Advance Auto Parts Annual Report 2022

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FY2022 Annual Report · Advance Auto Parts

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2022

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3/31/23 7:11 PM

2022 HIGHLIGHTS

$11.2 BILLION
TOTAL NET SALES

24 BASIS POINTS
ADJUSTED OPERATING INCOME MARGIN EXPANSION

$13.04
ADJUSTED DILUTED EPS

$298 MILLION
FREE CASH FLOW

$934 MILLION
CASH RETURNED TO SHAREHOLDERS THROUGH
A COMBINATION OF SHARE REPURCHASES AND
QUARTERLY CASH DIVIDENDS

During 2022, DieHard® received UL validation for its
Absorbent Glass Mat (AGM) battery, making it the fi rst auto
battery to receive the designation from UL. In addition, the
brand grew with the DieHard EV battery, which was the fi rst
aftermarket battery designed specifi cally for hybrids and
EVs to be offered by an auto parts retailer.

STATES AND
PROVINCES WITH
COMPANY OWNED
STORES AND BRANCHES

STATES AND
PROVINCES WITH
DISTRIBUTION CENTERS

Certain key metrics presented above are non-GAAP fi nancial measures. For additional information regarding these non-GAAP fi nancial measures, please see the discussion of these key
metrics included in the letter to our shareholders beginning on the following page.

STATES AND
PROVINCES WITH
COMPANY OWNED
STORES AND BRANCHES

STATES AND
PROVINCES WITH
DISTRIBUTION CENTERS

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3/31/23 7:11 PM

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

It has been a privilege to lead Advance for
the past seven years and I am proud of the
actions we took to improve performance. In my
first two years as CEO, we were faced with the
challenging task of replacing most of the top
leaders in the company. The task in front of
my new leadership team was to integrate what
were four separate companies operating in the
same segment and add highly capable talent
from both inside and outside the company.
We also needed to address our frontline
culture, which had deteriorated resulting in
significant turnover. While doing all of this, we
needed a plan to grow sales, expand margins
and take advantage of the significant cash
the business could return to shareholders.

Our new leadership team built a strategy to do
just that. We integrated four separate platforms
into a single financial and payroll system across
the enterprise to help us operate more efficiently.
We focused on building our brands and acquired
the DieHard brand. We invested heavily in our
digital capabilities to provide a leading online

and mobile experience for both professional and
DIY customers. We integrated the Advance and
Carquest supply chains along with Worldpac and
Autopart International. We added a common labor
management system to enable a standardized
level of productivity in our stores that is also
being rolled out to our DCs. We updated the
company’s legacy network by modernizing data
centers and leveraging the cloud for all core
selling systems. In addition, we reimagined our
company culture. From day one, we kept the
customer top of mind with every decision we
made, always asking the question: what can we
do to better serve our customers? And between
2018 and 2022, our performance improved.

2022 was a more challenging year for us and in the
latter half of the year, we started making strategic
inventory investments to improve our availability
and began taking surgical actions within our pricing
strategy to ensure we were competitive. While we
are certainly not happy with our overall performance
in 2022, we once again delivered comparable
store and net sales growth and expanded margins.

Total Net Sales (in billions)

Comparable Store Sales

Operating Income Margin

Adjusted Operating Income Margin (2)

2022

$11.2

0.3%

6.4%

9.8%

2021

$11.0

10.7%

7.6%

9.6%

Diluted Earnings Per Share

$8.27

$9.55

Adjusted Diluted Earnings Per Share (2,3)

$13.04

$12.02

Operating Cash Flow (in millions)

Free Cash Flow(4) (in millions)

$722

$298

$1,112

$823

2020 (1)

2019

2018

$10.1

2.4%

7.4%

8.0%

$7.14

$8.36

$970

$702

$9.7

1.1%

7.0%

9.2%

$6.84

$9.26

$867

$597

$9.6

2.3%

6.3%

7.4%

$5.73

$6.73

$811

$617

(1) For comparative purposes, adjusted results for 2020 are non-GAAP measures and are presented on a 52-week basis; GAAP and Free cash flow results are as reported. (2) Adjusted operating
income margin and Adjusted diluted EPS are non-GAAP measures and should not be a substitute for GAAP financial measures, and include Last-In First-Out (LIFO) impacts; transformation expenses;
General Parts International, Inc. (“GPI”) amortization of acquired intangible assets; expenses related to make-whole provisions, debt issuance costs and tender premiums resulting from the early
redemption of our 2020, 2022 and 2023 senior unsecured notes and an out-of-period correction. Additional information of non-GAAP financial measures for 2022 and 2021 can be found on
pages 21 and 22 of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K included within our 2022 Annual Report. Additional information of
non-GAAP financial measures for 2020 can be found on pages 23 and 24 of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K included
within our 2021 Annual Report. Additionally, the impact of LIFO on the company’s results of operations were included as a part of our non-GAAP reconciliation beginning in Q1 2021. Details of this
change can be found in our Q4 2020 Form 8-K. (3) 2018 Adjusted diluted EPS exclude the impact of the Tax Act. (4) 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 37 in our Form 10-K included within our 2022 Annual Report. See
Reconciliation of Free Cash Flow within our Q4 2022 and Q4 2021 Form 8-K.

— continued

2 0 2 2 P E R F O R M A N C E

Despite our 2022 performance, opportunity lies
ahead, and we believe that we are just getting
started in terms of realizing the potential of
Advance. We believe the decisive actions we took
in 2022 will help us accelerate growth in 2023
and beyond. In addition, we continue to leverage
the entirety of our enterprise assets to provide a
superior customer experience within professional
and accelerate growth and profitability among those
customers. From an industry standpoint, vehicles
continue to age, and the average car is now 12
years old. Americans put more miles on their cars
this past year than in the previous one and we see
this trend continuing into 2023. The semiconductor
chip shortage continues to constrain new vehicle
sales, which contributes to low scrappage of older
vehicles. All of this means more customers are
keeping their existing vehicles longer and those older
cars need parts, whether consumers do the work
themselves or take their vehicles to a mechanic.
We plan to earn their business due to our superior
service and distinctive product selections, including
our lineup of trusted brands including DieHard and
Carquest, and by ensuring we deliver the right part
at the right place at the right time, every time.

Great leadership teams build companies for the
long-term. They create a strategy to help ensure the
business is successful for years to come and remain
flexible and agile in the execution of that strategy.
And, with most of the integration activity now behind
us and a capable leadership team in place to carry
us into the future, I felt comfortable with the decision
I made this past February where I informed the
Board of Directors of my intention to retire at the end
of 2023. There is nothing more important to me right
now than Advance’s long-term success. My timing
was very intentional as it will enable an orderly and
thoughtful transition of responsibilities and afford
time to identify the best candidate for the position.
It will ensure my successor plays a role in developing
Advance’s next chapter to help ensure the company
accelerates our trajectory and capitalizes on what
we believe remains a significant opportunity ahead.

In the meantime, and as I look ahead to the next
several months, I remain committed to executing
our 2023 annual operating plan with excellence and
updating our long-term strategic business plan. We
spent considerable time over many years studying
the customer and drivers of demand in our industry
while investing behind those trends to position the
company for long-term success. We have strong
brands and a tremendous focus on parts availability.
We are relentlessly focused on the customer
experience. We have a differentiated set of assets
to compete in professional along with a growing
national footprint. Digitalization is empowering us to
be more responsive to the needs of customers and
consumers and we believe we are well positioned to
capitalize on this trend. We are upskilling our team
members to help ensure we have the workforce of the
future, while uplifting our communities to help ensure
we are a good neighbor in the markets we serve.

My entire team remains focused on the future
and unlocking the considerable Total Shareholder
Return (TSR) opportunity that we believe lies
ahead of us. This is highlighted by our four
primary TSR drivers: build an ownership culture,
grow faster than the industry, capitalize on a
unique margin expansion opportunity and return
a significant amount of cash to shareholders. We
now have a strong foundation in place that we
believe will continue to drive Advance’s growth
in each of these areas. Let’s look at each one:

B U I L D A N O W N E R S H I P
C U LT U R E

We recognize that our team members play a vital
role in our customer value proposition. Our frontline
team members are the face of Advance with DIY and
professional customers daily. Throughout 2022, we
continued our sustained investment in our frontline
team members as we have done for several years
in the form of compensation, training, safety and
inclusion to help improve retention and better serve
our customers. This includes our differentiated Fuel
the Frontline stock award program, which to date has
granted over 26,000 stock awards to frontline team

— continued

members, valued at nearly $75 million. We remain
the only company in our industry, and one of very
few across broader retail, to provide stock awards to
frontline team members. In 2022, we also launched
a new customer interaction model that trains our
frontline team members to focus on solving customer
problems rather than simply selling products. This
approach is more natural and better addresses
specific customer needs, wants and problems and
we believe it will help drive sales and improve the
customer experience. In addition, we continued to
build our safety culture across our distribution centers
and stores. We are extremely proud of our track
record in safety. Over the past five years we reduced
our total recordable incident rate across the company
by 61%. We also continue to make progress on
diversity, equity and inclusion, where we are focused
on the recruitment, retention and advancement
of people of color and women, the promotion of
allyship across the enterprise and the creation of
an even more inclusive culture. You can learn more
about our progress in these areas by reading our
2022 Corporate Sustainability and Social Impact
Report, which will be published later this spring.

G R O W FA S T E R T H A N T H E
I N D U S T R Y

Unfortunately, not everything in 2022 went as
planned and we fell well short when it came to topline
sales growth. We were not satisfied with our relative
Topline performance versus the industry last year,
and we took measured deliberate actions to address
this and accelerate growth. First, we’re making
strategic inventory investments to improve availability,
working closely with our vendors to ensure we get
the right part to the right place at the right time.
Second, we’re making surgical pricing investments
in certain categories to enable us to better address
changes in competitive pricing dynamics. We believe
of these two, the targeted inventory investment is
by far the most important step needed to set us up
for improved topline performance and share gains in
2023. Importantly, we remain flexible and agile, ready
to make further adjustments should the business

warrant them. On a positive note, we continued
to make investments in our digital platforms and
believe these investments are yielding results. Our
eCommerce and DIY Omnichannel business showed
strength as we exited the year, and we attained an
all-time high in online penetration in our professional
business in Q4 2022. We also opened 144 new
locations in 2022, the most we have opened in
close to 10 years. This means we are bringing our
superior products and service to new markets, which
will help us to grow and acquire new customers.

C A P I TA L I Z E O N A U N I Q U E
M A R G I N E X PA N S I O N
O P P O R T U N I T Y

In 2022, we once again delivered adjusted gross
margin expansion as we built our brands and
continued to drive productivity. Our focus on
category management, including strategic pricing
and owned brand expansion continued to benefit
margins. In fact, our owned brands now make up
over 50% of our enterprise sales mix. Our owned
brand growth was led by DieHard, one of the
automotive industry’s most recognizable brands
known for reliability and durability and a differentiator
for Advance. DieHard delivered double-digit sales
growth this year in part because of the successful
launch of DieHard Hand and Power Tools, as well as
our latest product innovation, the DieHard xEV 12-
volt battery which is optimized for hybrid and electric
vehicles. In addition, DieHard’s Gold and Platinum
batteries recently received circular economy
validation by UL validation. This achievement came
on the heels of DieHard AGM batteries receiving
the same distinction in 2021. We believe this
level of understanding about the full lifecycle of
one of our largest owned brands is a competitive
advantage for Advance. Meanwhile, as we enter
the final stages of integrating the company and put
most of the heavy lifting behind us, we expect to
drive continued productivity in supply chain, store
operations and within SG&A. Margin expansion
remains a major opportunity for us and we remain
focused on capitalizing on this to drive TSR.

— continued

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

In 2022, we returned approximately $934
million to shareholders through a combination
of share repurchases and our quarterly cash
dividend. In the first quarter of 2022, our
Board announced an increase in our quarterly
cash dividend to $1.50 per share. By way of
comparison, our dividend was only $0.06
per share when I joined the company in
2016. Over the long term, we remain bullish
on our ability to generate and return cash to
shareholders more in line with our history.

T H E R O A D A H E A D

At Advance, we remain focused on advancing
both short- and long-term priorities, hand in
hand, so we can deliver strong returns that grow
consistently over an extended period. More than

seven years into my journey as CEO, I am more
confident than ever that we are on the right path.

Our company has come a long way since our humble
beginnings back in 1932. I’m confident in the road
ahead and committed to finishing 2023 strong. Our
company is home to approximately 67,000 team
members who remind me daily why Advance is
such a special place to work and shop. Together,
we live our Advance Cultural Beliefs as we continue
to refine our strategy: Take Action, Be Accountable,
Move Forward, Champion Inclusion, Speak Up and
Grow Talent. These six Cultural Beliefs set us
apart and they will continue to do so in the future.
Primarily because of the team we have built, I
believe that Advance’s best days are in front of us.

Thank you for your support and the confidence
you’ve placed in us with your investment.

Tom Greco
President and Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K

________________________________________________

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

☐ 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)

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

4200 Six Forks Road, Raleigh, North Carolina 27609
(Address of principal executive offices) (Zip Code)

(540) 362-4911
(Registrant’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

Trading symbol Name of each exchange on which registered

AAP

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

☒ No ☐

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 ☐ No ☒

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 ☒ No ☐

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 ☒ No ☐

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 “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Non-accelerated filer

☒
☐

Accelerated filer
☐
Smaller reporting company ☐
Emerging growth company ☐

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 has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b))
by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of

the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐

No ☒

As of the last business day of the registrant’s most recently completed second fiscal quarter, July 16, 2022, the aggregate

market value of common stock held by non-affiliates of the registrant was $11,302,276,702, based on the last sales price on
July 16, 2022, as reported by the New York Stock Exchange.

As of February 24, 2023, the number of shares of the registrant’s common stock outstanding was 59,273,781 shares.

Documents Incorporated by Reference:

Portions of the registrant’s definitive proxy statement for its 2023 Annual Meeting of Stockholders, to be held on May 24,

2023, are incorporated by reference into Part III of this Form 10-K.

Part I.

Part II.

Part III.

Part IV.

Signatures

Item 1.

Item 1A.

Item 1B.

Item 2.

Item 3.

Item 4.

Item 5.

Item 6.

Item 7.

Item 7A.

Item 8.

Item 9.

Item 9A.

Item 9B.

Item 9C.

Item 10.
Item 11.

Item 12.

Item 13.

Item 14.

Item 15.

Item 16.

TABLE OF CONTENTS

Business

Risk Factors

Unresolved Staff Comments

Properties

Legal Proceedings

Mine Safety Disclosures

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risks

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures

Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence

Principal Accountant Fees and Services

Exhibits, Financial Statement Schedules

Form 10-K Summary

Page

29
29

FORWARD-LOOKING STATEMENTS

Certain statements herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements are usually identifiable by words such as “anticipate,” “believe,” “could,” “estimate,”
“expect,” “forecast,” “intend,” “likely,” “may,” “plan,” “position,” “possible,” “potential,” “probable,” “project,” “should,”
“strategy,” “will,” or similar language. All statements other than statements of historical fact are forward-looking statements,
including, but not limited to, statements about our strategic initiatives, operational plans and objectives, expectations for
economic conditions and recovery and future business and financial performance, as well as statements regarding underlying
assumptions related thereto. Forward-looking statements reflect our views based on historical results, current information and
assumptions related to future developments. Except as may be required by law, we undertake no obligation to update any
forward-looking statements made herein. Forward-looking statements are subject to a number of risks and uncertainties that
could cause actual results to differ materially from those projected or implied by the forward-looking statements. They include,
among others, factors related to the company’s leadership transition, the timing and implementation of strategic initiatives,
including with respect to labor shortages or disruptions and the impact on our ability to complete store openings, deterioration
of general macroeconomic conditions, the highly competitive nature of our industry, demand for our products and services,
complexities in our inventory and supply chain and challenges with transforming and growing our business. Please refer to
“Item 1A. Risk Factors” included in this report and other filings made by us with the Securities and Exchange Commission
(“SEC”) for a description of these and other risks and uncertainties that could cause actual results to differ materially from those
projected or implied by the forward-looking statements.

Item 1. Business.

PART I

Unless the context otherwise requires, “Advance,” “we,” “us,” “our,” 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 years ended December 31, 2022 (“2022”) and January 1, 2022
(“2021”) included fifty-two weeks of operations. Our fiscal year ended January 2, 2021 (“2020”) included fifty-three weeks of
operations.

Overview

We are a leading automotive aftermarket parts provider in North America, serving both professional installers

(“professional”) and “do-it-yourself” (“DIY”) customers, as well as independently owned operators. Our stores and branches
offer a broad selection of brand names, original equipment manufacturer (“OEM”) and owned brand 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 31, 2022, we operated 4,770 total stores and 316 branches primarily under the trade names
“Advance Auto Parts,” “Carquest” and “Worldpac.”

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 strategic acquisitions, new store openings and comparable store sales growth.
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. (“GPI”), 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 trade names.

Stores and Branches

Key factors in selecting sites and market locations in which we operate include population, demographics, traffic count,
vehicle profile, competitive landscape and the cost of real estate. During 2022, 144 stores and branches were opened and 30
were closed or consolidated, resulting in a total of 5,086 stores and branches as of December 31, 2022 compared with a total of
4,972 stores and branches as of January 1, 2022.

Through our integrated operating approach, we serve our professional and DIY customers through a variety of channels
ranging from traditional “brick and mortar” store locations to self-service e-commerce sites. We believe we are better able to
meet our customers’ needs by operating under several trade names, which are as follows:

Advance Auto Parts — Our 4,440 stores, inclusive of 328 hubs, as of December 31, 2022 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 7,800 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 23,000
stock keeping units (“SKUs”), consisting of a custom mix of products based on each store’s unique market. Supplementing
our stores’ inventory on-hand, less common SKUs are also available on a same-day or next-day basis from any of our
larger hub stores.

Carquest — Our 330 stores as of December 31, 2022, including 148 stores in Canada, are generally located in
freestanding buildings with a primary focus on professional customers, but also serve 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 25,000 SKUs. As of
December 31, 2022, Carquest also serves 1,311 independently owned stores that operate under the Carquest name.

Worldpac — Our 316 branches, of which 135 are branded Autopart International (“AI”), as of December 31, 2022
principally serve professional customers utilizing an efficient and sophisticated online ordering and fulfillment system.
Worldpac’s branches are generally larger than our other store locations, averaging approximately 18,400 square feet.
Worldpac’s complete product offering includes over 285,000 SKUs for domestic and import vehicles and specializes in
imported OEM parts. As part of our transformation efforts through December 31, 2022, we have converted all AI stores
into the Worldpac technology format.

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’ stores, and the cost of real estate. As of December 31, 2022, 4,915
stores and branches were located in 48 U.S. states and two U.S. territories, and 171 stores and branches were located in nine
Canadian provinces.

We serve our stores and branches primarily from our principal corporate offices in Raleigh, NC and Roanoke, VA. We also

maintain store support centers in Newark, CA and Norton, MA.

Our Products

The following table shows some of the types of products that we sell by major category:

Parts & Batteries

Accessories & Chemicals

Engine Maintenance

Batteries and battery accessories

Air conditioning chemicals and accessories

Air filters

Belts and hoses

Air fresheners

Brakes and brake pads

Antifreeze and washer fluid

Chassis parts

Electrical wire and fuses

Climate control parts

Electronics

Fuel and oil additives

Fuel filters

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 often offered at a good, better or best recommendation

differentiated by price and quality. We accept customer returns for many new, core and warranty products. Customer returns
have historically been immaterial.

Our Customers

Our professional customers consist primarily of customers for whom we deliver products from our store or branch
locations to their places of business, including garages, service stations and auto dealers. Our professional sales represented
approximately 59%, 58% and 57% of our sales in 2022, 2021 and 2020. We also serve 1,311 independently owned Carquest
stores with shipments directly from our distribution centers. Our DIY customers are primarily served through our stores, but can
also order online to pick up merchandise at a conveniently located store or have their purchases shipped directly to them.
Except where prohibited, we also provide a variety of services at our stores free of charge to our customers, including:

•
•
•
•
•

Battery and wiper installation;
Check engine light scanning;
Electrical system testing, including batteries, starters and alternators;
Oil and battery recycling; and
Loaner tool programs.

We also serve our customers online at www.AdvanceAutoParts.com or on our Advance Mobile App. Our professional
customers can conveniently place their orders electronically, including through MyAdvance.com and Technet, by phone or in-
store, and we deliver products from our stores or branch locations to their places of business.

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 31, 2022, we operated 50 distribution centers, ranging in size
from approximately 57,000 to 943,000 square feet with total square footage of approximately 12.6 million, including one
distribution center dedicated to reclamations. In 2022, we closed distribution centers in Riverside, California and Anchorage,
Alaska.

Merchandise, Marketing and Advertising

In 2022, we purchased merchandise from over 1,400 vendors, with no single vendor accounting for more than 10% of
purchases. Our purchasing strategy involves negotiating agreements to purchase merchandise over a specified period of time
along with other provisions, including pricing, rebates, 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®, Fram®, Gates®, Meguiar’sTM, Mobil 1TM, Moog®, Monroe®, NGK®,
Prestone®, Purolator®, Trico® and Wagner®. In addition to these branded products, we stock a wide selection of high-quality
owned brand products with a goal of appealing to value-conscious customers. These categories of merchandise include
chemicals, interior automotive accessories, batteries and parts under various owned brand names such as Autopart
International®, Carquest®, DieHard®, Driveworks® and Wearever®. For the DieHard® brand, we own the right to sell batteries
and to extend the DieHard® brand into other automotive and vehicular categories. We granted the seller an exclusive royalty-
free, perpetual license to develop, market and sell DieHard® branded products in certain non-automotive categories.

Our marketing and advertising program is designed to drive brand awareness, consideration by consumers and

omnichannel traffic by position in the aftermarket auto parts category. We strive to exceed our customers’ expectations end-to-
end through a comprehensive online and in-store pick up experience, extensive parts assortment, quality brands, experienced
parts professionals, professional programs that are designed to build loyalty with our customers and our DIY customer loyalty
program. Our DIY campaign was developed around a multi-channel communications plan that brings together radio, television,
digital marketing, social media, sponsorships, store execution, public relations and Speed Perks (our customer loyalty program).

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.

Human Capital Management

We believe our People are Our Best Part, and we have adopted six Cultural Beliefs to help us foster a culture that fully

engages our team members with our business: Speak Up, Be Accountable, Take Action, Move Forward, Grow Talent and
Champion Inclusion. Our Cultural Belief of Grow Talent highlights the importance to us of developing our team members in
their careers, and we seek to not only recruit the best talent, but also retain and promote the best talent. Through another
Cultural Belief, Champion Inclusion, we seek to fully leverage the ideas and talents of all our team members in caring for our
customers and each other. We encourage our team members to Speak Up and promote their engagement through a variety of
programs and networks within our organization.

As of December 31, 2022, we employed approximately 40,000 full-time team members and approximately 27,000 part-

time team members. Our workforce consisted of 82% of our team members employed in store-level operations, 13% in
distribution and 5% in our corporate offices. As of December 31, 2022, approximately 2% of our team members were
represented by labor unions.

Additional information about our human capital resources can be found in our Corporate Sustainability and Social Report,
which is available on our website. Our Corporate Sustainability and Social Report is not, and will not be deemed to be, a part of
this Annual Report on Form 10-K or incorporated by reference into any of our other filings with the Securities and Exchange
Commission (“SEC”).

Intellectual Property

We own a number of trade names, service marks and trademarks, including “Advance Auto Parts®,” “Advance Same

Day®,” “Autopart International®,” “Carquest®,” “CARQUEST Technical Institute®,” “DieHard®,” “DriverSide®,”
“MotoLogic®,” “MotoShop®,” “speedDIAL®,” “TECH-NET Professional Auto Service®” and “Worldpac®” for use in
connection with the automotive parts business. In addition, we own and have registered a number of trademarks for our owned
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 trademarks and we actively
defend and enforce them.

Competition

We operate in both the professional and DIY markets of the automotive aftermarket industry. Our primary competitors are

(i) both national and regional chains of automotive parts stores, including AutoZone, Inc., NAPA, O’Reilly Automotive, Inc.,
The Pep Boys-Manny, Moe & Jack and Auto Plus (formerly Uni-Select USA, Inc.), (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.
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 compared with 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 brand recognition, customer service, product offerings, availability, quality, service with
speed, price and store location.

Environmental and Other Regulatory 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, and do not anticipate
to have, a material impact on our operations.

We are also subject to numerous regulations including those related to labor and employment, discrimination, anti-bribery/

anti-corruption, product quality and safety standards, data privacy and taxes. Compliance with any such laws and regulations
has not had a material adverse effect on our operations to date. For more information, see the following disclosures in “Part I.
Item 1A. Risk Factors” elsewhere in this report.

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 2022. We make available free of charge through our Investor Relations
website, located at ir.advanceautoparts.com, 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
Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after we electronically file such materials
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’s
website at www.sec.gov.

Item 1A. Risk Factors.

You should consider carefully the risks and uncertainties described below together with the other information included in
this Annual Report on Form 10-K, including without limitation our consolidated financial statements and related notes thereto
and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting
Policies”. The occurrence of any of the following risks could materially adversely affect our business, financial condition,
results of operations, cash flows and future prospects, which could in turn materially affect the price of our common stock.

Risks Related to Our Operations and Growth Strategy

If we are unable to successfully implement our business strategy, our business, financial condition, results of operations
and cash flows could be adversely affected.

We have identified several initiatives as part of our business strategy to increase sales, expand margins, drive accelerated
growth and deliver top quartile results relative total shareholder return. We are currently making and expect to continue to make
significant investments to pursue our strategic initiatives. If we are unable to implement our strategic initiatives efficiently and
effectively, our business, financial condition, results of operations and cash flows could be adversely affected. We could also be
adversely affected if we have not appropriately prioritized and balanced our initiatives or if we are unable to effectively manage
change throughout our organization. Implementing strategic initiatives could disrupt or reduce the efficiency of our operations
and may not provide the anticipated benefits, or may provide them on a delayed schedule or at a higher cost. These risks
increase when significant changes are undertaken.

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.
As we expand our market presence, it becomes more critical that we have consistent and effective execution across all of our
locations and brands. There is uncertainty about the profitability of newly opened locations, including whether newly opened
stores will harm the profitability or comparable store sales of existing locations. The newly opened and existing locations’
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 online 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. For example, during 2021 through 2022 we experienced
significant delays associated with our planned opening of new locations in California, primarily as a result of permitting
challenges, and such delays increased our costs and resulted in significant lost sales opportunities. 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 employee-related severance or other facility closure costs for stores that are closed or relocated.

Omnichannel growth in our business is complex and if we are unable to successfully maintain a relevant omnichannel
experience for our customers, our sales and results of operations could be adversely impacted.

Our business has become increasingly omnichannel as we strive to deliver a seamless shopping experience to our
customers through both online and in-store shopping experiences. Operating an e-commerce platform is a complex undertaking
and exposes us to risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability
to attract and retain customers on a cost-effective basis and our ability to operate, support, expand and develop our internet
operations, website, mobile applications and software and other related operational systems. Continuing to improve our e-
commerce platform involves substantial investment of capital and resources, increasing supply chain and distribution
capabilities, attracting, developing and retaining qualified personnel with relevant subject matter expertise and effectively
managing and improving the customer experience. Omnichannel and e-commerce retail are competitive and evolving
environments. Insufficient, untimely or inadequately prioritized or ineffectively implemented investments could significantly
impact our profitability and growth and affect our ability to attract new customers, as well as maintain our existing ones.

Enhancing the customer experience through omnichannel programs such as buy-online-pickup-in-store, new or expanded
delivery options, the ability to shop through a mobile application or other similar programs depends in part on the effectiveness
of our inventory management processes and systems, the effectiveness of our merchandising strategy and mix, our supply chain
and distribution capabilities, and the timing and effectiveness of our marketing activities, particularly our promotions. Costs
associated with implementing omnichannel initiatives may be higher than expected, and the initiatives may not result in
increased sales, including same store sales, customer traffic, customer loyalty or other anticipated results. Website downtime
and other technology disruptions in our e-commerce platform, including interruptions due to cyber-related issues or natural
disasters, as well as supply and distribution delays and other related issues may affect the successful operation of our e-
commerce platform. If we are not able to successfully operate or improve our e-commerce platform and omnichannel business,
we may not be able to provide a relevant shopping experience or improve customer traffic, sales or margins, and our reputation,
operations, financial condition, results of operations and cash flows could be materially adversely affected.

If we are unable to successfully integrate future acquisitions into our existing operations or implement joint ventures or
other strategic relationships, it could adversely affect our business, financial condition, results of operations and cash
flows.

We expect to continue to make strategic acquisitions and enter into strategic relationships as an element of our growth

strategy. Acquisitions, joint ventures and other strategic relationships involve certain risks that could cause our growth and
profitability to differ from our expectations. The success of these acquisitions and relationships depends on a number of factors,
including but not limited to:

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our ability to continue to identify and acquire suitable targets or strategic partners, or to acquire additional companies
or enter into strategic relationships, at favorable prices and/or with favorable terms;
our ability to obtain the full benefits envisioned by strategic transactions or relationships;
the risk that management’s attention may be distracted;
our ability to attract and retain key personnel;
our ability to successfully integrate the operations and systems of the acquired companies, and to achieve the strategic,
operational, financial or other anticipated synergies of the acquisition or other transaction or relationship;
the performance of our strategic partners;
significant transaction or integration costs that may not be offset by the synergies or other benefits achieved in the near
term or at all;
additional operational risks, such as those associated with doing business internationally or expanding operations into
new territories, geographies or channels, that may become applicable to us; and
loss contingencies that we may assume or become subject to, whether known or unknown, of acquired companies,
which could relate to past, present or future facts, events, circumstances or occurrences.

If we experience difficulties implementing various information systems, our ability to conduct our 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 the process of implementing and updating
various information systems. 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 products, 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 significant 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, cash flows and internal controls structure.

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 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. If our investments in our supply chain do not provide the anticipated benefits,
we could experience sub-optimal inventory levels, inventory availability 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 with quality products on payment terms that are favorable to us.

If our merchandise offerings do not meet our customers’ expectations regarding safety, innovation and quality, we could
experience lost sales, increased costs and exposure to legal and reputational risk. Our suppliers are subject to applicable product
safety laws, and we are dependent on them to ensure that the products we buy comply with all safety and quality standards. We
have also 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. 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. 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. 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.

Our reliance on suppliers, including freight carriers and other third parties in our global supply chain, subjects us to
various risks and uncertainties which could adversely affect our financial results.

We source the products we sell from a wide variety of domestic and international suppliers, and place significant reliance
upon various third parties to transport, store and distribute those products to our distribution centers, stores and customers. 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 provisions 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. If we encounter any of these issues with our suppliers, our business, financial
condition, results of operations and cash flows could be adversely impacted.

In addition, our suppliers, including those within our global supply chain, are impacted by global conditions that in turn

may impact our ability to source merchandise at competitive prices or timely supply product at levels adequate to meet
consumer demand. For example, the recent surges in consumer demand, shortages of raw materials and disruptions to the global
supply chain resulting from lack of carrier capacity, labor shortages, port congestion and/or closures, amongst other factors,
have negatively impacted costs and inventory availability and may continue to have a negative impact on future results and
profitability. As suppliers increase prices charged to us for products, including transportation and distribution, as a result of
these or other factors, it may negatively impact our results. If we experience transitions or changeover with any of our
significant vendors, or if they experience financial difficulties or otherwise are unable to deliver merchandise to us on a timely
basis, or at all, we could have product shortages in our stores that could adversely affect customers’ perceptions of us and cause
us to lose customers and sales.

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, to a significant extent, depends on the continued engagement, 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. Our ability to attract, develop and retain an
adequate number of qualified team members depends on factors such as employee morale, our reputation, competition from
other employers, availability of qualified personnel, our ability to offer competitive compensation and benefit packages and our
ability to maintain a safe working environment. For example, during 2021 and 2022, we experienced unusually low availability
of workers, which we believe was primarily attributable to COVID-19-pandemic-related factors, and in turn has created
increased competition in labor markets. Disruptions and heightened competition may increase our costs, impact our ability to
serve customers and otherwise affect our business operations. We also believe our future success will depend in part upon our
ability to attract and retain highly skilled personnel for whom the market is highly competitive, particularly for individuals with
certain types of technical skills. Failure to recruit or retain qualified employees may impair our efficiency and effectiveness and
our ability to pursue growth opportunities. Additionally, turnover in executive or other key positions can disrupt progress in
implementing business strategies, result in a loss of institutional knowledge, cause other team members to take on substantially
more responsibility which results in greater workload demands and diverting attention away from key areas of the business, or
otherwise negatively impact our growth prospects or future operating results. In February 2023, our President and Chief
Executive Officer informed our Board of his intention to retire from his position at the end of the year. Leadership transitions
can be inherently difficult to manage, and uncertainty regarding future leadership at our organization or inadequate transition of
our Chief Executive Officer may increase the risk of turnover in executive or other key positions, negatively impact our ability
to recruit and retain talent, cause disruption to our business or hinder our planning, execution and future performance.

We operate in a competitive labor market and there is a risk that market increases in compensation could have an adverse
effect on our profitability. Market or government regulated increases to employee hourly wage rates, along with our ability to
implement corresponding adjustments within our labor model and wage rates, could have a significant impact to the
profitability of our business. In addition, approximately 2% 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.

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, 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 subject to numerous lawsuits alleging injury as a result of exposure to
asbestos-containing products (see Note 13. 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, anti-bribery/anti-corruption, data privacy 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 customers, suppliers, team members and business
information and the functioning of our computer systems, website and other online 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. The cost of complying with stricter and more complex data
privacy (such as the California Consumer Privacy Act, which grants expanded rights to access and delete personal information
and opt out of certain personal information sharing), data collection and information security laws and standards could also be
significant to us. Such laws and standards may also increase our responsibility and liability in relation to personal data that we
process, and we may be required to put in place additional mechanisms ensuring compliance with privacy laws and regulations.

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 “social engineering” attacks and “phishing” 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 or resulted in a known data breach. 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. While we maintain insurance coverage that may,
subject to policy terms and conditions, cover certain aspects of cyber risks, such insurance coverage may be insufficient to
cover losses in any particular situation. 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.

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, public health issues or pandemics or

the threat of any of these incidents 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, warfare, geopolitical unrest, or uncertainty 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’ 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 due to various reasons such as power
outages, telecommunication failures, computer viruses, security breaches, malicious cyber attacks 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 significant business interruptions may make it difficult or impossible to continue operations, and any
disaster recovery or crisis management plans we may employ may not suffice in any particular situation to avoid a significant
adverse impact to our business, financial condition and our results of operations.

Risks Related to Our Industry and the Business Environment

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 we sell depends on many factors and may decrease due to any number of reasons, including:

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a decrease in the total number of vehicles on the road or in the number of annual miles driven or significant increase
in the use of ride sharing services, because fewer vehicles means less maintenance and repairs, and lower vehicle
mileage, which decreases the need for maintenance and repair;
the economy, because as consumers reduce their discretionary spending by deferring vehicle maintenance or repair,
sales may decline and as new car purchases increase, the number of cars requiring maintenance and repair may
decrease;
the weather, because 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;
additionally, overall climate changes could create greater variability in weather events, which may result in greater
volatility for our business, or lead to other significant weather conditions that could impact our business;
the average duration of vehicle manufacturer warranties and average age of vehicles driven, because newer cars
typically require fewer repairs and will be repaired by the manufacturers’ 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’ warranties and tend
to need more maintenance and repair;
an increase in internet-based retailers, 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;
technological advances, including the rate of adoption of electric vehicles, hybrid vehicles, ride sharing services,
alternative modes of transportation, autonomously driven vehicles and future legislation related thereto, and the
increase in the quality of vehicles manufactured, 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 electric and hybrid
vehicles, do not require or require less frequent oil changes; and
the refusal of vehicle manufacturers to make available diagnostic, repair and maintenance information to the
automotive aftermarket industry that our professional and DIY customers require to diagnose, repair and maintain
their vehicles, because this may force consumers to have a majority of diagnostic work, repairs and maintenance
performed by the vehicle manufacturers’ dealer networks.

We may be adversely affected by legal, regulatory or market responses regarding technological adaptation in the
automotive industry.

Policy makers in the U.S. may enact legislative or regulatory proposals that would impose mandatory requirements on
greenhouse gas emissions and encourage more rapid adoption of vehicles that minimize emissions. Such laws, if enacted, are
likely to impact our business in a number of ways. For example, significant increases in fuel economy requirements, new
federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on
vehicles and automobile fuels could adversely affect annual miles driven, purchases of used vehicles that are likely to have a
higher need for maintenance and repair, or the relevancy of the products we sell to new vehicles coming into production. We

may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric
vehicles and other technologies that minimize emissions. Additionally, 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. Our
inability to appropriately respond to such changes, adapt our business to meet evolving demands or innovate to remain
competitive could adversely impact our business, financial condition, results of operations or cash flows.

If we are unable to compete successfully against other companies in the automotive aftermarket industry, we may lose
customers and market share 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 or lower prices, which would adversely impact our financial results.
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 online. 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, as well as our integrity and reputation, we
could lose customers to our competition. The products we sell are brands of our vendors and our owned brands. If the perceived
quality or value of the brands we sell declines in the perception of our customers, our results of operations could be negatively
affected.

Competition may require us to reduce our prices below our normal selling prices or increase our promotional spending,
which could lower our revenue and profitability. Competitive disadvantages may also prevent us from introducing new product
lines, require us to discontinue current product offerings, or change some of our current operating strategies. If we do not have
the resources, expertise and consistent execution, or otherwise fail to develop successful strategies, to address these potential
competitive disadvantages, we may lose customers and market share, our revenues and profit margins may decline and we may
be less profitable or potentially unprofitable.

Our inventory and ability to meet customer expectations may be adversely impacted by factors out of our control.

For the 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 in meeting our customers’ needs for automotive products (particularly parts availability) in a timely manner
could undermine our business strategy.

Deterioration of general macroeconomic conditions, including unemployment, inflation or deflation, consumer debt
levels, and/or 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 results.

Our business depends on developing and maintaining close relationships with our suppliers and on our suppliers’ 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’ 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 products
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 certain 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 macroeconomic conditions or an increase in fuel costs or proposed or additional tariffs may have a
negative impact on our customers’ net worth, financial resources, disposable income or willingness or ability to pay for
accessories, maintenance or repairs for their vehicles, resulting in lower sales. 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.

Risks Related to Our Common Stock and Financial Condition

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’ 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’s securities, securities class action litigation has often been instituted against such a company. Such litigation could
result in substantial costs and a diversion of our attention and resources, which could have an adverse effect on our business.
For example, in February 2018, following a significant decline in the price of our common stock, a putative class action was
commenced against us. The settlement agreement received final approval by the court in June 2022 and was fully paid by our
insurance carriers (see “Note 13. Contingencies” of this Annual Report on Form 10-K).

The amount and frequency of our share repurchases and dividend payments may fluctuate.

The amount, timing and execution of our share repurchase program may fluctuate based on our priorities for the use of cash

for other purposes such as operational spending, capital spending, acquisitions or repayment of debt. Changes in operational
results, cash flows, tax laws and our share price could also impact our share repurchase program and other capital activities. For
example, in August 2022, Congress enacted the Inflation Reduction Act of 2022, which instituted, among other things, a 1%
excise tax on certain corporate share repurchases beginning on January 1, 2023. Additionally, decisions to return capital to
stockholders, including through our repurchase program or the issuance of dividends on our common stock, remain subject to
determination of our Board of Directors that any such activity is in the best interests of our stockholders and is in compliance
with all applicable laws and contractual obligations.

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 indentures governing our senior unsecured 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 revolving credit facility are linked directly to our
credit ratings and the interest rates on future debt we issue or incur likely would be affected by our credit ratings in effect at the
time such debt is issued or incurred. 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 and less favorable terms on our other operating
and financing arrangements, including additional debt we may issue or incur in the future. 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’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.

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 as of December 31, 2022:

Distribution centers

50 locations in 31 U.S. states and four Canadian provinces

7,951

4,648

Location

Square Footage (in thousands)

Leased

Owned

Principal corporate offices:

Raleigh, NC

Roanoke, VA

Stores and branches

Item 3. Legal Proceedings.

Raleigh, NC

Roanoke, VA

4,915 stores and branches in 48 U.S. states and two U.S.
territories and 171 stores and branches in nine Canadian
provinces

245

265

—

36,302

6,289

Refer to discussion in Note 13. Contingencies, of the Notes to the Consolidated Financial Statements included herein for

information relating to legal proceedings.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities.

Our common stock is listed on the New York Stock Exchange under the symbol “AAP.”

As of February 24, 2023, there were 375 holders of record of our common stock, which does not include the number of

beneficial owners whose shares were represented by security position listings.

The following table sets forth information with respect to repurchases of our common stock for the fourth quarter ended

December 31, 2022:

Period

October 9, 2022 to November 5, 2022
November 6, 2022 to December 3, 2022
December 4, 2022 to December 31, 2022
Total

Total Number
of Shares
Purchased (1)

Average
Price Paid
per Share (1)
169.71
151.79
140.90
169.54

441,926 $
5,741 $
2 $
447,669 $

Total Number of
Shares Purchased
as Part of Publicly
Announced
Programs

Maximum Dollar
Value that May Yet
Be Purchased
Under the
Programs (in
thousands) (2)

441,762 $
— $
— $

441,762

947,339
947,339
947,339

(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

$0.9 million, or an average price of $151.78 per share, during the twelve weeks ended December 31, 2022.

(2) On February 8, 2022, our Board of Directors authorized an additional $1 billion to the existing share repurchase program. This authorization is

incremental to the $1.7 billion that was previously authorized by our Board of Directors.

Stock Price Performance

The following graph shows a comparison of the cumulative total return on our common stock, the Standard & Poor’s
(“S&P”) 500 Index and the S&P’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 30, 2017, 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

$275.00

$250.00

$225.00

$200.00

$175.00

$150.00

$125.00

$100.00

$75.00
0 / 1

2 / 3

9 / 1

2 / 2

8 / 1

2 / 2

1 / 0

1 / 2

1 / 0

1 / 2

2 / 3

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
30, 2017

December
29, 2018

December
28, 2019

January 2,
2021

January 1,
2022

December
31, 2022

$
$
$

100.00 $
100.00 $
100.00 $

151.06 $
94.80 $
112.04 $

154.32 $
126.06 $
144.71 $

155.68 $
148.85 $
210.44 $

243.72 $
191.58 $
251.08 $

159.22
156.88
165.00

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with

our consolidated historical financial statements and the notes to those statements that appear elsewhere in this report. Our
discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as
our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the section
titled “Part 1. Item 1A. Risk Factors” elsewhere in this report. The discussion of our financial condition and changes in our
results of operations, liquidity and capital resources for the fiscal year ended January 1, 2022 (“2021”) compared with the
fiscal year ended January 2, 2021 (“2020”) has been omitted from this Form 10-K, but are included in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for 2021, filed with the
Securities and Exchange Commission (“SEC”) on February 15, 2022. Amounts are presented in thousands, except per share
data, unless otherwise stated.

Management Overview

Net sales increased 1.4% during the fifty-two weeks ended December 31, 2022 (“2022”) compared with 2021, driven by
improvements in strategic pricing and growth in both new store openings and sales to professional customers, partially offset by
declines in DIY customer sales and units sold. Category growth was led by batteries, fluids and chemicals and motor oil.

We generated Diluted earnings per share (“Diluted EPS”) of $8.27 during 2022 compared with $9.55 in 2021. When
adjusted for the following non-operational items, our Adjusted diluted earnings per share (“Adjusted EPS”) in 2022 was $13.04
compared with $12.02 in 2021:

Year Ended

December 31,
2022

January 1,
2022

Last-in, first-out (“LIFO”) impacts
Transformation expenses
General Parts International, Inc. (“GPI”)

amortization of acquired intangible assets

Other adjustments

$
$

3.85 $
0.49 $

0.34 $
0.09 $

1.42
0.73

0.32
—

Refer to “Reconciliation of Non-GAAP Financial Measures” for a definition and reconciliation of Adjusted EPS and other

non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with U.S.
GAAP.

A high-level summary of our financial results and other highlights from 2022 includes:

•

Net sales during 2022 were $11.2 billion, an increase of 1.4% compared with 2021, driven by improvements in
strategic pricing and growth in both new stores openings and sales to our professional customers, partially offset by
declines in DIY customer sales and units sold.
Gross profit margin for 2022 was 44.5% of Net sales, a decrease of 33 basis points compared with 2021. This decrease
was primarily due to inflationary product costs, including the impact of LIFO related expenses, and unfavorable
channel mix, primarily offset by improvements in strategic pricing and product mix.
Operating income for 2022 was $714.2 million, a decrease of $124.6 million from 2021. As a percentage of Net sales,
operating income was 6.4%, a decrease of 122 basis points compared with 2021. The increase in Selling, general and
administrative (“SG&A”) costs was primarily driven by increases in labor-related inflation and transportation and fuel
costs, partially offset by decreases in incentive compensation and COVID-19 related expenses.
Cash flow from operations was $722.2 million during 2022, a decrease of 35.1% compared with 2021, primarily due to
a decrease in Net income, as well as a decrease related to working capital primarily driven by an increase in cash used
by Accrued Expenses and Inventories, partially offset by an increase in cash provided by Receivables, net.

Refer to “Results of Operations” and “Liquidity and Capital Resources” for further details on our results.

Business and Risk 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 strategic initiatives to help build a foundation for long-term success across the
organization, which include:

•

Continued refinement of a demand-based assortment, leveraging purchase and search history from our common
catalog, versus our existing push-down supply approach.
Advancement towards optimizing our footprint by market to drive share, repurpose our in-market store and asset base
and streamline our distribution network.
Continued evolution of our marketing campaigns, which focus on our customers and how we serve them every day
with care and speed and innovate to meet their needs, inclusive of the iconic DieHard® brand.
Progress in the implementation of a more efficient end-to-end supply chain to deliver our broad assortment of
inventory.
Actively pursuing new store openings in 2023, including through lease acquisition opportunities as available and
appropriate, in existing markets and new markets.
Continued negotiations with vendors on strategic sourcing and pricing to help mitigate inflationary pressures.

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. In addition to the “Business and Risk Update” section
included within Management’s Discussion and Analysis of Financial Condition and Results of Operations, these factors
include, but are not limited to:

Inflationary pressures, including product costs, logistics and labor
Global supply chain disruptions
Fuel costs
Unemployment rates
Consumer confidence and purchasing power
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.

Results of Operations

The following table sets forth certain of our operating data expressed as a percentage of net sales for the periods indicated.

(in millions)

Net sales

Cost of sales

Gross profit

SG&A

Operating income

Interest expense
Loss on debt
extinguishment
Other (expense)
income, net
Provision for
income taxes

Net income

Year Ended

2022 vs.
2021
December 31, 2022
$ Change
$ 11,154.7 100.0 % $ 10,998.0 100.0 % $ 10,106.3 100.0 % $ 156.7
123.4
55.2
6,192.6

January 1, 2022

January 2, 2021

6,069.2

5,624.7

55.5

55.7

2021 vs.
Basis
2020
Points
$ Change
— $ 891.7
444.5

Basis
Points
—
(47)

4,962.1
4,247.9
714.2
(51.1)

44.5
38.1
6.4
(0.5)

4,928.7
4,090.0
838.7
(37.8)

44.8
37.2
7.6
(0.3)

4,481.6
3,731.7
749.9
(46.9)

44.3
36.9
7.4
(0.5)

(33)
89

33.3
157.9
(124.6) (122)
(11)
(13.3)

447.2
358.3
88.9
9.1

(7.4)

(0.1)

—

(48.0)

(0.5)

(7.4)

(7)

48.0

(7.0)

(0.1)

5.0

0.0

(4.0)

0.0

(12.0)

(11)

9.0

(146.8)
501.9

(1.3)
4.5 % $

(189.8)
616.1

(1.7)
(158.0)
5.6 % $ 493.0

(1.6)
4.9 % $ (114.3) (110) $ 123.2

43.0

(31.8)

47
26
21
12

(16)
72

Note 1: Table amounts may not foot due to rounding.
Note 2: Fiscal years 2022 and 2021 included 52 weeks. Fiscal year 2020 included 53 weeks.

Net Sales

Net sales for 2022 were $11.2 billion, an increase of $156.7 million, or 1.4%, compared with 2021, and was primarily
driven by an improvement in strategic pricing and growth in both new store openings and professional sales, partially offset by
declines in DIY customer sales and units sold. Comparable store sales increased 0.3% led primarily by the professional
business. Category growth was led by batteries, fluids and chemicals and motor oil.

We calculate comparable store sales based on the change in store or branch sales starting once a location has been open for

13 complete accounting periods (approximately one year) and by including e-commerce sales. Sales to independently owned
Carquest stores are excluded from our comparable store sales. Acquired stores are included in our comparable store sales once
the stores have completed 13 complete accounting periods following the acquisition date. We include sales from relocated
stores in comparable store sales from the original date of opening. Comparable sales is intended only as supplemental
information and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the
United States of America (“GAAP”).

Gross Profit

Gross profit in 2022 was $5.0 billion, or 44.5% of Net sales, compared with $4.9 billion, or 44.8% of Net sales, in 2021, a

decrease of 33 basis points. Gross profit as a percentage of Net sales was negatively impacted by inflationary product costs,
including an increase in LIFO related expenses, of $189.5 million and unfavorable channel mix, primarily offset by
improvements in strategic pricing and product mix.

Selling, General and Administrative Expenses

SG&A for 2022 was $4.2 billion, or 38.1% of Net sales, compared with $4.1 billion, or 37.2% of Net sales, for 2021, an

increase of 89 basis points. This increase as a percentage of Net sales was primarily driven by increases in labor-related
inflation and transportation and fuel costs partially offset by decreases in incentive compensation and COVID-19 related
expenses.

Interest Expense

Interest expense for 2022 was $51.1 million, an increase of $13.3 million compared with 2021. This increase was primarily

due to incremental borrowings on our unsecured revolving credit facility, partially offset by a 100-basis-point rate differential
between our issued versus retired senior unsecured notes in 2022. Refer to Note 6. Long-term Debt and Fair Value of Financial
Instruments of the Notes to the Consolidated Financial Statements included herein for further details.

Loss on Early Redemptions of Senior Unsecured Notes

During the fifty-two weeks ended December 31, 2022, we incurred charges related to a make-whole provision and debt

issuance costs of $7.0 million and $0.4 million related to the early redemption of our 4.50% senior unsecured notes due
December 1, 2023 ("2023 Notes"). Refer to Note 6. Long-term Debt and Fair Value of Financial Instruments of the Notes to
the Consolidated Financial Statements included herein for further details.

Provision for Income Taxes

Our Provision for income taxes for 2022 was $146.8 million compared with $189.8 million for 2021, a decrease of $43.0
million primarily due to a decrease in taxable income. Our effective tax rate was 22.6% for 2022 and 23.6% for 2021. In 2022,
the rate decreased compared with prior year primarily due to a tax benefit resulting from the expiration of statute of limitations
for certain tax years in multiple states as well as enhanced utilization of tax credits in the current year.

Reconciliation of Non-GAAP Financial Measures

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes certain financial
measures not derived in accordance with GAAP. Non-GAAP financial measures, including Adjusted net income and Adjusted
EPS, 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) LIFO impacts; (2) transformation expenses under our
strategic business plan; (3) non-cash amortization related to the acquired GPI intangible assets; and (4) other nonrecurring
adjustments, are 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 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’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.

LIFO Impacts — Beginning the first quarter of 2021, to assist in comparing our current operating results with the
operational performance of other companies in our industry, the impact of LIFO on our results of operations is a reconciling
item to arrive at non-GAAP financial measures.

Transformation Expenses — Costs incurred in connection with our business plan that focuses on specific transformative
activities that relate to the integration and streamlining of our operating structure across the enterprise, that we do not view to be
normal cash operating expenses. These expenses will include, but not be limited to the following:

• Restructuring costs - Costs primarily relating to the early termination of lease obligations, asset impairment charges,
other facility closure costs and team member severance in connection with our voluntary retirement program and
continued optimization of our organization.

• Third-party professional services - Costs primarily relating to services rendered by vendors for assisting us with the

development of various information technology and supply chain projects in connection with our enterprise integration
initiatives.

• Other significant costs - Costs primarily relating to accelerated depreciation of various legacy information technology
and supply chain systems in connection with our enterprise integration initiatives and temporary off-site workspace for
project teams who are primarily working on the development of specific transformative activities that relate to the
integration and streamlining of our operating structure across the enterprise.

GPI Amortization of Acquired Intangible Assets — As part of our acquisition of GPI, we obtained various intangible

assets, including customer relationships, non-compete contracts and favorable lease agreements, which are subject to
amortization through 2025.

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

Net income (GAAP)

Cost of sales adjustments:

LIFO impacts

Transformation expenses:

Other significant costs

SG&A adjustments:

Year Ended

December 31,
2022

January 1,
2022

501,872 $

616,108

311,766

122,303

2,572

2,608

GPI amortization of acquired intangible assets

27,407

27,587

Transformation expenses:

Restructuring costs

Third-party professional services

Other significant costs
Other income adjustment (1)
Provision for income taxes on adjustments (2)
Adjusted net income (Non-GAAP)

Diluted earnings per share (GAAP)

Adjustments, net of tax

Adjusted diluted earnings per share (Non-GAAP)

4,657

27,074

5,351

7,408

27,307

24,099

8,796

—

(96,559)

791,548 $

(53,175)

775,633

8.27 $

4.77

13.04 $

9.55

2.47

12.02

(1) During 2022, we incurred charges relating to a make-whole provision and debt issuance cost of $7.0 million and

$0.4 million resulting from the early redemption of our 2023 Notes.

(2) The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective

non-GAAP adjustments.

Liquidity and Capital Resources

Overview

Our primary cash requirements necessary to maintain our current operations include payroll and benefits, inventory
purchases, contractual obligations, capital expenditures, payment of income taxes, funding of initiatives under our strategic
business plan and other operational priorities, including payment of interest on our long-term debt. Historically, we have also
used available funds to repay borrowings under our credit facility, to periodically repurchase shares of our common stock under
our share repurchase program, to pay our quarterly cash dividend and for acquisitions; however, depending on the priorities of
our business and in consideration of ongoing uncertainties related to general global macroeconomic conditions, our future uses
of cash may differ, including with respect to the weight we place on the preservation of cash and liquidity, degree of investment
in our business and other capital allocation factors. Given macroeconomic uncertainties and our planned focus on improved
working capital, we expect to temporarily pause share repurchases in 2023.

Typically, we have funded our cash requirements primarily through cash generated from operations, supplemented by
borrowings under our credit facilities and notes offerings as needed. We believe funds generated from our expected results of
operations, available cash and cash equivalents, and available borrowings under our credit facility will be sufficient to fund our
obligations for the next year. We also believe such funds, cash and available borrowings, together with our ability to generate
cash through credit facilities and notes offerings as needed, will be sufficient to fund our obligations long-term. Cash
requirements for obligations next year and beyond are discussed in the “Contractual and Off Balance Sheet Obligations”
section below.

On March 4, 2022, we issued our 3.50% senior unsecured notes due 2032 (the “2032 Notes”). Refer to Note 6. Long-term

Debt and Fair Value of Financial Instruments of the Notes to the Condensed Consolidated Financial Statements included
herein for further details. Proceeds from our 2032 Notes were utilized to fund the early redemption of our 2023 Notes and
supplement operational and capital expenditures.

Share Repurchases

In August of 2019, our Board of Directors approved a share repurchase program. Under the program, we may periodically
repurchase shares of our common stock at market prices through open market purchases effected through a broker dealer and in
privately negotiated transactions. The Board of Directors may increase or otherwise modify, renew, suspend or terminate the
share repurchase program without prior notice. On February 8, 2022, our Board of Directors authorized an additional $1.0
billion toward our share repurchase program. Previously, in April 2021 and November 2019, our Board of Directors authorized
$1.0 billion and $700.0 million for our share repurchase program.

During 2022, we repurchased 3.0 million shares of our common stock at an aggregate cost of $598.2 million, or an average

price of $201.88 per share, in connection with our share repurchase program. During 2021, we repurchased 4.6 million shares
of our common stock at an aggregate cost of $886.7 million, or an average price of $192.92 per share, under our share
repurchase program.

We had $947.3 million remaining under our share repurchase program as of December 31, 2022. Refer to “Item 5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” for further details on
our share repurchase program.

Capital Expenditures

Our primary capital requirements have been the funding of our investments in information technology and supply chain, e-

commerce and maintenance of existing stores and branches. We lease approximately 84% of our stores and branches.

Our capital expenditures were $424.1 million in 2022, an increase of $134.4 million from 2021, and were primarily related

to investments in new store openings, inclusive of leasehold improvements, as well as investments in information technology
and supply chain.

Our future capital requirements will depend in large part on the timing or number of the investments we make in

information technology and supply chain network initiatives and existing stores and new store development (leased and owned
locations) within a given year. In 2023, we anticipate that our capital expenditures related to such investments will range from
$300 million to $350 million but may vary with business conditions.

Analysis of Cash Flows

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

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 (decrease) increase in cash and cash
equivalents

December 31,
2022

722,222 $
(424,448)
(620,704)
(9,216)

Year Ended
January 1,
2022
1,112,262 $
(287,314)
(1,064,112)

5,600

January 2,
2021

969,688
(266,897)
(285,997)
(467)

(332,146) $

(233,564) $

416,327

Operating Activities

In 2022, Net cash provided by operating activities decreased $390.0 million to $722.2 million. The net decrease in cash
flows provided by operating activities compared with the prior year was primarily driven by lower Net income, higher incentive
compensation expense payout and a decrease in overall working capital. The decrease in working capital was primarily driven
by an increase in cash used by Accrued expenses and Inventories, partially offset by an increase in cash provided by
Receivables, net. Refer to “Results of Operations” for further details on our results.

Investing Activities

In 2022, Net cash used in investing activities increased $137.1 million to $424.4 million compared with 2021. Cash used in
investing activities for 2022 consisted primarily of purchases of property and equipment attributable to investments in new store
openings, including leasehold improvements, as well as information technology and supply chain.

Financing Activities

In 2022, Net cash used in financing activities decreased by $443.4 million to $620.7 million compared with 2021. The net

decrease in cash used in financing activities was attributable to net proceeds of $348.6 million received from the issuance of the
2032 Notes, a decrease in share repurchases of our common stock of $287.7 million and proceeds from net borrowings under
our unsecured revolving credit facility of $185.0 million during the fifty-two weeks ended December 31, 2022. The decrease
was partially offset by a net payment of $201.1 million for the early redemption of our 2023 Notes and an increase in dividends
paid of $175.3 million during 2022 compared with 2021.

Our Board of Directors has declared a quarterly cash dividend since 2006. Any payments of dividends in the future will be
at the discretion of our Board of Directors and will depend upon our results of operations, cash flows, capital requirements and
other factors deemed relevant by our Board of Directors.

Long-Term Debt

On March 4, 2022, we issued $350.0 million aggregate principal amount of our 2032 Notes. The 2032 Notes were issued at

99.61% of the principal amount of $350.0 million, are due March 15, 2032 and bear interest at 3.50% per year payable semi-
annually in arrears on March 15 and September 15 of each year.

On April 3, 2022, we redeemed the remaining $193.2 million principal amount of our outstanding 2023 Notes. In
connection with this early redemption, we incurred charges related to the make-whole provision and debt issuance costs of
$7.0 million and $0.4 million.

For additional information on transactions entered into relating to long-term debt during the fifty-two weeks ended

December 31, 2022, refer to Note 6. Long-term Debt and Fair Value of Financial Instruments of the Notes to the Consolidated
Financial Statements included herein.

As of February 28, 2023, we had a credit rating from S&P of BBB- and from Moody’s Investor Service of Baa2. The
current outlooks by S&P and Moody’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 be 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.

With respect to all senior unsecured notes for which Advance Auto Parts, Inc. (“Issuer”) is an issuer or provides a full and

unconditional guarantee, Advance Stores, a wholly-owned subsidiary of the Issuer, serves as the guarantor (“Guarantor
Subsidiary”). The subsidiary guarantees related to our senior unsecured notes are full and unconditional and joint and several,
and there are no restrictions on the ability of the Issuer to obtain funds from its Guarantor Subsidiary. Our captive insurance
subsidiary, an insignificant wholly-owned subsidiary of the Issuer, does not serve as guarantor of our senior unsecured notes.

Contractual and Off Balance Sheet Obligations

We enter into operating leases for certain store locations, distribution centers, office spaces, 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. As of December 31, 2022, our operating lease obligations were $2.69 billion. As of December 31, 2022, our long-
term debt, consisting of senior unsecured notes with varying maturities through 2032, was $1.20 billion and our credit revolver
outstanding balance was $185.0 million. Future interest payable related to long-term debt was $293.3 million as of
December 31, 2022. As part of our normal operations, we enter into purchase commitments primarily for the purchase of 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. As of December 31,
2022, our purchase commitments were $121.0 million.

On February 27, 2023, we entered into Amendment No. 1 (the “Amendment”) to the Credit Agreement, dated November 9,

2021, with Advance Auto Parts, Inc., as Borrower, Advance Stores Company, Incorporated, as a Guarantor, the lenders party
thereto, and Bank of America, N.A., as administrative agent (the “2021 Credit Agreement”). The Amendment extends the
maturity date of the 2021 Credit Agreement by one year from November 9, 2026, to November 9, 2027. The Amendment also
replaces an adjusted LIBOR benchmark rate with a Term Secured Overnight Financing Rate (“Term SOFR”) benchmark rate,
as adjusted by an increase of ten basis points, plus the applicable margin under 2021 Credit Agreement. The Amendment made
no other material changes to the terms of the 2021 Credit Agreement. The foregoing description of the Amendment does not
purport to be complete and is qualified in its entirety by the full text of the Amendment, which is attached hereto as Exhibit
10.29 and is incorporated by reference herein. Subsequent to December 31, 2022 and through the date of this filing, we had
additional net borrowings on our revolving credit facility of $469 million.

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.

Vendor Incentives

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. Advertising allowances provided as a reimbursement of specific, incremental
and identifiable costs incurred to promote a vendor’s products are included as an offset to SG&A when the cost is incurred.
Volume rebates and vendor promotional allowances that do not meet the requirements for offsetting in SG&A and that are
earned based on inventory purchases are initially recorded as a reduction to inventory. These deferred amounts are recorded as a
reduction to Cost of sales as the inventory is sold.

Vendor promotional allowances provided as a reimbursement of specific, incremental and identifiable costs incurred to
promote a vendor’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. Periodic assessments of the accruals are performed to determine the
appropriateness of the estimate and are adjusted accordingly.

Amounts received or receivable from vendors that are not yet earned are reflected initially as a reduction to inventory,
which subsequently is recorded to Cost of sales. Our 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.

Self-Insurance Reserves

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’
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 Other long-term liabilities.

While we do not expect the amounts ultimately paid to differ significantly from our estimates, our self-insurance reserves

and corresponding Cost of sales and 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 31, 2022 would result in a change
in expense of approximately $14.5 million for 2022.

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 “Recently Issued Accounting Pronouncements” in Note
2. Significant Accounting Policies, of 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 Term SOFR, plus a margin, or an alternate base rate, plus a margin. As of December 31, 2022, we had $185.0
million borrowings outstanding under our revolving credit facility. As of January 1, 2022, 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 2022 and 2021, foreign currency transactions did not materially impact Net income.

Item 8. Financial Statements and Supplementary Data.

This information is included in “Item 15. Exhibits, Financial Statement Schedules” of this annual report and is incorporated

herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

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 “Exchange 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’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 “reasonable 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.

Evaluation of Disclosure Controls and Procedures

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 31, 2022. 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’s Report on Internal Control over Financial Reporting

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 “reasonable 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 “reasonable 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 31, 2022, management, including our principal executive officer and principal financial officer, assessed
the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control - Integrated
Framework (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 31, 2022 is
effective.

Changes in Internal Control Over Financial Reporting

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 31, 2022 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of Registered Public Accounting Firm

Our internal control over financial reporting as of December 31, 2022 has been audited by Deloitte & Touche LLP, an

independent registered public accounting firm, who also audited our consolidated financial statements for the year ended
December 31, 2022, 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 31, 2022.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Item 10. Directors, Executive Officers and Corporate Governance.

PART III

For a discussion of our directors, executive officers and corporate governance, see the information set forth in the sections
and subsections entitled “Proposal No. 1 - Election of Directors,” “Corporate Governance,” “Additional Information Regarding
Executive Compensation - Information Concerning our Executive Officers,” “Audit Committee Report,” and “Additional
Information Regarding Executive Compensation - Delinquent Section 16(a) Reports,” “Code of Ethics and Business Conduct”
and “Code of Ethics for Finance Professionals” in our proxy statement for the 2023 annual meeting of stockholders to be filed
with the SEC within 120 days after the close of our fiscal year ended December 31, 2022 (the “2023 Proxy Statement”), which
is incorporated herein by reference.

Item 11. Executive Compensation.

See the information set forth in the sections entitled “Compensation Committee Report,” “Compensation Discussion and

Analysis,” “Compensation Program Risk Assessment,” “Additional Information Regarding Executive Compensation” and
“Director Compensation” in the 2023 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 subsections entitled “Equity Compensation Plan Information” and “Security Ownership

of Certain Beneficial Owners and Management” in the 2023 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 subsections entitled “Corporate Governance - Related Party Transactions” and “Board

Independence and Structure” in the 2023 Proxy Statement, which is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

See the information set forth in the subsection entitled “2022 and 2021 Audit Fees” in the 2023 Proxy Statement, which is

incorporated herein by reference.

Item 15. Exhibits, Financial Statement Schedules.

PART IV

(1) Financial Statements
Audited Consolidated Financial Statements of Advance Auto Parts, Inc. and Subsidiaries for the
years ended December 31, 2022, January 1, 2022 and January 2, 2021:

Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34)

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

(2) Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts

(3) Exhibits

Exhibit Index

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 31, 2022 and January 1, 2022, 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 31, 2022, 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 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2022, 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 31, 2022, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 28, 2023, 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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.

Vendor Incentives — Refer to Note 2 to the Consolidated Financial Statements

Critical Audit Matter Description

The Company receives incentives in the form of reductions in amounts owed to and/or payments due from vendors related to
volume rebates and other promotions. Volume rebates and vendor promotional allowances are earned based on inventory
purchases and initially recorded as a reduction to inventory, except for allowances provided as reimbursement of specific,
incremental and identifiable costs incurred to promote a vendor’s products that are offset in selling, general and administrative
expenses. The deferred amounts are recorded as a reduction in cost of sales as the inventory is sold. Total deferred vendor
incentives included as a reduction of inventories were $77.5 million as of December 31, 2022.

The Company purchases inventory from a significant number of vendors, with no single vendor accounting for more than 10%
of purchases. While many of these incentives are under long-term agreements in excess of one year, others are negotiated on
an annual basis or shorter. Accordingly, auditing vendor incentives was challenging due to the extent of audit effort required to
evaluate whether the vendor incentives were recorded in accordance with the terms of the vendor agreements.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to whether the vendor incentives were recorded in accordance with the terms of the vendor
agreements included the following, among others:

• We tested the effectiveness of controls over the process that ensures that all vendor agreements are communicated to

accounting.

• We tested the effectiveness of controls over the recording of vendor incentives as a reduction in inventories, and

subsequently as a reduction in cost of sales as the related inventory was sold.

• We selected a sample of vendor incentives from the income recognized as a reduction to cost of sales during the year
and from incentive income that was deferred at year-end, and recalculated, using the terms of the vendor agreement,
both the amount recorded as deferred vendor incentives as a reduction in inventories and the amount recognized in
earnings as a reduction in cost of sales.

• We selected a sample of vendors from the Company’s inventory purchases made during the year and confirmed

directly with the vendor that the agreement obtained from the Company and used in the determination of recording
vendor incentives as a reduction in cost of sales was the most recent for the applicable period between the parties.

• We tested the amount of the income by developing an expectation based on the historical amounts recorded as a

percentage of total cost of sales and compared our expectation to the amount recorded.

/s/Deloitte & Touche LLP

Charlotte, North Carolina
February 28, 2023

We have served as the Company’s auditor since 2002.

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 “Company”) as
of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (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 31, 2022, based on criteria established
in Internal Control — Integrated Framework (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 31,
2022, of the Company and our report dated February 28, 2023, 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's
Report on Internal Control over Financial Reporting. 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’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’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’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.

/s/Deloitte & Touche LLP

Charlotte, North Carolina
February 28, 2023

Advance Auto Parts, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share data)

Assets
Current assets:

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

Total current assets

Property and equipment, net of accumulated depreciation of $2,590,382 and $2,403,567

Operating lease right-of-use assets
Goodwill
Other intangible assets, net
Other assets

Total assets

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses
Current portion of long-term debt
Other current liabilities

Total current liabilities

Long-term debt
Non-current operating lease liabilities
Deferred income taxes
Other long-term liabilities
Total liabilities

Commitments and contingencies

Stockholders’ 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;
76,989 shares issued and 59,264 outstanding at December 31, 2022
76,663 shares issued and 62,009 outstanding at January 1, 2022

Additional paid-in capital
Treasury stock, at cost, 17,724 and 14,654 shares
Accumulated other comprehensive loss
Retained earnings

Total stockholders’ equity
Total liabilities and stockholders’ equity

December 31,
2022

January 1,
2022

269,282 $
698,613
4,915,262
163,695
6,046,852
1,690,139

601,428
782,785
4,659,018
232,245
6,275,476
1,528,311

2,607,690
990,471
620,901
62,429

2,671,810
993,744
651,217
73,651
$ 12,018,482 $ 12,194,209

4,123,462 $
634,447
185,000
427,480
5,370,389
1,188,283
2,278,318
415,997
87,214
9,340,201

3,922,007
777,051
—
481,249
5,180,307
1,034,320
2,337,651
410,606
103,034
9,065,918

—

8
897,560
(2,918,768)
(45,143)

8
845,407
(2,300,288)
(22,627)
4,605,791
3,128,291
$ 12,018,482 $ 12,194,209

4,744,624
2,678,281

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

Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share data)

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

Operating income

Other, net:

Interest expense

Loss on early redemptions of senior unsecured notes

Other (expense) 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 31,
2022

Year Ended
January 1,
2022

January 2,
2021

$ 11,154,722 $ 10,997,989 $ 10,106,321

6,192,622

4,962,100

4,247,949

714,151

6,069,241

4,928,748

4,090,031

838,717

5,624,707

4,481,614

3,731,707

749,907

(51,060)

(37,791)

(7,408)

(6,996)

—

4,999

(65,464)

(32,792)

648,687

805,925

(46,886)

(48,022)

(3,984)

(98,892)

651,015

(146,815)

(189,817)

(157,994)

501,872 $

616,108 $

493,021

8.32 $

9.62 $

60,351

64,028

8.27 $

9.55 $

60,717

64,509

7.17

68,748

7.14

69,003

Fiscal years 2022 and 2021 included 52 weeks. Fiscal year 2020 included 53 weeks.

Consolidated Statements of Comprehensive Income
(in thousands)

Net income

Other comprehensive income:

December 31,
2022

Year Ended
January 1,
2022

January 2,
2021

501,872 $

616,108 $

493,021

Changes in net unrecognized other postretirement benefit costs,

net of tax of $66, $93 and $54
Currency translation adjustments
Total other comprehensive income

Comprehensive income

(186)
(22,330)
(22,516)
479,356 $

(264)
4,396
4,132
620,240 $

(152)
7,962
7,810
500,831

Fiscal years 2022 and 2021 included 52 weeks. Fiscal year 2020 included 53 weeks.

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

Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(in thousands, except per share data)

Common Stock

Amount

Additional
Paid-in Capital

Treasury
Stock, at cost

Accumulated
Other
Comprehensive
Loss

Retained
Earnings

Total
Stockholders’
Equity

735,183 $
—

(924,389) $
—

(34,569) $
—

3,772,848 $
493,021

Balance, December 28, 2019
Net income

Total other comprehensive income

Restricted stock units and deferred stock units

vested

Share-based compensation

Stock issued under employee stock purchase

plan

Repurchases of common stock
Cash dividends declared ($1.00 per common

share)

Other
Balance, January 2, 2021

Net income
Total other comprehensive income

Restricted stock units and deferred stock units

vested

Share-based compensation

Stock issued under employee stock purchase

plan

69,232 $
—

—

234
—

(3,125)

—

—
66,361

—
—

331

—

Repurchases of common stock

(4,710)

Cash dividends declared ($3.25 per common

share)

Other

Balance, January 1, 2022

Net income

Total other comprehensive loss

Issuance of shares upon the exercise of stock

options

Restricted stock units and deferred stock units

vested

Share-based compensation

Stock issued under employee stock purchase

plan

—

62,009

—

297

—

Repurchases of common stock

(3,070)

Cash dividends declared ($6.00 per common

share)

Other

—

8 $

—

—
—

—

—
8

—
—

—

—
45,271

3,270

—

(15)
783,709

—
—

—

63,067

3,074

—

(4,443)

845,407

—

535

—

50,978

4,140

—

(3,500)

—

—
—

—

(469,691)

—

—
(1,394,080)

—
—

—

(906,208)

—

7,810

—
—

—

—
(26,759)

—
4,132

—

(2,300,288)

(22,627)

—

(618,480)

—

(22,516)

—

3,549,081
493,021

7,810

—
45,271

3,270

(469,691)

(69,235)

(15)
3,559,512

616,108
4,132

—

63,067

3,074

(906,208)

(206,951)

(4,443)

3,128,291

501,872

(22,516)

535

—

50,978

4,140

(618,480)

—

—
—

—

(69,235)

—
4,196,634

616,108
—

—

(206,951)

—

4,605,791

501,872

—

(363,039)

—

(3,500)

Balance, December 31, 2022

59,264 $

8 $

897,560 $

(2,918,768) $

(45,143) $

4,744,624 $

2,678,281

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

Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)

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
Loss on early redemption of senior unsecured notes
Provision for deferred income taxes
Other, net
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
Purchase of intangible asset
Proceeds from sales of property and equipment

Net cash used in investing activities

Cash flows from financing activities:
Payments on senior unsecured notes
Borrowings under credit facilities
Payments on credit facilities
Proceeds from issuance of senior unsecured notes, net
Dividends paid
Repurchases 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

Supplemental cash flow information:

Interest paid
Income tax payments
Non-cash transactions:

Accrued purchases of property and equipment

December 31,
2022

Year Ended
January 1,
2022

January 2,
2021

501,872 $

616,108 $

493,021

283,800
50,978
3,581
7,408
6,338
2,587

81,254
(272,253)
212,568
(165,643)
9,732
722,222

(424,061)
(1,900)
1,513
(424,448)

259,933
63,067
8,949
—
68,202
(7,985)

(32,652)
(120,272)
281,064
109,983
(134,135)
1,112,262

(289,639)

—
2,325
(287,314)

(201,081)
2,035,000
(1,850,000)
348,618
(336,230)
(618,480)
1,469
(620,704)
(9,216)
(332,146)
601,428
269,282 $

—
—
—
—

(160,925)
(906,208)
3,021

(1,064,112)

5,600
(233,564)
834,992
601,428 $

250,081
45,271
4,727
48,022
8,136
1,467

(59,014)
(101,449)
216,488
78,507
(15,569)
969,688

(267,576)
(230)
909
(266,897)

(602,568)
500,000
(500,000)
847,092
(56,347)
(469,691)
(4,483)
(285,997)
(467)
416,327
418,665
834,992

46,159 $
94,605 $

36,372 $
177,317 $

34,011
146,073

8,927 $

14,369 $

4,963

$
$

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

Advance Auto Parts, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Amounts presented in thousands, except per share data, unless otherwise stated)

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 (“professional”) and “do-it-yourself” (“DIY”) customers. The accompanying consolidated financial
statements have been prepared by us and include the accounts of Advance Auto Parts, Inc., its wholly-owned subsidiaries,
Advance Stores Company, Incorporated (“Advance Stores”) and Neuse River Insurance Company, Inc., and their subsidiaries
(collectively referred to as “Advance,” “we,” “us” or “our”).

As of December 31, 2022, we operated a total of 4,770 stores and 316 branches primarily within the United States, with
additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of December 31, 2022, we served 1,311
independently owned Carquest branded stores across the same geographic locations served by our stores and branches in
addition to Mexico and various Caribbean islands. Our stores operate primarily under the trade names “Advance Auto Parts”
and “Carquest,” and our branches operate under the “Worldpac” trade names.

Accounting Period

Our fiscal year ends on the Saturday closest to December 31st. All references herein for the years “2022,” “2021” and
“2020” represent the fiscal years ended December 31, 2022 and January 1, 2022, which consisted of fifty-two weeks, and fiscal
year ended January 2, 2021, which consisted of fifty-three weeks.

Basis of Presentation

The consolidated financial statements include the accounts of Advance prepared in accordance with accounting principles

generally accepted in the United States of America (“GAAP”). 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 highly-liquid instruments with original maturities of three months
or less. Additionally, credit card and debit card receivables from banks, which generally settle in less than four business days,
are included in cash equivalents.

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 (“LIFO”) 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 2022 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 adjust the carrying value as necessary.

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 or more frequent basis. Advertising allowances provided as a reimbursement of
specific, incremental and identifiable costs incurred to promote a vendor’s products are included as an offset to Selling, general
and administrative expenses (“SG&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 recorded as a reduction of Inventories were $77.5 million and $82.4 million as of
December 31, 2022 and January 1, 2022.

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 Other Indefinite-Lived Intangible Assets

We perform our evaluation for the impairment of goodwill and other 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. Our evaluation of goodwill and other indefinite-lived
intangibles may be a Step-0 analysis, which consists of a qualitative assessment, or a Step-1 analysis, which includes a
quantitative assessment. In a Step-0 analysis, 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 a quantitative goodwill impairment test. In the quantitative goodwill impairment test, we compare the carrying value of
a reporting unit to its fair value. In performing a Step-1 analysis, we have historically used an income approach which requires
many assumptions including forecast, discount rate, long-term growth rate, among other items. We have also utilized the
market approach which derives metrics from comparable publicly-traded companies. We have generally engaged a third-party
valuation firm to assist in the fair value assessment of goodwill. If the fair value of the reporting unit is lower than its carrying
amount, goodwill is written down for the amount by which the carrying amount exceeds the reporting unit's fair value.

Our other indefinite-lived intangible assets are tested for impairment at the asset group level. Other indefinite-lived
intangible assets 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 have four operating segments, defined as “Advance Auto Parts/Carquest U.S.,” “Carquest Canada,” “Worldpac” and

“Independents.” As each operating segment represents a reporting unit, goodwill is assigned to each reporting unit.

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’ compensation and health care claims of our team

members, while maintaining stop-loss coverage with third-party insurers to limit our 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 self-insurance reserves in Accrued expenses and Other long-term liabilities in the
accompanying Consolidated Balance Sheets.

Leases

We lease certain store locations, distribution centers, office spaces, equipment and vehicles. We recognize lease expense on

a straight-line basis over the initial term of the lease unless external economic factors exist such that renewals are reasonably
certain. In those instances, the renewal period would be included in the lease term to determine the period in which to recognize
the lease expense. Most leases require us to pay non-lease components, such as taxes, maintenance, insurance and other certain
costs applicable to the leased asset. For leases related to our store locations, distribution centers, office spaces and vehicles, we
account for lease and non-lease components as a single amount.

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 valuation inputs.

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

Accounting Standards Codification 606, Revenue From Contracts With Customers (Topic 606) (“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’s transaction price to each of these performance
obligations separately using explicitly stated amounts or our best estimate using historical data.

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 one 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. 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.

Some of our products include a core component, which represents a recyclable piece of the auto part. If a customer

purchases an auto part that includes a core component, the customer is charged for the core unless a used core is returned at the
time of sale. Customers that return a core subsequent to the sale date will be refunded.

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 31,
2022

Year Ended
January 1,
2022

January 2,
2021

66 %
20
13
1
100 %

67 %
20
12
1
100 %

66 %
21
12
1
100 %

Receivables, net, consists primarily of receivables from professional customers and is stated at net realizable value. We
grant credit to certain professional customers who meet our pre-established credit requirements. We regularly review accounts
receivable balances and maintain allowances for credit losses estimated 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 inventory-related
reserves 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 benefits costs; and transportation expenses associated with moving merchandise inventories from stores and
branches to customer locations.

Preopening Expenses

Preopening expenses, which consist primarily of payroll and occupancy costs related to the opening of new stores, are

expensed as incurred.

Advertising Costs

We expense advertising costs as incurred. Advertising expense, net of qualifying vendor promotional funds, was $164.0

million, $178.0 million and $132.3 million in 2022, 2021 and 2020.

Foreign Currency Translation

The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates. 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. Foreign currency transactions, which are
included in Other (expense) income, net, was a loss of $4.4 million in 2022, income of $1.7 million in 2021 and a loss of $6.9
million in 2020.

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 in an 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 awards (collectively “share-based awards”) if the conversion of these
awards are dilutive. 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 (“CODM”) 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 four operating segments, for the purpose of allocating resources and evaluating
financial performance.

We have one reportable segment as the four operating segments are aggregated primarily due 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 offered, customer base and the methods used to distribute products and provide services to its
customers.

Recently Issued Accounting Pronouncements - Not Yet Adopted

Reference Rate Reform

In March 2021, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic

848 (“ASU 2022-06”), which defers when companies will be required to find an alternative rate to LIBOR to December 31,
2024. ASU 2022-06 applies to all entities subject to meeting certain criteria that have contracts, hedging relationships or other
transactions that include the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued
because of reference rate reform. We have modified current agreements to reference an alternative rate other than LIBOR, and
do not believe it will have a material impact on our consolidated financial statements.

Supplier Finance Programs

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50):
Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”), which requires a company to disclose sufficient
qualitative and quantitative information about any supplier finance program in which it participates as a buyer. In each annual
reporting period, the company should disclose the key terms of the program, including a rollforward of those obligations
outstanding at the beginning of the period. ASU 2022-04 is effective for fiscal years beginning after December 15, 2022,
including interim periods within those fiscal years, except for the requirement on rollforward information, which is effective for
fiscal years beginning after December 15, 2023. We are currently evaluating the impact of adopting ASU 2022-04 on our
consolidated financial statements and related disclosures, and do not believe it will have a material impact on our consolidated
financial statements.

Recently Issued Accounting Pronouncements - Adopted

Credit Losses

During the first quarter of 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which required us to measure all expected credit
losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable
supportable forecasts. This replaced the existing incurred loss model and is applicable to the measurement of credit losses on
financial assets, including trade receivables. The adoption of ASU 2016-13 did not have a material impact on our consolidated
financial statements.

Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes. ASU 2019-12 was effective for fiscal years, and
interim periods within those years, beginning after December 15, 2020. The adoption of this new standard did not have a
material impact on our consolidated financial condition, results of operations or cash flows."

Inventories:

We used the LIFO method of accounting for approximately 92.2% of Inventories at December 31, 2022 and 89.8% of
Inventories at January 1, 2022. As a result of changes in the LIFO reserve, we recorded an increase to Cost of sales of $311.8
million and $122.3 million in 2022 and 2021 and a decrease to Cost of sales of $13.8 million in 2020.

Purchasing and warehousing costs included in Inventories as of December 31, 2022 and January 1, 2022 were $637.1

million and $515.3 million.

Inventory balances were as follows:

Inventories at first-in, first-out (“FIFO”)
Adjustments to state inventories at LIFO
Inventories at LIFO

4. Goodwill and Other Intangible Assets, Net:

Goodwill

December 31,
2022
5,193,911 $
(278,649)
4,915,262 $

January 1,
2022
4,625,900
33,118
4,659,018

At December 31, 2022 and January 1, 2022, the carrying amount of Goodwill in the accompanying Consolidated Balance

Sheets was $990.5 million and $993.7 million. The change in Goodwill during 2022 and 2021 was $3.3 million and $0.2
million, and related to foreign currency translation.

Other Intangible Assets, Net

Amortization expense was $31.0 million, $31.1 million and $31.6 million for 2022, 2021 and 2020. A summary of the
composition of the gross carrying amounts and accumulated amortization of acquired other intangible assets are presented in the
following table:

December 31, 2022

January 1, 2022

Gross
Carrying
Amount

Accumulated
Amortization

Net

Gross
Carrying
Amount

Accumulated
Amortization

Net

$ 349,428 $

(267,806) $ 81,622 $ 351,136 $

(239,302) $ 111,834

40,157

(38,051)

2,106

38,257

(37,844)

413

389,585

(305,857)

83,728

389,393

(277,146) 112,247

Amortized intangible assets:

Customer relationships

Non-compete and other

Indefinite-lived intangible assets:

Brands, trademark and trade names
Total intangible assets

537,173
$ 926,758 $

—

537,173

538,970

(305,857) $ 620,901 $ 928,363 $

—

538,970
(277,146) $ 651,217

Future Amortization Expense

The expected amortization expense for the next five years and thereafter for acquired intangible assets recorded as of

December 31, 2022 was as follows:

Year

Amount

2023 $
2024
2025
2026
2027

Thereafter

28,357
28,097
26,602
380
292
—
83,728

5. Receivables, net:

Receivables, net, consisted of the following:

Trade

Vendor

Other

Total receivables

Less: allowance for credit losses

Receivables, net

December 31,
2022

January 1,
2022

576,548 $

126,640

10,638

713,826

506,725

201,933

84,289

792,947

(15,213)

(10,162)

698,613 $

782,785

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

Long-term debt consisted of the following:

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

costs of $453 at January 1, 2022) due December 1, 2023

1.75% Senior Unsecured Notes (net of unamortized discount and debt issuance
costs of $3,053 and $3,618 at December 31, 2022 and January 1, 2022) due
October 1, 2027

3.90% Senior Unsecured Notes (net of unamortized discount and debt issuance
costs of $4,438 and $5,022 at December 31, 2022 and January 1, 2022) due
April 15, 2030

3.50% Senior Unsecured Notes (net of unamortized discount and debt issuance

costs of $4,226 at December 31, 2022 ) due March 15, 2032

Revolver credit facility (interest rate of 7.5% as of December 31, 2022)

Less: Current portion of long-term debt

Long-term debt, excluding the current portion

Fair value of long-term debt

December 31,
2022

January 1,
2022

— $

193,220

346,947

346,382

495,562

494,718

345,774
185,000

—
—

1,373,283

1,034,320

(185,000)

—

1,188,283 $

1,034,320

1,021,396 $

1,092,000

Fair Value of Financial Assets and Liabilities

The fair value of our senior unsecured notes was determined using Level 2 inputs based on quoted market prices. The

carrying amounts of our Cash and cash equivalents, Receivables, net, Accounts payable and Accrued expenses approximate
their fair values due to the relatively short-term nature of these instruments.

Bank Debt

On November 9, 2021, we entered into a credit agreement that provides a $1.2 billion unsecured revolving credit facility

(the “2021 Credit Agreement”) with Advance Auto Parts, Inc., as Borrower, Advance Stores, as a Guarantor, the lenders party
thereto, and Bank of America, N.A., as the Administrative Agent, and replaced the previous credit agreement. The revolver
under the 2021 Credit Agreement replaced the revolver under the previous credit agreement. The revolver under the 2021
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 $500.0 million during the term of the 2021 Credit Agreement.

As of December 31, 2022, we had $185.0 million outstanding borrowings under the 2021 Credit Agreement and borrowing

availability was $1.0 billion. Under the 2021 Credit Agreement, we had no letters of credit outstanding as of December 31,
2022. As of January 1, 2022, we had no outstanding borrowings under the 2021 Credit Agreement and borrowing availability
was $1.2 billion. Under the 2021 Credit Agreement, we had no letters of credit outstanding as of January 1, 2022.

Interest on any borrowings on the 2021 Credit Agreement is 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 1.00% for the adjusted LIBOR and 0.00% for alternate
base rate borrowings. A facility fee of 0.125% per annum is charged on the total revolving facility commitment, payable
quarterly in arrears. Under the terms of the 2021 Credit Agreement, the interest rate spread and facility fee are based on our
credit rating. The interest rate spread ranges from 0.795% to 1.30% for adjusted LIBOR borrowings and 0.00% to 0.30% for
alternate base rate borrowings. The facility fee ranges from 0.08% to 0.20%.

On February 27, 2023, we entered into Amendment No. 1 (the “Amendment”) to the 2021 Credit Agreement. The
Amendment extends the maturity date of the 2021 Credit Agreement by one year from November 9, 2026, to November 9,
2027. The Amendment also replaces an adjusted LIBOR benchmark rate with a term secured overnight financing rate
benchmark rate, as adjusted by an increase of ten basis points, plus the applicable margin under 2021 Credit Agreement. The
Amendment made no other material changes to the terms of the 2021 Credit Agreement. Subsequent to December 31, 2022 and
through the date of this filing, we had additional net borrowings on our revolving credit facility of $469 million.

The 2021 Credit Agreement contains customary covenants restricting the ability of: (a) Advance Auto Parts, Inc. and its
subsidiaries to, among other things, (i) create, incur or assume additional debt (only with respect to subsidiaries of Advance
Auto Parts, Inc.), (ii) incur liens, (iii) guarantee obligations, and (iv) change the nature of their business; (b) Advance Auto
Parts, Inc., 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 Auto Parts, Inc., among other things, to change its holding
company status. Advance is also required to comply with financial covenants with respect to a maximum leverage ratio and a
minimum coverage ratio. The 2021 Credit Agreement also provides for customary events of default, including non-payment
defaults, covenant defaults and cross-defaults of Advance’s other material indebtedness. We were in compliance with our
financial covenants with respect to the 2021 Credit Agreement as of December 31, 2022.

As of December 31, 2022 and January 1, 2022, we had $90.2 million and $92.0 million of bilateral letters of credit issued
separately from the 2021 Credit Agreement, none of which were drawn upon. These bilateral letters of credit generally have a
term of one year or less and primarily serve as collateral for our self-insurance policies.

Senior Unsecured Notes

Our 4.50% senior unsecured notes due December 1, 2023 (the “2023 Notes”) were issued in December 2013 at 99.69% of

the principal amount of $450.0 million. The 2023 Notes bear interest, payable semi-annually in arrears on June 1 and December
1, at a rate of 4.50% per year. Pursuant to a cash tender offer that was completed on September 29, 2020, we repurchased
$256.3 million of our 2023 Notes with the net proceeds from the 2027 Notes. In connection with this tender offer, we incurred
charges relating to tender premiums and debt issuance costs of $30.5 million and $1.4 million. On April 4, 2022, we redeemed
the remaining $193.2 million principal amount of our outstanding 2023 Notes with the net proceeds from the issuance of the
3.50% senior unsecured notes due March 15, 2032 (the “2032 Notes”). In connection with this early redemption, we incurred
charges related to the make-whole provision and debt issuance costs of $7.0 million and $0.4 million.

On April 16, 2020, we issued $500.0 million aggregate principal amount of senior unsecured notes (the “Original Notes”).
The Original Notes were issued at 99.65% of the principal amount and mature April 15, 2030. The Original Notes bear interest,
payable semi-annually in arrears on April 15 and October 15, at a rate of 3.90% per year.

On July 28, 2020, we completed an exchange offer whereby the Original Notes in the aggregate principal amount of
$500.0 million, which were not registered under the Securities Act of 1933, as amended (the “Securities Act”), were exchanged
for a like principal amount of 3.90% senior unsecured notes due 2030 (the “Exchange Notes” or “2030 Notes”), which have
been registered under the Securities Act. The Original Notes were substantially identical to the Exchange Notes, except that the
Exchange Notes are registered under the Securities Act and are not subject to the transfer restrictions and certain registration
rights agreement provisions applicable to the Original Notes.

On September 16, 2020, we redeemed all $300.0 million aggregate principal amount of our outstanding 2022 Notes. In

connection with this early redemption, we incurred charges relating to a make-whole provision and debt issuance costs of
$15.8 million and $0.3 million.

On September 29, 2020, we issued $350.0 million aggregate principal amount of senior unsecured notes (the “2027

Notes”). The 2027 Notes were issued at 99.67% of the principal amount, and are due October 1, 2027 and bear interest at
1.75% per year, payable semi-annually in arrears on April 1 and October 1 of each year. In connection with the 2027 Notes
offering, we incurred $2.9 million of debt issuance costs.

On March 4, 2022, we issued $350.0 million aggregate principal amount of senior unsecured notes. The 2032 Notes were
issued at 99.61% of the principal amount and are due on March 15, 2032. The 2032 Notes bear interest, payable semi-annually
in arrears on March 15 and September 15, at a rate of 3.50% per year. In connection with the 2032 Notes offering, we incurred
$3.2 million of debt issuance costs.

Our 2023 Notes, 2027 Notes, 2030 Notes and 2032 Notes are collectively referred to herein as our “senior unsecured
notes” or the “Notes.” The terms of the 2023 Notes, 2027 Notes and 2032 notes are governed by an indenture dated as of April
29, 2010 (as amended, supplemented, waived or otherwise modified, the “2010 Indenture”) among Advance Auto Parts, Inc.,
the subsidiary guarantors from time to time party thereto and Wells Fargo Bank, National Association, as Trustee. The terms of
the 2030 Notes are governed by an indenture dated as of April 16, 2020 (as amended, supplemented, waived or otherwise
modified, the “2020 Indenture” and together with the 2010 Indenture, the “Indentures”) among Advance Auto Parts, Inc., 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 senior unsecured notes at any time or from time to time, at the redemption prices

described in the Indentures. In addition, in the event of a Change of Control Triggering Event (as defined in the Indentures), 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. Currently, the Notes are fully and unconditionally guaranteed, jointly and severally, on
an unsubordinated and unsecured basis by guarantor and subsidiary guarantees, as defined by the Indenture.

The Indentures contain 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 Indentures 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 ten 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 Indentures also contain covenants limiting our ability to incur debt
secured by liens and to enter into certain sale and lease-back transactions.

Future Payments

As of December 31, 2022, the aggregate future annual maturities of long-term debt instruments were as follows:

Year

Amount

2023 $

2024

2025

2026

2027

Thereafter

—

350,000

850,000

1,200,000

Debt Guarantees

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

ours totaling $96.9 million as of December 31, 2022. 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 was
$174.6 million as of December 31, 2022. We believe that the likelihood of performance under these guarantees is remote.

7. Property and Equipment:

Property and equipment consisted of the following:

Land and land improvements (1)
Buildings

Building and leasehold improvements
Furniture, fixtures and equipment
Vehicles
Construction in progress

Less: Accumulated depreciation
Property and equipment, net

(1) Land is deemed to have an indefinite life.

Useful Lives

December 31,
2022

January 1,
2022

10 years $

471,349 $

30 - 40 years

535,884

3 - 15 years
3 - 20 years
3 years

722,006
2,398,818
14,549
137,915
4,280,521
(2,590,382)
1,690,139 $

471,101

528,558

602,515
2,196,099
14,593
119,012
3,931,878
(2,403,567)
1,528,311

Depreciation expense relating to Property and equipment was $252.8 million, $228.8 million and $218.5 million for 2022,

2021 and 2020. We capitalized $41.5 million, $63.2 million and $58.4 million incurred for the development of internal use
computer software during 2022, 2021 and 2020. These costs were classified in the Construction in progress category, but once

placed into service is removed from Construction in progress and classified within the Furniture, fixtures and equipment
category and is depreciated on the straight-line method over three to ten years.

8. Leases and Other Commitments:

Leases

Substantially all of our leases are for facilities and vehicles. The initial term for facilities are typically five to ten years,
with renewal options at five-year intervals, with the exercise of lease renewal options at our sole discretion. Our vehicle and
equipment leases are typically three to six years. Our lease agreements do not contain any material residual value guarantees or
material restrictive covenants.

Operating lease liabilities consisted of the following:

Total operating lease liabilities

December 31,
2022
2,692,861 $

January 1,
2022
2,802,772

Less: Current portion of operating lease liabilities
Non-current operating lease liabilities

(414,543)
2,278,318 $

(465,121)
2,337,651

The current portion of operating lease liabilities was included in Other current liabilities in the accompanying Consolidated

Balance Sheets.

Total lease cost was included in Cost of sales and SG&A in the accompanying Consolidated Statements of Operations and

is recorded net of immaterial sublease income. Total lease cost comprised the following:

Operating lease cost

Variable lease cost

Total lease cost

Year Ended

December 31,
2022

January 1,
2022

563,959 $

171,621

735,580 $

538,323

148,130

686,453

The future maturity of lease liabilities are as follows:

Year

Amount

2023 $

501,276

2024
2025
2026
2027

Thereafter
Total lease payments
Less: Imputed interest
Total operating lease

523,097
491,055
381,295
312,518
840,306
3,049,547
(356,686)

liabilities $

2,692,861

Operating lease liabilities included $45.2 million related to options to extend lease terms that are reasonably certain of

being exercised and excluded $98.6 million of legally binding lease obligations for leases signed, but not yet commenced.

The weighted average remaining lease term and weighted average discount rate for our operating leases were 6.9 years and

3.4% as of December 31, 2022. We calculated the weighted average discount rates using incremental borrowing rates, which
equal the rates of interest that we would pay to borrow funds on a fully collateralized basis over a similar term.

Other information relating to our lease liabilities were as follows:

Year Ended

December 31,
2022

January 1,
2022

Cash paid for amounts included in the
measurement of lease liabilities:

Operating cash flows from operating leases

624,484 $

514,053

Right-of-use assets obtained in exchange for

lease obligations:

Operating leases

432,497 $

726,326

Other Commitments

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 31, 2022, future
payments of these arrangements were $121.0 million and were not accrued in our Consolidated Balance Sheet.

9. Accrued Expenses:

Accrued expenses consisted of the following:

December 31,
2022

January 1,
2022

Payroll and related benefits

155,441 $

Taxes payable

Self-insurance reserves

Inventory related accruals

Accrued rebates

Accrued professional services/legal

Capital expenditures

Other

Total accrued expenses

10. Share Repurchase Program:

106,712

72,337

43,025

42,415

22,317

8,927

183,273

634,447 $

207,984

111,380

53,424

113,439

35,611

18,448

14,369

222,396

777,051

In February 2022, our Board of Directors authorized an additional $1.0 billion toward the existing share repurchase
program. Previously in April 2021 and November 2019, our Board of Directors authorized $1.0 billion and $700.0 million for
our share repurchase program. Our share repurchase program permits the repurchase of our common stock on the open market
and in privately negotiated transactions from time to time. The Board of Directors may increase or otherwise modify, renew,
suspend or terminate the share repurchase program without prior notice.

During 2022, we repurchased 3.0 million shares of our common stock at an aggregate cost of $598.2 million, or an average
price of $201.88 per share, in connection with our share repurchase program. We had $947.3 million remaining under our share
repurchase program as of December 31, 2022. During 2021, we repurchased 4.6 million shares of our common stock at an
aggregate cost of $886.7 million or an average price of $192.92 per share, under our share repurchase program.

11. Earnings per Share:

The computations of basic and diluted earnings per share were as follows:

December 31,
2022

Year Ended
January 1,
2022

January 2,
2021

Numerator

Net income applicable to common shares

501,872 $

616,108 $

493,021

Denominator

Basic weighted average common shares

Dilutive impact of share-based awards
Diluted weighted average common shares (1)

60,351

366

60,717

64,028

481

64,509

Basic earnings per common share

Diluted earnings per common share

8.32 $

8.27 $

9.62 $

9.55 $

68,748

255

69,003

7.17

7.14

(1) For 2022, 2021 and 2020, restricted stock units (“RSUs”) excluded from the diluted calculation as their inclusion would

have been anti-dilutive were 115 thousand, 9 thousand and 119 thousand.

12. Income Taxes:

Provision for Income Taxes

Provision for income taxes consisted of the following:

2022

Federal

State

Foreign

2021

Federal

State

Foreign

2020

Federal
State
Foreign

Current

Deferred

Total

95,784 $

4,046 $

17,531

27,162

3,919

(1,627)

99,830

21,450

25,535

140,477 $

6,338 $

146,815

78,814 $

55,467 $

134,281

21,420

21,381

11,747

988

33,167

22,369

121,615 $

68,202 $

189,817

112,096 $
23,779
13,983
149,858 $

7,718 $
1,066
(648)
8,136 $

119,814
24,845
13,335
157,994

The provision for income taxes differed from the amount computed by applying the federal statutory income tax rate due

to:

Income before provision for income taxes at

statutory U.S. federal income tax rate (21%
for 2022, 2021 and 2020)

State income taxes, net of federal income tax

benefit

Other, net

December 31,
2022

Year Ended
January 1,
2022

January 2,
2021

136,224 $

169,244 $

136,713

16,946

(6,355)

26,177

(5,604)

18,610

2,671

Provision for income taxes

146,815 $

189,817 $

157,994

Deferred Income Tax Assets (Liabilities)

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

December 31,
2022

January 1,
2022

Deferred income tax assets:

Accrued expenses not currently deductible for
tax

19,589 $

Share-based compensation

Accrued medical and workers compensation

Net operating loss carryforwards

Operating lease liabilities

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

Operating lease right-of-use assets

12,642

13,666

3,577

678,432

9,291

737,197

(5,036)

732,161

(130,899)

(226,499)

(137,464)

(653,296)

38,133

12,431

9,408

3,828

690,405

6,986

761,191

(3,015)

758,176

(132,592)

(231,632)

(139,089)

(665,469)

Total deferred income tax liabilities

(1,148,158)

(1,168,782)

Net deferred income tax liabilities

(415,997) $

(410,606)

As of December 31, 2022 and January 1, 2022, our net operating loss (“NOL”) carryforwards comprised state NOLs of

$108.9 million and $110.5 million. These NOLs may be used to reduce future taxable income and expire periodically through
2039. Due to uncertainties related to the realization of these NOLs in certain jurisdictions, as well as other credits available to
us, we have recorded a valuation allowance of $3.0 million as of December 31, 2022 and January 1, 2022. In addition, we
recorded a $2.0 million valuation allowance on foreign tax credit carryforwards as of December 31, 2022. The amount of
deferred income tax assets realizable 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 31, 2022 and January 1, 2022, these accumulated net earnings generated by our foreign
operations were approximately $98.7 million and $75.5 million, which did not include earnings deemed to be repatriated as part
of the U.S. Tax Cuts and Jobs Act. It is not practicable to determine the income tax liability that would be payable if such
earnings were repatriated.

Unrecognized Tax Benefits

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

December 31,
2022

January 1,
2022

January 2,
2021

Unrecognized tax benefits, beginning of period

19,139 $

25,127 $

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

(261)

928

(256)

(6,254)

484

(849)

2,240

(2,993)

(4,870)

Unrecognized tax benefits, end of period

13,371 $

19,139 $

29,762

1,808

—

1,528

—

(7,971)

25,127

As of December 31, 2022, January 1, 2022 and January 2, 2021, the entire amount of unrecognized tax benefits, if

recognized, would reduce our annual effective tax rate of 22.6%, 23.6% and 24.3%. During 2022, 2021 and 2020, we recorded
income tax-related interest and penalties of $0.6 million, $0.7 million and $0.2 million due to uncertain tax positions included
in the Provision for income taxes in the accompanying Consolidated Statements of Operations. As of December 31, 2022 and
January 1, 2022, we recorded a liability for potential interest of $2.7 million and $3.3 million and for potential penalties of $0.1
million for each year. 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 2019.

13. Contingencies:

Currently and from time to time, we are 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 pending legal matters cannot be determined, based
on the facts presently known, it is management’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.

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 “Class 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 alleged 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. On February 7, 2020, the court granted in part and denied in part our motion to dismiss. On November
6, 2020, the court granted the plaintiff’s motion for class certification. On March 15, 2021, we moved for reconsideration of the
order denying in part our motion to dismiss, and on October 15, 2021, we filed a motion for summary judgment, seeking full
dismissal of the case. Following mediation, on November 5, 2021, the parties executed a confidential binding term sheet to
settle all claims and on December 23, 2021, the parties executed a settlement agreement fully documenting their agreement. The
settlement agreement received final approval from the court on June 13, 2022. The settlement amount of $49.3 million was
fully paid by our insurance carriers.

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.

14. Benefit Plans:

401(k) Plan

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 $24.5 million, $27.3 million and $21.3 million in 2022, 2021 and 2020.

Deferred Compensation

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’s base salary and bonus as determined by the Retirement Plan Committee.
We established and maintain a deferred compensation liability for this plan. As of December 31, 2022 and January 1, 2022,
these liabilities were $13.7 million and $15.0 million.

15. 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 (“2014 LTIP”), which was approved by our stockholders on May 14, 2014. In 2022,
2021 and 2020, we granted share-based compensation in the form of RSUs or deferred stock units (“DSUs”). Our grants, which
have three methods of measuring fair value, generally include a time-based service or a performance-based or a market-based
portion, which collectively represent the target award.

In 2022 and 2021, we also granted options to purchase common stock to certain employees under our 2014 LTIP. The
options are granted at an exercise price equal to the closing market price of Advance's common stock on the date of the grant,
expire after ten years and vest one-third annually over three years. We record compensation expense for the grant date fair value
of the option awards evenly over the vesting period.

At December 31, 2022, there were 4.2 million shares of common stock available for future issuance under the 2014 LTIP
based on management’s current estimate of the probable vesting outcome for performance-based awards. Shares forfeited and
shares withheld for payment of taxes due become available for reissuance and are included in availability.

Restricted Stock Units

For time-based RSUs, the fair value of each award was determined based on the market price of our common stock on the

date of grant. Time-based 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.

For performance-based RSUs, the fair value of each award was determined based on the market price of our common stock
on the date of grant. Performance-based 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.
Performance-based 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. The number of performance-based awards outstanding is based
on the number of awards that we believed were probable of vesting at December 31, 2022.

There were no performance-based RSUs granted during 2022 or 2021. 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 31, 2022. Compensation expense for performance-based awards of $11.8 million, $22.8 million and $9.4 million in
2022, 2021 and 2020 was determined based on management’s estimate of the probable vesting outcome.

For market-based RSUs, the fair value of each award 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:

Risk-free interest rate (1)
Expected dividend yield
Expected stock price volatility (2)

2022

2021

2020

1.6%

—%

34.6%

0.3%

—%

36.0%

0.9%

0.8%

34.0%

(1) The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate having a term consistent with the

vesting period of the award.

(2) 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.

Additionally, we estimated a liquidity discount of 9.2% using the Chaffe Model to adjust the fair value for the post-vest

restrictions. Vesting of market-based RSUs 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.

The following table summarizes activity for time-based, performance-based and market-based RSUs in 2022:

Time-Based

Performance-Based

Market-Based

Number
of
Awards

Weighted
Average
Grant Date
Fair Value

Number
of
Awards

Weighted
Average
Grant Date
Fair Value

Number
of
Awards

Weighted
Average
Grant Date
Fair Value

Nonvested at January 1, 2022

Granted

Change in units based on performance
Vested (1)
Forfeited

466 $

209 $

— $

(219) $

(62) $

162.33

196.61

—

158.06

178.04

197 $

142.23

— $

(6) $

(78) $

(8) $

—

119.95

160.38

132.01

112 $

57 $

— $

(22) $

(12) $

Nonvested at December 31, 2022
394 $
(1) The vested shares of market-based RSUs were not exercised due to low multiplier effect for 2019 awards.

105 $

130.88

180.41

135 $

179.66

205.52

—

165.84

193.42

191.72

The following table summarizes certain information concerning activity for time-based, performance-based and market-

based RSUs:

Year Ended

December 31,
2022

January 1,
2022

January 2,
2021

Time-based:

Weighted average fair value of RSUs granted
Total grant date fair value of RSUs vested

Performance-based:

Weighted average fair value of RSUs granted
Total grant date fair value of RSUs vested

Market-based:

Weighted average fair value of RSUs granted
Total grant date fair value of RSUs vested

$
$

196.61 $
34,685 $

183.41 $
34,555 $

— $
12,460 $

— $
7,987 $

205.52 $
3,695 $

204.97 $
3,650 $

137.47
30,231

130.03
1,123

145.04
2,646

As of December 31, 2022, the maximum potential payout under our currently outstanding performance-based and market-

based RSUs were 120 thousand and 271 thousand units.

Stock Options

In 2022, we granted 114 thousand stock options where the weighted average fair value of stock options granted was $53.98

per share. The fair value was estimated on the date of grant by applying the Black-Scholes-Merton option-pricing valuation
model.

The following table includes summary information for stock options as of December 31, 2022:

Number of
Awards

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual
Life (Years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2022

Granted

Exercised

Forfeited

Outstanding at December 31, 2022

Exercisable at December 31, 2022

111 $

114 $

(3) $

(16) $

206 $

34 $

176.50

204.48

176.50

192.75

190.75

176.50

8.6

7.9

—

The following table presents the weighted average assumptions used in determining the fair value of options granted:

Risk-free interest rate (1)
Expected life (2)
Expected volatility (3)
Expected dividend yield (4)

Year Ended
December 31,
2022

1.90%

6 years

34.0%

2.60%

(1) The risk-free interest rate is based on the yield in effect at grant for zero-coupon U.S. Treasury notes with maturities

equivalent to the expected term of the stock options.

(2) The expected term represents the period of time options granted are expected to be outstanding. As we do not have
sufficient historical data, we utilized the simplified method provided by the Securities and Exchange Commission to
calculate the expected term as the average of the contractual term and vesting period.

(3) Expected volatility is the measure of the amount by which the stock price has fluctuated or is expected to fluctuate. We

utilized historical trends and the implied volatility of our publicly traded financial instruments in developing the
volatility estimate for our stock options.

(4) The expected dividend yield is calculated based on our expected quarterly dividend and the three-month average stock

price as of the grant date.

Other Considerations

Total income tax benefit related to share-based compensation expense for 2022, 2021 and 2020 was $12.5 million, $15.2

million and $11.5 million.

As of December 31, 2022, there was $65.5 million of unrecognized compensation expense related to all share-based

awards that is expected to be recognized over a weighted average period of 1.45 years.

Deferred Stock Units

We grant share-based awards annually to our Board of Directors in connection with our 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 (“DSU Plan”). Each DSU is equivalent to one share of our common stock
and will be distributed in common shares after the director’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 9 thousand, 10 thousand and 12 thousand DSUs in 2022, 2021, and 2020. The weighted average fair value of

DSUs granted during 2022, 2021 and 2020 was $193.05, $191.24 and $130.14. The DSUs were awarded at a price equal to the
market price of our underlying common stock on the date of the grant. For 2022, 2021 and 2020, we recognized $1.7 million,
$1.6 million and $1.6 million of share-based compensation expense for these DSU grants.

Employee Stock Purchase Plan

We also offer an employee stock purchase plan (“ESPP”). 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 31, 2022, there were 0.9 million shares available to be issued under the ESPP.

16. Accumulated Other Comprehensive Loss:

Accumulated other comprehensive loss, net of tax, consisted of the following:

Unrealized
Gain (Loss) on
Postretirement
Plan

Foreign
Currency
Translation

Accumulated
Other
Comprehensive
(Loss) Income

Balance, December 28, 2019

1,322 $

(35,891) $

(34,569)

2020 activity

Balance, January 2, 2021

2021 activity

Balance, January 1, 2022

2022 activity

(152)

1,170

(264)

906

(186)

7,962

(27,929)

4,396

(23,533)

(22,330)

Balance, December 31, 2022

720 $

(45,863) $

7,810

(26,759)

4,132

(22,627)

(22,516)

(45,143)

Advance Auto Parts, Inc.
Schedule II - Valuation and Qualifying Accounts
(in thousands)

Allowance for credit losses

January 2, 2021

January 1, 2022

December 31, 2022

Balance at
Beginning of
Period

Charges to
Expenses

Deductions(1)

Balance at
End of Period

14,249 $

11,929 $

10,162 $

14,933 $

11,125 $

24,399 $

(17,253) $

(12,892) $

(19,348) $

11,929

10,162

15,213

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

EXHIBIT INDEX

Exhibit No. Exhibit Description

3.1

3.2

4.0

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

4.10

4.11

4.12

4.13

10.1

Restated Certificate of Incorporation of Advance Auto
Parts, Inc. (“Advance Auto”) (as amended effective as of
May 24, 2017).

Amended and Restated Bylaws of Advance Auto Parts,
Inc., effective May 24, 2017.
Description of Securities Registered under Section 12 of
the Securities Exchange Act of 1934, as amended.
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 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.

Indenture, dated as of April 16, 2020 by and among
Advance Auto Parts, Inc., each of the subsidiary
guarantors party thereto and Wells Fargo Bank, National
Association, as trustee.
Eighth Supplemental Indenture, dated as of September 29,
2020, among Advance Auto Parts, Inc. each of the
Guarantors from time to time party thereto and Wells
Fargo Bank, National Association, as Trustee.
Ninth Supplemental Indenture, dated as of March 4, 2022,
among Advance Auto Parts, Inc., Advance Stores
Company, Incorporated and Computershare Trust
Company, N.A., as successor to Wells Fargo, National
Association, as Trustee.
Form of 3.500% Notes due 2032 (included in Exhibit
4.12).

Incorporated by Reference

Filed

Form

Exhibit

Filing Date Herewith

10-Q

3.1

8/14/2018

10-Q

3.2

8/18/2020

10-K

4.0

2/18/2020

8-K

4.1

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

10-Q

4.5

4.7

1/17/2012

12/9/2013

4.11

5/28/2014

8-K

4.1

4/17/2020

8-K

4.6

9/30/2020

8-K

4.1

3/4/2022

8-K

4.2

3/4/2022

Form of Indemnification Agreement between Advance
Auto Parts and each of its Directors.

8-K

10.19

5/20/2004

Exhibit No. Exhibit Description
10.2

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

Advance Auto Parts, Inc. 2004 Long-Term Incentive Plan
(amended as of April 17, 2008).
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).
Form of Advance Auto Parts, Inc. SARs Award
Agreement and Restricted Stock Unit Award Agreement.
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
Stock Unit Plan for Non-Employee Directors and Selected
Executives (As Amended and Restated Effective as of
January 1, 2008).

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.
Employment Agreement effective August 21, 2016
between Advance Auto Parts, Inc. and Robert B. Cushing.
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).

Advance Auto Parts, Inc. 2017 Amended and Restated
Executive Incentive Plan.

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.

Employment Agreement effective October 3, 2018
between Advance Auto Parts, Inc. and Reuben E. Slone.
Advance Auto Parts, Inc. 2014 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.

Advance Auto Parts, Inc. Deferred Compensation
Program, as amended and restated effective January 1,
2021.
Form of 2021 Advance Auto Parts, Inc. Time-Based
Restricted Stock Unit Award Agreement.

Incorporated by Reference

Filed

Form

Exhibit

Filing Date Herewith

10-Q

10.19

5/29/2008

10-K

10.17

3/1/2011

10-K

10.48

2/25/2014

10-K

10.52

3/3/2015

10-K

10.54

3/3/2015

10-Q

10.1

5/31/2016

10-Q

10.2

5/31/2016

10-K

10.50

2/28/2017

10-K

10.55

2/28/2017

10-K

10.56

2/28/2017

DEF14A Appendix A

4/6/2017

10-K

10.58

2/21/2018

10-Q

10.1 11/13/2018

10-K

10.53

2/9/2019

10-K

10.57

2/9/2019

10-K

10.58

2/9/2019

10-K

10.45

2/22/2021

10-Q

10.1

6/2/2021

Incorporated by Reference

Filed

Form

Exhibit

Filing Date Herewith

10-Q

10.2

6/2/2021

10-Q

10.3

6/2/2021

8-K

10.1 11/15/2021

8-K

10.2 11/15/2021

10-Q

10.1

5/24/2022

10-Q

10-K

10.2 05/24/2022

10.3 05/24/2022

10.4 05/24/2022

10.29 02/15/2022

X
X

Exhibit No. Exhibit Description

10.20

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

21.1
22.1
23.1

31.1

31.2

32.1

Form of 2021 Advance Auto Parts, Inc. Performance-
Based Restricted Stock Unit Award Agreement.
Form of 2021 Advance Auto Parts, Inc. Nonqualified
Stock Option Award Agreement.
Credit Agreement, dated as of November 9, 2021, 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 November 9, 2021,
among Advance Auto Parts, Inc., the guarantors from time
to time party thereto and Bank of America, N.A, as
administrative agent for the lenders.
Employment Agreement effective March 15, 2022
between Advance Auto Parts, Inc. and Jason B. McDonell.

Form of 2022 Advance Auto Parts, Inc. Time-Based
Restricted Stock Unit Award Agreement.

Form of 2022 Advance Auto Parts, Inc. Performance-
Based Restricted Stock Unit Award Agreement.
Form of 2022 Advance Auto Parts, Inc. Nonqualified
Stock Option Award Agreement.
Description of Non-Employee Director Compensation.

Amendment No. 1 to the Credit Agreement Dated as of
February 27, 2023
Subsidiaries of Advance Auto Parts, Inc.
List of Issuers and its Guarantor Subsidiaries.

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

101.LAB
101.PRE

104.1

XBRL Taxonomy Extension Calculation Linkbase
Document.
XBRL Taxonomy Extension Definition Linkbase
Document.
XBRL Taxonomy Extension Labels Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase
Document.
Cover Page Interactive Data File (Embedded within the
Inline XBRL document and included in Exhibit).

Item 16. Form 10-K Summary.

None.

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 28, 2023

ADVANCE AUTO PARTS, INC.

By:

/s/ William J. Pellicciotti Jr.

William J. Pellicciotti Jr.

Senior Vice President, Chief Accounting Officer

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 28, 2023

Thomas R. Greco

(Principal Executive Officer)

/s/ Jeffrey W. Shepherd
Jeffrey W. Shepherd

/s/ William J. Pellicciotti Jr.
William J. Pellicciotti Jr.

/s/ Eugene I. Lee, Jr.
Eugene I. Lee, Jr.

/s/ Carla J. Bailo
Carla J. Bailo

/s/ John F. Ferraro
John F. Ferraro

/s/ Joan M. Hilson

Joan M. Hilson

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

/s/ Douglas A. Pertz
Douglas A. Pertz

/s/ Sherice R. Torres
Sherice R. Torres

/s/ Nigel Travis
Nigel Travis

/s/ Arthur L. Valdez Jr.
Arthur L. Valdez Jr.

Executive Vice President, Chief Financial Officer

February 28, 2023

(Principal Financial Officer)

Senior Vice President, Controller and Chief Accounting Officer

February 28, 2023

(Principal Accounting Officer)

Chairman and Director

February 28, 2023

Director

(This page intentionally left blank.)

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

Corporate Office:
4200 Six Forks Road
Raleigh, North Carolina 27609
919-227-5466

Internet Site:
www.AdvanceAutoParts.com

Annual Meeting:
May 24, 2023 at 8:30 a.m. ET
www.virtualshareholdermeeting.com/AAP2023
There will be no physical location for this year’s meeting.

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,
4200 Six Forks Road, Raleigh, North Carolina 27609 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

E X E C U T I V E T E A M 1

Thomas R. Greco*
President and
Chief Executive Officer

Robert B. Cushing*
Executive Vice President,
Professional

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

Jason B. McDonell*
Executive Vice President,
Merchandising, Marketing
and eCommerce

William J. Pellicciotti Jr.*
Senior Vice President, Controller
and Chief Accounting Officer

Natalie S. Schechtman*
Executive Vice President,
Chief Human Resources Officer

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

Stephen J. Szilagyi*
Executive Vice President,
Supply Chain

Herman L. Word, Jr.*
Executive Vice President,
U.S. Stores and Carquest
Independents

Sri R. Donthi
Executive Vice President,
Chief Technology Officer

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

Eugene I. Lee, Jr.
Chair of the Board, Advance Auto
Parts, Inc. and Chairman, Darden
Restaurants, Inc.

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

Carla J. Bailo ^ ◊
Retired President and Chief
Executive Officer of the Center for
Automotive Research

Jeffrey J. Jones II † ◊
President, Chief Executive
Officer, H&R Block, Inc.;
Compensation Committee Chair

John F. Ferraro ^
Former Global Chief Operating
Officer, Ernst & Young; Audit
Committee Chair

Joan M. Hilson ^
Chief Financial & Strategy Officer,
Signet Jewelers, Ltd.

Douglas A. Pertz † ◊
Executive Chairman,
The Brink’s Company

Sherice R. Torres †
Chief Marketing Officer, Circle
Internet Financial, LLC

Elisabeth L. Eisleben
Senior Vice President,
Communications, Investor
Relations and Community Affairs

Dena R. Lamar
Vice President, Chief Diversity,
Equity and Inclusion Officer

Reuben E. Slone
Supply Chain Advisor

1 As of April 1, 2023
* Denotes Executive Officer

Nigel Travis † ◊
Retired Chief Executive Officer
and Former Chairman of the
Board, Dunkin’ Brands Group, Inc.;
Nominating and Corporate
Governance Committee Chair

Arthur L. Valdez Jr. ^
Former Executive Vice President,
Chief Supply Chain & Logistics
Officer, Target Corporation

^ Audit Committee
† Compensation Committee
◊ Nominating and Corporate Governance Committee

412756_Advance Auto Parts Covers Annual Report Final .pdf 3

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4 2 0 0 S I X F O R K S RO A D | R A L E I G H , N O R T H C A RO L I N A 2 7 6 0 9 | 8 7 7 . 2 3 8 . 2 6 2 3 | A DVA N C E A U T O PA R T S . C O M

412756_Advance Auto Parts Covers Annual Report Final .pdf 4

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