2017€vs.
2016
$€Change

Basis
Points
… $ (193.9) …
90
(23.0)
(46)
(90)
(170.9)
46
125
24
46.5
(215)
(217.4)
22
…
1.1
4
(2)
(2)
(2.3)
(244)
(234.5)
89
27
15.9
(65) $

Note:ƒTableƒamountsƒmayƒnotƒfootƒdueƒtoƒrounding.

2018€Compared€to€2017

Net Sales

Net€sales€for€2018€were€$9,580.6€million,€an€increase€of€$206.8€million,€or€2.2%,€from€net€sales€in€2017.€This€increase€was

primarily€due€to€our€comparable€store€sales€growth€of€2.3%.€Our€growth€in€comparable€store€sales€was€driven€by€an€overall
improvement€across€our€business€in€2018,€growth€in€our€Professional€and€Canadian€businesses,€increased€sales€in€several
product€categories€and€strong€spring€and€summer€selling€seasons,€partially€offset€by€decreased€sales€in€the€winter€season
resulting€from€extreme€cold€temperatures.

Gross Profit

Gross€profit€for€2018€was€$4,219.4€million,€or€44.0%€of€net€sales,€as€compared€to€$4,085.0€million,€or€43.6%€of€net€sales,

in€2017,€an€increase€of€46€basis€points.€The€increase€in€gross€profit€as€a€percentage€of€net€sales€was€primarily€the€result€of€an
improvement€in€inventory€management€related€to€utilizing€inventory€on€hand€and€material€cost€optimization€efforts,€as€well€as
a€continued€focus€on€productivity€initiatives€throughout€the€year.€These€improvements€in€margin€were€partially€offset€by
increased€supply€chain€costs€due€to€higher€fuel€prices€and€transportation€costs.

SG&A

SG&A€for€2018€was€$3,615.1€million,€or€37.7%€of€net€sales,€as€compared€to€$3,514.8€million,€or€37.5%€of€net€sales,€for
2017,€an€increase€of€24€basis€points.€This€increase€as€a€percentage€of€net€sales€was€primarily€due€to€costs€incurred€in€connection
with€our€transformation€plan,€higher€bonus€and€increased€spending€related€to€our€new€marketing€campaign.€Partially€offsetting
these€costs€were€lower€GPI€integration€and€store€closure€and€consolidation€and€insurance€and€claims€expense€in€2018€compared
to€the€prior€year,€as€well€as€a€continued€focus€on€expense€management€throughout€the€year.

Income Taxes

Our€effective€income€tax€rate€was€23.7%€and€8.6%€for€2018€and€2017.€The€increase€in€our€effective€tax€rate€for€2018
compared€to€2017€was€primarily€related€to€the€net€tax€benefit€of€$143.8€million€related€to€the€Act€that€was€recorded€in€2017.
This€was€partially€offset€by€the€reduction€of€the€federal€tax€rate€from€35%€to€21%€due€to€the€enactment€of€the€Act,€which
favorably€impacted€our€Net€income€for€2018€by€$77.7€million,€or€$1.05€per€diluted€share.€During€the€third€quarter€of€2018€in
conjunction€with€the€completion€of€our€2017€U.S.€income€tax€return,€we€identified€a€change€in€estimate€to€amounts€previously
recorded€for€the€remeasurement€of€the€net€deferred€tax€liability€and€nonrecurring€repatriation€tax€on€accumulated€earnings€of
foreign€subsidiaries€which€resulted€in€a€net€tax€benefit€of€$5.7€million.€Our€accounting€for€the€impact€of€the€Act€under€Staff
Accounting€Bulletin€No.€118€(ƒSAB€118„)€was€completed€as€of€the€third€quarter€of€2018.

19

2017€Compared€to€2016

Net Sales

Net€sales€for€2017€were€$9,373.8€million,€a€decline€of€$193.9€million,€or€2.0%,€over€net€sales€for€2016.€This€decrease€was
primarily€due€to€our€comparable€store€sales€decline€of€2.0%€and€the€portion€of€sales€that€did€not€transfer€from€stores€that€were
consolidated.€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€was€$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€our€transformation€plan€and€higher€customer€facing€costs€including€store€labor€and€incentives€and€higher
medical€costs.€Partially€offsetting€these€costs€were€lower€GPI€integration€and€store€closure€and€consolidation€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€was€primarily€due€to
a€net€$143.8€million€benefit€related€to€the€Act.

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;€(2)€non-cash€charges€related€to€the
acquired€GPI€intangible€assets;€(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.

20

GPI€Integration€and€Store€Closure€and€Consolidation€Expenses…We€acquired€GPI€in€2014€and€are€progressing€in€our
multi-year€plan€to€integrate€the€operations€of€GPI€with€AAP.€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.€In€addition€to€integration€expenses,€we€incur€store€closure€and
consolidation€expenses€that€consist€of€expenses€associated€with€our€plans€to€convert€and€consolidate€the€Carquest€stores
acquired€from€GPI.€While€periodic€store€closures€are€common,€these€closures€represent€a€significant€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,€including€WP€and€AI.€These€expenses€will€include,€but€not€be€limited€to,€restructuring
costs,€store€closure€costs€and€third-party€professional€services€and€other€significant€costs€to€integrate€and€streamline€our
operating€structure€across€the€enterprise.€We€are€focused€on€several€areas€throughout€Advance,€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€of
1986€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.€During€the€third€quarter€of€2018,€and€in€conjunction€with€the€completion€of€our€2017€U.S.€income€tax€return,€we
identified€a€change€in€estimate,€in€accordance€with€SAB€118,€to€amounts€previously€estimated€for€the€remeasurement€of€the€net
deferred€tax€liability€and€nonrecurring€repatriation€tax€on€accumulated€earnings€foreign€subsidiaries.

We€have€included€a€reconciliation€of€this€information€to€the€most€comparable€GAAP€measures€in€the€following€table.

(inƒthousands,ƒexceptƒperƒshareƒdata)

Net€income€(GAAP)

Cost€of€sales€adjustments:

Transformation€expenses

SG&A€adjustments:

GPI€integration€and€store€closure€and€consolidation€expenses

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€29,
2018

December€30,
2017

$

423,847

$

475,505

6,740

…

7,360

38,018
93,767
…
(36,274)
(5,665)
527,793

5.73

1.40
7.13

$

$

$

26,207

39,477
50,425
(8,878)
(40,748)
(143,756)
398,232

6.42
(1.05)
5.37

$

$

$

(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.€

21

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€debt€securities€as€needed.€We€believe€funds€generated€from€our
expected€results€of€operations,€available€cash€and€cash€equivalents,€and€available€borrowing€capacity€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€investments€in€supply€chain€and€information€technology

(ƒIT„),€e-commerce€and€maintenance€of€existing€stores.€We€lease€approximately€84%€of€our€stores.€

Our€capital€expenditures€were€$193.7€million€in€2018,€an€increase€of€$4.0€million€from€2017.€This€increase€in€capital
expenditures€related€to€several€IT€projects,€including€our€Finance€enterprise€resource€planning€tool,€as€well€as€investment€in
supply€chain€and€store€improvements.

Our€future€capital€requirements€will€depend€in€large€part€on€the€timing€or€number€of€the€investments€we€make€on€IT€and
supply€chain€network€initiatives€and€existing€stores€and€new€store€development€(leased€and€owned€locations)€within€a€given
year.€In€2019,€we€anticipate€that€our€capital€expenditures€related€to€such€investments€will€range€from€$250€million€to€$300
million,€but€may€vary€with€business€conditions.€

Analysis of Cash Flows

The€following€table€summarizes€our€cash€flows€from€operating,€investing€and€financing€activities:

(inƒmillions)

Cash€flows€provided€by€operating€activities
Cash€flows€used€in€investing€activities
Cash€flows€used€in€financing€activities
Effect€of€exchange€rate€changes€on€cash
Net€increase€in€cash€and€cash€equivalents

OperatingƒActivities

Year€Ended

December€29,
2018

December€30,
2017

January€2,
2016

$

$

811.0
(191.8)
(263.9)
(5.7)
349.6

$

$

600.8
(178.6)
(14.9)
4.5
411.8

$

$

523.3
(262.0)
(217.1)
0.3
44.4

For€2018,€net€cash€provided€by€operating€activities€increased€$210.2€million€to€$811.0€million.€The€net€increase€in

operating€cash€flows€compared€to€the€prior€year€was€primarily€driven€by€our€focus€on€working€capital€management,€including
an€increase€in€Accounts€payable,€partially€offset€by€increases€in€Receivables,€net€and€Inventories.

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.

22

InvestingƒActivities

For€2018,€net€cash€used€in€investing€activities€increased€by€$13.2€million€to€$191.8€million€compared€to€2017.€The€increase

in€cash€used€in€investing€activities€was€primarily€driven€by€an€increase€in€capital€expenditures€related€to€several€IT€projects,
including€our€Finance€enterprise€resource€planning€tool,€as€well€as€investments€in€supply€chain,€e-commerce€and€store
improvements.

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.€

FinancingƒActivities

For€2018,€net€cash€used€in€financing€activities€increased€by€$249.0€million€to€$263.9€million.€This€increase€was€primarily€a

result€of€returning€cash€to€shareholders€in€the€form€of€stock€repurchases€and€dividends.

For€2017,€net€cash€used€in€financing€activities€decreased€by€$202.3€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.

Long-Term Debt

As€of€December€29,€2018,€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.

On€January€29,€2019,€we€notified€Wells€Fargo€Bank,€N.A.,€as€trustee,€of€our€intent€to€redeem€all€$300.0€million€aggregate
principal€amount€of€our€outstanding€5.75%€Notes€due€2020.€For€detailed€information€refer€to€Note€7,€Long-termƒDebtƒandƒFair
ValueƒofƒFinancialƒInstruments,€of€the€Notes€to€the€Consolidated€Financial€Statements€included€herein.

Stock Repurchases 

On€August€8,€2018,€the€Company's€Board€of€Directors€authorized€a€$600€million€stock€repurchase€program.€Under€this
authorization,€the€Company€repurchased€1.7€million€shares€of€its€common€stock€at€an€aggregate€cost€of€$272.8€million€during
2018.€We€had€$327.2€million€remaining€under€our€stock€repurchase€program€as€of€December€29,€2018.€

Subsequent€to€December€29,€2018,€we€have€repurchased€0.8€million€shares€of€common€stock€at€an€aggregate€cost€of

$127.2€million€through€our€stock€repurchase€program.

Off-Balance-Sheet Arrangements 

As€of€December€29,€2018,€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€senior€unsecured€notes,€revolving€credit€facility€and€letters€of€credit€outstanding.

23

Contractual Obligations

In€addition€to€our€senior€unsecured€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€29,€2018
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€commitments€(4)

$

Total
1,050,210

174,375

2,876,275

558,165

101,516

Less€than€1
Year

1€-€3€Years

3€-€5€Years

More€than€5
Years

$

210

$

300,000

$

750,000

$

51,000

520,541

…

35,276

76,125

898,707

…

34,520

47,250

619,586

…

31,720

…

…

837,441

…

…

$

4,760,541

$

607,027

$

1,309,352

$

1,448,556

$

837,441

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€senior€unsecured€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€29,€2018,€the€related€balances€have€not€been€reflected€in€the€ƒPayments€Due€by€Period„€section€of€the€table.€

(3)

(4) Purchase€commitments€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.€

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,€we€realigned€our
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,€we€now€have€five€operating€segments.€As
each€operating€segment€represents€a€reporting€unit,€goodwill€was€reassigned€to€the€affected€reporting€units€using€a€relative€fair
value€approach.

24

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.€We€use€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€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.€

InventoryƒReserves

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€29,€2018€would€result€in€a€change€in€expense€of
approximately€$9.5€million€for€2018.

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.

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€29,€2018€would€result€in€a€change€in€expense€of
approximately€$15.4€million€for€2018.

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.

25

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.

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€29,€2018€and€December€30,€2017,
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€our€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€2018,€2017€and€2016,€foreign€currency€transactions€did€not€significantly€impact€net
income.

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.

26

Item€9A.€Controls€and€Procedures.

DisclosureƒControlsƒandƒProcedures

Disclosure€controls€and€procedures€(as€that€term€is€defined€in€Rules€13a-15(e)€and€15d-15(e)€under€the€Securities

Exchange€Act€of€1934,€as€amended€(the€ƒExchange€Act„))€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,€and€that€such€information€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€29,€2018.€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€to€accomplish€their€objectives€at€the€reasonable€assurance€level.

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.€Our€internal€control€over€financial€reporting€is€a€process€designed€under
the€supervision€of€our€principal€executive€officer€and€principal€financial€officer,€and€effected€by€our€Board€of€Directors,
management€and€other€personnel,€to€provide€ƒreasonable€assurance„€regarding€the€reliability€of€financial€reporting€and€the
preparation€of€our€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€our€assets;€(2)€provide€reasonable€assurance€that€transactions€are€recorded
as€necessary€to€permit€preparation€of€financial€statements€in€accordance€with€GAAP,€and€that€our€receipts€and€expenditures€are
being€made€only€in€accordance€with€authorizations€of€our€management€and€directors;€and€(3)€provide€ƒreasonable€assurance„
regarding€prevention€or€timely€detection€of€unauthorized€acquisition,€use,€or€disposition€of€our€assets€that€could€have€a€material
effect€on€the€financial€statements.

As€of€December€29,€2018,€management,€including€our€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€InternalƒControl
-ƒIntegratedƒFrameworkƒ(2013)€issued€by€the€Committee€of€Sponsoring€Organizations€of€the€Treadway€Commission€(COSO).
Based€on€this€assessment,€management€has€determined€that€our€internal€control€over€financial€reporting€as€of€December€29,
2018€is€effective.€

ChangesƒinƒInternalƒControlƒOverƒFinancialƒReporting

There€were€no€changes€in€our€internal€control€over€financial€reporting€(as€that€term€is€defined€in€Rules€13a-15(f)€and
15d-15(f)€under€the€Exchange€Act)€that€occurred€during€the€quarter€ended€December€29,€2018€that€have€materially€affected,€or
are€reasonably€likely€to€materially€affect,€our€internal€control€over€financial€reporting.

AttestationƒReportƒofƒRegisteredƒPublicƒAccountingƒFirm

Our€internal€control€over€financial€reporting€as€of€December€29,€2018€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€29,€2018,€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€29,€2018.

Item€9B.€Other€Information.

Refer€to€discussion€in€Note€4,€ExitƒActivitiesƒandƒOtherƒInitiatives,€of€the€Notes€to€the€Consolidated€Financial€Statements

included€herein.

27

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€2019€annual€meeting€of€stockholders€to€be€filed€with€the€SEC€within€120
days€after€the€end€of€the€year€ended€December€29,€2018€(the€ƒ2019€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€2019€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€2019€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€2019€Proxy€Statement,€which€is€incorporated€herein€by€reference.

Item€14.€Principal€Accountant€Fees€and€Services.€

See€the€information€set€forth€in€the€section€entitled€ƒ2018€and€2017€Audit€Fees„€in€the€2019€Proxy€Statement,€which€is

incorporated€herein€by€reference.

28

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€29,€2018,€December€30,€2017€and€December€31,€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(cid:129)€Equity.......................................................................
Consolidated€Statements€of€Cash€Flows.........................................................................................................
Notes€to€the€Consolidated€Financial€Statements ............................................................................................

30

32

33

33

34

35

36

(2)€Financial€Statement€Schedule

Schedule€II€-€Valuation€and€Qualifying€Accounts.............................................................................................

69

(3)€Exhibits

Exhibit€Index.....................................................................................................................................................

70

29

REPORT€OF€INDEPENDENT€REGISTERED€PUBLIC€ACCOUNTING€FIRM

To€the€stockholders€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€"Company")
as€of€December€29,€2018€and€December€30,€2017,€the€related€consolidated€statements€of€operations,€comprehensive€income,
changes€in€stockholders'€equity,€and€cash€flows€for€each€of€the€three€years€in€the€period€ended€December€29,€2018,€and€the€related
notes€and€the€schedule€listed€in€the€Index€at€Item€15€(collectively€referred€to€as€the€"financial€statements").€In€our€opinion,€the
financial€statements€present€fairly,€in€all€material€respects,€the€financial€position€of€the€Company€as€of€December€29,€2018€and
December€30,€2017,€and€the€results€of€its€operations€and€its€cash€flows€for€each€of€the€three€years€in€the€period€ended€December
29,€2018,€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's€internal€control€over€financial€reporting€as€of€December€29,€2018,€based€on€criteria€established€in
Internalƒ Controlƒ -ƒ Integratedƒ Frameworkƒ (2013)€ issued€ by€ the€ Committee€ of€ Sponsoring€ Organizations€ of€ the€ Treadway
Commission€and€our€report€dated€February€19,€2019,€expressed€an€unqualified€opinion€on€the€Company's€internal€control€over
financial€reporting.

Basis€for€Opinion

These€financial€statements€are€the€responsibility€of€the€Company's€management.€Our€responsibility€is€to€express€an€opinion€on
the€Company'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€19,€2019

We€have€served€as€the€Company(cid:129)s€auditor€since€2002.

30

REPORT€OF€INDEPENDENT€REGISTERED€PUBLIC€ACCOUNTING€FIRM€

To€the€stockholders€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€29,€2018,€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€29,€2018,€based€on€criteria€established€in€Internal
Controlƒ-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€29,
2018,€of€the€Company€and€our€report€dated€February€19,€2019,€expressed€an€unqualified€opinion€on€those€consolidated€financial
statements€and€financial€statement€schedule.€

Basis€for€Opinion€

The€Company'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'sƒReportƒonƒInternal
ControlƒoverƒFinancialƒReporting.€Our€responsibility€is€to€express€an€opinion€on€the€Company'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€19,€2019

31

Advance€Auto€Parts,€Inc.€and€Subsidiaries
Consolidated€Balance€Sheets
(inƒthousands,ƒexceptƒperƒshareƒdata)

Assets

December€29,
2018

December€30,
2017

Current€assets:

Cash€and€cash€equivalents
Receivables,€net
Inventories
Other€current€assets

Total€current€assets

Property€and€equipment,€net€of€accumulated€depreciation€of€$1,918,502€and

$1,783,383

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;
75,831€shares€issued€and€72,460€outstanding€at€December€29,€2018
75,569€shares€issued€and€73,936€outstanding€at€December€30,€2017

Additional€paid-in€capital
Treasury€stock,€at€cost,€3,371€and€1,633€shares
Accumulated€other€comprehensive€loss
Retained€earnings

Total€stockholders(cid:129)€equity

$

$

$

$

$

$

$

896,527
624,972
4,362,547
198,408
6,082,454

1,368,985
990,237
550,593
48,379
9,040,648

3,172,790
623,141
90,019
3,885,950
1,045,720
318,353
239,812

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

…

…

8
694,797
(425,954)
(44,193)
3,326,155
3,550,813
9,040,648

$

8
664,646
(144,600)
(24,954)
2,920,096
3,415,196
8,482,301

The€accompanying€notes€to€the€consolidated€financial€statements€are€an€integral€part€of€these€statements.

32

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,€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

€

December€29,
2018
9,580,554

$

Year€Ended
December€30,
2017
9,373,784

$

December€31,
2016
9,567,679

$

5,361,141

4,219,413

3,615,138

604,275

5,288,735

4,085,049

3,514,837

570,212

5,311,764

4,255,915

3,468,317

787,598

(56,588)
7,577
(49,011)
555,264

131,417
423,847

5.75

73,728

5.73
73,991

$

$

$

(58,801)
8,848
(49,953)
520,259

44,754
475,505

6.44

73,846

6.42
74,110

$

$

$

(59,910)
11,147
(48,763)
738,835

279,213
459,622

6.22

73,562

6.20
73,856

$

$

$

Consolidated€Statements€of€Comprehensive€Income
(inƒthousands)

Net€income
Other€comprehensive€(loss)€income:

Changes€in€net€unrecognized€other€postretirement€benefit€costs,

net€of€tax€of€$103,€$126€and€$346

Currency€translation€adjustments

Total€other€comprehensive€(loss)€income

Comprehensive€income

December€29,
2018

Year€Ended
December€30,
2017

December€31,
2016

$

423,847

$

475,505

$

459,622

(294)
(18,945)
(19,239)
404,608

$

(194)
14,941

14,747
490,252

$

(534)
4,892

4,358
463,980

$

The€accompanying€notes€to€the€consolidated€financial€statements€are€an€integral€part€of€these€statements.

33

Advance€Auto€Parts,€Inc.€and€Subsidiaries
Consolidated€Statements€of€Changes€in€Stockholdersƒ€Equity
(inƒthousands,ƒexceptƒperƒshareƒdata)

Common€Stock

Shares

Amount

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,€restricted€stock€units€and€deferred

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€loss

Issuance€of€shares€upon€the€exercise€of€stock

appreciation€rights

Tax€withholdings€related€to€the€exercise€of€stock

appreciation€rights

Restricted€stock€units€and€deferred€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€30,€2017

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

Restricted€stock€units€and€deferred€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€29,€2018

$

73,314
…

…

149

…

…

372

…
30

(116)

…

…

73,749

…

…

…

67

…

147

…

29

(56)

…

…

73,936

…

…

11

…

215

…

36

(1,738)

…

…

72,460

$

7
…

…

1

…

…

…

…
…

…

…

…

8

…

…

…

…

…

…

…

…

…

…

…

8

…

…

…

…

…

…

…

…

…

…

8

Treasury
Stock,€at
cost

Accumulated
Other
Comprehensive
Loss

Retained
Earnings

Total
Stockholdersƒ
Equity

Additional
Paid-in
Capital

$ 603,332
…

…

…

(19,558)

22,325

…

20,422
4,369

…

…

162

$ (119,709) $

…

…

…

…

…

…

…
…

(18,393)

…

…

(44,059) $ 2,021,077
459,622

…

$

4,358

…

…

…

…

…
…

…

…

…

…

…

…

…

…

…
…

…

(17,764)

…

631,052

(138,102)

(39,701)

2,462,935

…

782

…

…

(6,531)

…

35,267

4,053

…

…

23

…

…

…

…

…

…

…

…

(6,498)

…

…

…

…

14,747

…

…

…

…

…

…

…

…

475,505

(490)

…

…

…

…

…

…

…

(17,854)

…

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

664,646

(144,600)

(24,954)

2,920,096

3,415,196

…

…

…

(773)

…

27,760

3,200

…

…

(36)

…

…

…

…

…

…

…

(281,354)

…

…

…

423,847

(19,239)

…

…

…

…

…

…

…

…

…

…

…

…

…

…

…

(17,788)

…

423,847

(19,239)

…

(773)

…

27,760

3,200

(281,354)

(17,788)

(36)

$ 694,797

$ (425,954) $

(44,193) $ 3,326,155

$

3,550,813

The€accompanying€notes€to€the€consolidated€financial€statements€are€an€integral€part€of€these€statements.

34

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€long-lived€assets

Other,€net

Provision€(benefit)€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€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

December€29,
2018

Year€Ended

December€30,
2017

December€31,
2016

$

423,847

$

475,505

$

459,622

238,184

27,760

15,956

2,195

15,956

(21,471)

(206,125)

285,493

93,940

(64,707)

811,028

249,260

35,267

17,106

3,123

(151,263)

36,047

167,548

(197,168)

(13,295)

(21,325)

600,805

258,387

20,452

5,999

(2,039)

20,213

(41,642)

(144,603)

(119,325)

49,341

16,898

523,303

(193,715)

(189,758)

(259,559)

1,888

…

11,099

20

2,212

(4,697)

(191,827)

(178,639)

(262,044)

32,014

…

…

(17,819)

3,200

(773)

(281,354)

817

(263,915)

(5,696)

349,590

546,937

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

$

$

$

$

896,527

$

546,937

$

135,178

45,322

143,213

15,365

$

$

$

53,509

192,116

14,335

$

$

$

55,457

225,327

21,176

The€accompanying€notes€to€the€consolidated€financial€statements€are€an€integral€part€of€these€statements.

35

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€professional€installers,€or€Professional,€and€ƒdo-it-yourself,„€or€DIY€customers.€The€accompanying€consolidated€financial
statements€have€been€prepared€by€us€and€include€the€accounts€of€Advance€Auto€Parts,€Inc.,€its€wholly€owned€subsidiary,
Advance€Stores€Company,€Incorporated€(ƒAdvance€Stores„),€and€its€subsidiaries€(collectively€referred€to€as€ƒAdvance,„€ƒwe,„
ƒus,„€or€ƒour„).€

As€of€December€29,€2018,€our€operations€are€comprised€of€4,966€stores€and€143€distribution€branches€primarily€within€the
United€States,€with€additional€locations€in€Canada,€Puerto€Rico€and€the€U.S.€Virgin€Islands.€Our€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€1,231€independently€owned€Carquest€branded€stores€across€the€same
geographic€locations€served€by€our€stores€in€addition€to€Mexico,€the€Bahamas,€Turks€and€Caicos,€the€British€Virgin€Islands€and
the€Pacific€Islands.€

Accounting€Period€

Our€fiscal€year€ends€on€the€Saturday€nearest€the€end€of€December.€All€references€herein€for€the€years€ƒ2018,„€ƒ2017„€and

ƒ2016„€represent€the€fiscal€years€ended€December€29,€2018,€December€30,€2017€and€December€31,€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.

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

Our€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€our€merchandise€inventory€is€primarily€determined
using€the€last-in,€first-out€(ƒLIFO„)€method.€Under€the€LIFO€method,€our€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€2018€and€prior€years.
We€regularly€review€inventory€quantities€on-hand,€consider€whether€we€may€have€excess€inventory€based€on€our€current
approach€for€managing€slower€moving€inventory€and€adjusts€the€carrying€value€as€necessary.

36

Vendor€Incentives€

We€receive€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€Inventories€were€$164.1€million€and€$179.2€million€as€of€December€29,€2018€and
December€30,€2017.

We€recognize€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

We€perform€our€evaluation€for€the€impairment€of€goodwill€and€indefinite-lived€intangible€assets€for€our€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.€We€assess€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,€€we
compare€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.€Our€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,€we€realigned€our€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,€we€now€have€five€operating€segments,€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.€

37

Valuation€of€Long-Lived€Assets

We€evaluate€the€recoverability€of€our€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,€we€estimate€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

We€are€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€our€historical€claims€experience.€We€include
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€us€with€a€manufacturer(cid:129)s€warranty€is€the€responsibility€of

our€vendors.€However,€we€have€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€us€primarily€includes€batteries,€but€may€also€include€other€parts€such€as€brakes€and€shocks.€We€estimate€our
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

We€lease€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€us€to
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.€

38

Closed€Facility€Liabilities€and€Exit€Activities

We€continually€review€the€operating€performance€of€our€existing€store€locations€and€close€or€relocate€certain€stores
identified€as€underperforming.€Expenses€accrued€pertaining€to€closed€facility€exit€activities€are€included€in€our€closed€facility
liabilities,€within€Accrued€expenses€and€Other€long-term€liabilities€in€the€accompanying€consolidated€balance€sheets,€and
recognized€in€Cost€of€sales€or€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

We€provide€share-based€compensation€to€our€eligible€Team€Members€and€Board€of€Directors.€We€are€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.€We€calculate€the€fair€value€of€all€share-based€awards€at€the€date€of€grant€and€use€the€straight-line€method€to
amortize€this€fair€value€as€compensation€cost€over€the€requisite€service€period.€

Revenues

Revenue€for€periods€through€December€30,€2017€was€reported€under€Accounting€Standards€Codification€(ƒASC„)€605,
RevenueƒRecognitionƒ(Topicƒ605).€We€recognized€revenue€at€the€time€the€sale€is€made,€at€which€time€our€walk-in€customers
took€immediate€possession€of€the€merchandise€or€same-day€delivery€was€made€to€our€Professional€delivery€customers,€which
included€certain€independently€owned€store€locations.€For€e-commerce€sales,€revenue€was€recognized€either€at€the€time€of€pick-
up€at€one€of€our€store€locations€or€at€the€time€of€shipment€depending€on€the€customer(cid:129)s€order€designation.€Sales€were€recorded
net€of€discounts,€sales€incentives€and€rebates,€sales€taxes€and€estimated€returns€and€allowances.€We€estimated€the€reduction€to
sales€and€cost€of€sales€for€returns€based€on€current€sales€levels€and€our€historical€return€experience.€

Effective€December€31,€2017,€we€adopted€ASC€606,€RevenueƒFromƒContractsƒWithƒCustomersƒ(Topicƒ606)€(ƒASC€606„).

The€results€of€applying€Topic€606€using€the€modified€retrospective€approach€were€insignificant€and€did€not€have€a€material
impact€on€our€consolidated€financial€condition,€results€of€operations,€cash€flows,€business€process,€controls€or€systems.

ASC€606€defines€a€performance€obligation€as€a€promise€in€a€contract€to€transfer€a€distinct€good€or€service€to€the€customer
and€is€considered€the€unit€of€account.€The€majority€of€our€contracts€have€one€single€performance€obligation€as€the€promise€to
transfer€the€individual€goods€is€not€separately€identifiable€from€other€promises€in€the€contracts€and€is,€therefore,€not€distinct.
Discounts€and€incentives€are€treated€as€separate€performance€obligations.€We€allocate€the€contract(cid:129)s€transaction€price€to€each€of
these€performance€obligations€separately€using€explicitly€stated€amounts€or€our€best€estimate€using€historical€data.€Additionally,
we€estimate€and€record€gift€card€breakage€as€redemptions€occur.

In€accordance€with€ASC€606€revenue€is€recognized€at€the€time€the€sale€is€made,€at€which€time€our€walk-in€customers€take
immediate€possession€of€the€merchandise€or€same-day€delivery€is€made€to€our€Professional€delivery€customers,€which€include
certain€independently-owned€store€locations.€Payment€terms€are€established€for€our€Professional€delivery€customers€based€on
pre-established€credit€requirements.€Payment€terms€vary€depending€on€the€customer€and€generally€range€from€1€to€30€days.
Based€on€the€nature€of€receivables,€no€significant€financing€components€exist.€For€e-commerce€sales,€revenue€is€recognized
either€at€the€time€of€pick-up€at€one€of€our€store€locations€or€at€the€time€of€shipment€depending€on€the€customer's€order
designation.€Sales€are€recorded€net€of€discounts,€sales€incentives€and€rebates,€sales€taxes€and€estimated€returns€and€allowances.
We€estimate€the€reduction€to€Net€sales€and€Cost€of€sales€for€returns€based€on€current€sales€levels€and€our€historical€return
experience.

We€provide€assurance€type€warranty€coverage€primarily€on€batteries,€brakes€and€struts€whereby€we€are€required€to€provide

replacement€product€at€no€cost€or€a€reduced€cost€for€a€set€period€of€time.

39

The€following€table€summarizes€financial€information€for€each€of€our€product€groups.€

Percentage€of€Sales,€by€Product€Group

Parts€and€Batteries
Accessories€and€Chemicals
Engine€Maintenance
Other

Total

December€29,
2018

Year€Ended
December€30,
2017

December€31,
2016

66%
20%
13%
1%
100%

65%
20%
14%
1%
100%

66%
19%
14%
1%
100%

Receivables,€net€consist€primarily€of€receivables€from€Professional€customers.€We€grant€credit€to€certain€Professional
customers€who€meet€our€pre-established€credit€requirements.€Accounts€receivable€is€stated€at€net€realizable€value.€We€regularly
review€accounts€receivable€balances€and€maintains€allowances€for€doubtful€accounts€for€estimated€losses€whenever€events€or
circumstances€indicate€the€carrying€value€may€not€be€recoverable.€We€consider€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.€We€control€credit€risk€through€credit€approvals,€credit€limits€and
accounts€receivable€and€credit€monitoring€procedures.

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,€impairment€of€inventory€resulting€from€store€closures€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€

We€expense€advertising€costs€as€incurred.€Advertising€expense,€net€of€qualifying€vendor€promotional€funds,€was€$120.9

million,€$102.8€million€and€$97.0€million€in€2018,€2017€and€2016.€Vendor€promotional€funds,€which€reduced€advertising
expense,€amounted€to€$26.9€million€and€$33.3€million€and€$29.3€million€in€2018,€2017€and€2016.

Foreign€Currency€Translation

The€assets€and€liabilities€of€our€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€$5.0€million€during€2018€and€$4.0€million€during€2017.

40

Income€Taxes€

We€account€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.

We€recognize€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€us€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€we€must€determine€the
probability€of€various€possible€outcomes.€

We€reevaluate€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€our€recognition€or€measurement€could€result€in€the€recognition€of€a€tax€benefit€or€an
increase€to€the€tax€accrual.€€

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.€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.€Our€CODM,€the€Chief€Executive€Officer,€reviews€financial€information€presented€on€a€consolidated
basis,€accompanied€by€information€about€our€five€operating€segments,€for€purposes€of€allocating€resources€and€evaluating
financial€performance.

We€have€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€February€2016,€the€Financial€Accounting€Standards€Board€(ƒFASB„)€issued€Accounting€Standards€Update€(ƒASU„)
2016-02,€Leasesƒ(Topicƒ842)ƒ(ƒASU€2016-02„).€This€ASU€is€a€comprehensive€new€accounting€standard€with€respect€to€leases
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.€ASU€2016-02€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€previous€lease€guidance.€ASU€2016-02€is€effective€for
annual€periods€beginning€after€December€15,€2018,€including€interim€periods€within€those€years;€earlier€adoption€is€permitted.€

41

In€July€2018,€the€FASB€issued€ASU€2018-11,€Leasesƒ(Topicƒ842):ƒTargetedƒImprovements,€which€provides€clarifications

and€improvements€to€ASU€2016-02€including€allowing€entities€to€elect€an€additional€transition€method€with€which€to€adopt
ASU€2016-02.€The€approved€transition€method€enables€entities€to€apply€the€transition€requirements€in€this€ASU€at€the€effective
date€of€ASU€2016-02€(rather€than€at€the€beginning€of€the€earliest€comparative€period€presented€as€currently€required)€with€the
effect€of€initially€applying€ASU€2016-02€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€ASC€840,€Leasesƒ(Topicƒ840)ƒ(ƒASC€840„),€including€the€disclosure€requirements€of€ASC€840.€Using€this
transition€method,€we€plan€to€adopt€ASU€2016-02€at€the€beginning€of€2019.€We€also€plan€to€elect€the€package€of€practical
expedients€permitted€under€the€transition€guidance€within€the€new€standard.€In€addition,€as€a€practical€expedient€relating€to€our
facility€and€vehicle€leases,€we€plan€to€not€separate€lease€components€from€nonlease€components.€This€practical€expedient€was
not€elected€for€our€equipment€leases.

We€are€in€process€of€finalizing€the€implementation€of€our€leasing€software€solution€and€are€continuing€to€identify€changes
to€our€business€processes,€systems€and€controls€to€support€adoption€of€the€new€standard€in€2019.€We€are€evaluating€the€impact
that€the€new€standard€will€have€on€the€consolidated€financial€statements.€Based€on€our€initial€evaluation,€upon€adoption€of€ASU
2016-02,€we€anticipate€recording€lease€assets€and€liabilities€of€approximately€$2.5€billion€on€our€consolidated€balance€sheet,
primarily€relating€to€real€estate.€As€the€majority€of€our€leases€will€remain€operating€in€nature€and€the€expense€recognition€will
be€similar€to€the€straight-line€expense€treatment€that€was€previously€required,€we€expect€an€insignificant€impact€to€our
consolidated€statements€of€operations€and€cash€flows.

In€March€2018,€the€FASB€issued€ASU€2018-05,€IncomeƒTaxesƒ(Topicƒ740)ƒ-ƒAmendmentsƒtoƒSECƒParagraphsƒPursuantƒto
SECƒStaffƒAccountingƒBulletinƒNo.ƒ118ƒ(ƒSAB€118„).€ASU€2018-05€provides€guidance€on€accounting€for€the€tax€effects€of€the
U.S.€Tax€Cuts€and€Jobs€Act€(the€ƒAct„)€pursuant€to€the€Staff€Accounting€Bulletin€No.€118,€which€allows€companies€to€complete
the€accounting€under€ASC€740,€IncomeƒTaxesƒ(Topicƒ740)€within€a€one-year€measurement€period€from€the€Act€enactment€date,
which€occurred€in€the€financial€statements€for€the€year€ended€December€30,€2017.€During€2018,€and€in€conjunction€with€the
completion€of€our€2017€U.S.€income€tax€return,€we€identified€certain€adjustments€to€amounts€previously€estimated€for€the
remeasurement€of€the€net€deferred€tax€liability€and€nonrecurring€repatriation€tax€on€accumulated€earnings€of€foreign
subsidiaries€that€resulted€in€a€net€tax€benefit€of€$5.7€million€and€reflects€a€change€in€estimate.€Our€analysis€under€SAB€118€is
complete.

In€June€2018,€the€FASB€issued€ASU€2018-07,€Compensationƒ-ƒStockƒCompensationƒ(Topicƒ718)€to€expand€the€scope€of
ASC€718,€Compensation€-€Stock€Compensation€(Topic€718)€(ƒASU€2018-07„),€to€include€share-based€payment€transactions€for
acquiring€goods€and€services€from€nonemployees.€The€pronouncement€is€effective€for€fiscal€years,€and€for€interim€periods
within€those€fiscal€years,€beginning€after€December€15,€2018,€with€early€adoption€permitted.€We€elected€to€early€adopt€ASU
2018-07€in€the€second€quarter€of€2018.€The€results€of€applying€ASU€2018-07€were€insignificant€and€did€not€have€a€material
impact€on€our€consolidated€financial€condition,€results€of€operations,€cash€flows,€business€process,€controls€or€systems.

In€August€2018,€the€FASB€issued€ASU€2018-15,€Intangiblesƒ-ƒGoodwillƒandƒOtherƒ-ƒInternal-UseƒSoftwareƒ(Subtopic
350-40),€which€aligns€the€requirements€for€capitalizing€implementation€costs€incurred€in€a€hosting€arrangement€that€is€a€service
contract€with€the€requirements€for€capitalizing€implementation€costs€incurred€to€develop€or€obtain€internal-use€software€(and
hosting€arrangements€that€include€an€internal-use€software€license).€The€pronouncement€is€effective€for€years,€and€for€interim
periods€within€those€years,€beginning€after€December€15,€2019,€with€early€adoption€permitted.€We€elected€to€early€adopt€ASU
2018-15€in€the€third€quarter€of€2018€on€a€prospective€basis.€The€results€of€applying€ASU€2018-15€were€insignificant€and€did€not
have€a€material€impact€on€our€consolidated€financial€condition,€results€of€operations,€cash€flows,€business€process,€controls€or
systems.
€

42

3.

Inventories:

We€used€the€LIFO€method€of€accounting€for€approximately€89%€and€88%€of€inventories€at€December€29,€2018€and
December€30,€2017.€As€a€result€of€changes€in€the€LIFO€reserve,€we€recorded€a€decrease€to€cost€of€sales€of€$39.8€million€in
2018,€an€increase€to€cost€of€sales€of€$2.7€million€in€2017€and€a€decrease€to€cost€of€sales€of€€$40.7€million€in€2016.€

Purchasing€and€warehousing€costs€included€in€inventory€as€of€December€29,€2018€and€December€30,€2017,€were€$435.2

million€and€$429.8€million.

Inventory€balances€were€as€follows:

(inƒthousands)
Inventories€at€first€in,€first€out€(ƒFIFO„)
Adjustments€to€state€inventories€at€LIFO
Inventories€at€LIFO

4. Exit€Activities€and€Other€Initiatives:

2018ƒStoreƒRationalization

$

December€29,
2018
4,119,617
242,930
4,362,547

$

$

December€30,
2017
3,965,370
203,122
4,168,492

$

During€the€fourth€quarter€of€2018,€the€Board€of€Directors€approved€a€plan€to€close€certain€underperforming€stores€as€part€of
our€strategy€to€transform€the€enterprise.€As€of€December€29,€2018,€total€charges€related€to€these€actions€are€expected€to€total€up
to€approximately€$50€million,€which€consists€of€$35€million€relating€to€future€lease€obligations€that€will€be€amortized€over€the
remaining€lease€term€upon€store€closure,€$10€million€of€other€facility€closures€costs€and€$5€million€of€severance.€€During€2018,
no€stores€had€been€closed€in€connection€with€this€initiative;€however,€we€recorded€an€impairment€charge€of€$7.9€million€as€part
of€our€plan€to€close€certain€underperforming€stores,€which€were€included€in€SG&A€in€the€accompanying€consolidated
statements€of€operations.

2017ƒStoreƒandƒSupplyƒChainƒRationalizationƒ

During€the€fourth€quarter€of€2017,€the€Board€of€Directors€approved€a€plan€to€close€certain€underperforming€stores€and

begin€to€rationalize€our€supply€chain€costs€as€part€of€our€strategy€to€transform€the€enterprise.€As€of€December€29,€2018,€total
charges€related€to€these€actions€are€expected€to€total€up€to€approximately€$70€million,€which€consist€of€$35€million€relating€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.€

During€2018,€we€incurred€$25.5€million€of€early€termination€of€lease€obligation€charges,€$8.9€million€of€inventory€and
supply€chain€asset€impairment€charges,€$13.6€million€of€facility€closure€costs€and€$3.5€million€of€severance€relating€to€the€store
and€supply€chain€rationalization.€Of€these€costs,€$44.8€million€are€included€in€SG&A€and€$6.7€million€are€included€in€Cost€of
sales€in€the€accompanying€consolidated€statements€of€operations.€

During€2017,€no€stores€or€distribution€centers€had€been€closed€in€connection€with€this€initiative;€however,€we€recorded€an

impairment€charge€of€$6.9€million€as€part€of€our€plan€to€close€certain€underperforming€stores,€which€were€included€in€SG&A€in
the€accompanying€consolidated€statements€of€operations.

43

TotalƒExitƒLiabilities

Our€total€exit€liabilities€include€liabilities€recorded€in€connection€with€the€initiatives€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€2019.€Of€our€total€exit€liabilities€as€of€December€29,€2018,€$27.0€million€is€included€in€Other€long-term€liabilities
and€the€remainder€is€included€in€Accrued€expenses€in€the€accompanying€consolidated€balance€sheets.€A€summary€of€our€exit
liabilities€are€presented€in€the€following€table:

(inƒthousands)

Balance,€December€31,€2016
Reserves€established
Change€in€estimates
Cash€payments
Balance,€December€30,€2017
Reserves€established
Change€in€estimates
Cash€payments
Balance,€December€29,€2018

5. Goodwill€and€Intangible€Assets:

Goodwill

Closed€Facility
Lease
Obligations

$

$

44,265
7,940
(1,116)
(19,519)
31,570
25,285
1,664
(16,217)
42,302

Severance
959
7,927
(699)
(6,542)
1,645
6,600
(324)
(4,532)
3,389

$

$

$

$

Total

45,224
15,867
(1,815)
(26,061)
33,215
31,885
1,340
(20,749)
45,691

At€December€29,€2018€and€December€30,€2017,€the€carrying€amount€of€goodwill€was€$990.2€million€and€$994.3€million.

The€change€in€goodwill€during€2018€and€2017€was€$4.1€million€and€$3.4€million€related€to€foreign€currency€translation.

IntangibleƒAssetsƒOtherƒThanƒGoodwill

Amortization€expense€was€$40.7€million,€$47.4€million€and€$48.0€million€for€2018,€2017€and€2016.€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€29,€2018

December€30,€2017

Gross
Carrying
Amount

Accumulated
Amortization

Net

Gross
Carrying
Amount

Accumulated
Amortization

Net

(148,889) $ 200,268
14,348

$ 351,203
32,512

$

$ 349,157
27,139

$

37,875
414,171

(12,791)
(36,974)
(198,654)

901
215,517

54,929
438,644

(116,909) $ 234,294
(14,959)
17,553
(46,389)
(178,257)

8,540
260,387

Indefinite-lived€intangible€assets:

Brands,€trademark€and€tradenames

Total€intangible€assets

335,076
$ 749,247

$

… 335,076
(198,654) $ 550,593

337,287
$ 775,931

$

… 337,287
(178,257) $ 597,674

44

FutureƒAmortizationƒExpense

The€table€below€shows€expected€amortization€expense€for€the€next€five€years€and€thereafter€for€acquired€intangible€assets

recorded€as€of€December€29,€2018:

Year
(inƒthousands)

Amount

2019 $
2020
2021
2022
2023
Thereafter

$

32,475
32,277
31,727
31,574
28,616
58,848
215,517

6.€ Receivables,€net:

Receivables,€net€consist€of€the€following:

(inƒthousands)

December€29,
2018

December€30,
2017

Trade
Vendor
Other

Total€receivables
Less:€allowance€for€doubtful€accounts
Receivables,€net

$

$

397,909
228,024
17,081

643,014
(18,042)
624,972

$

$

389,963
220,510
14,103

624,576
(18,219)
606,357

7. Long-term€Debt€and€Fair€Value€of€Financial€Instruments:€

Long-term€debt€consists€of€the€following:€

(inƒthousands)

5.75%€Senior€Unsecured€Notes€(net€of€unamortized€discount€and€debt€issuance
costs€of€$802€and€$1,403€at€December€29,€2018€and€December€30,€2017)€due
May€1,€2020

4.50%€Senior€Unsecured€Notes€(net€of€unamortized€discount€and€debt€issuance
costs€of€$833€and€$1,108€at€December€29,€2018€and€December€30,€2017)€due
January€15,€2022

4.50%€Senior€Unsecured€Notes€(net€of€unamortized€discount€and€debt€issuance

costs€of€$2,645€and€$3,162€at€December€29,€2018€and€December€30,€2017)€due
December€1,€2023

Other

Less:€Current€portion€of€long-term€debt

Long-term€debt,€excluding€current€portion

Fair€value€of€long-term€debt

December€29,
2018

December€30,
2017

$

299,198

$

298,597

299,167

298,892

447,355

210
1,045,930
(210)
1,045,720

1,074,000

$

$

446,838

350
1,044,677
(350)
1,044,327

1,109,000

$

$

45

FairƒValueƒofƒFinancialƒAssetsƒandƒLiabilities

The€fair€value€of€our€senior€unsecured€notes€was€determined€using€Level€2€inputs€based€on€quoted€market€prices.€We
believe€the€carrying€value€of€its€other€long-term€debt€approximates€fair€value.€The€carrying€amounts€of€our€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,€we€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.€We€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€our€option,€in
minimum€principal€amounts€as€specified€in€the€2017€Credit€Agreement.€The€2017€Credit€Agreement€terminates€in€January
2022;€however,€we€may€request€one€or€two€one-year€extensions€of€the€termination€date€prior€to€the€first€or€second€anniversary
of€the€closing€date.

On€January€31,€2018,€we€entered€into€Amendment€No.€1€to€the€2017€Credit€Agreement€(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€we€are€required€to€comply€with;€and€(iii)€extended€the€termination€date€of€the€2017€Credit€Agreement€from€January
31,€2022€until€January€31,€2023.€We€have€the€option€to€make€one€additional€written€request€of€the€lenders€to€extend€the
termination€date€then€in€effect€for€one€additional€year.

As€of€December€29,€2018,€we€had€no€outstanding€borrowings€under€the€revolver€and€borrowing€availability€was€$998.0
million€based€on€our€leverage€ratio.€As€of€December€29,€2018,€we€had€letters€of€credit€outstanding€of€$100.5€million,€which
generally€have€a€term€of€one€year€or€less€and€primarily€serve€as€collateral€for€our€self-insurance€policies.

Interest€on€any€borrowings€on€the€revolver€will€be€based€at€our€option,€on€an€adjusted€LIBOR,€plus€a€margin,€or€an
alternate€base€rate,€plus€a€margin.€After€an€initial€interest€period,€we€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€our€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.€We€were€in€compliance€with€our
financial€covenants€with€respect€to€the€2017€Credit€Agreement€as€of€December€29,€2018.

46

On€January€10,€2019,€we€entered€into€Amendment€No.€2€to€the€2017€Credit€Agreement€(the€ƒ€Second€Amendment„),

among€Advance€Stores€Company,€Incorporated,€as€Borrower,€Advance€Auto€Parts,€Inc.,€as€Parent,€the€banks,€financial
institutions€and€other€institutional€lenders€parties€thereto€and€Bank€of€America,€N.A.,€as€Administrative€Agent.€The€Second
Amendment:€(i)€added€a€new€definition€of€"Insurance€Subsidiary"€to€the€2017€Credit€Agreement€meaning€each€wholly€owned
subsidiary€of€Parent€that€is€maintained€as€a€special€purpose€self-insurance€subsidiary€and€any€of€its€subsidiaries;€(ii)€provided
that€an€Insurance€Subsidiary€does€not€serve€as€a€Guarantor€of€the€2017€Credit€Agreement;€and€(iii)€provided€that€Insurance
Subsidiaries€are€permitted€to€incur€intercompany€indebtedness.€Insurance€Subsidiaries€will€not€be€required€to€serve€as
Guarantors€of€the€Parent's€unsecured€notes€so€long€as€they€are€not€guarantors€of€the€2017€Credit€Agreement.

SeniorƒUnsecuredƒNotes

Our€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.€Our€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.€Our€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€Advance,€the
subsidiary€guarantors€from€time€to€time€party€thereto€and€Wells€Fargo€Bank,€National€Association,€as€Trustee.

We€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),€we€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.€We€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
our€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€our€exercise€of€our€legal€or€covenant
defeasance€option.€

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€us€or€any€of€our€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€us€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€us€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€us€and€our
subsidiaries€to€incur€debt€secured€by€liens€and€to€enter€into€sale€and€lease-back€transactions.€

On€January€29,€2019,€we€notified€Wells€Fargo€Bank,€N.A.,€as€trustee,€of€our€intent€to€redeem€all€$300.0€million€aggregate
principal€amount€of€our€outstanding€5.75%€Notes€due€2020€(the€ƒ2020€Notes„)€at€a€redemption€price€of€approximately€$1,035
per€$1,000€principal€amount€of€the€2020€Notes,€plus€accrued€and€unpaid€interest,€if€any,€to€the€expected€redemption€date€of
February€28,€2019.

47

FutureƒPayments

As€of€December€29,€2018,€the€aggregate€future€annual€maturities€of€long-term€debt€instruments€are€as€follows:

Year
(inƒthousands)

Amount

$

2019

2020

2021

2022

2023

Thereafter

210

300,000

…

300,000

450,000

…

$

1,050,210

DebtƒGuaranteesƒ

We€are€a€guarantor€of€loans€made€by€banks€to€various€independently€owned€Carquest-branded€stores€that€are€customers€of

ours€totaling€$24.3€million€as€of€December€29,€2018.€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€$53.9
million€as€of€December€29,€2018.€We€believe€that€the€likelihood€of€performance€under€these€guarantees€is€remote.

8. Property€and€Equipment:
€

Property€and€equipment€consists€of€the€following:

(inƒthousands)

Useful€Lives

December€29,
2018

December€30,
2017

Land€and€land€improvements
Buildings

Building€and€leasehold€improvements
Furniture,€fixtures€and€equipment
Vehicles

Construction€in€progress

Less€-€Accumulated€depreciation
Property€and€equipment,€net

0€-€10€years $

30€-€40€years

3€-€30€years
3€-€20€years
2€-€13€years

$

$

453,511
488,977

504,518
1,740,960
14,636

84,885
3,287,487
(1,918,502)
1,368,985

$

451,261
478,235

490,635
1,675,522
16,587

65,281
3,177,521
(1,783,383)
1,394,138

Depreciation€expense€relating€to€Property€and€equipment€was€$201.6€million,€$206.9€million€and€$216.0€million€for€2018,

2017€and€2016.€We€capitalized€$13.0€million,€$11.2€million€and€$13.0€million€incurred€for€the€development€of€internal€use
computer€software€during€2018,€2017€and€2016.€These€costs€are€currently€classified€in€the€Construction€in€progress€category
above,€but€once€placed€into€service€within€the€Furniture,€fixtures€equipment€category,€these€costs€will€be€depreciated€on€the
straight-line€method€over€three€to€eleven€years.

In€2018,€2017€and€2016,€we€recognized€impairment€losses€of€$13.4€million,€$13.3€million€and€$2.8€million,€on€various

store€and€corporate€assets.

48

9. Accrued€Expenses:
€

Accrued€expenses€consist€of€the€following:

(inƒthousands)

December€29,
2018

December€30,
2017

Payroll€and€related€benefits

$

129,909

$

Taxes€payable

Self-insurance€reserves

Warranty€reserves

Capital€expenditures

Transportation

Other

119,203

70,962

45,280

15,365

28,872

213,550

Total€accrued€expenses

$

623,141

$

The€following€table€presents€changes€in€our€warranty€reserves:

92,106

112,930

65,463

49,024

14,335

25,476

174,214

533,548

(inƒthousands)

Warranty€reserves,€beginning€of€period
Additions€to€warranty€reserves
Reserves€utilized

Warranty€reserves,€end€of€period

10. Stock€Repurchase€Program:

December€29,
2018

Year€Ended
December€30,
2017

December€31,
2016

$

$

49,024
43,200
(46,944)
45,280

$

$

47,243
50,895
(49,114)
49,024

$

$

44,479
46,903
(44,139)
47,243

Our€stock€repurchase€program€allow€us€to€repurchase€our€common€stock€on€the€open€market€or€in€privately€negotiated

transactions€from€time€to€time.€On€August€8,€2018,€our€Board€of€Directors€authorized€a€$600.0€million€stock€repurchase
program.€€This€new€authorization€replaced€the€previous€$500.0€million€stock€repurchase€program€that€was€authorized€by€our
Board€of€Directors€on€May€14,€2012.€

During€2018,€we€repurchased€1.7€million€shares€of€its€common€stock€at€an€aggregate€cost€of€$272.8€million,€or€an€average
price€of€$163.17€per€share,€in€connection€with€our€stock€repurchase€program.€We€had€$327.2€million€remaining€under€our€stock
repurchase€program€as€of€December€29,€2018.€During€2017,€we€repurchased€no€shares€of€our€common€stock€under€our€stock
repurchase€program.€

Subsequent€to€December€29,€2018,€we€have€repurchased€0.8€million€shares€of€common€stock€at€an€aggregate€cost€of€$127.2

million,€or€$159.65€per€share,€through€our€stock€repurchase€program.

49

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

December€29,
2018

Year€Ended
December€30,
2017

December€31,
2016

$

423,847

$

475,505

$

459,622

73,728

263

73,991

73,846

264

74,110

73,562

294

73,856

6.22

6.20

Basic€earnings€per€common€share

Diluted€earnings€per€common€share

$

$

5.75

5.73

$

$

6.44

6.42

$

$

€
12. Income€Taxes:
€
U.S.ƒTaxƒReform

On€December€22,€2017,€the€U.S.€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.
We€are€required€to€remeasure€deferred€income€tax€assets€and€liabilities€in€the€reporting€period€of€enactment.€The€remeasurement
of€the€our€net€deferred€income€tax€liability€resulted€in€a€$155.1€million€income€tax€benefit€in€2017.€In€2017,€we€also€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€our€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€our€foreign€operations€and€will€be€treated
as€being€indefinitely€reinvested€outside€the€U.S.€

During€2018,€in€conjunction€with€the€completion€of€our€2017€U.S.€income€tax€return,€we€identified€a€change€in€estimate€to
amounts€previously€estimated€in€2017€for€the€remeasurement€of€the€net€deferred€tax€liability€and€nonrecurring€repatriation€tax
on€accumulated€earnings€of€foreign€subsidiaries€that€resulted€in€a€net€tax€benefit€of€$5.7€million.€Our€analysis€under€Staff
Accounting€Bulletin€No.€118€is€complete.

50

ProvisionƒforƒIncomeƒTaxes

Provision€for€income€taxes€consists€of€the€following:

(inƒthousands)

Current

Deferred

Total

2018

Federal

State

Foreign

2017

Federal

State

Foreign

2016

Federal

State
Foreign

$

$

$

$

$

$

72,598

$

14,745

$

19,571

23,292

115,461

146,855

31,352

17,810

196,017

209,499

29,345
20,156
259,000

$

$

$

$

$

87,343

23,010

21,064

$

131,417

3,439
(2,228)
15,956

(146,741) $
(3,437)
(1,085)
(151,263) $

17,989

$

1,366
858
20,213

$

114

27,915

16,725

44,754

227,488

30,711
21,014
279,213

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€(21%€for€2018€and€35%€for€2017€and€2016)

State€income€taxes,€net€of€federal€income€tax€benefit
Impact€of€the€Act

Other,€net

December€29,
2018

Year€Ended
December€30,
2017

December€31,
2016

$

$

116,605
18,178
(5,655)
2,289
131,417

$

$

182,091
18,145
(143,756)
(11,726)
44,754

$

$

258,592
19,962
…

659
279,213

51

DeferredƒIncomeƒTaxƒAssetsƒ(Liabilities)

Temporary€differences€that€give€rise€to€significant€deferred€income€tax€assets€(liabilities)€are€as€follows:€

Deferred€income€tax€assets:

(inƒthousands)

December€29,
2018

December€30,
2017

Accrued€expenses€not€currently€deductible€for€tax

$

40,066

$

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

7,780

34,430

7,423

21,091

8,390

119,180
(8,694)
110,486

(92,505)
(196,772)
(139,562)
(428,839)
(318,353) $

$

38,200

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)

As€of€December€29,€2018€and€December€30,€2017,€our€net€operating€loss€(ƒNOL„)€carryforwards€related€to€state€NOLs€of
$195.0€million€and€$177.8€million.€These€NOLs€may€be€used€to€reduce€future€taxable€income€and€expire€periodically€through
2037.€Due€to€uncertainties€related€to€the€realization€of€these€NOLs€in€certain€jurisdictions,€we€have€recorded€a€valuation
allowance€of€$3.8€million€and€$3.8€million€as€of€December€29,€2018€and€December€30,€2017.€In€addition,€we€have€recorded€a
$4.9€million€valuation€allowance€on€foreign€tax€credit€carryforwards.€The€amount€of€deferred€income€tax€assets€realizable,
however,€could€change€in€the€future€if€projections€of€future€taxable€income€change.€

We€have€not€recorded€deferred€taxes€when€earnings€from€foreign€operations€are€considered€to€be€indefinitely€invested

outside€of€the€U.S.€As€of€December€29,€2018,€these€accumulated€net€earnings€generated€by€our€foreign€operations€were
approximately€$12.1€million,€which€did€not€include€earnings€deemed€to€be€repatriated€as€part€of€the€Act.€It€is€not€practicable€to
determine€the€income€tax€liability€that€would€be€payable€if€such€earnings€were€repatriated.

UnrecognizedƒTaxƒBenefits

The€following€table€summarizes€the€activity€of€our€gross€unrecognized€tax€benefits:

(inƒthousands)

Unrecognized€tax€benefits,€beginning€of€period
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

December€29,
2018

December€30,
2017

December€31,
2016

$

$

22,665
5,435
(1,356)
5,425
(14)
(1,331)
30,824

$

$

13,946
8,077
(2,331)
5,644
(1,496)
(1,175)
22,665

$

$

13,841
8,274
(1,600)
2,105
(6,894)
(1,780)
13,946

52

As€of€December€29,€2018,€December€30,€2017€and€December€31,€2016,€the€entire€amount€of€unrecognized€tax€benefits,€if
recognized,€would€reduce€our€annual€effective€tax€rate.€During€2018,€we€recorded€a€gain€relating€to€income€tax-related€interest
and€penalties€of€$0.9€million€due€to€uncertain€tax€positions€included€in€Provision€for€income€taxes€in€the€accompanying
consolidated€statements€of€operations.€During€2017€and€2016,€we€recorded€expenses€relating€to€income€tax-related€interest€and
penalties€of€$1.7€million€and€$1.9€million€due€to€uncertain€tax€positions€included€in€Provision€for€income€taxes€in€the
accompanying€consolidated€statements€of€operations.€As€of€December€29,€2018€and€December€30,€2017,€we€recorded€a€liability
for€potential€interest€of€$3.3€million€and€$4.2€million€and€for€potential€penalties€of€$0.1€million€and€$0.1€million.€We€did€not
provide€for€any€penalties€associated€with€tax€contingencies€unless€considered€probable€of€assessment.€We€do€not€expect€our
unrecognized€tax€benefits€to€change€significantly€over€the€next€12€months.€With€few€exceptions,€we€are€no€longer€subject€to
U.S.€federal,€state€and€local€or€non-U.S.€income€tax€examinations€by€tax€authorities€for€years€before€2014.

13. Lease€and€Other€Commitments:
€

Initial€terms€for€facility€leases€are€typically€5€to€10€years,€with€renewal€options€at€5€year€intervals,€and€may€include€rent
escalation€clauses.€As€of€December€29,€2018,€future€minimum€lease€payments€due€under€non-cancelable€operating€leases€with
lease€terms€extending€through€the€year€2059€are€as€follows:

Year
(inƒthousands)

Amount

2019
2020

2021
2022
2023

Thereafter

$

$

520,541
481,812

416,895
349,470
270,116

837,441
2,876,275

NetƒRentƒExpense

The€following€table€summarizes€net€rent€expense:€

(inƒthousands)

December€29,
2018

Year€Ended
December€30,
2017

December€31,
2016

Minimum€facility€rentals

$

484,291

$

483,178

$

Equipment€rentals
Vehicle€rentals

Less:€Sub-lease€income

OtherƒCommitments

23,635
53,015
560,941
(7,141)
553,800

$

24,786
32,670
540,634
(7,144)
533,490

$

$

473,596

26,897
47,251
547,744
(7,379)
540,365

We€have€entered€into€certain€arrangements€which€require€the€future€purchase€of€goods€or€services.€Our€obligations

primarily€consist€of€payments€for€the€purchase€of€hardware,€software€and€maintenance.€As€of€December€29,€2018,€future
payments€amount€to€$101.5€million€and€are€not€accrued€in€our€consolidated€balance€sheet.

53

14. Contingencies:€

We€are€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.€We€record€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€our€consolidated€financial€position,€results€of€operations€or€cash€flows.

Our€Western€Auto€subsidiary,€together€with€other€defendants€(including€Advance€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€us€are€in€the€early€stages€of€litigation.€While€the€damages€claimed€against€the€defendants€in
some€of€these€proceedings€are€substantial,€we€believe€many€of€these€claims€are€at€least€partially€covered€by€insurance€and
historically€asbestos€claims€against€us€have€been€inconsistent€in€fact€patterns€alleged€and€immaterial.€We€do€not€believe€the
cases€currently€pending€will€have€a€material€adverse€effect€on€our€financial€position,€results€of€operations€or€cash€flows.€

15. Benefit€Plans:

401(k)ƒPlan€

We€maintain€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€our€discretion.
Company€contributions€to€these€plans€were€$15.0€million,€$14.2€million€and€$13.9€million€in€2018,€2017€and€2016.€

DeferredƒCompensationƒ

We€maintain€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.
We€established€and€maintained€a€deferred€compensation€liability€for€this€plan.€As€of€December€29,€2018€and€December€30,
2017,€these€liabilities€were€$12.2€million€and€$16.8€million.
€
16. Share-Based€Compensation:

Overview

We€grant€share-based€compensation€awards€to€our€Team€Members€and€members€of€our€Board€of€Directors€as€provided€for
under€our€2014€Long-Term€Incentive€Plan€(ƒ2014€LTIP„),€which€was€approved€by€our€shareholders€on€May€14,€2014.€In€2018,
2017€and€2016,€we€granted€share-based€compensation€in€the€form€of€stock€appreciation€rights€(ƒSARs„),€restricted€stock€units
(ƒRSUs„)€or€deferred€stock€units€(ƒDSUs„).€Our€grants,€which€have€three€methods€of€measuring€fair€value,€generally€include€a
time-based€service,€a€performance-based€or€a€market-based€portion,€which€collectively€represent€the€target€award.

At€December€29,€2018,€there€were€5.3€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.€We€issue€new€shares
of€common€stock€upon€exercise€of€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.€

54

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

1.2%
0.2%
27.7%
55

€

(1)

(2)

(3)

The€risk-free€interest€rate€is€based€on€the€U.S.€Treasury€constant€maturity€interest€rate€having€a€term€consistent€with
the€expected€life€of€the€award.€
Expected€volatility€is€determined€using€a€blend€of€historical€and€implied€volatility.
The€expected€life€of€our€awards€represents€the€estimated€period€of€time€until€exercise€and€is€based€on€historical
experience€of€previously€granted€awards.

As€no€time-based€and€performance-based€SARs€were€granted€in€2018€or€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

our€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€Simulation€Model€Assumptions
Risk-free€interest€rate€(1)
Expected€dividend€yield
Expected€stock€price€volatility€(2)

2018

2017

2.4%
0.2%
34.0%

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€our€stock€prices€and€our€peer€group.

As€no€market-based€RSUs€were€granted€in€2016,€the€Monte€Carlo€simulation€model€was€not€utilized€and€no€assumptions

were€created.

Additionally,€we€estimated€a€liquidity€discount€of€14.5%€using€the€Chaffe€Protective€Put€Method€to€adjust€the€fair€value€for

the€post-vest€restrictions.

Time-BasedƒAwards

Our€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€our€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.€

55

The€following€table€summarizes€activity€for€time-vested€SARs€and€RSUs€in€2018:€

(inƒthousands,ƒexceptƒperƒshareƒdata)
Outstanding€SARs€/€Nonvested
RSUs€at€December€30,€2017

Granted

Exercised

Vested

Forfeited

Outstanding€SARs€/€Nonvested
RSUs€at€December€29,€2018

Vested€and€expected€to€vest

Outstanding€and€exercisable

Weighted-
Average
Exercise
Price

Number
of€Awards

113

$

126.07

…
(26)
…
(4)

…

71.06

…

71.94

83

83

14

$

$

$

145.91

145.91

74.55

SARs

RSUs

Weighted-
Average
Remaining
Contractual
Term€(in
years)

Aggregate
Intrinsic
Value

Number€of
Awards

Weighted-
Average
Grant€Date
Fair€Value

$

346

259

…
(125)
(70)

135.58

130.12

…

140.62

124.55

410

$

132.49

3.71

3.71

0.98

$

$

$

1,172

…

1,172

The€aggregate€intrinsic€value€of€time-vested€SARs€and€performance-based€SARs€is€based€on€our€closing€stock€price€of
$155.46€as€of€the€last€trading€day€of€2018.€The€fair€value€of€time-based€RSUs€and€performance-based€RSUs€is€determined
based€on€the€market€price€of€our€common€stock€on€the€date€of€grant.€

The€following€table€summarizes€certain€information€concerning€activity€for€time-vested€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

Performance-BasedƒAwards

Year€Ended

December€29,
2018

December€30,
2017

December€31,
2016

$
$

$

$

… $
$

1,898

… $
$

11,455

43.64
31,450

130.12

17,527

$

$

131.01

13,578

$

$

155.51

16,089

Our€outstanding€performance-based€awards€consist€of€SARs€and€RSUs.€Performance€awards€generally€may€vest€following
a€three-year€period€subject€to€our€achievement€of€certain€financial€goals€as€specified€in€the€grant€agreements.€Depending€on€our
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.€We€also€grant€broad-
based€incentive€awards€to€store€and€field€team€members€that€vested€over€a€one-year€service€period€based€on€the€achievement€of
performance€goals.

56

The€number€of€performance-based€awards€outstanding€is€reflected€in€the€following€tables€based€on€the€number€of€awards

that€we€believed€were€probable€of€vesting€at€December€29,€2018.€Performance-based€SARs€and€performance-based€RSU(cid:129)s
granted€during€2018€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€updated€probability
assessment€as€of€December€29,€2018.€

Compensation€expense€for€performance-based€awards€of€$5.4€million,€$13.6€million,€and€$0.8€million€in€2018,€2017€and

2016,€was€determined€based€on€management(cid:129)s€estimate€of€the€probable€vesting€outcome.€
€

The€following€table€summarizes€activity€for€performance-based€SARs€and€RSUs€in€2018:

SARs

RSUs

Weighted-
Average
Remaining
Contractual
Term€(in
years)

Weighted-
Average
Exercise
Price

$

90.90

Aggregate
Intrinsic
Value

Number
of€Awards

Weighted-
Average
Grant€Date
Fair€Value

(inƒthousands,ƒexceptƒperƒshareƒdata)
Outstanding€SARs€/€Nonvested
RSUs€at€December€30,€2017

Granted
Change€in€units€based€on

performance

Exercised
Vested
Forfeited

Number
of€Awards

29

…

…
(12)
…
(2)

Outstanding€SARs€/€Nonvested
RSUs€at€December€29,€2018

Vested€and€expected€to€vest

Outstanding€and€exercisable

15

15

15

$

$

$

…

…

85.92
…
84.80

96.04

96.04

96.04

1.51

1.51

1.51

$

$

$

838

…

838

$

125

115

(41)
…
(56)
(18)

156.36

119.08

147.09

…
163.42
124.85

125

$

126.19

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€29,
2018

Year€Ended
December€30,
2017

December€31,
2016

$

$

$

$

… $
610
$

… $
$

5,221

36.78
11,556

119.08

9,224

$

$

146.42

7,823

$

$

163.76

13,512

As€of€December€29,€2018,€the€maximum€potential€payout€under€our€currently€outstanding€performance-based€SARs€and

RSUs€was€310€thousand€and€228€thousand€units.€

Market-BasedƒAwards

Our€outstanding€market-based€awards€consist€of€RSUs.€Market-based€RSU(cid:129)s€vesting€depends€on€our€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.

57

At€the€beginning€of€2018,€24€thousand€market-based€RSUs€were€outstanding.€During€2018,€a€total€of€38€thousand€market-

based€RSUs€were€granted€at€a€weighted€average€fair€value€of€$131.48€per€unit€and€9€thousand€market-based€RSUs€were
forfeited€at€a€weighted€average€fair€value€of€$137.58.€

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.€

OtherƒConsiderations

Total€income€tax€benefit€related€to€share-based€compensation€expense€for€2018,€2017€and€2016€was€$6.8€million,€$15.3

million€and€$7.5€million.

As€of€December€29,€2018,€there€was€$53.0€million€of€unrecognized€compensation€expense€related€to€all€share-based

awards€that€was€expected€to€be€recognized€over€a€weighted€average€period€of€1.7€years.

DeferredƒStockƒUnits

We€grant€share-based€awards€annually€to€our€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€our€common€stock
and€will€be€distributed€in€common€shares€after€the€director(cid:129)s€service€on€the€Board€ends.€DSUs€granted€vest€over€a€one€year
service€period.€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.€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.

We€granted€15€thousand€DSUs€in€2018.€The€weighted€average€fair€value€of€DSUs€granted€during€2018,€2017€and€2016€was
$127.14,€$125.34,€and€$146.30.€The€DSUs€are€awarded€at€a€price€equal€to€the€market€price€of€our€underlying€stock€on€the€date
of€the€grant.€For€2018,€2017€and€2016,€we€recognized€$1.9€million,€$1.5€million€and€$0.9€million€of€share-based€compensation
expense€for€these€DSU€grants.€

EmployeeƒStockƒPurchaseƒPlan

We€also€offer€an€employee€stock€purchase€plan€(ƒESPP„).€Under€the€ESPP,€eligible€Team€Members€may€elect€salary
deferrals€to€purchase€our€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€29,€2018,€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€2,€2016

2016€activity
Balance,€December€31,€2016

2017€activity
Balance,€December€30,€2017

2018€activity

Balance,€December€29,€2018

Unrealized€Gain
(Loss)€on
Postretirement€Plan
2,486
$
(534)
1,952
(194)
1,758
(294)
1,464

$

$

$

Foreign€Currency
Translation

Accumulated€Other
Comprehensive
(Loss)€Income

(46,545) $
4,892
(41,653)
14,941
(26,712)
(18,945)
(45,657) $

(44,059)
4,358
(39,701)
14,747
(24,954)
(19,239)
(44,193)

58

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€Advance.€Investments€in€subsidiaries€of€Advance€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.€

59

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€29,€2018

(inƒthousands)

Assets

Advance
Auto€Parts,
Inc.

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries Eliminations Consolidated

Current€assets:

Cash€and€cash€equivalents

$

785,605

$

110,922

$

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

… $
…

…

3,103

3,103

77
…

…
2,408
3,945,862

590,269

4,182,973

191,318

5,750,165

1,359,980
943,364

510,586
47,815
474,772

1,048,993
…
$ 5,000,443

…
102,886
$ 9,189,568

$

… $
…

…

…

…

…
…

…
(2,408)
(4,420,634)
(1,048,993)
(400,466)
$ (5,872,501) $

34,703

179,574

3,987

329,186

8,928
46,873

40,007
564
…

…
297,580
723,138

$

… $ 2,954,632
603,460
91,994
3,650,086

3,444
…
3,444

1,045,720
…
…

…
306,127
238,500

…

1,048,993

400,466

…

$

218,158

$

16,237
(1,975)
232,420

…
14,634
1,312

…

…

… $
…
…
…

…
(2,408)
…
(1,048,993)
(400,466)

896,527

624,972

4,362,547

198,408

6,082,454

1,368,985
990,237

550,593
48,379
…

…
…
9,040,648

3,172,790

623,141
90,019
3,885,950

1,045,720
318,353
239,812

…

…

3,550,813
$ 5,000,443

3,945,862
$ 9,189,568

474,772

$

723,138

(4,420,634)
$ (5,872,501) $

3,550,813

9,040,648

60

Condensed€Consolidating€Balance€Sheet
As€of€December€30,€2017€

(inƒthousands)

Assets

Advance
Auto€Parts,
Inc.

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries Eliminations Consolidated

Current€assets:

Cash€and€cash€equivalents

$

$

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

…

…

…

23

103

…

…

3,224
3,521,330

567,460

3,986,724

103,118

5,139,922

1,384,115

943,359

551,781

68,749
448,462

1,048,700
…
$ 4,573,380

…
…
$ 8,536,388

$

(23) $
…

…
(75)
(98)

…

…

…
(3,223)
(3,969,792)
(1,048,700)
(332,467)
$ (5,354,280) $

38,897

181,768

2,063

287,045

9,920

50,934

45,893

554
…

…
332,467
726,813

$

… $ 2,657,792
511,841
50,963
3,220,596

1,134
…
1,134

1,044,327
…
…
…

112,723

…
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

61

Condensed€Consolidating€Statement€of€Operations
For€the€Year€Ended€December€29,€2018€

(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

Advance
Auto€Parts,
Inc.

Guarantor
Subsidiaries
… $ 9,225,772

Non-
Guarantor
Subsidiaries Eliminations Consolidated
9,580,554
$

(165,101) $

519,883

$

…

…

20,235
(20,235)

(52,253)
73,174

20,921

686

2,519

(1,833)
425,680

5,169,076

4,056,696

3,547,645

509,051

(4,336)
(6,961)
(11,297)
497,754

117,015

380,739
44,941

357,166

162,717

98,412

64,305

1
(7,482)
(7,481)
56,824

11,883

44,941
…

(165,101)
…
(51,154)
51,154

…
(51,154)
(51,154)
…

…

…
(470,621)
(470,621) $

5,361,141

4,219,413

3,615,138

604,275

(56,588)
7,577
(49,011)
555,264

131,417

423,847
…

423,847

Net€income

$

423,847

$

425,680

$

44,941

$

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
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

475,089

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

Net€income

$

475,505

$

475,089

$

57,616

$

62

Condensed€Consolidating€Statement€of€Operations
For€the€Year€Ended€December€31,€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)€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

Advance
Auto€Parts,
Inc.

Guarantor
Subsidiaries
… $ 9,254,477

Non-
Guarantor
Subsidiaries Eliminations Consolidated
9,567,679
$

(243,545) $

556,747

$

…

…

28,695
(28,695)

(52,081)
81,683

29,602

907

1,588

(681)
460,303

5,171,953

4,082,524

3,402,323

680,201

(7,897)
(19,558)
(27,455)
652,746

260,155

392,591
67,712

383,356

173,391

92,287

81,104

68

4,010

4,078

85,182

17,470

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

Net€income

$

459,622

$

460,303

$

67,712

$

63

Condensed€Consolidating€Statement€of€Comprehensive€Income
For€the€Year€Ended€December€29,€2018

(inƒthousands)

Net€income

Other€comprehensive€loss:

Changes€in€net€unrecognized€other

postretirement€benefit€costs

Currency€translation€adjustments

Equity€in€other€comprehensive€loss€of

subsidiaries

Total€other€comprehensive€loss

Comprehensive€income

Advance
Auto€Parts,
Inc.
423,847

$

Guarantor
Subsidiaries
425,680
$

Non-
Guarantor
Subsidiaries Eliminations Consolidated
423,847
$

(470,621) $

44,941

$

…

…

(294)
…

(19,239)
(19,239)
404,608

$

(18,945)
(19,239)
406,441

$

$

…
(18,945)

…
(18,945)
25,996

…

…

38,184

38,184
(432,437) $

$

(294)
(18,945)

…
(19,239)
404,608

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
Equity€in€other€comprehensive€income€of

subsidiaries
Total€other€comprehensive€income

Comprehensive€income

Advance
Auto€Parts,
Inc.
475,505

$

Guarantor
Subsidiaries
475,089
$

Non-
Guarantor
Subsidiaries Eliminations Consolidated
475,505
$

(532,705) $

57,616

$

…

…

(194)
…

14,747
14,747
490,252

$

14,941
14,747
489,836

$

$

…

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€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
Other€comprehensive€income

Comprehensive€income

4,358
4,358
463,980

$

4,892
4,358
464,661

$

$

64

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

Condensed€Consolidating€Statement€of€Cash€Flows
For€the€Year€Ended€December€29,€2018

(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

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€(decrease)€increase€in€cash€and€cash

equivalents

Cash€and€cash€equivalents,€beginning€of

period

Cash€and€cash€equivalents,€end€of€period

$

Guarantor
Subsidiaries
753,948

… $

Non-
Guarantor
Subsidiaries Eliminations Consolidated
811,028
$

57,080

… $

$

…

…

…

…

…

…

…

…

…
(23)
(23)
…

(23)

(192,156)

(1,559)

1,842

…
(190,314)

35,280
(17,819)

3,200

(773)
(281,354)
817
(260,649)
…

46

…
(1,513)

(3,266)
…

…

…

…
…
(3,266)
(5,696)

302,985

46,605

…

…

…

…

…

…

…

…

…
23
23

…

23

23
… $

482,620
785,605

$

64,317
110,922

$

(23)
… $

(193,715)

1,888

…
(191,827)

32,014
(17,819)

3,200

(773)
(281,354)
817
(263,915)
(5,696)

349,590

546,937
896,527

65

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
482,620

$

$

56,635
64,317

$

(22)
(23) $

135,178
546,937

66

Condensed€Consolidating€Statement€of€Cash€Flows
For€the€Year€Ended€December€31,€2016€

(inƒthousands)

Advance
Auto€Parts,
Inc.

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries Eliminations Consolidated

$

14

$

491,180

$

32,109

$

… $

523,303

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

$

…

…

…

…

…

…

…

…

…

…

…
…

…
…

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
78,543

$

27,324
56,635

$

$

(8)
(22) $

90,782
135,178

67

19. Quarterly€Financial€Data€(unaudited):

The€following€table€summarizes€quarterly€financial€data€for€2018€and€2017:

2018

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

2017

(inƒthousands,ƒexceptƒperƒshareƒdata)

Net€sales

Gross€profit

Net€income

Basic€earnings€per€common€share
Diluted€earnings€per€common€share

$

$

$

$

$

$
$

$

$
$

2,873,848

1,272,284

136,727

1.85

1.84

First

(16ƒweeks)

2,890,838

1,270,684

107,960

1.46
1.46

$

$

$

$

$

$
$

$

$
$

2,326,652

1,011,559

117,836

1.59

1.59

Second

(12ƒweeks)

2,263,727

993,088

87,049

1.18
1.17

$

$

$

$

$

$
$

$

$
$

2,274,982

1,006,927

115,843

1.57

1.56

Third

(12ƒweeks)

2,182,233

947,708

95,996

1.30
1.30

$

$

$

$

$

$
$

$

$
$

2,105,072

928,643

53,441

0.74

0.74

Fourth

(12ƒweeks)

2,036,986

873,569

184,500

2.50
2.49

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.€

68

Advance€Auto€Parts,€Inc.
Schedule€II€-€Valuation€and€Qualifying€Accounts
(inƒthousands)

Allowance€for€doubtful€accounts€receivable
December€31,€2016

December€30,€2017

December€29,€2018

Balance€at
Beginning€of
Period

$

$

$

25,758

29,164

18,219

$

$

$

Charges€to
Expenses

Deductions

Balance€at
End€of
Period

24,597

20,110

18,445

$

$

$

(21,191) (1) $
(31,055) (1) $
(18,622) (1) $

29,164

18,219

18,042

(1) Accounts€written€off€during€the€period.€These€amounts€did€not€impact€our€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.

69

Exhibit€No. Exhibit€Description

EXHIBIT€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).

70

Incorporated€by€Reference

Filed

Form

Exhibit

Filing€Date Herewith

10-K

2.1

2/25/2014

10-Q

3.1

8/14/2018

10-Q

8-K

3.2

5/22/2018

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

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

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).

Advance€Auto€Parts,€Inc.€Executive€Incentive€Plan.

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.

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.
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€Parts,€Inc.€Restricted€Stock€Unit
Agreement€dated€March€1,€2013.
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.

71

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

DEF€14A Appendix€B 4/11/2007
6/4/2008

10.35

8-K

8-K

10-K

10-K

8-K
10-K

10.39 11/21/2008

10.33

2/28/2012

10.34

2/28/2012

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

10.1

12/9/2013

8-K

10.2

12/9/2013

10-K
10-K

10.45
10.46

2/25/2014
2/25/2014

10-K

10.48

2/25/2014

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

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.
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.
2016€Restricted€Stock€Unit€Award€Agreement€(Time-
Based)€between€Advance€Auto€Parts,€Inc.€and€Thomas€B.
Okray€dated€November€21,€2016.

72

Incorporated€by€Reference

Filed

Form

Exhibit

Filing€Date Herewith

10-K

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-Q

10-Q

10-Q

8-K

10.4
10.5

5/31/2016
5/31/2016

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

10.50

2/28/2017

10.52

2/28/2017

Exhibit€No. Exhibit€Description

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

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

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).
Employment€Agreement€effective€September€17,€2018
between€Advance€Auto€Parts,€Inc.€and€Jeffrey€W.
Shepherd.

Amendment€No.€2€to€the€Credit€Agreement,€dated€as€of
January€10,€2019,€among€Advance€Auto€Parts,€Inc.,
Advance€Stores€Company,€Incorporated,€the€lenders€party
thereto,€and€Bank€of€America,€N.A.,€as€Administrative
Agent.
Employment€Agreement€effective€February€6,€2018
between€Advance€Auto€Parts,€Inc.€and€Michael€T.
Broderick.
Employment€Agreement€effective€October€3,€2018
between€Advance€Auto€Parts,€Inc.€and€Reuben€E.€Slone.

Form€of€2017€Advance€Auto€Parts,€Inc.€Performance-
Based€Restricted€Stock€Unit€Award€Agreement.
Form€of€2018€Advance€Auto€Parts,€Inc.€Performance-
Based€Restricted€Stock€Unit€Award€Agreement.
Form€of€2018€Advance€Auto€Parts,€Inc.€Time-Based
Restricted€Stock€Unit€Award€Agreement.

Advance€Auto€Parts,€Inc.€2004€Long-Term€Incentive€Plan
(as€amended€effective€August€7,€2018).
2018€Restricted€Stock€Unit€Award€Agreement
(Performance-Based)€between€Advance€Auto€Parts,€Inc.
and€Rueben€E.€Slone€dated€November€19,€2018.

21.1

Subsidiaries€of€Advance€Auto€Parts,€Inc.

73

Incorporated€by€Reference

Filed

Form

Exhibit

Filing€Date Herewith

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

8-K

10.1

2/6/2018

10-K

10.57

2/21/2018

10-K

10.58

2/21/2018

10-Q

10.1 11/13/2018

8-K

10.1 10/15/2018

X

X

X

X

X

X

X

X

Exhibit€No. Exhibit€Description

23.1

31.1

31.2

32.1

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

Item€16.€Form€10-K€Summary.€

None.

Incorporated€by€Reference

Filed

Form

Exhibit

Filing€Date Herewith

X

X

X

X

X

X

X

X

X

X

74

Signatures

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.€

Dated: February€19,€2019

ADVANCE€AUTO€PARTS,€INC.

By:

/s/€Jeffrey€W.€Shepherd

Jeffrey€W.€Shepherd

ExecutiveƒViceƒPresident,ƒChiefƒFinancialƒOfficer,
ControllerƒandƒChiefƒAccountingƒOfficer

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€19,€2019

Thomas€R.€Greco

(Principal€Executive€Officer)

/s/€Jeffrey€W.€Shepherd
Jeffrey€W.€Shepherd

Executive€Vice€President,€Chief€Financial€Officer,€Controller€and
Chief€Accounting€Officer

February€19,€2019

(Principal€Financial€and€Accounting€Officer)

/s/€Jeffrey€C.€Smith

Chairman€and€Director

February€19,€2019

Jeffrey€C.€Smith

/s/€John€F.€Bergstrom

Director

John€F.€Bergstrom

/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/€Nigel€Travis

Nigel€Travis

/s/€Douglas€A.€Pertz
Douglas€A.€Pertz

/s/€Jeffrey€J.€Jones€II
Jeffrey€J.€Jones€II

Director

Director

Director

/s/€Sharon€L.€McCollam

Director

Sharon€L.€McCollam

75

February€19,€2019

February€19,€2019

February€19,€2019

February€19,€2019

February€19,€2019

February€19,€2019

February€19,€2019

February€19,€2019

February€19,€2019

February€19,€2019

S H A R E H O L D E R   I N F O R M A T I O N

Corporate Office:
2635 East Millbrook Road
Raleigh, NC 27604 
877-238-2623

Internet Site:
www.AdvanceAutoParts.com

Annual Meeting:
May 15, 2019 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 (SEC) by writing to the Investor Relations Department,  
2635 East 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 Support

Robert B. Cushing* 
Executive Vice President, 
Professional

Tammy M. Finley* 
Executive Vice President, 
General Counsel and  
Corporate Secretary 

Natalie S. Rothman Schechtman* 
Executive Vice President, 
Human Resources

Michael C. Creedon, Jr. 
Division President,  
North

Jeffrey W. Shepherd* 
Executive Vice President,  
Chief Financial Officer, Controller 
and Chief Accounting Officer 

Reuben E. Slone* 
Executive Vice President,  
Supply Chain

Maria R. Ayres 
Division President,  
South

Sri Donthi 
Executive Vice President,  
Chief Technology Officer

Yogesh Jashnani 
Senior Vice President,  
Marketing, Insights and Analytics

David L. McCartney 
President,  
Carquest North America 

B O A R D   O F   D I R E C T O R S

 ‡Committee Chair

Jeffrey C. Smith 
Chair of the Board, Advance Auto 
Parts, Inc., and Managing Member,  
Chief Executive Officer and  
Chief Investment Officer,  
Starboard Value LP

John F. Ferraro (3‡) 
Executive Vice President, 
Strategy and Sales,  
Aquilon Energy Services 
Past Global Chief Operating Officer, 
Ernst & Young 

John F. Bergstrom (2‡) 
Chairman and  
Chief Executive Officer, 
Bergstrom Corporation

Brad W. Buss (1‡) 
Retired Chief Financial Officer, 
SolarCity Corporation

Fiona P. Dias (3) 
Principal Digital Partner,  
Ryan Retail Consulting

Thomas R. Greco 
President and  
Chief Executive Officer, 
Advance Auto Parts, Inc.

Jeffrey J. Jones II** (2) 
President and  
Chief Executive Officer,  
H&R Block, Inc.

Adriana Karaboutis (1) 
Chief Information and Digital Officer, 
National Grid PLC

Eugene I. Lee, Jr. (2) 
President and  
Chief Executive Officer,  
Darden Restaurants, Inc. 

Sharon L. McCollam** (1) 
Retired Chief Administrative  
and Chief Financial Officer,  
Best Buy Co. Inc.

Douglas A. Pertz (3) 
President and 
Chief Executive Officer,  
The Brink’s Company

Nigel Travis (3) 
Chairman of the Board and  
Retired Chief Executive Officer,  
Dunkin’ Brands Group, Inc.

Committee Membership:   1 – Audit   2 – Compensation   3 – Nominating and Corporate Governance

** Mr. Jones and Ms. McCollam joined the Board of Directors as of February 11, 2019.

 
 
 
 
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