2024
ANNUAL
REPORT
Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both
professional installer and do-it-yourself customers.
CORPORATE PROFILE
As of
DECEMBER 28, 2024
4,788
ADVANCE AND
CARQUEST STORES
934
INDEPENDENTS
ABOUT ADVANCE
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
2024 was my first full year as CEO of Advance.
The passion of our team members continues
to impress me, and I admire their dedication
to serving our customers. We cemented
our strategy on the blended box to serve
both professional and DIY customers from
the same store. We moved with urgency
to align our operating philosophy with a
customer-first mindset to set a course for our
turnaround. I devoted a considerable amount
of time visiting stores and distribution
centers, meeting with our team members,
vendors, and customers. The feedback
from these interactions was crucial in the
formulation of our strategy. During 2024,
we took significant transformative actions to
reposition the company to deliver consistent
profitable growth and create value for our
shareholders over the long-term.
Among those actions, the most significant
was the completion of the sale of Worldpac
for $1.5 billion. This divestment was a major
milestone for the company, enabling us
to simplify our operating structure and
allowing our teams to sharpen their focus
on initiatives to improve the blended box
business. With the proceeds from the
transaction, we ended 2024 with a healthy
balance sheet and strong liquidity to
navigate our turnaround.
Separately, as part of our strategic review,
we also evaluated the Carquest Canada
business and made the decision to retain
the operations. Our Canadian retail business
resembles the U.S. blended box and provides
additional opportunities to drive long-term
growth for the company.
Following the strategic review, we conducted
an extensive review of our U.S. operations.
We made the difficult decision to rationalize
our store and distribution center footprint
to ensure we move forward with a solid
foundation. Over 75% of our revised store
footprint is in designated market areas
where we have the number one or number
two position based on store density. Going
forward, we look to grow our presence in
markets of strength.
Throughout 2024, we continued to make
targeted investments to improve our
competitive position. We invested an
aggregate $100 million in price reductions
across our assortment. We invested in
additional training and resources for our
frontline sales team to reduce turnover and
enable us to better serve our customers. On
the technology front, we completed the rollout
of the warehouse and inventory management
systems and invested in stores to enhance the
stability of our point-of-sale platform.
In November 2024, we introduced a three-
year strategic plan. At the foundation of our
strategic plan are the three fundamental
pillars of merchandising, supply chain
and store operations. We have outlined
initiatives under each pillar and have turned
our focus to executing our plan to put us
on the path to deliver consistent profitable
growth. We are measuring the success of
each pillar with clearly defined KPIs to hold
our teams accountable.
In Merchandising - We are addressing
product gaps by partnering with vendors
for faster access to high-quality products at
the right cost. Our team is developing new
capabilities to accurately place thousands
of parts at the store level to serve the
varying needs of customers across multiple
markets. We are in the initial stages of
rolling out a new store-based assortment
— continued
Shane O’Kelly
President and Chief Executive Officer
model. In addition to providing faster access
to the right parts, we are also redesigning our
promotional campaigns with fewer, bigger,
and bolder offers to effectively manage the
experience for our customers.
In Supply Chain – During 2024, we continued
to make progress on the consolidation of our
distribution network, which began in late-
2023. Since then, we have closed 10 of 38
U.S. DCs. As we complete the consolidation
and flow additional volume in these DCs, we
expect to drive incremental labor productivity.
We are also transforming our supply chain into
a multi-echelon network with the build-out of
market hubs, which enable us to place more
parts closer to the customer. At the end of
2024, we operated 19 market hubs, including
17 opened during the year.
And finally, in Stores - Our team is focused
on increasing the speed and quality of
service for our customers. To support the
needs of our field team, we are launching a
new standardized store operating model,
which is expected to be rolled out company-
wide by the end of 2025. The feedback of our
long-tenured regional field leaders has been
critical in the development of this model
as they understand the specific needs of
professional and DIY customers. Components
of this model include better allocation of time
to customer facing activities to drive stronger
labor productivity and faster delivery times to
serve our customers with speed.
Over the last twelve months, we have further
strengthened our executive team with leaders
that combine deep retail expertise with strong
functional knowledge. We welcomed our
new chief merchandising officer and other
leaders overseeing assortment & inventory,
and pricing & promotions to enhance our
merchandising capabilities. More recently
we hired a new chief accounting officer, chief
technology officer and general counsel.
In closing, I want to thank the entire Advance
team for their hard work during 2024. While
we still have considerable work ahead of us,
I am optimistic about our path forward. I am
confident in the team’s ability to advance our
turnaround in 2025 and beyond.
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 28, 2024
☐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
54-2049910
(State or other jurisdiction of incorporation or organization)
(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
Trading symbol
Name of each exchange on which registered
Common Stock, $0.0001 par value
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
☒
Accelerated filer
☐
Non-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. ☐
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 13, 2024, the aggregate market
value of common stock held by non-affiliates of the registrant was $2,350,271,465, based on the last sales price on July 13, 2024, as
reported by the New York Stock Exchange.
As of February 21, 2025, the number of shares of the registrant’s common stock outstanding was 59,792,946 shares.
Documents Incorporated by Reference:
Portions of the registrant’s definitive proxy statement for its 2025 Annual Meeting of Stockholders, to be held on May 14, 2025, are
incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
Page
Part I.
Item 1.
Business
2
Item 1A.
Risk Factors
7
Item 1B.
Unresolved Staff Comments
16
Item 1C.
Cybersecurity
15
Item 2.
Properties
17
Item 3.
Legal Proceedings
17
Item 4.
Mine Safety Disclosures
17
Part II.
Item 5.
Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
18
Item 6.
Selected Quarterly Financial Data
20
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
21
Item 7A.
Quantitative and Qualitative Disclosures About Market Risks
32
Item 8.
Financial Statements and Supplementary Data
32
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
32
Item 9A.
Controls and Procedures
32
Item 9B.
Other Information
34
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
34
Part III.
Item 10.
Directors, Executive Officers and Corporate Governance
35
Item 11.
Executive Compensation
35
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
35
Item 13.
Certain Relationships and Related Transactions, and Director Independence
35
Item 14.
Principal Accountant Fees and Services
35
Part IV.
Item 15.
Exhibits, Financial Statement Schedules
36
Item 16.
Form 10-K Summary
80
Signatures
81
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, “guidance,” “intend,” “likely,” “may,” “plan,” “position,” “possible,”
“potential,” “probable,” “project,” “should,” “strategy,” “target,” “will,” or similar language. All statements other
than statements of historical fact are forward-looking statements, including, but not limited to, statements about
the Company’s strategic initiatives, restructuring and asset optimization plans, financial objectives, operational
plans and objectives, statements about the sale of the Company’s Worldpac business, including statements
regarding the benefits of the sale and use of proceeds therefrom, statements regarding expectations for economic
conditions, future business and financial performance, as well as statements regarding underlying assumptions
related thereto. Forward-looking statements reflect the Company’s views based on historical results, current
information and assumptions related to future developments. Except as may be required by law, the Company
undertakes 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, the Company’s ability to
hire, train and retain qualified employees, the timing and implementation of strategic initiatives, risks associated
with the Company’s restructuring and asset optimization plans, deterioration of general macroeconomic
conditions, geopolitical factors including increased tariffs and trade restrictions, the highly competitive nature of
the industry, demand for the Company’s products and services, risks relating to the impairment of assets,
including intangible assets such as goodwill, access to financing on favorable terms, complexities in the Company’s
inventory and supply chain and challenges with transforming and growing its business. Please refer to “Item 1A.
Risk Factors” 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.
1
PART I
Item 1. Business.
Unless the context otherwise requires, the “Company,” “Advance,” and similar terms refer to Advance Auto Parts, Inc., its
subsidiaries and their respective operations on a consolidated basis. The Company’s fiscal year consists of 52 or 53 weeks
ending on the Saturday closest to December 31st each year. The Company’s previous three fiscal years ended on
December 28, 2024 (“2024”), December 30, 2023 (“2023”) and December 31, 2022 (“2022”) and each included fifty-two
weeks of operations.
Overview
Advance Auto Parts, Inc. and its subsidiaries is 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. The
Company’s stores 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 28, 2024, the Company operated 4,788 stores primarily under
the trade names “Advance Auto Parts” and “Carquest.”
The Company was founded in 1929 as Advance Stores Company, Incorporated, and operated as a retailer of general
merchandise until the 1980s. During the 1980s, the Company began targeting the sale of automotive parts and accessories to
DIY customers. The Company initiated the professional delivery program in 1996 and has served professional customers since
2000. The Company has 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, the Company 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.
On November 1, 2024, the Company completed the sale of the Worldpac business for net proceeds of approximately $1.47
billion after transaction costs and excluding the impact of taxes. The transaction reflects a strategic shift in the Company’s
business with increased focus on the Advance blended-box model. Refer to Note 20. Discontinued Operations of the notes to
the Consolidated Financial Statements included herein for further details.
On November 13, 2024, the Company’s Board of Directors approved a restructuring and asset optimization plan (“2024
Restructuring Plan”) designed to improve the Company’s profitability and growth potential and streamline its operations. This
plan is supplemental to other ongoing initiatives to simplify the Company's business and improve profitable growth and
entails, among other items, certain store and independent location closures as well as headcount reductions and
organizational design changes to align the Company’s workforce to the expected needs of the Company's business. The
Company is also pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational
efficiencies. Refer to Note 3. Restructuring of the notes to the Consolidated Financial Statements included herein for further
details.
Stores
During 2024, 42 stores were opened and 40 were closed, resulting in a total of 4,788 stores as of December 28, 2024
compared with a total of 4,786 stores as of December 30, 2023. On November 14, 2024, the Company announced the 2024
Restructuring Plan, which includes the reduction of approximately 500 stores, approximately 200 independent locations and
four distribution centers by mid-2025.
The Company serves its professional and DIY customers through a variety of channels ranging from traditional “brick and
mortar” store locations to self-service e-commerce sites. The Company believes it is better able to meet its customers’ needs
by operating under two trade names, which are as follows:
Advance Auto Parts — The Company’s 4,507 stores, inclusive of 316 hubs, as of December 28, 2024, are generally located in
freestanding buildings with a focus on both professional and DIY customers. The average size of an Advance Auto Parts
location (including stores, hubs and market hubs) is approximately 8,000 square feet. These stores carry a wide variety of
products serving aftermarket auto part needs for both domestic and import vehicles with product offerings of approximately
23,600 stock keeping units (“SKUs”), consisting of a custom mix of products based on each store’s market. Supplementing the
Company’s stores’ inventory on-hand, less common SKUs are also available on a same-day or next-day basis from any of the
larger hub stores or market hub locations.
2
Carquest — The Company’s 281 stores as of December 28, 2024, including 149 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 7,500 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 16,400 SKUs. As of December 28,
2024, 934 independently-owned stores operated under the Carquest name.
Store Development
The key factors used in selecting sites and market locations in which the Company operates include population,
demographics, traffic count, vehicle profile, number and strength of competitors’ stores and the cost of real estate. As of
December 28, 2024, 4,639 stores were located across 48 U.S. states and two U.S. territories, and 149 stores were located
across six Canadian provinces.
The Company serves the stores primarily from its executive office in Raleigh, NC.
Company Products
The following table shows some of the types of products that the Company sells 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
Fuel and oil additives
Brakes and brake pads
Antifreeze and washer fluid
Fuel filters
Chassis parts
Electrical wire and fuses
Grease and lubricants
Climate control parts
Electronics
Motor oil
Clutches and drive shafts
Floor mats, seat covers and interior accessories
Oil filters
Engines and engine parts
Hand and specialty tools
Part cleaners and treatments
Exhaust systems and parts
Lighting
Transmission fluid
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
The Company provides customers with quality products that are often offered at a good, better or best recommendation
differentiated by price and quality. The Company accepts customer returns for many new, core and warranty products.
Customer returns have historically been immaterial.
Customers
The Company’s professional customers primarily consist of customers for whom the Company delivers products to their
places of business, including garages, service stations and auto dealerships. The Company’s professional sales represented
approximately 50% of sales in 2024, 2023 and 2022. The Company also serves 934 independently-owned Carquest stores with
shipments directly from distribution centers. DIY customers are primarily served through the Company’s stores, but can also
order online to pick up merchandise at a nearby store or have their purchases shipped directly to them. Except where
prohibited, the Company also provides a variety of services at its stores free of charge to 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.
3
The Company also serves customers online at www.AdvanceAutoParts.com or on the Advance Mobile App. Professional
customers can conveniently place their orders electronically, including through MyAdvance.com, by phone or in-store, and
the Company delivers products to their places of business.
Supply Chain
The Company’s supply chain consists of a network of distribution centers, hubs and stores that enable the Company to
provide same-day or next-day availability to customers. As of December 28, 2024, the Company operated 28 distribution
centers, ranging in size from approximately 70,000 to 943,000 square feet with total square footage of approximately 8.5
million, including one distribution center dedicated to reclamations. In 2024, the Company converted eight distribution
centers to market hubs, closed four distribution centers as a result of the 2024 Restructuring Plan and closed one distribution
center as part of the normal course of business. Additionally, nine distribution centers were sold as part of the Worldpac
transaction.
Merchandise, Marketing and Advertising
In 2024, the Company purchased merchandise from over 634 vendors. The Company’s purchasing strategy involves
negotiating agreements with vendors to purchase merchandise over a specified period of time along with other provisions,
including pricing, rebates, volume and payment terms.
The Company aims to carry a broad selection of high quality and reputable brand name automotive parts and accessories that
the Company believes will appeal to professional customers and also generate DIY customer traffic. Some of the Company’s
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, the Company stocks a wide selection of high-quality
owned brand products with a goal of appealing to value-conscious customers. These categories of merchandise include
batteries, brakes, chassis, ride control, engine management, filtration, chemicals and other parts under various owned brand
names such as Carquest®, DieHard®, Driveworks® and Wearever®. For the DieHard® brand, the Company owns the right to sell
batteries and to extend the DieHard® brand into other automotive and vehicular categories. The Company granted the seller
an exclusive royalty-free, perpetual license to develop, market and sell DieHard® branded products in certain non-automotive
categories.
The Company’s marketing and advertising programs are designed to drive brand awareness, consideration by consumers and
omnichannel traffic by position in the aftermarket auto parts category. The Company strives to exceed its 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 customers and the DIY
customer loyalty program.
Seasonality
The Company’s business is somewhat seasonal in nature, with the highest sales usually occurring in the spring and summer
months. In addition, the Company’s 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 cause
automotive parts to fail at an accelerated rate which can lead to enhanced sales. The fourth quarter is generally the most
volatile as weather and spending trade-offs typically influence the professional and DIY sales.
Human Capital
As of December 28, 2024, the Company employed approximately 33,200 full-time team members and 29,600 part-time team
members. The Company’s workforce consisted of 87.4% of team members employed in store-level operations, 8.9% in
distribution and 3.7% in corporate offices. As of December 28, 2024, approximately 1.5% of team members were represented
by labor unions.
Additional information about the Company’s human capital resources can be found in the Corporate Sustainability and Social
Report, which is available on the Company’s website. The 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 the Company’s other filings
with the Securities and Exchange Commission (“SEC”).
4
Intellectual Property
The Company owns a number of trade names, service marks and trademarks, including “Advance Auto Parts®,” “Advance
Same Day®,” “Carquest®,” “CARQUEST Technical Institute®,” “DieHard®,” “DriverSide®,” “MotoLogic®,” “MotoShop® and “TECH-
NET Professional Auto Service®”, for use in connection with the automotive parts business. In addition, the Company owns
and has registered a number of trademarks for the owned brands. The Company believes that these trade names, service
marks and trademarks are important to the merchandising strategy. The Company does not know of any infringing uses that
would materially affect the use of these trade names and trademarks and will actively defend and enforce them.
Competition
The Company operates in both the professional and DIY markets of the automotive aftermarket industry. The Company’s
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. The Company believes that chains of automotive parts stores that, like the Company,
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 the business include brand recognition,
customer service, product offerings, availability, quality, service with speed, price and store location.
Environmental and Other Regulatory Matters
The Company is subject to various federal, state and local laws and governmental regulations relating to the operation of the
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. The Company sells products containing hazardous
materials as part of the business. In addition, customers may bring automotive lead-acid batteries, used motor oil or other
recyclable items onto the properties. The Company currently provides collection and recycling programs for used lead-acid
batteries, used oil and other recyclable items at a majority of the stores as a service to its customers. Pursuant to agreements
with third-party vendors, lead-acid batteries, used motor oil and other recyclable items are collected by team members,
deposited onto pallets or into vendor supplied containers and stored by the Company until collected by the third-party
vendors for recycling or proper disposal. The terms of the contracts with third-party vendors require that they are in
compliance with all applicable laws and regulations. The Company’s 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 the Company’s experience, the
Company does 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.
The Company owns and leases 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, the Company
receives notices from the U.S. Environmental Protection Agency and state environmental authorities indicating that there may
be contamination on properties that the Company owns, leases or operates or may have owned, leased or operated in the
past or on adjacent properties for which the Company may be responsible. Compliance with these laws and regulations and
clean-up of released hazardous substances have not had a material impact on operations to date.
The Company is also subject to numerous regulations including those related to labor and employment, discrimination, anti-
bribery/anti-corruption, false claims, product quality and safety standards, data privacy, taxes, workplace safety, consumer
protection and trade compliance. Compliance with any such laws and regulations has not had a material adverse effect on the
operations to date. For more information, see the following disclosures in “Part I. Item 1A. Risk Factors” in this report.
5
Available Information
The Company’s internet address is www.AdvanceAutoParts.com. The Company’s website and the information contained
therein or linked thereto are not part of this Annual Report on Form 10-K for 2024. The Company makes available free of
charge through the Investor Relations website located at ir.advanceautoparts.com, the Company’s 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 the Company electronically files such materials with, or furnishes 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.
6
Item 1A. Risk Factors.
One 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, the Company’s 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 the Company’s business,
financial condition, results of operations, cash flows and future prospects, which could in turn materially affect the price of
the Company’s common stock.
Risks Related to the Company’s Operations and 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.
The Company undertook a comprehensive strategic and operational review to improve its performance of its business and
create long-term value. This review resulted in, among other things, narrowed business priorities and initiatives aimed at
improving core performance in key areas. The Company is currently making and expects to continue to make significant
investments to improve its business. If the Company is unable to implement initiatives efficiently and effectively, the
Company’s business, financial condition, results of operations and cash flows could be adversely affected. The Company could
also be adversely affected if it has not appropriately prioritized and balanced its initiatives or if the Company is unable to
effectively manage change throughout the organization. Implementing strategic initiatives could disrupt or reduce the
efficiency of the Company’s 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 and when multiple projects with
interdependencies and shared human resources are pursued simultaneously.
Restructuring our operations is a significant undertaking and introduces risk to the continuity and results of the Company's
operations.
In November 2024, the Company announced a plan to restructure its operations to improve profitability and growth potential
and streamline the Company's operations. This plan is supplemental to other ongoing initiatives to simplify the Company's
business and improve profitable growth and entails, among other items, certain store and independent location closures as
well as headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of
the Company's business. The Company is also pursuing efficiencies in procurement, pricing and professional and outside
services, in addition to operational efficiencies. These measures are subject to known and unknown risks and uncertainties,
including whether the Company has targeted the appropriate areas for its cost-saving efforts and at the appropriate scale, the
Company's ability to successfully execute the restructuring plan and achieve the cost-savings anticipated while minimally
disrupting our operations and whether, if required in the future, the Company will be able to appropriately target any
additional areas for its cost-saving efforts.
The Company expects to incur restructuring charges and undertake other exit-related activities as a result of such initiatives.
For example, execution of the Company’s plan is expected to result in the termination of certain leases, leading to exits of
certain properties over time and the incurrence of expenses, including but not limited to impairment charges and contingent
obligations, which could be material. The terms, scope and timing of any additional changes to our lease obligations, as well
as any other effects on our landlord relationships or reputation with other real estate owners, are uncertain. As a result of the
restructuring plan, the Company currently expects to incur approximately $875 million to $960 million in total charges, which
is estimated to include $275 million to $310 million of cash charges and $600 million to $650 million of non-cash charges,
primarily as a result of closure sites and the reduction in workforce. The Company’s expectations for charges to be incurred
and cash to be expended in connection with the restructuring activities are based on a number of assumptions, and the
Company may experience unanticipated consequences, such as higher than anticipated lease termination and facility closure
costs, asset impairment or other unforeseen expenses related to the restructuring.
Implementing any restructuring plan, including the one the Company has outlined, presents potential risks that may impair
our ability to achieve or sustain anticipated cost reductions or operational improvements. These risks include the potential for
management distraction from ongoing business activities, requirement of capital investment that could otherwise be used for
the operation and growth of the Company’s existing business, inadequate support of important business functions due to
staffing changes and other cost reduction efforts, delays or inability to achieve targeted efficiencies as a result of economic,
competitive or other factors, failure to maintain adequate controls and procedures while executing our restructuring plans,
disruptions to important business relationships, and damage to our reputation and brand. Additionally, as a result of
restructuring initiatives, the Company may experience a loss of continuity and accumulated knowledge or increased employee
attrition and difficulty attracting and retaining highly skilled employees, which may, among other things, slow the progress of
7
our turnaround initiatives or impair the Company’s ability to maintain and enhance the Company’s internal controls and
procedures.
The implementation of the Company’s restructuring efforts, including the potential reduction of the Company’s facilities and
workforce, may not improve our operational and cost structure or result in greater efficiency of the Company’s organization;
and the Company may not be able to support sustainable profitable growth following the Company’s restructuring actions.
Failure to achieve or sustain the expected cost reductions and other benefits related to these restructuring initiatives could
have a material adverse effect on the Company’s results of operations, financial condition and cash flows.
We are exposed to risks associated with potential divestitures, which may impact our ability to fully realize the anticipated
benefits of those transactions.
The Company recently sold its Worldpac business. Divestitures are complex transactions involving inherent risks, including the
potential for distractions of management from the core remaining business of the Company and the occurrence of events that
may impact our ability to fully realize the anticipated benefits of the divestitures. Transactions of this nature carry risks
associated to variation from expectations, including with respect to provision of transition services and post-closing claims for
liability.
If we are unable to adequately design, implement, operate and maintain various information and technology systems, our
ability to conduct business could be negatively impacted.
The Company is dependent on information and technology systems to facilitate the day-to-day operations of the business and
to produce timely, accurate and reliable information on financial and operational results. The company is in the process of
designing, implementing and updating various systems. These initiatives will require significant investment of human and
financial resources, and the Company may experience significant delays, increased costs and other difficulties with these
projects. Deficiencies in the design or implementation or maintenance of these systems could lead to inaccuracy of data and
disruption to the Company’s business operations. In addition, the Company is utilizing data analytics and piloting the use of
advance technological applications to support various business initiatives. Any inability on our part to properly capture or
interpret data may impair our ability to successfully execute our business plans.
The efficacy of the Company’s supply chain is important to its business operations and ability to grow the Company’s
business, and if the Company is unable to maintain adequate supply chain capacity or improve supply chain efficiency, it
could adversely affect its business, financial condition and results of operations and cash flows.
The Company’s store inventories are primarily replenished by shipments from its network of distribution centers. The
Company’s strategy to improve supply chain efficiency includes developing a network of market hubs to create economies of
scale and enhance service levels for our customers. If the Company is unable to maintain adequate capacity in its supply chain
network, or improve the efficiency of its supply chain, through the implementation of its market hub strategy or otherwise,
the Company may experience higher inventory costs, lower availability, slower delivery speed and ultimately a lower ability to
meet consumer product needs and channel preferences. The Company plans to further invest in its distribution center
infrastructure to help ensure safety, reliability and efficiency across its operations, which will require capital investments. The
Company is also working to improve product lifecycle management and address slower-moving inventory in its network. The
Company’s investments in supply chain may not provide the anticipated benefits, and experiencing sub-optimal inventory
levels, inventory availability or increases in its costs could adversely affect its business, financial condition, results of
operations and cash flows.
An unstable global economic and geopolitical landscape increases uncertainty about key areas of doing business
internationally and may have a negative impact on our business.
The United States has recently enacted and proposed to enact significant new tariffs. Additionally, the current administration
has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing
discussion and commentary regarding potential significant changes to U.S. trade policies, enforcement priorities, sanctions,
treaties and tariffs. Some of the Company’s merchandise is imported from various countries, including Canada, China and
Mexico, and newly proposed tariffs and any additional tariffs on products sourced from these or other countries could
materially increase our costs. There continues to exist significant uncertainty about the future economic and political
relationship between the U.S. and other countries. These developments, or the perception that any of them could occur, may
have a material effect on global economic conditions, the stability of global financial markets or global trade, which may in
turn impact product cost, disrupt supply chains or otherwise negatively impact our business, financial condition and results of
operation.
8
The Company’s reliance on suppliers, including freight carriers and other third parties in the Company’s global supply chain,
subjects it to various risks and uncertainties which could adversely affect its financial results.
The Company sources the products it sells from a wide variety of domestic and international suppliers, and places significant
reliance upon various third parties to transport, store and distribute those products to the Company’s distribution centers,
stores and customers. The Company’s financial results depend on it securing acceptable terms with its suppliers for, among
other things, the price of merchandise the Company purchases from them, funding for various forms of promotional
programs, payment terms and provisions covering returns and factory warranties. To varying degrees, the Company’s
suppliers may be able to leverage their competitive advantages - for example, their scale, financial strength, the strength of
their brand with customers, their own stores or online channels or their relationships with other retailers - to the Company’s
commercial disadvantage. Generally, the Company’s ability to negotiate favorable terms with its suppliers is more difficult
with suppliers for whom the Company purchases represent a smaller proportion of their total revenues, consequently
impacting the Company’s profitability from such vendor relationships. If the Company encounters any of these issues with its
suppliers, its business, financial condition, results of operations and cash flows could be adversely impacted.
In addition, the Company’s suppliers, including those within its global supply chain, are impacted by global conditions that in
turn may impact the Company’s ability to source merchandise at competitive prices or timely supply product at levels
adequate to meet consumer demand. For example, disruptions to the global supply chain resulting from lack of carrier
capacity, labor shortages, geopolitical unrest, changes in foreign trade policies, port congestion and/or closures, amongst
other factors, may negatively impact costs, inventory availability and operating results. If suppliers increase prices charged to
the Company for products, including transportation and distribution, as a result of these or other factors such as tariffs,
heightened trade compliance and sanctions enforcement, inflation or the cost of participating in vendor financing programs, it
may negatively impact the Company’s results. If the Company experiences transitions or changeover with any of its significant
vendors, or if its vendors experience financial difficulties or are otherwise unable to deliver merchandise to the Company on a
timely basis, or at all, the Company could have product shortages in its stores that could adversely affect customers’
perceptions of the Company and cause the Company to lose customers and sales.
If the Company is unable to keep its desired existing store locations or open new locations in desirable places on favorable
terms, it could adversely affect its business, financial condition, results of operations and cash flows.
The Company began undertaking a restructuring and asset optimization plan in late 2024, whereby it targeted closing
approximately 500 stores and 200 independent locations during 2025. However, it does intend to continue to open new
stores in attractive markets as it improves its business. 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
profitability of newly opened and existing locations’ will depend on the competition the Company faces as well as its ability to
properly stock, market and price the products desired by customers in their markets. The actual number and format of any
new locations to be opened and the success of the Company’s strategy will depend on a number of factors, including, among
other things:
•
the availability of desirable locations;
•
the negotiation of acceptable lease or purchase terms for new locations;
•
the availability of financial resources, including access to capital at cost-effective interest rates;
•
the Company’s ability to expand its online offerings and sales; and
•
the Company’s ability to manage the expansion and to hire, train and retain qualified team members.
The Company competes with other retailers and businesses for suitable locations for its stores. Local land use and zoning
regulations, environmental regulations and other regulatory requirements may impact its ability to find suitable locations and
influence the cost of constructing, renovating and operating its stores. In addition, real estate, zoning, construction and other
delays may adversely affect store openings and renovations and increase the Company’s costs. Further, changing local
demographics at existing store locations may adversely affect revenue and profitability levels at those stores. The early
termination or expiration of leases at existing store locations may adversely affect the Company if the renewal terms of those
leases are unacceptable to it and the Company is forced to close or relocate stores. If the Company determines to close or
relocate a store subject to a lease, the Company may remain obligated under the applicable lease for the balance of the lease
term. In addition to potentially incurring costs related to lease obligations, the Company may also incur employee-related
severance or other facility closure costs for stores that are closed or relocated.
9
Omnichannel growth in the Company’s business is complex and if the Company is unable to successfully maintain a
relevant omnichannel experience for its customers, its sales and results of operations could be adversely impacted.
Omnichannel and e-commerce retail are competitive and evolving environments. Operating an e-commerce platform is a
complex undertaking and exposes the Company to risks and difficulties frequently experienced by internet-based businesses,
including risks related to the Company’s ability to attract and retain customers on a cost-effective basis and its ability to
operate, support, expand and develop its internet operations, website, mobile applications and software and other related
operational systems.
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 the Company’s inventory management processes and systems, the effectiveness of its merchandising strategy
and mix, its supply chain and distribution capabilities, and the timing and effectiveness of its marketing activities, particularly
its promotions. Website or catalog downtime and other technology disruptions in its omnichannel business, including
interruptions due to cyber-related issues, aging informational technology infrastructure or natural disasters, as well as supply
and distribution delays and other related issues may negatively affect the Company’s operations. If the Company is not able to
successfully operate or improve its e-commerce platform and omnichannel business, the Company may not be able to provide
a relevant shopping experience or improve customer traffic, sales or margins, and the Company’s reputation, operations,
financial condition, results of operations and cash flows could be materially adversely affected.
The Company depends on the services of many qualified executives and other team members, whom the Company may
not be able to attract, develop and retain.
The Company’s success, to a significant extent, depends on the continued engagement, services and experience of its
executives and other team members. The Company’s ability to attract, develop and retain an adequate number of qualified
team members depends on factors such as employee morale, the Company’s reputation, competition from other employers,
availability of qualified personnel, its ability to offer competitive compensation and benefit packages and its ability to
maintain a safe working environment. Failure to recruit or retain qualified team members may impact the Company’s ability
to serve its customers, increase its costs and impair its efficiency and 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, impair the Company’s ability to execute, distract other team members from their key areas of focus
or otherwise negatively impact the Company’s business and results. If the Company is unable to attract and retain personnel
with expertise in the required areas, there may be disruptions in its financial processes and reporting, or higher likelihood of
control deficiencies or future material weaknesses in internal control over financial reporting.
The Company operates in a competitive labor market and has been investing in key roles in its frontline organization, and
there is a risk that increases in compensation could have an adverse effect on the Company’s profitability. Additionally,
government regulated increases to employee hourly wage rates, along with the Company’s ability to implement
corresponding adjustments within its labor model and wage rates, could have a negative impact on its profitability.
Approximately 1.5% of the Company’s team members are represented by unions. If these team members, or if non-union
team members, were to engage in a strike, work stoppage, or other slowdown, or if the terms and conditions in labor
agreements were renegotiated, the Company could experience a disruption in its operations and higher ongoing labor costs.
The Company has established policies and procedures to help maintain the privacy and security of its customers, suppliers,
and team members, as well as the security and functioning of its technology (business information, computer systems,
website and other online offerings). In the event of a security breach or other cyber security event, the Company could
experience adverse operational effects or interruptions and/or become subject to legal or regulatory proceedings, any of
which could result in substantial costs and damage to its reputation in the marketplace. To date the Company is not aware
that it has experienced a material cyber security incident.
The nature of the Company’s business requires it to receive, retain and transmit certain personal information (PI) about its
customers, suppliers and team members. Some of this PI is managed by or shared with third-party service providers. The
Company uses contractual provisions and certain third-party risk management processes to protect such PI and other
confidential information and to help ensure that technology functions remain operational.
Despite these efforts, a compromise of the Company’s data security systems or those of businesses it interacts is possible.
This could result in information being obtained by unauthorized persons, adverse operational effects, interruptions or other
failures that could have a material adverse effect on the Company’s business, financial condition, results of operations and
cash flows. The Company develops, maintains and updates processes and systems to help reduce the likelihood of an
occurrence.
10
Information Security controls 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 Company leverages a risk-based approach to selecting controls to reduce the likelihood of a failure.
The cost of complying with stricter and more numerous, complex state data privacy laws (such as the California Consumer
Privacy Act), data collection and information security laws and standards is also significant to the Company. Such laws and
standards increase the Company’s responsibility and liability in relation to personal data that it processes, and the Company
may be required to put in place additional mechanisms ensuring compliance with privacy laws and regulations.
Additionally, since the Company does not control its third-party service providers and its ability to monitor their data security
is limited, the Company cannot ensure the security measures they take will be sufficient to protect the Company’s data.
Despite the Company’s efforts, its security measures may be breached 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.
The Company maintains 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 the Company’s equipment, its network, third-party providers, or unauthorized
access could result in significant operational difficulties including legal and financial exposure and damage to the Company’s
reputation that could potentially have an adverse effect on its business.
If the Company is unable to successfully integrate future acquisitions into its existing operations or implement joint
ventures or other strategic relationships, it could adversely affect the Company’s business, financial condition, results of
operations and cash flows.
The Company may continue to make strategic acquisitions and enter into strategic relationships as an element of its strategy.
Acquisitions, joint ventures and other strategic relationships involve certain risks that could cause the Company’s growth and
profitability to differ from its expectations. The success of these acquisitions and relationships depends on a number of
factors, including but not limited to:
•
the Company’s 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;
•
the Company’s ability to obtain the full benefits envisioned by strategic transactions or relationships;
•
the risk that management’s attention may be distracted;
•
the Company’s ability to attract and retain key personnel;
•
the Company’s 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 the Company’s 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 the Company; and
•
loss contingencies that the Company 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.
11
The Company is dependent on its suppliers to supply it with products that comply with safety and quality standards at
competitive prices.
The Company is dependent on its vendors continuing to supply it with quality products on payment terms that are favorable
to the Company. The current geopolitical environment, including tariffs, customs and trade and economic sanctions, may
require us to change our supply chain or to source products from different regions, which could come with risks. If the
Company’s merchandise offerings do not meet its customers’ expectations regarding safety, innovation and quality, the
Company could experience lost sales, increased costs and exposure to legal and reputational risk. The Company’s suppliers
are subject to applicable product safety laws, and the Company is dependent on them to ensure that the products the
Company buys comply with all safety and quality standards. The Company also has established standards for product safety
and quality and workplace standards that it requires all its suppliers to meet. The Company does not condone human
trafficking, forced labor, child labor, harassment or abuse of any kind, and it expects its suppliers to operate within these
same principles and legal requirements. The Company’s ability to find qualified suppliers who can supply products in a timely
and efficient manner that meet the Company’s standards, timeline and other needs can be challenging. Events that give rise
to actual, potential or perceived product safety concerns could expose the Company 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 the Company’s suppliers are subject to additional government regulation of their product
design and/or manufacturing processes, or the imposition of new tariffs, the cost of the merchandise the Company purchases
may rise. In addition, negative customer perceptions regarding the safety or quality of the products the Company sells could
cause its customers to seek alternative sources for their needs, resulting in lost sales. In those circumstances, it may be
difficult and costly for the Company to regain the confidence of the Company’s customers.
Because the Company is involved in litigation from time to time, and is subject to numerous laws and governmental
regulations, the Company could incur substantial judgments, fines, legal fees and other costs.
The Company is 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, the company is 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 products,
real estate and product defects. The damages sought against the Company in some of these litigation proceedings are
substantial. Although the company maintains liability insurance for some litigation claims, if one or more of the claims were to
greatly exceed the Company’s insurance coverage limits or if the Company’s insurance policies do not cover a claim, this could
have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows. For
instance, the company is subject to a potential securities class action regarding past public disclosures (See Item 3. Legal
Proceedings of this Annual Report on Form 10-K) and to numerous lawsuits alleging injury as a result of exposure to asbestos-
containing products (see Note 14. Contingencies, of the Notes to the Consolidated Financial Statements included herein).
The Company is subject to numerous federal, state and local laws and governmental regulations relating to, among other
things, environmental protection, product quality and safety standards, weights and measures, building and zoning
requirements, labor and employment, discrimination, anti-bribery/anti-corruption, false claims, data privacy, income taxes
and trade sanctions and compliance. Compliance with existing and future laws and regulations could increase the cost of
doing business and adversely affect the Company’s results of operations. If the company fails to comply with existing or future
laws or regulations, the Company may be subject to governmental or judicial fines or sanctions while incurring substantial
legal fees and costs as well as reputational risk. In addition, the Company’s capital and operating expenses could increase due
to remediation measures that may be required if the Company is found to be noncompliant with any existing or future laws or
regulations.
Business interruptions may negatively impact the Company’s 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, wildfires or other natural disasters, war or acts of terrorism, civil or geopolitical unrest,
public health issues, epidemics or pandemics or the threat of any of these incidents or others, may have a negative impact on
the Company’s ability to obtain merchandise to sell in the Company’s stores, result in certain of stores being closed for an
extended period of time, negatively affect the lives of the Company’s customers or team members, or otherwise negatively
impact the Company’s operations. Some of the Company’s 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 the company cannot obtain such merchandise from other sources at similar costs and without an adverse
delay, sales and profit margins may be negatively affected.
12
In the event that commercial transportation, including the global shipping industry, is curtailed or substantially delayed, the
business may be adversely impacted due to difficulty receiving merchandise from the Company’s suppliers and/or
transporting it to the Company’s stores.
Terrorist attacks, warfare, geopolitical instability, 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 the Company and the Company’s suppliers, and also negatively impact customers’ disposable income,
causing an adverse impact on the Company’s business, sales, profit margins and results of operations.
The Company has extensive reliance on computer systems and the systems of business partners to manage data or 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 computer systems of the Company or its
business partners fail, the company may experience loss of critical data and interruptions or delays in the Company’s 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 the Company may employ may not suffice in any
particular situation to avoid a significant adverse impact to the business, financial condition and results of operations.
Risks Related to the Company’s Industry and the Business Environment
If overall demand for the products that the Company sells declines, the Company’s business, financial condition, results of
operations and cash flows will suffer. Decreased demand could also negatively impact the Company’s stock price.
Overall demand for products the Company sells depends on many factors and may decrease due to any number of reasons,
including:
•
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 the Company’s 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 the Company’s business, or lead to other significant weather conditions that could
impact the Company’s 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 the Company’s physical stores and may cause fewer customers to order aftermarket parts on the Company’s
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 the Company’s 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.
13
The Company 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 the Company’s 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 the Company sells to new
vehicles coming into production. The Company 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 the Company or its suppliers. The Company’s inability to appropriately respond to such changes,
adapt the Company’s business to meet evolving demands or innovate to remain competitive could adversely impact the
Company’s business, financial condition, results of operations or cash flows.
If the Company is unable to compete successfully against other companies in the automotive aftermarket industry, the
Company may lose customers and market share and the Company’s 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. The Company competes 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 the Company’s competitors may possess advantages over the Company in certain markets the
Company shares, 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, distribution network, product
availability, employee staffing, prices and product warranties. Internet-based retailers may possess cost advantages over the
Company due to lower overhead costs, time and travel savings and ability to price competitively. In order to compete
favorably, the Company may need to increase availability, change inventory assortment, increase delivery speeds, incur higher
shipping costs or lower prices, any of which could adversely impact the Company’s financial results. Consolidation among the
Company’s 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 the Company competes.
In addition, the Company’s reputation is critical to the Company’s continued success. Customers are increasingly shopping,
reading reviews and comparing products and prices online. If the Company fails 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 the Company’s integrity and reputation, the Company could lose customers due to competition. The products the Company
sells are both third-party vendor brands and the Company’s owned brands. If the perceived quality or value of the brands the
Company sells declines in the perception of its customers, the Company’s results of operations could be negatively affected.
Competition may require the Company to reduce its prices below the Company’s normal selling prices or increase the
Company’s promotional spending, which could lower the Company’s revenue and profitability. Competitive disadvantages
may also prevent the Company from introducing new product lines, require the Company to discontinue current product
offerings, or change some of the Company’s current operating strategies. If the Company does not have the resources,
expertise and consistent execution, or otherwise fail to develop successful strategies, to address these potential competitive
disadvantages, the Company may lose customers and market share, the Company’s revenues and profit margins may decline
and the Company may be less profitable or potentially unprofitable.
The Company’s inventory and ability to meet customer expectations may be adversely impacted by factors out of the
Company’s control.
For the portion of the Company’s inventory manufactured and/or sourced outside the United States, geopolitical changes,
changes in trade regulations or tariff rates, currency fluctuations, work stoppages, labor strikes, unionizing activity, port
delays, shipping disruptions, civil unrest, natural disasters, pandemics and other factors beyond the Company’s control may
increase the cost of items the Company purchases, lead to lengthy delays in acquiring products or create shortages that could
have a material adverse effect on the Company’s sales and profitability. In addition, unanticipated changes in consumer
preferences or any unforeseen hurdles in meeting the Company’s customers’ needs for automotive products (particularly
parts availability) in a timely manner could undermine the Company’s business strategy.
14
Deterioration of general macroeconomic conditions, including unemployment, inflation or deflation, rising consumer debt
levels, and/or high fuel and energy costs, could have a negative impact on the Company’s business, financial condition,
results of operations and cash flows due to impacts on the Company’s suppliers, customers and operating results.
The Company’s business depends on developing and maintaining close relationships with the Company’s suppliers and on the
Company’s suppliers’ ability and willingness to sell quality products to the Company at favorable prices and terms. Many
factors outside the Company’s control may harm these relationships and the ability or willingness of these suppliers to sell the
Company 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 the Company’s 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 the Company’s product requirements. Financial or operational difficulties that some of the Company’s suppliers may
face could also increase the cost of the products the Company purchases from them or the Company’s ability to source
products from them. The Company might not be able to pass its increased costs on to its customers. If the Company’s
suppliers fail to develop new products, the Company may not be able to meet the demands of the Company’s customers and
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 the Company’s relationship with certain suppliers, and could lead to less
competition and result in higher prices. The Company 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 the Company’s 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 the Company’s customers, resulting in fewer parts failures and a reduced need for elective
maintenance.
Rising energy prices also directly impact the Company’s operating and product costs, including the Company’s store, supply
chain, professional delivery, utility and product acquisition costs.
Risks Related to the Company’s Common Stock and Financial Condition
The Company’s level of indebtedness, a downgrade in the Company’s credit ratings or a deterioration in global credit
markets could limit the cash flow available for operations and could adversely affect the Company’s ability to service its
debt or obtain additional financing.
The Company’s level of indebtedness could restrict the Company’s operations and make it more difficult for it to satisfy its
debt obligations. For example, the Company’s level of indebtedness could, among other things:
•
affect the Company’s liquidity by limiting the Company’s ability to obtain additional financing for working capital;
•
limit the Company’s ability to obtain financing for capital expenditures and acquisitions or make any available
financing more costly;
•
require the Company to dedicate all or a substantial portion of the Company’s cash flow to service the Company’s
debt, which would reduce funds available for other business purposes, such as capital expenditures, dividends or
acquisitions;
•
limit the Company’s flexibility in planning for or reacting to changes in the markets in which the Company competes;
•
place the Company at a competitive disadvantage relative to the Company’s competitors who may have less
indebtedness;
•
render the Company more vulnerable to general adverse economic and industry conditions; and
•
make it more difficult for the Company to satisfy the Company’s financial obligations.
The indentures governing the Company’s senior unsecured notes and credit agreement governing the Company’s credit
facilities contain financial and other restrictive covenants. The Company’s 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 its debt, including such notes.
15
In addition, the Company’s overall credit rating may be negatively impacted by the Company’s performance, deteriorating and
uncertain credit markets or other factors that may or may not be within the Company’s control. The interest rates on the
Company’s revolving credit facility are linked directly to the Company’s credit ratings and the interest rates on future debt the
Company issues or incurs likely would be affected by the Company’s credit ratings in effect at the time such debt is issued or
incurred. Accordingly, negative impact on the Company’s credit ratings may result in higher interest rates and interest
expense on any borrowings under the Company’s revolving credit facility and less favorable terms on the Company’s other
operating and financing arrangements, including additional debt the Company 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 the Company’s vendors based on the Company’s credit rating, which could result in increased working capital
requirements. Furthermore, the Company’s revolving credit facility contemplates securitization of the facility in the event of
further downgrade in credit ratings. Securitization of the Company’s assets may make it more difficult for the Company to
access financing on favorable terms.
Conditions and events in the global credit market could have a material adverse effect on the Company’s access to short- and
long-term borrowings to finance the Company’s operations and the terms and cost of that debt. It is possible that one or
more of the banks that provide the Company with financing under its revolving credit facility may fail to honor the terms of
the Company’s 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 the Company’s business, financial condition, results of operations and cash flows.
The market price of the Company’s common stock may be volatile and could expose us to securities class action litigation.
The stock market and the price of the Company’s common stock may be subject to wide fluctuations based upon general
economic and market conditions in addition to the Company’s public perception and performance. Downturns in the stock
market may cause the price of the Company’s common stock to decline. The market price of the Company’s stock may also be
affected by the Company’s ability to meet analysts’ expectations or financial guidance that the Company provides to the
investment community. Inability to accurately forecast the Company’s operational and financial performance could increase
volatility in the Company’s stock. Failure to meet expectations set by the Company or its analysts, even slightly, could have an
adverse effect on the price of the Company’s 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 the Company’s attention and resources, which could have an adverse effect on
the Company’s business. For example, a potential securities class action regarding past public disclosures and a related
derivative shareholder litigation suit have been filed against the Company following a period of significant decline in the
Company’s stock price (See Item 3. Legal Proceedings of this Annual Report on Form 10-K).
The amount and frequency of the Company’s share repurchases and dividend payments may fluctuate.
The amount, timing and execution of the Company’s share repurchase program may fluctuate based on the Company’s
priorities for the use of cash for other purposes such as operational spending, capital spending, acquisitions or repayment or
repurchase of debt. Changes in operational results, cash flows, tax laws and the Company’s share price could also impact the
Company’s share repurchase program and other capital activities. The Company’s revolving credit facility contains restrictions
on the Company’s ability to increase its dividend to shareholders and generally prohibits open market repurchases of the
Company’s stock. Additionally, decisions to return capital to stockholders, including through the Company’s repurchase
program or the issuance of dividends on the Company’s common stock, remain subject to determination of the Company’s
Board of Directors that any such activity is in the best interests of the Company’s stockholders and is in compliance with all
applicable laws and contractual obligations.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
The Company has processes in place for assessing, identifying and managing risks from potential cyber threats and
vulnerabilities. To protect the Company’s information systems from cyber threats, the Company uses a variety of tools,
controls, technologies, methods, systems and other processes that are designed to prevent, detect, escalate, investigate,
mitigate and/or remediate data loss, theft, misuse, unauthorized access or other security incidents or vulnerabilities affecting
information systems and data.
16
The Company’s Chief Information Security Officer (“CISO”) and Vice President, Chief Audit Executive, who oversees the
Company’s enterprise risk management (“ERM”) framework, partner on definition and treatment of cyber risks. Cybersecurity
is a component of the Company’s ERM framework and processes. The Company utilizes a range of capabilities to help identify
and assess potential cyber threats and vulnerabilities, which feed into the development and regular updating of a risk
mitigation plan to help manage the Company’s cybersecurity risk posture. The Company evaluates cyber security risks on an
ongoing basis across several categories in terms of probability of the likelihood and magnitude of potential impact, using
evaluation results to inform areas of focus and prioritization.
The Company evaluates risks associated with use of third-party providers through a lifecycle-based approach, conducting risk-
based due diligence before engagement, using contractual provisions to apportion risk, and for certain third-party providers,
engaging in architectural review and validation at the beginning of engagement. The Company uses third parties to assist with
penetration testing, simulated attacks and survey and other threat intelligence reporting on third parties, as well as review
and enhancement of associated response processes.
The Company’s cyber risk mitigation plan is reviewed on a bimonthly cadence with a cross-functional Cyber Steering
Committee, the managerial governing body that regularly reviews the top cyber risks and receives reports on progress on key
cyber initiatives. The Company’s CISO leads the Cyber Steering Committee, which also includes individuals with experience
identifying and managing enterprise risks, including the Company’s President and Chief Executive Officer, Executive Vice
President, Chief Financial Officer, Executive Vice President, General Counsel and Corporate Secretary and Vice President, Chief
Audit Executive, as well as individuals with technical expertise in information technology, data governance and cyber matters
and/or experience in managing cyber incident responses, including the Company’s Executive Vice President, Chief Technology
Officer, Vice President, Information Technology Operations and Senior Vice President, Deputy General Counsel and Chief
Compliance Officer.
The Internal Audit function assesses cyber security risks and audits components of cyber security on an annual basis. At least
every three years, the Company uses an external party to evaluate the maturity of the program against the National Institute
of Standards and Technology (“NIST”) Cybersecurity Framework.
The Audit Committee of the Company’s Board of Directors is charged with reviewing, discussing with management and
overseeing the Company’s information technology and cybersecurity risk. The Audit Committee receives reports on
cybersecurity risk and management thereof at least semi-annually, and the full Board of Directors receives such reports at
least annually.
As of December 28, 2024, we are not aware of any instances of material cybersecurity incidents that impacted the Company
in the last three years.
Item 2. Properties.
The following table summarizes the location, ownership status and total square footage of space utilized for distribution
centers, principal corporate office and retail stores as of December 28, 2024:
Square Footage (in thousands)
Location
Leased
Owned
Distribution centers
28 locations in 22 U.S. states and three Canadian provinces
3,929
4,591
Executive office
Raleigh NC
245
—
Stores
4,639 stores in 48 U.S. states and two U.S. territories and
149 stores in six Canadian provinces
31,637
6,276
Item 3. Legal Proceedings.
Refer to discussion in Note 14. Contingencies, of the Notes to the Consolidated Financial Statements included herein for
information relating to legal proceedings.
Item 4. Mine Safety Disclosures.
Not applicable.
17
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The Company’s common stock is listed on the New York Stock Exchange under the symbol “AAP.”
As of February 21, 2025, there were 1,112 holders of record of 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 the Company’s common stock for the fourth quarter
ended December 28, 2024:
Period
Total Number
of Shares
Purchased (1)
Average Price
Paid per
Share (1)
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)
October 6, 2024 to November 2, 2024
— $
—
— $
947,339
November 3, 2024 to November 30, 2024
18,062 $
38.13
— $
947,339
December 1, 2024 to December 28, 2024
4,615 $
43.66
— $
947,339
Total
22,677 $
39.26
—
(1)
All repurchases reported in this table relate to the withholding of shares upon the vesting of restricted stock units to settle income tax liabilities (“net
settlement”). 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 $39.26 per share, during the twelve weeks ended December 28, 2024.
(2)
On February 8, 2022, the 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 the Board of Directors. Amendment No. 5 to the Company’s 2021 Credit Agreement currently
generally prohibits open market share repurchases.
18
Stock Price Performance
The following graph shows a comparison of the cumulative total return on the Company’s 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 the Company’s
common stock was $100.00 on December 28, 2019, 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 the
Company’s common stock.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
ADVANCE AUTO PARTS, INC., S&P 500 INDEX
AND S&P RETAIL INDEX
Advance Auto Parts
S&P 500 Index
S&P Retail Index
12/28/19
01/02/21
01/01/22
12/31/22
12/30/23
12/28/24
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
Company/Index
December
28, 2019
January 2,
2021
January 1,
2022
December
31, 2022
December
30, 2023
December
28, 2024
Advance Auto Parts
$
100.00 $
100.24 $
155.04 $
98.45 $
40.70 $
29.34
S&P 500 Index
$
100.00 $
118.08 $
151.98 $
124.46 $
157.17 $
199.46
S&P Retail Index
$
100.00 $
145.42 $
173.50 $
114.02 $
162.36 $
219.96
19
Item 6. Selected Quarterly Financial Data.
The following table sets forth the Company’s selected quarterly financial data. This data should be read along with
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s consolidated
financial statements and the related notes included elsewhere in this report.
On August 22, 2024, the Company entered into a definitive purchase agreement to sell Worldpac for $1.5 billion, with
customary purchase price adjustments for working capital and other items. The Company’s sale of Worldpac was progress
towards the changing landscape of the business with increased focus on the Advance blended-box model. The transaction
closed on November 1, 2024. Net proceeds from the transaction after paying transaction fees and excluding the impact of
taxes was approximately $1.47 billion. This was a strategic shift in the Company’s business, and as such, beginning in third
quarter of 2024, Worldpac was presented as discontinued operations in the Company’s Consolidated Financial Statements. As
a result, the Company has recast its quarterly results for 2024 and 2023.
For the year ended December 28, 2024, the decline in operating results was primarily due to inventory-related charges
attributable to liquidation sales as a result of store closures and streamlining inventory assortment resulting from the Board-
approved restructuring and asset optimization plan (“2024 Restructuring Plan”). Refer to Note 3. Restructuring of the Notes to
the Consolidated Financial Statements included herein for further details.
For the quarters ended
(in thousands, except per share data)
December 28, 2024
October 5, 2024
July 13, 2024
April 20, 2024
Net sales
$
1,996,025
$
2,147,991
$
2,177,836
$
2,772,475
Gross profit
347,117
907,898
949,465
1,204,041
Net (loss) income from continuing operations
(609,531)
(25,363)
30,506
17,433
Net income from discontinued operations
194,754
19,349
14,485
22,579
Net (loss) income
$
(414,777) $
(6,014) $
44,991
$
40,012
Basic (loss) earnings per common share from
continuing operations
$
(10.20) $
(0.42) $
0.51
$
0.29
Basic earnings per common share from discontinued
operations
3.26
0.32
0.24
0.38
Basic (loss) earnings per share
$
(6.94) $
(0.10) $
0.75
$
0.67
Diluted (loss) earnings per common share from
continuing operations
$
(10.16) $
(0.42) $
0.51
$
0.29
Diluted earnings per common share from
discontinued operations
3.24
0.32
0.24
0.38
Diluted (loss) earnings per share
$
(6.92) $
(0.10) $
0.75
$
0.67
20
For the quarters ended
(in thousands, except per share data)
December 30, 2023
October 7, 2023
July 15, 2023
April 22, 2023
Net sales
$
2,014,405
$
2,218,205
$
2,190,407
$
2,786,058
Gross profit
819,629
817,567
969,795
1,253,118
Net (loss) income from continuing operations
(35,190)
(74,186)
55,838
23,514
Net income from discontinued operations
62
12,149
22,739
24,809
Net (loss) income
$
(35,128) $
(62,037) $
78,577
$
48,323
Basic (loss) earnings per common share from
continuing operations
$
(0.59) $
(1.25) $
0.94
$
0.40
Basic earnings per common share from discontinued
operations
—
0.20
0.38
0.41
Basic (loss) earnings per share
$
(0.59) $
(1.05) $
1.32
$
0.81
Diluted (loss) earnings per common share from
continuing operations
$
(0.59) $
(1.24) $
0.94
$
0.39
Diluted earnings per common share from
discontinued operations
—
0.20
0.38
0.42
Diluted (loss) earnings per share
$
(0.59) $
(1.04) $
1.32
$
0.81
Note: Quarterly balances presented may not add up to the totals disclosed on the Consolidated Statements of Operations due to rounding.
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 the
Company’s consolidated historical financial statements and the notes to those statements that appear elsewhere in this
report. The Company’s discussion contains forward-looking statements based upon current expectations that involve risks and
uncertainties, such as the Company’s 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 the Company’s
financial condition and changes in the Company’s results of operations, liquidity and capital resources for the fiscal year ended
December 30, 2023 (“2023”) compared with the fiscal year ended December 31, 2022 (“2022”) 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 the Company’s Annual Report on Form 10-K for 2023, filed with the Securities and Exchange Commission
(“SEC”) on March 12, 2024, and the amended Annual Report on Form 10-K/A filed with the SEC on May 30, 2024 (collectively
the “2023 Form 10-K”). Amounts are presented in thousands, except per share data, unless otherwise stated.
Management Overview
On August 22, 2024, the Company entered into a definitive purchase agreement to sell Worldpac, and on November 1, 2024,
the Company completed the sale. As a result, Worldpac was presented as discontinued operations beginning in the third
quarter of 2024. Unless otherwise noted, the discussion below relates to the Company’s continuing operations.
A high-level summary of the Company’s financial results and other highlights from 2024 includes:
•
Net sales from continuing operations during 2024 were $9.1 billion, a decrease of 1.2% compared with 2023, driven by a
decrease in price and volume partially offset by a favorable product mix. Comparable store sales declined 0.7%.
•
Gross profit margin from continuing operations for 2024 was 37.5% of net sales, a decrease of 444 basis points compared
with 2023, primarily due to inventory-related charges attributable to the location closures and streamlining product
assortment resulting from the Board-approved restructuring and asset optimization plan (“2024 Restructuring Plan”).
•
Operating loss from continuing operations for 2024 was $713.3 million, a decrease of $752.2 million from 2023. As a
percentage of net sales, operating loss was 7.8%, a decrease of 827 basis points compared with 2023. This decrease was
primarily attributable to gross margin decline and the impairment of long-lived assets due to the 2024 Restructuring Plan.
•
Cash flows provided by operating activities from continuing operations was $140.5 million during 2024, a decrease of
0.9% compared with 2023, primarily attributable to an increase in net working capital offset by lower net income and
provision for deferred income taxes compared with 2023 prior year.
•
Diluted earnings per share (“Diluted EPS”) from continuing operations was a loss of $9.80 during 2024 compared with a
loss of $0.50 in 2023.
21
Refer to “Results of Operations” and “Liquidity and Capital Resources” for further details on the Company’s results.
Business and Risk Update
The Company continues to make progress on the various elements of its business plan, which is focused on improving the
customer experience, margin expansion, and driving consistent execution for both professional and DIY customers. To achieve
these improvements, the Company has undertaken planned strategic actions to help build a foundation for long-term success
across the organization, which include:
•
The completion of the sale of Worldpac with net proceeds of approximately $1.47 billion after transaction costs and
excluding the impacts of taxes;
•
Completing an assessment of the productivity of all assets, including company-owned stores and Carquest Independents,
to achieve merchandising excellence;
•
The 2024 Restructuring Plan designed to improve the Company’s profitability and growth potential and streamline its
operations;
•
Reducing costs to remain competitive while reinvesting in the frontline;
•
Making organizational changes to position the Company for success; and
•
Consolidating the Company’s supply chain.
On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan which is designed to
improve the Company’s profitability and growth potential and streamline its operations. This plan is supplemental to other
ongoing initiatives to simplify the Company's business and improve profitable growth and entails, among other items, certain
store and independent location closures, streamlining product assortment and headcount reductions and organizational
design changes to align the Company’s workforce to the expected needs of the Company's business. The Company is also
pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational efficiencies.
Refer to Liquidity and Capital Resources and Note 3. Restructuring for further details.
Industry Update
Operating within the automotive aftermarket industry, the Company is 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 this Management’s Discussion and Analysis of Financial Condition and Results of Operations, these
factors include, but are not limited to:
•
Inflationary pressures, including logistics and labor
•
Global supply chain disruptions
•
Cost of fuel
•
Miles driven
•
Unemployment rates
•
Interest rates
•
Consumer confidence and purchasing power
•
Competition
•
Changes in new car sales
•
Economic and geopolitical uncertainty
•
Increased foreign currency exchange volatility
While these factors tend to fluctuate, the Company remains confident in the long-term growth prospects for the automotive
parts industry.
22
Results of Operations
The following table sets forth certain of the Company’s operating data from continuing operations expressed as a percentage
of net sales for the periods indicated.
Year Ended
2024 vs.
2023
$ Change
Basis
Points
2023 vs.
2022
$ Change
Basis
Points
(in millions)
December 28, 2024
December 30, 2023
December 31, 2022
Net sales
$ 9,094.3
100.0 % $ 9,209.1
100.0 % $ 9,148.9
100.0 % $ (114.8)
— $
60.2
—
Cost of sales(1)
5,685.8
62.5
5,349.0
58.1
4,916.0
53.7
336.8
443.7
433.0
435.0
Gross profit
3,408.5
37.5
3,860.1
41.9
4,232.9
46.3
(451.6) (443.7)
(372.8) (435.0)
SG&A exclusive of
restructuring and
related expenses
3,812.9
41.9
3,805.2
41.3
3,708.3
40.5
7.7
60.6
96.9
78.8
Restructuring and
related expenses
308.9
3.4
16.0
0.2
—
—
292.9
322.3
16.0
17.4
SG&A
4,121.8
45.3
3,821.2
41.5
3,708.3
40.5
300.6
382.9
113.0
96.2
Operating (loss)
income
(713.3)
(7.8)
38.9
0.4
524.6
5.7
(752.2) (826.6)
(485.8) (531.2)
Interest expense
(81.0)
(0.9)
(88.0)
(1.0)
(50.8)
(0.6)
7.0
6.4
(37.1)
(40.0)
Loss on debt
extinguishment
—
—
—
—
(7.4)
(0.1)
—
—
7.4
8.1
Other income
(expense), net
26.2
0.3
1.9
0.0
(6.2)
(0.1)
24.3
26.8
8.1
8.8
Provision for income
taxes
(181.1)
(2.0)
(17.2)
(0.2)
99.7
1.1
(163.9) (180.6)
(116.8) (127.6)
Net (loss) income
from continuing
operations
$ (587.0)
(6.5) % $
(30.0)
(0.3) % $
360.5
3.9 % $ (557.0) (612.8) $ (390.6) (426.7)
Note: Table amounts may not foot due to rounding.
(1) Cost of sales includes $431.5 million of inventory-related charges attributable to the location closures and streamlining product
assortment resulting from the 2024 Restructuring Plan.
Net Sales
Net sales for 2024 were $9.1 billion, a decline of $114.7 million, or 1.2%, compared with 2023. Net sales was negatively
impacted by strategic pricing investments coupled with volume decline, partially offset by favorable product mix. Comparable
store sales declined 0.7%. Category growth was led by batteries, filters and engine management.
The Company calculates comparable store sales based on the change in store sales starting once a location has been open for
approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to
independently owned Carquest locations. Acquired stores are included in the Company’s comparable store sales one year
after acquisition. The Company includes sales from relocated stores in comparable store sales from the original date of
opening. Closed stores and stores in process of closing under the 2024 Restructuring Plan are not included in the comparable
store sales calculation. Comparable store 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 2024 was $3.41 billion, or 37.5% of net sales, compared with $3.86 billion, or 41.9% of net sales in 2023, a
decrease of 444 basis points. Gross profit as a percentage of net sales declined primarily due to $431.5 million of inventory-
related charges attributable to the location closures and streamlining product assortment associated with the 2024
Restructuring Plan and liquidation sales at closing stores and distribution center locations.
23
Selling, General and Administrative Expenses, Exclusive of Restructuring and Related Expenses
Selling, general and administrative (“SG&A”) expenses, exclusive of restructuring expenses for 2024 was $3.81 billion, or
41.9% of net sales, compared with $3.81 billion, or 41.3% of Net sales for 2023, an increase of 61 basis points. The increase in
SG&A expense as a percentage of net sales was primarily driven by higher labor-related costs attributable to wage-
investments in frontline team members and occupancy costs partially offset by a decline in marketing expenses.
Restructuring and Related Expenses
Restructuring and related expenses for 2024 was $308.9 million, or 3.4% of net sales. These expenses represent costs
primarily attributable to the 2024 Restructuring Plan and included $204.2 million of long-lived asset impairment and
accelerated amortization and depreciation charges, $19.7 million of distribution network optimization, $24.7 million of
incremental reserves of the collectibility of receivables resulting from contract terminations with independents, $15.2 million
severance and other labor related expenses and third party professional fees. Refer to Note 3. Restructuring of the Notes to
the Consolidated Financial Statements included for additional detail.
Interest Expense
Interest expense for 2024 was $81.0 million, a decrease of $7.0 million compared with 2023. This decrease was attributable to
an increase in interest income due to higher investment balances compared with the prior year. Refer to Note 7. 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
The Company’s Provision for income taxes for 2024 was a benefit of $181.1 million compared with a benefit of $17.2 million
for 2023, an increase of $164.0 million primarily due to a decrease in taxable income. The Company’s effective tax rate was
23.6% for 2024 and 36.4% for 2023. In 2024. The tax rate decreased compared with prior year primarily due to a tax benefit
resulting from a discrete charge related to share-based compensation, 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, Adjusted EPS, Adjusted
SG&A Margin, and Adjusted Operating Income, should not be used as a substitute for GAAP financial measures, or considered
in isolation, for the purpose of analyzing operating performance, financial position or cash flows.
The Company has presented these non-GAAP financial measures as the Company believes that the presentation of the
financial results that exclude (1) transformation expenses under the Company’s turnaround plans, inclusive of the Worldpac
divestiture (2) other significant expenses and (3) nonrecurring tax expense are useful and indicative of the Company's base
operations because the expenses vary from period to period in terms of size, nature and significance. These measures assist in
comparing the Company’s current operating results with past periods and with the operational performance of other
companies in the industry. The disclosure of these measures allows investors to evaluate the Company’s 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 the Company has determined are not normal, recurring cash
operating expenses necessary to operate the Company’s business and the rationale for why providing these measures is
useful to investors as a supplement to the GAAP measures.
Transformation Expenses — Expenses incurred in connection with the Company's turnaround plans and specific
transformative activities related to asset optimization that the Company does not view to be normal cash operating expenses.
These expenses primarily include:
•
Restructuring and other related expenses — Expenses relating to strategic initiatives, including severance expense,
retention bonuses offered to store-level employees to help facilitate the closing of stores, incremental reserves
related to the collectibility of receivables resulting from contract terminations with certain independents associated
with the 2024 Restructuring Plan and third-party professionals assisting in the development and execution of the
strategic initiatives.
24
•
Inventory write-down — Expenses relating to the incremental write-down of inventory to net realizable value due to
liquidation sales and streamlining inventory assortment due to store and distribution center closures associated with
the 2024 Restructuring Plan.
•
Impairment and write-down of long-lived assets - Expenses relating to the impairment of operating lease ROU assets
and property and equipment, incremental depreciation as a result of accelerating long-lived assets over a shorter
useful life, and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for
leases the Company expects to exit before the end of the contractual term, net of gains on lease terminations, in
connection with the 2024 Restructuring Plan and Other Restructuring Plan.
•
Distribution network optimization — Expenses primarily relating to the conversion of the stores and distribution
centers to market hubs, including temporary labor, incremental depreciation as a result of accelerating long-lived
assets over a shorter useful life, nonrecurring professional service fees and team member severance.
Other Expenses — Expenses incurred by the Company that are not viewed as normal cash operating expenses and vary from
period to period in terms of size, nature, and significance. These expenses primarily include:
•
Other professional service fees — Expenses relating to nonrecurring services rendered by third-party vendors
engaged to perform a strategic business review, including the Company’s transformation initiatives.
•
Worldpac post transaction-related expenses — Expenses primarily relating to non-recurring separation activities
provided by third-party professionals subsequent to the sale of Worldpac.
•
Executive turnover — Expenses associated with the hiring search for leadership positions and compensation.
•
Material weakness remediation — Incremental expenses associated with the remediation of the Company’s
previously-disclosed material weaknesses in internal control over financial reporting.
•
Cybersecurity incident— Expenses related to the response and remediation of a cybersecurity incident.
Nonrecurring Tax Expense — Income tax incurred by the Company from the book to tax basis difference in the Worldpac
Canada stock directly resulting from the sale of Worldpac.
The following table includes a reconciliation of this information to the most comparable GAAP measures:
25
Year Ended
Classification
December 28,
2024
December 30,
2023
Net loss from continuing operations (GAAP)
$
(586,955) $
(30,024)
Cost of sales adjustments:
Transformation expenses:
Inventory write-down
Restructuring
431,529
—
Selling, general and administrative adjustments:
Transformation expenses:
Restructuring and other related expenses (1)
Restructuring
60,682
7,835
Impairment and write-down of long-lived assets (2)
Restructuring
204,156
—
Distribution network optimization (3)
Restructuring
19,713
—
Other expenses:
Other professional service fees
Restructuring
15,533
—
Worldpac post transaction-related expenses
Restructuring
7,258
—
Executive turnover
Restructuring
1,561
8,152
Material weakness remediation
Non-restructuring
4,579
1,438
Cybersecurity incident
Non-restructuring
3,491
—
Other income adjustments:
TSA services
(2,537)
—
Provision for income taxes on adjustments (4)
(186,491)
(4,356)
Nonrecurring tax expense (5)
10,000
—
Adjusted net loss (Non-GAAP)
$
(17,481) $
(16,955)
Diluted loss per share from continuing operations (GAAP)
$
(9.80) $
(0.50)
Adjustments, net of tax
9.51
0.22
Adjusted EPS (Non-GAAP)
$
(0.29) $
(0.28)
(1) Restructuring and other related expenses included transactional expenses due to incremental receivable reserves resulting from contract terminations with
certain independents as part of the 2024 Restructuring Plan of $24.7 million, severance and other labor related costs of $15.2 million as part of the 2024
Restructuring Plan, and nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan of $20.8 million.
(2) During the fifty-two weeks ended December 28, 2024, the Company recorded impairment charges for ROU assets and property and equipment of
$171.4 million and incremental accelerated depreciation and amortization for property and equipment and ROU assets of $32.7 million.
(3) Distribution network optimization includes incremental depreciation as a result of accelerating long-lived assets over a shorter useful life of $5.0 million.
(4) The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments.
(5) Income tax incurred by the Company from the book to tax basis difference in the Worldpac Canada stock directly resulting from the sale of Worldpac.
Liquidity and Capital Resources
Overview
The Company’s primary cash requirements necessary to maintain the Company’s current operations include payroll and
benefits, inventory purchases, contractual obligations, capital expenditures, payment of income taxes, funding of initiatives
and other operational priorities, including payment of interest on the Company’s long-term debt. Historically, the Company
has also used available funds to repay borrowings under the Company’s credit facility, to periodically repurchase shares of the
Company’s common stock under the share repurchase program, to pay the Company’s quarterly cash dividend and for
acquisitions. The Company also anticipates using cash in connection with its restructuring and asset optimization plan. The
Company’s future uses of cash may differ, including with respect to the weight the Company places on the preservation of
cash and liquidity, degree of investment in the Company’s business and other capital allocation priorities.
26
Typically, the Company has funded its cash requirements primarily through cash generated from operations, supplemented by
borrowings under the Company’s credit facilities and note offerings as needed. Funds generated from the Company’s
expected results of operations, available cash and cash equivalents and available borrowings under its credit facility will be
sufficient to fund its obligations for the next year. The Company also believes 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 August 22, 2024, the Company entered into a definitive purchase agreement to sell its Worldpac business for $1.5 billion,
with customary adjustments for working capital and other items, as well as provision of letters of credit in an aggregate
amount of up to $200 million for up to 12 months following the closing of the transaction, which letter of credit exposure will
reduce to zero no later than 24 months after the closing, to support supply chain financing for the buyer. The transaction
closed on November 1, 2024. Net proceeds from the transaction after paying expenses and excluding the impact of taxes
were approximately $1.47 billion. The Company intends to use net proceeds from the transaction for general corporate
purposes, which may include the provision of additional working capital, funding internal operational improvement initiatives
and repayment or refinancing of outstanding indebtedness. The Company believes funds generated from its expected results
of operations, available cash and cash equivalents, net proceeds from the Worldpac sale and available borrowings under
credit facilities and note offerings as needed will be sufficient to fund its obligations for the next twelve months and beyond.
On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan which is designed to
improve the Company’s profitability and growth potential and streamline its operations. This plan anticipates closure of
approximately 500 stores, approximately 200 independent locations and four distribution centers by mid-2025, as well as
headcount reductions. As a result of the 2024 Restructuring Plan, the Company incurred $680.8 million of restructuring
expenses in 2024. The Company estimates that it will incur additional expenses of approximately $225.0 million to $275.0
million including $200.0 million to $250.0 million of cash expenses primarily composed of lease termination and other exit
expenses and professional services, by the end of fiscal year 2025.
As further described in Note 18. Supplier Finance Programs, the Company maintains certain supplier finance programs. Bank
participation and company utilization of those programs may vary based on a number of factors. If bank participation is
insufficient to cover planned utilization, the Company may experience shorter payable terms for inventory than anticipated,
which could impact its capital resources and capital allocation decisions.
Share Repurchase Program
In August 2019, the Company’s Board of Directors approved a share repurchase program. Under the program, the Company
was able to periodically repurchase shares of common stock at market prices through open market purchases effected
through a broker dealer and in privately negotiated transactions. The Board of Directors was able to increase or otherwise
modify, renew, suspend or terminate the share repurchase program without prior notice. On February 8, 2022, the
Company’s Board of Directors authorized an additional $1.0 billion toward the Company’s share repurchase program, an
increase to the $1.7 billion that had previously been authorized under the program. However, on November 13, 2024, the
Company entered into Amendment No. 5 to the 2021 Credit Agreement (as defined below), which generally prohibits open
market share repurchases.
During 2024 and 2023, the Company did not purchase any shares of its common stock under the share repurchase program.
The Company had $947.3 million remaining under the share repurchase program as of December 28, 2024. Refer to “Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” for further
details on the Company’s share repurchase program.
Capital Expenditures
The Company’s primary capital requirements have been the funding of the Company’s investments in information technology
and supply chain, e-commerce and maintenance of existing stores. The Company leases approximately 83% of the Company’s
stores.
The Company’s capital expenditures were $180.8 million in 2024, a decrease of $44.9 million from 2023, related to the
decrease of spend in information technology, fewer store openings and fewer marketing-related projects from 2023 to 2024.
The Company’s future capital requirements will depend in large part on the timing or number of the investments the
Company makes in information technology and supply chain network initiatives and existing stores and new store
development (leased and owned locations) within a given year. In 2025, the Company anticipates that the Company’s capital
expenditures related to such investments will be approximately $300 million but may vary with business conditions.
27
Analysis of Cash Flows
The following table summarizes the Company’s cash flows from operating, investing and financing activities:
Year Ended
(in thousands)
December 28,
2024
December 30,
2023
December 31,
2022
Cash flows provided by operating activities from
continuing operations
$
140,504 $
141,788 $
622,638
Cash flows (used in) provided by operating
activities from discontinued operations
(55,871)
145,587
113,933
Cash flows used in investing activities from
continuing operations
(167,406)
(218,750)
(399,520)
Cash flows provided by (used in) investing
activities from discontinued operations
1,522,160
(16,739)
(24,928)
Cash flows (used in) provided by financing
activities
(75,010)
189,267
(620,704)
Effect of exchange rate changes on cash
1,569
(8,487)
(8,664)
Net increase (decrease) in cash and cash
equivalents
$
1,365,946 $
232,666 $
(317,245)
Operating Activities
In 2024, cash flows provided by operating activities decreased $1.3 million to $140.5 million. The net decrease in cash flows
provided by operating activities was primarily attributable to lower net income and provision for deferred income taxes offset
by an increase in net working capital compared with 2023 prior year. Refer to “Results of Operations” for further details on
the Company’s results.
Investing Activities
In 2024, cash flows used in investing activities decreased $51.3 million to $167.4 million compared with 2023. This decrease
was attributable to fewer store openings, lower capital spend in information technology and marketing-related development
projects.
Financing Activities
In 2024, cash flows used in financing activities increased by $264.3 million to $75.0 million compared with 2023. The net
increase in cash used in financing activities was attributable to the issuances of senior unsecured notes in the prior year
partially offset by a decrease in dividends paid in the current year compared with 2023.
The Company’s Board of Directors has declared a quarterly cash dividend since 2006. Any payments of dividends in the future
will be at the discretion of the Company’s Board of Directors and will depend upon the Company’s results of operations, cash
flows, capital requirements and other factors deemed relevant by the Company’s Board of Directors. In addition, Amendment
No. 5 to the 2021 Credit Agreement prevents the Company from increasing its cash dividends.
Long-Term Debt
On March 9, 2023, the Company issued the 5.90% senior unsecured notes due 2026 (the “2026 Notes”) at 99.94% of the
principal amount of $300.0 million and the 5.95% senior unsecured notes due 2028 (the “2028 Notes”) at 99.92% of the
principal amount of $300.0 million. The 2026 Notes and 2028 Notes bear interest at a rate of 5.90% and 5.95%, respectively,
and are payable semi-annually in arrears in March and September. Proceeds from the Company’s 2026 and 2028 Notes were
utilized to make repayments on the Company’s revolving facility and supplement operational and capital expenditures.
For additional information on transactions entered into relating to long-term debt during the fifty-two weeks ended
December 28, 2024, refer to Note 7. Long-term Debt and Fair Value of Financial Instruments of the Notes to the Consolidated
Financial Statements included herein.
28
As of February 26, 2025, the Company had a credit rating from S&P of BB+ and from Moody’s Investor Service of Ba1. The
current outlooks by S&P and Moody’s were negative and stable, respectively. The current pricing grid used to determine the
Company’s borrowing rate under the Company’s revolving credit facility is based on the Company’s credit ratings. If the
Company’s credit ratings decline, it would negatively impact the Company’s interest rate, and the Company’s access to
additional financing on favorable terms may be limited. In addition, the Company’s current revolving credit facility would
require securitization in the event of further decline in the Company’s credit rating from S&P. As previously disclosed, a
decline in credit ratings or perceived creditworthiness, among other factors, may impact participation in supplier finance
programs, which in turn could shorten payable terms, result in an increase in working capital requirements or otherwise
negatively impact capital resources.
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 the Company’s 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. The
Company’s captive insurance subsidiary, an insignificant wholly-owned subsidiary of the Issuer, does not serve as guarantor of
the Company’s senior unsecured notes.
Contractual and Off Balance Sheet Obligations
The Company entered into operating leases for certain store locations, distribution centers, office spaces, equipment and
vehicles. The Company’s property leases generally contain renewal and escalation clauses and other concessions. These
provisions are considered in the Company’s calculation of the Company’s 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 the Company’s minimum lease payment calculations. As of December 28, 2024, the Company’s operating
lease obligations were $2.4 billion. As of December 28, 2024, the Company’s long-term debt, consisting of senior unsecured
notes with varying maturities through 2032, was $1.8 billion. Future interest payable related to long-term debt was $380.0
million as of December 28, 2024. As part of the Company’s normal operations, the Company enters 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 28, 2024, the Company’s purchase commitments were $147.5 million.
On February 27, 2023, the Company entered into Amendment No. 1 (“Amendment No. 1”) 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 (“2021 Credit Agreement”). Amendment No. 1
extended the maturity date of the 2021 Credit Agreement by one year from November 9, 2026, to November 9, 2027.
Amendment No. 1 also replaced 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 the 2021 Credit Agreement. Amendment
No. 1 made no other material changes to the terms of the 2021 Credit Agreement. On August 21, 2023, the Company entered
into Amendment No. 2 (“Amendment No. 2”) to the 2021 Credit Agreement in order to amend certain financial covenants
related to the Consolidated Coverage Ratio (as defined therein), and on November 20, 2023, the Company entered into
Amendment No. 3 (“Amendment No. 3”) to the 2021 Credit Agreement in order to further amend financial covenants related
to the Consolidated Coverage Ratio. Pursuant to Amendment No. 2 and Amendment No. 3, the Company may not permit the
Consolidated Coverage Ratio to be less than (a) 1.75 to 1.00 for each period of four fiscal quarters ending on October 7, 2023
through and including the period of four fiscal quarters ending on October 5, 2024, (b) 2.00 to 1.00 for each period of four
fiscal quarters ending on December 28, 2024 through and including the period of four fiscal quarters ending on October 4,
2025 and (c) 2.25 to 1.00 for each period of four fiscal quarters ending after October 4, 2025. Amendment No. 2. and
Amendment No. 3 made no other material changes to the terms of the 2021 Credit Agreement.
On February 26, 2024, the Company entered into Amendment No. 4 (“Amendment No. 4”) to the 2021 Credit Agreement to
enable certain addbacks to the definition of Consolidated EBITDA contained therein for specific write-downs of inventory and
vendor receivables. Amendment No. 4 also updated certain limitations on future incurrences of other indebtedness and liens,
replacing the cap thereon of 10% of consolidated net tangible assets with $400 million, and eliminated the $250 million
basket for accounts receivable securitization transactions. Amendment No. 4 made no other material changes to the terms of
the 2021 Credit Agreement. In addition to the Company’s Consolidated Coverage Ratio requirement, the Company was
required to maintain a maximum leverage ratio of 3.75 to 1.00. On November 13, 2024, the Company entered into
Amendment No. 5 to the 2021 Credit Agreement. Amendment No. 5 (i) permits up to $575 million of certain restructuring
charges to be added back to Consolidated EBITDAR (as defined therein), (ii) permits up to $800 million of unrestricted cash to
be netted out of debt in the calculation of the Leverage Ratio (as defined therein), and (iii) reduced the minimum
Consolidated Coverage Ratio (as defined therein) to 1.50 to 1.00 through July 12, 2025 and 1.75 to 1.00 thereafter.
Amendment No. 5 also reduced the unsecured revolving credit facility under the 2021 Credit Agreement from $1.2 billion to
$1.0 billion and amended the pricing on the loans thereunder in connection with changes in the Company’s credit ratings.
29
Amendment No. 5 also updated certain covenants and other limitations on the Company, including (i) expanding the scope of
the covenant restricting the ability to create, incur or assume additional debt to cover Advance Auto Parts, Inc., (ii) restricting
the Company’s rights to complete share repurchases and increase cash dividend amounts, (iii) requiring the Company to grant
liens on deposit accounts, inventory and accounts receivables if credit ratings are downgraded below a minimum threshold,
(iv) imposing an additional monthly minimum daily liquidity financial covenant of $750 million, (v) providing for the maturity
date under the 2021 Credit Agreement to automatically spring forward to the extent necessary for the 2021 Credit Agreement
to mature at least 91 days prior to any scheduled maturity date under any of the Company’s senior unsecured notes, (vi)
prohibiting further extensions of the maturity date under the 2021 Credit Agreement beyond the existing maturity date, and
(vii) eliminating certain baskets for additional indebtedness, liens, and asset sales.
On February 25, 2025, the Company entered into Amendment No. 6 (“Amendment No. 6”) to the 2021 Credit Agreement to,
among other things, (i) expand the scope of domestic subsidiaries that would be required to grant security interests and
guarantee the Company’s obligations under the 2021 Credit Agreement upon the occurrence of a Springing Lien Trigger Event
(as defined therein) to include all of the Company’s subsidiaries other than the Company’s Insignificant Subsidiaries (as
defined in Amendment No. 6), (ii) revise the definition of Consolidated Coverage Ratio to exclude up to $175 million of
accelerated rent charges related to lease buyouts and to permit the minimum Consolidated Coverage Ratio to remain at 1.50
to 1.00 for one additional quarter before increasing to 1.75 to 1.00 on and after the fiscal quarter ending on January 3, 2026,
(iii) revise the definition of Consolidated EBITDA to increase the threshold for Identified Restructuring Charges (as defined
therein) from $575 million to $625 million, and (iv) expand the scope of the guaranteed obligations to include bank product
obligations and cash management obligations.
The Company’s compliance with these covenants will depend upon achieving the Company’s financial targets including
improvements in operating income. As of December 28, 2024, giving consideration to the amendments to the Company’s
2021 Credit Agreement through that date, the Company was in compliance with the financial covenants required thereby. The
Company currently expects to be in compliance with these financial covenants for the next 12 months. However, risk of
noncompliance increases if the Company’s financial performance worsens or the Company is required to increase borrowings
to fund operations. If the Company is not in compliance with the financial covenants required by the 2021 Credit Agreement,
and cannot timely secure an amendment or waiver thereof, the Company would be in default of the 2021 Credit Agreement
and the Company’s outstanding senior unsecured notes, which would have a material adverse impact on the Company’s
financial condition.
Critical Accounting Policies
The Company’s financial statements have been prepared in accordance with GAAP. The Company’s 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 the Company’s
management. The Company’s estimates and judgments are based on currently available information, historical results and
other assumptions the Company believes are reasonable. Actual results could differ materially from these estimates.
The preparation of the Company’s financial statements included the following significant estimates and exercise of judgment.
Vendor Incentives
The Company receives 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 received 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 the Company’s 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.
30
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. The Company’s estimate of the portion of deferred revenue that will be realized
within one year of the balance sheet date is included in Other current liabilities. Earned amounts that are receivable from
vendors are included in Receivables, net, except for that portion expected to be received after one year, which is included in
Other assets, net. The Company regularly reviews the receivables from vendors to ensure they are able to meet their
obligations. Historically, the change in the Company’s reserve for receivables related to vendor funding has not been
significant.
Self-Insurance Reserves
The Company’s 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 the
Company’s historical claims experience. Specific factors include, but are not limited to, assumptions about health care costs,
the severity of accidents, 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. The Company classifies the portion of the Company’s self-
insurance reserves that is not expected to be settled within one year in Other long-term liabilities.
While the Company does not expect the amounts ultimately paid to differ significantly from the Company’s estimates, the
Company’s 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 the Company’s self-insurance liabilities
at December 28, 2024 would result in a change in expense of approximately $14.1 million for 2024.
Excess and Obsolete Inventory Reserves
The Company’s excess and obsolete inventory reserve assessment includes analyzing the Company’s inventory at the SKU
level by assessing each SKU quantity based on years on hand, the stage within the product lifecycle the SKU is assigned and
sales history. From this data analysis, the Company’s excess and obsolete inventory is identified, analyzed and compared
against the Company’s reserve. Additionally, from time to time, specific SKUs may be identified as excess and/or obsolete for
which a reserve will be recognized.
The Company classifies each product into a product lifecycle category: introduction, expansion, saturation, reduction and
disposition. This assessment is routinely performed and includes, but is not limited to, the analysis of anticipated, historical
and actual demand; and changes in customer preferences. SKU-level classifications are updated as warranted.
Restructuring and Related Expenses
The Company records restructuring and transformation activities when management commits to and approves a restructuring
plan. The components of a restructuring plan require significant management judgments and estimates that would materially
impact reported performance if different assumptions were used and have a significant uncertainty in measurements.
Impairment of inventory is recognized when the cost of inventory exceeds its net realizable value. There are significant
assumptions required by management to estimate the net realizable value associated with inventory located at the stores and
distribution centers to be closed, including the anticipated sell through rate and estimated sales proceeds less costs to sell.
Asset impairment charges associated with operating lease right-of-use (“ROU”) assets are recognized when the ROU carrying
value exceeds its fair value. There are significant assumptions required by management to estimate the fair value of ROU
assets, including the market rental rates and discount rates utilized in the discounted cash flow model. Severance and
retention costs associated with workforce reductions are recognized at the time of communication to employees, unless
future service is required, in which case the costs are recognized ratably over the future service period. Employee termination
benefits are recognized as a liability when it is probable that a liability exists, and the amount is reasonably estimable. Other
exit-related costs, including nonrecurring professional fees, are recognized as incurred. Restructuring expenses are recognized
as an operating expense in cost of sales or selling, general and administrative expenses within the consolidated statements of
operations and related liabilities are recorded within accounts payable and accrued expenses on the consolidated balance
sheets. The Company periodically evaluates and, if necessary, adjusts its estimates based on currently available information.
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 the consolidated financial statements, see “Recently Issued Accounting Pronouncements” in Note
2. Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included herein.
31
Item 7A. Quantitative and Qualitative Disclosures about Market Risks.
The Company is subject to interest rate risk to the extent the Company borrows against its revolving credit facility as it is
based, at the Company’s option, on adjusted Term Secured Overnight Financing Rate (“SOFR”) plus a margin, or an alternate
base rate plus a margin. As of December 28, 2024 and December 30, 2023, the Company had no borrowings outstanding
under its revolving credit facility.
The Company’s financial assets that are exposed to credit risk consist primarily of trade accounts receivable and vendor
receivables. The Company is exposed to normal credit risk from customers. The Company’s concentration of credit risk is
limited because the Company’s 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. The Company has not historically had significant credit losses.
The Company is exposed to foreign currency exchange rate fluctuations for the portion of its inventory purchases
denominated in foreign currencies. The Company believes that the price volatility relating to foreign currency exchange rates
is partially mitigated by the Company’s ability to adjust selling prices. During 2024 and 2023, 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 Exchange Act) are
management’s controls and other procedures that are designed to ensure that information required to be disclosed by
management in the Company’s reports that are filed or submitted 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 management, including the Company’s 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
Management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the
effectiveness of its disclosure controls and procedures as of December 28, 2024. Based on this evaluation, the Company’s
principal executive officer and our principal financial officer have concluded that, as of the end of the period covered by this
report, the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable
assurance level.
32
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the
Company as defined in Rule 13(a) - 15(f) under the Exchange Act. Management’s 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. Management’s
internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with GAAP, and that its receipts and expenditures are being made only in accordance with authorizations of management and
directors; and (3) provide “reasonable assurance” regarding prevention or timely detection of unauthorized acquisition, use or
disposition of its assets that could have a material effect on the financial statements.
As of December 28, 2024, management, including the Company’s principal executive officer and principal financial officer,
assessed the effectiveness of its 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 evaluation, the Company’s principal executive officer and our principal financial officer have concluded that, as
of the end of the period covered by this report, the Company’s internal control over financial reporting was effective to
accomplish their objectives at the reasonable assurance level.
Details on Prior Material Weaknesses Fully Remediated During the Period
As disclosed in the Form 10-Q for the period ended October 5, 2024, the Company devoted significant time and resources to
complete its remediation of the material weakness. The following components of the remediation plan, among others, have
been executed:
•
Backfilled open roles and hired approximately 40 experienced personnel, an increase of 37% from the first quarter of
2024, (both permanent employees and contract labor) with the requisite accounting and internal controls knowledge and
experience to sufficiently complement the existing global controllership organization;
•
Completed the review of the organizational structure of the global controllership function by a third-party consultant and
implemented recommended changes;
•
Assessed our methodologies, policies, and procedures to ensure adequate design and effectiveness of processes
supporting internal control over financial reporting;
•
Assessed the specific training needs for newly hired and existing personnel and developed and delivered training
programs designed to uphold our internal controls standards. Monthly trainings have been held with account
reconciliation preparers and reviewers along with target trainings for individual control owners; and
•
Following the departure of the Company’s Chief Financial Officer during the third fiscal quarter of 2023, hired a new Chief
Financial Officer who began employment with the Company on November 27, 2023.
The Company considers that the actions described above are comprehensive and have sufficiently strengthened the
Company’s internal control over financial reporting. The significant progress observed to date provides evidence that the
remediation efforts are effective in improving the control environment. Based on management’s evaluation of the Company’s
accounting resources and personnel used to fulfill internal control responsibilities over a sustained period of financial
reporting, the Company has concluded that the material weakness over accounting resources has been fully remediated as of
October 5, 2024.
Details on Account Reconciliation Material Weakness
In addition, as disclosed in the Form 10-Q for the period ended April 20, 2024, in connection with the preparation of the
financial statements for the first quarter of 2024, management identified certain cash account reconciliations whereby a
former employee in the Company’s India-based shared services center circumvented a cash reconciliation controls policy and
concealed unreconciled items. This individual did not follow the Company’s policy to display all reconciling items in the
reconciliation process. Based on the remediation measures described above, including adding redundant or compensating
controls and implementing a quality control function, the Company has concluded that the material weakness over account
reconciliations has been fully remediated as of December 28, 2024.
Management believes that the Consolidated Financial Statements and related financial information included in this Form 10-K
present fairly, in all material respects, our balance sheets, statements of operations, comprehensive income and cash flows as
of and for the periods presented.
33
Changes in Internal Control Over Financial Reporting
Except for the changes described above, there has been no change in the Company’s internal control over financial reporting
during the fourth quarter ended December 28, 2024 that has materially affected or is reasonably likely to materially affect its
internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Attestation Report of Registered Public Accounting Firm
Management’s internal control over financial reporting as of December 28, 2024 has been audited by Deloitte & Touche LLP,
an independent registered public accounting firm, who also audited the Company’s consolidated financial statements for the
year ended December 28, 2024, as stated in their report included herein, which expresses an unqualified opinion on the
effectiveness of its internal control over financial reporting as of December 28, 2024.
Item 9B. Other Information.
During the twelve weeks ended December 28, 2024, no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted,
modified or terminated by the Company’s officers or directors as each term is defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
34
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
For a discussion of the Company’s 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 the Company’s 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 the Company’s proxy statement for the 2025 annual
meeting of stockholders to be filed with the SEC within 120 days after the close of our fiscal year ended December 28, 2024
(the “2025 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 2025 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 2025 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 2025 Proxy Statement, which is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
See the information set forth in the subsection entitled “2024 and 2023 Audit Fees” in the 2025 Proxy Statement, which is
incorporated herein by reference.
35
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(1) Financial Statements
Audited Consolidated Financial Statements of Advance Auto Parts, Inc. and Subsidiaries for the years
ended December 28, 2024, December 30, 2023 and December 31, 2022:
Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
37
Consolidated Balance Sheets
41
Consolidated Statements of Operations
42
Consolidated Statements of Comprehensive Income
42
Consolidated Statements of Changes in Stockholders' Equity
43
Consolidated Statements of Cash Flows
44
Notes to the Consolidated Financial Statements
46
(2) Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
76
(3) Exhibits
Exhibit Index
77
36
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 28, 2024 and December 30, 2023, 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 28, 2024, 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 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for
each of the three years in the period ended December 28, 2024, 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 28, 2024, 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 26, 2025, 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 matters communicated below are matters arising from the current-period audit of the financial statements
that were communicated or required to be communicated to the audit committee and that (1) relate 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 matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to which they relate.
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.
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.
37
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.
Restructuring — Refer to Note 3 to the Consolidated Financial Statements
Critical Audit Matter Description
The Company recorded restructuring and impairment charges related to its Board of Directors approved restructuring and
asset optimization plan (“2024 Restructuring Plan”). This plan anticipates the closure of approximately 500 stores,
approximately 200 independent locations and four distribution centers. The Company incurred $740.4 million of
restructuring charges, which primarily related to inventory write-down charges for reducing inventory to net realizable value
in connection with the store and distribution center closures and asset impairment charges associated with operating lease
right-of-use (ROU) assets. The determination of restructuring charges and related reserves requires management to make
significant estimates and assumptions regarding the amount of inventory write-down charges and impairment charges of
operating lease ROU assets.
The principal considerations for our determination that the evaluation of restructuring charges associated with inventory
write-downs for closed store and distribution center locations and impairment charges related to operating lease ROU assets
are:
•
The significant assumptions required by management in estimating the net realizable value associated with
inventory located at the stores and distribution centers to be closed including the anticipated sell through rate and
estimated sales proceeds less costs to sell.
•
The significant assumptions required by management to estimate the fair value of ROU assets utilizing a discounted
cash flow model including market rental rates and discount rates.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the anticipated sell through rate and estimated sales proceeds less costs to sell associated
with inventory write-down charges included the following, among others:
•
Tested the effectiveness of controls over management’s process for developing the inventory write-down charges,
including controls over the review of the anticipated sell through rate and estimated sales proceeds less costs to
sell, and the completeness and accuracy of underlying data.
•
Evaluated the reasonableness of management’s estimates of net realizable value of inventory for locations to be
closed based on subsequent sales activity and contractual agreements with wholesalers to purchase the inventory
at an agreed upon price.
Our audit procedures related to market rental rates and discount rates associated with the Company’s impairment
assessment of ROU assets included the following, among others:
•
Tested the effectiveness of controls over management’s impairment assessment process, including key assumptions
used in the impairment analysis such as market rental rates and appropriate discount rate.
•
Evaluated the reasonableness of management’s impairment assessment of ROU assets by:
◦
Testing the completeness and accuracy of underlying data
38
◦
Evaluating key assumptions including involvement of our valuation specialist to assess market rental rates
and discount rates
◦
Testing the mathematical accuracy of management’s calculations, including the completeness and accuracy
of underlying data
/s/Deloitte & Touche LLP
Charlotte, North Carolina
February 26, 2025
We have served as the Company’s auditor since 2002.
39
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 and subsidiaries (the “Company”) as of
December 28, 2024, 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 28, 2024, 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 as of and for the year ended December 28, 2024, of the Company and our
report dated February 26, 2025, expressed an unqualified opinion on those financial statements.
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 Controls 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 26, 2025
40
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share data)
December 28,
2024
December 30,
2023
Assets
Current assets:
Cash and cash equivalents
$
1,869,417 $
488,049
Receivables, net
544,040
609,528
Inventories
3,612,081
3,893,569
Other current assets
118,002
180,402
Current assets held for sale
—
1,205,473
Total current assets
6,143,540
6,377,021
Property and equipment, net of accumulated depreciation of $3,060,247 and $2,729,208
1,334,338
1,555,985
Operating lease right-of-use assets
2,242,602
2,347,073
Goodwill
598,217
601,159
Other intangible assets, net
405,751
419,161
Other noncurrent assets
73,661
85,988
Noncurrent assets held for sale
—
889,939
Total assets
$
10,798,109 $
12,276,326
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
3,407,889 $
3,526,079
Accrued expenses
784,635
616,067
Other current liabilities
472,833
396,408
Current liabilities held for sale
—
768,851
Total current liabilities
4,665,357
5,307,405
Long-term debt
1,789,161
1,786,361
Non-current operating lease liabilities
1,897,165
2,039,908
Deferred income taxes
192,671
355,635
Other long-term liabilities
83,813
83,538
Noncurrent liabilities held for sale
—
183,751
Total liabilities
8,628,167
9,756,598
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;
77,721 shares issued and 59,774 outstanding at December 28, 2024 and
77,349 shares issued and 59,512 outstanding at December 30, 2023
8
8
Additional paid-in capital
993,691
946,099
Treasury stock, at cost, 17,947 and 17,837 shares
(2,939,787)
(2,933,286)
Accumulated other comprehensive loss
(47,146)
(52,232)
Retained earnings
4,163,176
4,559,139
Total stockholders’ equity
2,169,942
2,519,728
Total liabilities and stockholders’ equity
$
10,798,109 $
12,276,326
The accompanying notes to the consolidated financial statements are an integral part of these statements.
41
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share data)
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Net sales
$
9,094,327 $
9,209,075 $
9,148,874
Cost of sales
5,685,807
5,348,966
4,916,004
Gross profit
3,408,520
3,860,109
4,232,870
Selling, general and administrative expenses, exclusive of
restructuring and related expenses
3,812,924
3,805,235
3,708,252
Restructuring and related expenses
308,902
15,987
—
Selling, general and administrative expenses
4,121,826
3,821,222
3,708,252
Operating (loss) income
(713,306)
38,887
524,618
Other, net:
Interest expense
(81,033)
(87,989)
(50,841)
Loss on early redemptions of senior unsecured notes
—
—
(7,408)
Other income (expense), net
26,241
1,924
(6,176)
Total other, net
(54,792)
(86,065)
(64,425)
(Loss) Income before provision for income taxes
(768,098)
(47,178)
460,193
Provision for income taxes
(181,143)
(17,154)
99,657
Net (loss) income from continuing operations
(586,955)
(30,024)
360,536
Net income from discontinued operations
251,167
59,759
103,866
Net (loss) income
$
(335,788) $
29,735 $
464,402
Basic (loss) earnings per common share from continuing operations
$
(9.84) $
(0.51) $
5.97
Basic earnings per common share from discontinued operations
4.21
1.01
1.73
Basic (loss) earnings per common share
$
(5.63) $
0.50 $
7.70
Basic weighted-average common shares outstanding
59,647
59,432
60,351
Diluted (loss) earnings per common share from continuing operations
$
(9.80) $
(0.50) $
5.94
Diluted earnings per common share from discontinued operations
4.19
1.00
1.71
Diluted earnings (loss) per common share
$
(5.61) $
0.50 $
7.65
Diluted weighted-average common shares outstanding
59,902
59,608
60,717
Consolidated Statements of Comprehensive Income
(in thousands)
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Net (loss) income
$
(335,788) $
29,735 $
464,402
Other comprehensive loss:
Changes in net unrecognized other postretirement benefit costs,
net of tax of $53, $(29) and $66
(149)
82
(186)
Currency translation adjustments
5,235
(7,619)
(17,450)
Total other comprehensive loss
5,086
(7,537)
(17,636)
Comprehensive (loss) income
$
(330,702) $
22,198 $
446,766
The accompanying notes to the consolidated financial statements are an integral part of these statements.
42
Shares
Amount
Balance, January 1, 2022
62,009
$
8
$
845,407
$
(2,300,288) $
(27,059) $
4,563,724
$
3,081,792
Net income
—
—
—
—
—
464,402
464,402
Total other comprehensive income
—
—
—
—
(17,636)
—
(17,636)
Issuance of shares upon the exercise of stock
options
3
—
535
—
—
—
535
Restricted stock units and deferred stock
units vested
297
—
—
—
—
—
—
Share-based compensation
—
—
50,978
—
—
—
50,978
Stock issued under employee stock purchase
plan
25
—
4,140
—
—
—
4,140
Repurchases of common stock
(3,070)
—
—
(618,480)
—
—
(618,480)
Cash dividends declared ($6.00 per common
share)
—
—
—
—
—
(363,039)
(363,039)
Other
—
—
(3,500)
—
—
—
(3,500)
Balance, December 31, 2022
59,264
8
897,560
(2,918,768)
(44,695)
4,665,087
2,599,192
Net income
—
—
—
—
—
29,735
29,735
Total other comprehensive income
—
—
—
—
(7,537)
—
(7,537)
Issuance of shares upon the exercise of stock
options
—
—
—
—
—
—
—
Restricted stock units and deferred stock
units vested
308
—
—
—
—
—
—
Share-based compensation
—
—
45,647
—
—
—
45,647
Stock issued under employee stock purchase
plan
53
—
3,892
—
—
—
3,892
Repurchases of common stock
(113)
—
—
(14,518)
—
—
(14,518)
Cash dividends declared ($2.25 per common
share)
—
—
—
—
—
(135,683)
(135,683)
Other
—
—
(1,000)
—
—
—
(1,000)
Balance, December 30, 2023
59,512
8
946,099
(2,933,286)
(52,232)
4,559,139
2,519,728
Net (loss)
—
—
—
—
—
(335,788)
(335,788)
Total other comprehensive loss
—
—
—
—
5,086
—
5,086
Restricted stock units and deferred stock
units vested
304
—
312
—
—
—
312
Share-based compensation
—
—
44,597
—
—
—
44,597
Stock issued under employee stock purchase
plan
68
—
2,683
—
—
—
2,683
Repurchases of common stock
(110)
—
—
(6,501)
—
—
(6,501)
Cash dividends declared ($1.00 per common
share)
—
—
—
—
—
(60,846)
(60,846)
Other
—
—
—
—
—
671
671
Balance, December 28, 2024
59,774
$
8
$
993,691
$
(2,939,787) $
(47,146) $
4,163,176
$
2,169,942
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(in thousands, except per share data)
Common Stock
Additional
Paid-in Capital
Treasury Stock,
at cost
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders’
Equity
The accompanying notes to the consolidated financial statements are an integral part of these statements.
43
Cash flows from operating activities:
Net (loss) income
$
(335,788) $
29,735 $
464,402
Net income from discontinued operations
251,167
59,759
103,866
Net (loss) income from continuing operations
(586,955)
(30,024)
360,536
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
291,980
269,430
248,327
Share-based compensation
42,193
40,905
46,482
Write-down on receivables
34,176
—
—
Loss on sale and impairment of long-lived assets
157,957
857
2,345
Loss on early redemption of senior unsecured notes
—
—
7,408
Provision for deferred income taxes
(203,276)
(37,175)
22,811
Other, net
3,968
3,267
2,587
Net change in:
Receivables, net
28,952
(114,745)
27,420
Inventories
270,403
(64,146)
(70,969)
Accounts payable
(110,112)
57,518
119,334
Accrued expenses
126,588
94,698
(158,632)
Other assets and liabilities, net
84,630
(78,797)
14,989
Net cash provided by operating activities from continuing
operations
140,504
141,788
622,638
Net cash (used in) provided by operating activities from
discontinued operations
(55,871)
145,587
113,933
Net cash provided by operating activities
84,633
287,375
736,571
Cash flows from investing activities:
Purchases of property and equipment
(180,800)
(225,672)
(398,757)
Purchase of intangible asset
—
—
(1,900)
Proceeds from sales of property and equipment
13,394
6,922
1,137
Net cash used in investing activities from continuing operations
(167,406)
(218,750)
(399,520)
Net cash provided by (used in) investing activities from
discontinued operations
1,522,160
(16,739)
(24,928)
Net cash provided by (used in) investing activities
1,354,754
(235,489)
(424,448)
Cash flows from financing activities:
Borrowings under credit facilities
—
4,805,000
2,035,000
Payments on credit facilities
—
(4,990,000)
(1,850,000)
Proceeds from issuance of senior unsecured notes, net
—
599,571
348,618
Payments on senior unsecured notes
—
—
(201,081)
Dividends paid
(59,855)
(209,293)
(336,230)
Purchase of noncontrolling interests
(9,101)
—
—
Repurchases of common stock
(6,501)
(14,518)
(618,480)
Other, net
447
(1,493)
1,469
Net cash (used in) provided by financing activities
(75,010)
189,267
(620,704)
Effect of exchange rate changes on cash
1,569
(8,487)
(8,664)
Net increase (decrease) in cash and cash equivalents
1,365,946
232,666
(317,245)
Cash and cash equivalents, beginning of period
503,471
270,805
588,050
Cash and cash equivalents, end of period
$
1,869,417 $
503,471 $
270,805
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
44
Summary of cash and cash equivalents:
Cash and cash equivalents of continuing operations, end of period
$
1,869,417 $
488,049 $
220,134
Cash and cash equivalents of discontinued operations, end of period
—
15,422
50,671
Cash and cash equivalents, end of period
$
1,869,417 $
503,471 $
270,805
Supplemental cash flow information:
Interest paid
$
75,740 $
73,844 $
46,159
Income tax payments
$
37,037 $
98,792 $
94,605
Non-cash transactions:
Accrued purchases of property and equipment
$
14,841 $
5,287 $
8,927
Transfer of property and equipment from (to) assets related to
discontinued operations to (from) continuing operations
$
7,262 $
(1,666) $
—
Advance Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
The accompanying notes to the consolidated financial statements are an integral part of these statements.
45
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 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
“the Company”).
On August 22, 2024, the Company entered into a definitive purchase agreement to sell its Worldpac, Inc. business
(“Worldpac”), which reflects a strategic shift in its business. The Company completed the sale of Worldpac for a cash
consideration of $1.5 billion, with customary adjustments for working capital and other items. The transaction closed on
November 1, 2024. The Company received net proceeds of approximately $1.47 billion from the transaction after paying
transaction fees and excluding the impact of taxes. The Company intends to use net proceeds from the transaction for general
corporate purposes, which may include the provision of additional working capital, funding internal operational improvement
initiatives and repayment or refinancing of outstanding indebtedness. As a result of the sale, the Company has presented
Worldpac as discontinued operations in its Consolidated Statements of Operations and Consolidated Statements of Cash
Flows for all periods presented. Additionally, the related assets and liabilities associated with the discontinued operations
were classified as held for sale for prior period in the Consolidated Balance Sheet. Refer to Note 20. Discontinued Operations
of the Notes to the Consolidated Financial Statements included herein.
As of December 28, 2024, the Company operated a total of 4,788 stores primarily within the United States, with additional
locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of December 28, 2024, the Company served 934
independently owned Carquest branded stores across the same geographic locations served by the Company’s stores in
addition to Mexico and various Caribbean islands. The Company’s stores operate primarily under the trade names “Advance
Auto Parts” and “Carquest.”
The Company has one reportable segment and two operating segments. The operating segments are aggregated primarily
due to the economic and operational similarities of each operating segment as the stores 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. The Company previously had three operating segments as Worldpac was one of the
Company’s operating segments. The sale of Worldpac resulted in the Company having two operating segments, “Advance
Auto Parts/Carquest U.S.” and “Carquest Canada.” Refer to Note 19. Segment Reporting for additional information on the
Company’s segments.
On November 13, 2024, the Company’s Board of Directors approved a restructuring and asset optimization plan (“2024
Restructuring Plan”) designed to improve the Company’s profitability and growth potential and streamline its operations.
Additionally, in November 2023, the Company announced a strategic and operational plan which would result in $150 million
of savings, of which $50 million would be reinvested into frontline team members. In addition to a reduction in workforce, this
plan streamlines the Company’s supply chain by configuring a multi-echelon supply chain by leveraging current asset and
operating fewer, more productive distribution centers that focus on replenishment and move more parts closer to the
customer. Refer to Note 3. Restructuring of the notes to the Consolidated Financial Statements included herein.
Accounting Period
The Company’s fiscal year ends on the Saturday closest to December 31st. All references herein for the years 2024, 2023 and
2022 represent the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022, and consisted of fifty-
two 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.
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Amounts presented in thousands, except per share data, unless otherwise stated)
46
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
The Company’s inventory consists primarily of parts, batteries, accessories and other products used on vehicles that have
reasonably long shelf lives and is stated at the lower of cost or market. The cost of the Company’s merchandise inventory is
primarily determined using the last-in, first-out (“LIFO”) method. Under the LIFO method, the Company’s cost of sales reflects
the costs of the most recently purchased inventories, while the inventory carrying balance represents the costs relating to
prices paid in 2024 and prior years. The Company regularly reviews inventory quantities on-hand to consider whether it has
excess or obsolete inventory and adjusts the carrying value as necessary. In the fourth quarter of 2024, the Company
announced a restructuring and asset optimization plan designed to improve the Company’s profitability and growth potential
and streamline its operations. In executing this plan and initiating store closure activities, the Company liquidated inventory
held at these locations and rationalized its product assortment held as a result of a reduced sell-through footprint which
resulted in an inventory charge of $431.5 million and was reflected in cost of sales. In 2023, the Company performed a
strategic and operational review of the business, which included the rationalization of product assortment and planned
decisive actions. As a result, the Company made a change in the estimate of excess inventory reserves resulting in a
$109.5 million charge to cost of sales.
Vendor Incentives
The Company receives incentives in the form of reductions to amounts owed to and/or payments from vendors related to
volume rebates and other promotional considerations. Many of these incentives are under long-term agreements in excess of
one year, while others are negotiated on an annual 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 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 volume rebates and allowances are earned based on inventory purchases.
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.
Costs incurred with the acquisition or development of software for internal use are capitalized and amortized over the
expected useful life of the software, generally five years. Subsequent additions, modifications or upgrades are capitalized to
the extent it enhances the software’s functionality. Capitalized software is 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.
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Amounts presented in thousands, except per share data, unless otherwise stated)
47
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
The Company performs an evaluation for the impairment of goodwill and other indefinite-lived intangible assets for the
Company’s reporting units annually as of the first day of the fourth quarter, or when indications of potential impairment exist.
These indicators would include a significant change in operating performance, the business climate, legal factors, competition,
or a planned sale or disposition of a significant portion of the business, among other factors. The 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, the Company assesses qualitative factors such as current
company performance and overall economic factors to determine if it is more-likely-than-not that the goodwill might be
impaired and whether it is necessary to perform a quantitative goodwill impairment test. In the quantitative goodwill
impairment test, the Company compares the carrying value of a reporting unit to its fair value. In performing a Step-1 analysis,
the Company has historically used an income approach which requires many assumptions including forecast, discount rate,
long-term growth rate, among other items. The Company has also utilized the market approach which derives metrics from
comparable publicly-traded companies. The Company has 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.
The 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, the Company
concludes that no intangible asset impairment has occurred. If the carrying value of the indefinite-lived intangible asset
exceeds the fair value, the Company recognizes an impairment loss.
The Company has two operating segments, defined as “Advance Auto Parts/Carquest U.S.” and “Carquest Canada.” As each
operating segment represents a reporting unit, goodwill is assigned to each reporting unit. See Note 5. Goodwill and
Intangibles for additional information.
Valuation of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets, including finite-lived intangible assets, whenever events or
changes in circumstances indicate that the carrying amount of an asset might not be recoverable and exceeds its fair value.
When such an event occurs, the Company estimates the undiscounted future cash flows expected to result from the use of
the long-lived asset or asset group and its eventual disposition. These impairment evaluations involve estimates of asset
useful lives and future cash flows. If the undiscounted expected future cash flows are less than the carrying amount of the
asset and the carrying amount of the asset exceeds its fair value, an impairment loss is recognized. When an impairment loss
is recognized, the carrying amount of the asset is reduced to its estimated fair value based on quoted market prices or other
valuation techniques (e.g., discounted cash flow analysis).
The Company assessed the recoverability of its long-lived assets assigned to closing locations in connection with the
announced restructuring and distribution network optimization plan. This assessment resulted in carrying values that
exceeded fair values for certain asset groups, primarily related to ROU assets. As a result, an impairment charge of $171.4
million was recorded, and is reflected in SG&A. Impairment charges not related to the restructuring and asset optimization
plans were not material. See Restructuring and Related Expenses policy below.
48
Self-Insurance
The Company is self-insured for general and automobile liability, workers’ compensation and health care claims of the
Company’s team members, while maintaining stop-loss coverage with third-party insurers to limit the Company’s total liability
exposure. Expenses associated with these liabilities are calculated for (i) claims filed, (ii) claims incurred but not yet reported
and (iii) projected future claims using actuarial methods followed in the insurance industry as well as the Company’s historical
claims experience. The Company includes the current portion of self-insurance reserves in accrued expenses and the long-
term portion of self-insurance reserves in other long-term liabilities in the accompanying Consolidated Balance Sheets.
Leases
The Company leases certain store locations, distribution centers, office spaces, equipment and vehicles. The Company
recognizes 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 the Company to pay non-lease components, such as
taxes, maintenance, insurance and other certain costs applicable to the leased asset. For leases related to store locations,
distribution centers, office spaces and vehicles, the Company accounts 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
The Company provides share-based compensation to the Company’s eligible team members and Board of Directors. The
Company is required to exercise judgment and make estimates when determining the (i) fair value of each award granted and
(ii) projected number of awards expected to vest. The Company calculates the fair value of all share-based awards at the date
of grant and 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 the Company’s 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. The Company allocates the contract’s transaction
price to each of these performance obligations separately using explicitly stated amounts or the Company’s best estimate
using historical data.
In accordance with ASC 606, revenue is recognized at the time the sale is made at which time the Company’s walk-in
customers take immediate possession of the merchandise or same-day delivery is made to the Company’s professional
delivery customers, which include certain independently owned store locations. Payment terms are established for the
Company’s professional delivery customers based on pre-established credit requirements. Payment terms vary depending on
the customer and generally range from one to thirty 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 the Company’s 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. The Company estimates the reduction to net sales
and cost of sales for returns based on current sales levels and the Company’s historical return experience.
49
Some of the Company’s 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 the Company’s product groups:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Percentage of Sales, by Product Group
Parts and Batteries
63 %
63 %
63 %
Accessories and Chemicals
22
22
23
Engine Maintenance
14
14
13
Other
1
1
1
Total
100 %
100 %
100 %
Receivables, net, consists primarily of receivables from professional customers and is stated at net realizable value. The
Company grants credit to certain professional customers who meet the Company’s pre-established credit requirements. The
Company regularly reviews accounts receivable balances and maintains allowances for credit losses estimated whenever
events or circumstances indicate the carrying value may not be recoverable. The Company considers the following factors
when determining if collection is reasonably assured: customer creditworthiness, past transaction history with the customer,
current economic and industry trends and changes in customer payment terms. The Company controls credit risk through
credit approvals, credit limits and accounts receivable and credit monitoring procedures.
Cost of Sales
Cost of sales includes actual product cost, warranty costs, vendor incentives, cash discounts on payments to vendors, costs
associated with operating the Company’s distribution network, including payroll and benefits costs, occupancy costs and
depreciation, in-bound freight-related costs from the Company’s vendors, impairment of inventory resulting from store
closures and inventory-related reserves and costs associated with moving merchandise inventories from the Company’s
distribution centers to stores and customers. Refer to the Restructuring and Related Expenses policy below.
Selling, General and Administrative Expenses, Exclusive of Restructuring and Related 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 the Company’s professional
delivery program, including payroll and benefits costs; and transportation expenses associated with moving merchandise
inventories from stores to customer locations.
50
Restructuring and Related Expenses
The Company records restructuring and transformation activities when management or the Board of Directors commits to
and approves a restructuring plan. Impairment of inventory is recognized when the cost of inventory exceeds its net realizable
value. Asset impairment charges associated with operating lease ROU assets are recognized when the ROU carrying value
exceeds its fair value. Severance and retention costs associated with workforce reductions are recognized at the time of
communication to employees, unless future service is required, in which case the costs are recognized ratably over the future
service period. Employee termination benefits are recognized as a liability when it is probable that a liability exists, and the
amount is reasonably estimable. Other exit-related costs, including nonrecurring professional fees, are recognized as incurred.
Restructuring expenses are recognized as an operating expense in cost of sales or selling, general and administrative expenses
within the consolidated statements of operations and related liabilities are recorded within accounts payable and accrued
expenses on the consolidated balance sheets. The Company periodically evaluates and, if necessary, adjusts its estimates
based on currently available information. Refer to Note 3. Restructuring of the Notes to the Consolidated Financial Statements
included for additional detail.
Preopening Expenses
Preopening expenses, which consist primarily of payroll and occupancy costs related to the opening of new stores, are
expensed as incurred as a component of SG&A in the accompanying Consolidated Statements of Operations.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense, net of qualifying vendor promotional funds, was
$79.6 million, $149.6 million and $160.9 million in 2024, 2023 and 2022, respectively.
Foreign Currency Translation
The assets and liabilities of the Company’s 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 income (expense), net, were a loss of $5.5 million, $7.3 million and $3.7 million in
2024, 2023 and 2022, respectively.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.
Under the asset and liability method, deferred tax assets and liabilities are determined based on the differences between the
financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences
are expected to reverse. Deferred income taxes reflect the net income tax effect of temporary differences between the basis
of assets and liabilities for financial reporting purposes and for income tax reporting purposes. The effect of a change in tax
rates on deferred tax assets and liabilities is recognized in income in the period of the enactment date.
The Company recognizes tax benefits and/or tax liabilities for uncertain income tax positions based on a two-step process.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it
is more-likely-than-not that the position will be sustained in an audit, including resolution of related appeals or litigation
processes, if any. The second step requires the Company to estimate and measure the tax benefit as the largest amount that
is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such
amounts as the Company must determine the probability of various possible outcomes.
The Company reevaluates these uncertain tax positions on a quarterly basis or when new information becomes available to
management. The reevaluations are based on many factors, including but not limited to, changes in facts or circumstances,
changes in tax law, successfully settled issues under audit, expirations due to statutes of limitations and new federal or state
audit activity. Any change in either the Company’s recognition or measurement could result in the recognition of a tax benefit
or an increase to the tax accrual.
51
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.
Recently Issued Accounting Pronouncements - Not Yet Adopted
Disclosure Improvements
In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06,
Disclosure Improvements (“ASU 2023-06”), which defines when companies will be required to improve and clarify disclosure
and presentation requirements. This ASU should be applied prospectively, and the effective date will be determined for each
individual disclosure based on the effective date of the SEC’s removal of the related disclosure. If the applicable requirements
have not been removed by the SEC by June 30, 2027, this ASU will not become effective. Early adoption is prohibited. The
Company is currently evaluating the impact of adopting ASU 2023-06 on the consolidated financial statements and related
disclosures, and does not believe it will have a material impact on the consolidated financial statements.
Climate Disclosure Requirements
In March 2024, the SEC issued its final climate disclosure rules, which require the disclosure of climate-related information in
annual reports and registration statements. The rules require disclosure in the audited financial statements of certain effects
of severe weather events and other natural conditions and greenhouse gas emissions above certain financial thresholds, as
well as amounts related to carbon offsets and renewable energy credits or certificates, if material. Additionally, the rule
established disclosure requirements regarding material climate-related risks, descriptions of board oversight and risk
management activities, the material impacts of these risks on a registrants' strategy, business model and outlook and any
material climate-related targets or goals. On April 4, 2024, the SEC determined to voluntarily stay the final rules pending
certain legal challenges. Prior to the stay in the new rules, disclosures would have been effective for annual periods beginning
January 1, 2025, except for the greenhouse gas emissions disclosure which would have been effective for annual periods
beginning January 1, 2026. The Company is currently evaluating the impact of the new rules on the consolidated financial
statements and related disclosures.
Income Tax Disclosure Improvements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (“ASU 2023-09”), which requires a company to enhance its
income tax disclosures. In each annual reporting period, the company should disclose the specific categories used in the rate
reconciliation and additional information for reconciling items that meet a quantitative threshold, including disaggregation of
taxes paid by jurisdiction. The related disclosures are effective for the fiscal year beginning after December 15, 2024. The
Company is currently evaluating the impact of adopting ASU 2023-09 on its consolidated financial statements and related
disclosures and believes the adoption will result in additional disclosures, but will not have any other impact on its
consolidated financial statements.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense
Disaggregation (“ASU 2024-03”), which requires public entities to disclose more detailed information about certain costs and
expenses presented in the income statement, including inventory purchases, employee compensation, selling expenses and
depreciation. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning
after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU
2024-03 on the consolidated financial statements and related disclosures.
52
Recently Issued Accounting Pronouncements - Adopted
Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which
requires a company to disclose additional, more detailed information about a reportable segment’s significant expenses, even
if there is one reportable segment, and is intended to improve the disclosures about a public entity’s reportable segments.
The ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15,
2024, with early adoption permitted. The Company has evaluated the impact of the adoption of ASU 2023-07 and the
adoption resulted in additional segment reporting disclosures, but did not have any other impact on its consolidated financial
statements. See Note 19. Segment Reporting for the additional segment reporting disclosures.
3. Restructuring
2024 Restructuring Plan
On November 13, 2024, the Company’s Board of Directors approved a restructuring and asset optimization plan (“2024
Restructuring Plan”) designed to improve the Company’s profitability and growth potential and streamline its operations. This
plan anticipates closure of approximately 500 stores, approximately 200 independent locations and four distribution centers
by mid-2025, as well as headcount reductions.
Expenses associated with the 2024 Restructuring Plan included: 1) inventory write-down of inventory to net realizable value
due to liquidation sales as a result of store closures and streamlining assortment associated with the 2024 Restructuring Plan
announced in fourth quarter 2024, 2) noncash asset impairment and accelerated amortization and depreciation of operating
lease ROU assets and plant, property and equipment, 3) personnel expenses related to severance and transition expenses,
which were offered to certain employees who would provide services through key dates to ensure completion of closure
activities and 4) other location closure-related activity, including nonrecurring services rendered by third-party vendors
assisting with the turnaround initiatives and other related expenses, including incremental revisions to receivable
collectability due to termination of contracts with independents associated with the 2024 Restructuring Plan.
Other Restructuring Initiatives
In November 2023, the Company announced a strategic and operational plan which would result in $150.0 million of savings,
of which $50.0 million would be reinvested into frontline team members. In addition to a reduction in workforce, this plan
streamlines the Company’s supply chain by configuring a multi-echelon supply chain by leveraging current asset and operating
fewer, more productive distribution centers that focus on replenishment and move more parts closer to the customer. In
achieving this plan, the Company is in process of converting certain distribution centers and stores into market hubs. In
addition to providing replenishment to near-by stores, market hubs support retail operations. In addition to the distribution
network optimization, other restructuring expenses included: 1) Worldpac post transaction-related expenses for professional
services and 2) other restructuring expenses including nonrecurring services rendered by third-party vendors assisting with
the turnaround initiatives, including a strategic business review, income in connection with the Worldpac transition service
agreement, executive turnover costs and a book to tax basis difference in connection with the Worldpac sale.
For the year ended December 28, 2024, the Company incurred the following charges related to the restructuring plans.
Inventory related expenses are reflected in Cost of sales on the Consolidated Statement of Operations. The remaining
categories are included in Selling, general and administrative expenses in the Consolidated Statements of Operations. There
were no restructuring costs associated with the 2024 Restructuring Plan prior to 2024.
53
Year Ended
2024 Restructuring Plan Expenses: (1)
December 28,
2024
December 30,
2023
Cost of sales:
Inventory write-down
$
431,529 $
—
Selling, general and administrative expenses:
Impairment and write-down of long-lived assets
188,601
—
Severance and other personnel expenses
15,234
—
Other location closure related expenses (2)
45,448
—
Total selling, general and administrative expenses
249,283
—
2024 Restructuring Plan Expenses
$
680,812 $
—
Other Restructuring Plan Expenses:
Selling, general and administrative expenses:
Distribution network optimization (3)
$
19,713 $
—
Impairment and write-down of long-lived assets
15,555
—
Worldpac post transaction-related expenses
7,258
—
Other restructuring expenses (4)
17,093
15,987
Other Restructuring Plan Expenses
$
59,619 $
15,987
(1) The table above excludes certain routine impairment charges of long-lived assets and write-downs of slow-moving inventory
occurring in the ordinary course of business.
(2) Other location closure-related activity includes nonrecurring services rendered by third-party vendors assisting with the 2024
Restructuring Plan and other related expenses of $20.8 million including incremental revisions to receivable collectability due
to contract terminations with independents associated with the restructuring plan of $24.7 million.
(3) Distribution network optimization includes incremental depreciation as a result of accelerating long-lived assets over a
shorter useful life of $5.0 million.
(4) For the year ended December 28, 2024, Other Restructuring Plan expenses include nonrecurring services rendered by third-
party vendors to perform a strategic business review of $15.5 million and executive turnover costs of $1.6 million. For the year
ended December 30, 2023, Other Restructuring expenses include severance costs associated with a reduction in workforce and
professional service fees.
The following table shows the change in the restructuring liability during the year ended December 28, 2024, which are
included within accounts payable, accrued liabilities and other current liabilities in the Consolidated Balance Sheets, is as
follows:
Restructuring liability
Professional
service fees
Severance and
other personnel
expenses
Balance at December 30, 2023
$
769 $
4,072
Restructuring expenses during the period
43,604
27,059
Cash payments
(20,943)
(17,174)
Balance at December 28, 2024
$
23,430 $
13,957
During 2025, the Company anticipates additional restructuring and related expenses consisting primarily of lease termination
impacts, other exit-related expenses related to ceased use buildings and employee termination benefits in connection to the
restructuring plan. The Company incurred $740.4 million during 2024 related to the restructuring plan including $125.4 million
of cash expenses offset by $2.5 million of TSA services. The Company estimates that it will incur additional expenses of
approximately $225.0 million to $275.0 million including $200.0 million to $250.0 million of cash expenses primarily
composed of lease termination and other exit expenses and professional services, by the end of fiscal year 2025.
54
4. Inventories
The Company used the LIFO method of accounting for approximately 91.5% of Inventories at December 28, 2024 and 92.8% of
Inventories at December 30, 2023. As a result, the Company recorded a decrease to Cost of sales of $92.0 million in 2024, a
decrease to Cost of sales of $115.6 million in 2023 and an increase to Cost of sales of $283.4 million in 2022.
During 2024, the Company experienced a significant decrease in inventory values primarily due to the 2024 Restructuring
Plan. This decrease resulted in liquidations of LIFO inventory layers carried at costs prevailing in prior years. The effect of the
LIFO liquidation was a decrease to cost of sales of $21.2 million and an increase to net earnings of $15.9 million ($0.27 per
diluted share). During 2023, the Company experienced a decrease in inventory values which resulted in a liquidation of a LIFO
inventory layer. This liquidation did not have a material impact to the Consolidated Financial Statements.
Purchasing and warehousing costs included in Inventories as of December 28, 2024 and December 30, 2023 were $367.8
million and $454.0 million, respectively.
Inventory balances were as follows:
December 28,
2024
December 30,
2023
Inventories at first-in, first-out (“FIFO”)
$
3,623,377 $
3,996,877
Adjustments to state inventories at LIFO
(11,296)
(103,308)
Inventories at LIFO
$
3,612,081 $
3,893,569
In 2024, the Company recorded $431.5 million of inventory write-downs, primarily related to reducing inventory to net
realizable value for closing operations and streamlining inventory assortment associated with the 2024 Restructuring Plan
announced in fourth quarter 2024, which is included in cost of sales within the accompanying Consolidated Statements of
Operations. Refer to Note 3. Restructuring of the notes to the Consolidated Financial Statements included herein.
5. Goodwill and Other Intangible Assets, Net
Goodwill
At December 28, 2024 and December 30, 2023, the carrying amount of goodwill in the accompanying Consolidated Balance
Sheets was $598.2 million and $601.2 million, respectively. The change in Goodwill during 2024 and 2023 was $2.9 million and
$1.0 million, respectively, and related to foreign currency translation. There has been no history of impairment of goodwill
experienced to date.
Other Intangible Assets, Net
Amortization expense was $12.4 million, $13.3 million and $14.9 million for 2024, 2023 and 2022, respectively. 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 28, 2024
December 30, 2023
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amortized intangible assets:
Customer relationships
$ 156,317 $
(145,747) $ 10,570 $ 157,344 $
(135,339) $ 22,005
Non-compete and other
40,157
(39,064)
1,093
40,157
(38,575)
1,582
196,474
(184,811)
11,663 197,501
(173,914)
23,587
Indefinite-lived intangible assets:
Brands, trademark and trade
names
394,088
— 394,088 395,574
— 395,574
Total intangible assets
$ 590,562 $
(184,811) $ 405,751 $ 593,075 $
(173,914) $ 419,161
55
Future Amortization Expense
The expected amortization expense for the next five years and thereafter for acquired intangible assets recorded as of
December 28, 2024 was as follows:
Year
Amount
2025
$
10,991
2026
380
2027
292
$
11,663
6. Receivables, net
Receivables, net, consisted of the following:
December 28,
2024
December 30,
2023
Trade
$
416,625 $
421,293
Vendor
157,058
199,580
Other
28,149
12,271
Total receivables
601,832
633,144
Less: allowance for credit losses
(57,792)
(23,616)
Receivables, net
$
544,040 $
609,528
For the year ended December 28, 2024, the allowance for credit losses increased $34.2 million, primarily due to incremental
reserves established as a result of the 2024 Restructuring Plan. Refer to Note 3. Restructuring of the Notes to the Consolidated
Financial Statements included herein.
56
7.
Long-term Debt and Fair Value of Financial Instruments
Long-term debt consisted of the following:
December 28,
2024
December 30,
2023
5.90% Senior Unsecured Notes (net of unamortized discount and debt
issuance costs of $890 and$1,631 at December 28, 2024, and December 30,
2023) due March 9, 2026
$
299,110 $
298,369
1.75% Senior Unsecured Notes (net of unamortized discount and debt
issuance costs of $1,916 and $2,486 at December 28, 2024 and December 30,
2023) due October 1, 2027
348,084
347,514
5.95% Senior Unsecured Notes (net of unamortized discount and debt
issuance costs of $1,429 and $1,884 at December 28, 2024 and December 30,
2023) due March 9, 2028
298,571
298,116
3.90% Senior Unsecured Notes (net of unamortized discount and debt
issuance costs of $3,259 and $3,851 at December 28, 2024, and December 30,
2023) due April 15, 2030
496,741
496,149
3.50% Senior Unsecured Notes (net of unamortized discount and debt
issuance costs of $3,344 and $3,787 at December 28, 2024, and December 30,
2023) due March 15, 2032
346,655
346,213
1,789,161
1,786,361
Less: Current portion of long-term debt
—
—
Long-term debt, excluding the current portion
$
1,789,161 $
1,786,361
Fair value of long-term debt
$
1,648,642 $
1,641,409
Fair Value of Financial Assets and Liabilities
The fair value of the Company’s senior unsecured notes was determined using Level 2 inputs based on quoted market prices.
The carrying amounts of the Company’s 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, the Company entered into a credit agreement that provided 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. The Company 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.
On February 27, 2023, the Company entered into Amendment No. 1 (“Amendment No. 1”) to the 2021 Credit Agreement.
Amendment No. 1 extended the maturity date of the 2021 Credit Agreement by one year from November 9, 2026, to
November 9, 2027. Amendment No. 1 also replaced an adjusted LIBOR benchmark rate with a term secured overnight
financing rate benchmark rate, as adjusted by an increase of 10 basis points, plus the applicable margin under 2021 Credit
Agreement.
57
On August 21, 2023, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the 2021 Credit Agreement in
order to amend certain financial covenants related to the Consolidated Coverage Ratio (as defined therein), and on November
20, 2023, the Company entered into Amendment No. 3 (“Amendment No. 3”) to the 2021 Credit Agreement in order to
further amend financial covenants related to the Consolidated Coverage Ratio. Pursuant to Amendment No. 2 and
Amendment No. 3, the Company may not permit the Consolidated Coverage Ratio to be less than (a) 1.75 to 1.00 for each
period of four fiscal quarters ending on October 7, 2023 through and including the period of four fiscal quarters ending on
October 5, 2024, (b) 2.00 to 1.00 for each period of four fiscal quarters ending on December 28, 2024 through and including
the period of four fiscal quarters ending on October 4, 2025 and (c) 2.25 to 1.00 for each period of four fiscal quarters ending
after October 4, 2025. Amendment No. 2. and Amendment No. 3 made no other material changes to the terms of the 2021
Credit Agreement.
On February 26, 2024, the Company entered into Amendment No. 4 (“Amendment No. 4”) to the 2021 Credit Agreement to
enable certain addbacks to the definition of Consolidated EBITDA contained therein for specific write-downs of inventory and
vendor receivables. Amendment No. 4 also updated certain limitations on future incurrences of other indebtedness and liens,
replacing the cap thereon of 10% of consolidated net tangible assets with $400 million, and eliminated the $250 million
basket for accounts receivable securitization transactions. Amendment No. 4 made no other material changes to the terms of
the 2021 Credit Agreement.
On November 13, 2024, the Company entered into Amendment No. 5 to the 2021 Credit Agreement. Amendment No. 5 (i)
permits up to $575 million of certain restructuring charges to be added back to Consolidated EBITDAR (as defined therein), (ii)
permits up to $800 million of unrestricted cash to be netted out of debt in the calculation of the Leverage Ratio (as defined
therein), and (iii) reduced the minimum Consolidated Coverage Ratio (as defined therein) to 1.50 to 1.00 through July 12,
2025 and 1.75 to 1.00 thereafter. Amendment No. 5 also reduced the unsecured revolving credit facility under the 2021 Credit
Agreement from $1.2 billion to $1.0 billion and amended the pricing on the loans thereunder in connection with changes in
the Company’s credit ratings, as described below.
Amendment No. 5 also updated certain covenants and other limitations on the Company, including (i) expanding the scope of
the covenant restricting the ability to create, incur or assume additional debt to cover Advance Auto Parts, Inc., (ii) restricting
the Company’s rights to complete share repurchases and increase cash dividend amounts, (iii) requiring the Company to grant
liens on deposit accounts, inventory and accounts receivables if credit ratings are downgraded below a minimum threshold,
(iv) imposing an additional monthly minimum daily liquidity financial covenant of $750 million, (v) providing for the maturity
date under the 2021 Credit Agreement to automatically spring forward to the extent necessary for the 2021 Credit Agreement
to mature at least 91 days prior to any scheduled maturity date under any of the Company’s senior unsecured notes, (vi)
prohibiting further extensions of the maturity date under the 2021 Credit Agreement beyond the existing maturity date, and
(vii) eliminating certain baskets for additional indebtedness, liens and asset sales.
On February 25, 2025, the Company entered into Amendment No. 6 (“Amendment No. 6”) to the 2021 Credit Agreement to,
among other things, (i) expand the scope of domestic subsidiaries that would be required to grant security interests and
guarantee the Company’s obligations under the 2021 Credit Agreement upon the occurrence of a Springing Lien Trigger Event
(as defined therein) to include all of the Company’s subsidiaries other than the Company’s Insignificant Subsidiaries (as
defined in Amendment No. 6), (ii) revise the definition of Consolidated Coverage Ratio to exclude up to $175 million of
accelerated rent charges related to lease buyouts and to permit the minimum Consolidated Coverage Ratio to remain at 1.50
to 1.00 for one additional quarter before increasing to 1.75 to 1.00 on and after the fiscal quarter ending on January 3, 2026,
(iii) revise the definition of Consolidated EBITDA to increase the threshold for Identified Restructuring Charges (as defined
therein) from $575 million to $625 million, and (iv) expand the scope of the guaranteed obligations to include bank product
obligations and cash management obligations.
The interest rates on outstanding amounts, if any, on the revolving facility under the 2021 Credit Agreement will be based, at
the Company’s option, on Term Secured Overnight Financing Rate (“SOFR”) (as defined in the 2021 Credit Agreement), plus a
margin, or an alternate base rate, plus a margin. The margins per annum for the revolving loan will vary from 0.795% to
1.525% for Term SOFR (with margins of 1.325% or greater applying when credit ratings are below BBB/Baa2) and from 0.00%
to 0.525% for alternate base rate (with margins of 0.325% or greater applying when credit ratings are below BBB/Baa2) based
on the assigned debt ratings of the Company. A facility fee will be charged on the total revolving facility commitment, payable
quarterly in arrears, in an amount that will vary from 0.08% to 0.35% (with rates of 0.250% or greater applying when credit
ratings are below BB+/Ba1) per annum based on the assigned debt ratings of the Company.
58
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, (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. The Company was in compliance with its financial covenants with respect to the 2021 Credit
Agreement as of December 28, 2024.
As of December 28, 2024 and December 30, 2023, the Company had no outstanding borrowings or letters of credit
outstanding under the 2021 Credit Agreement. As of December 28, 2024, the borrowing availability was $1.0 billion. As of
December 30, 2023, the borrowing availability was $1.2 billion.
As of December 28, 2024 and December 30, 2023, the Company had $90.8 million and $91.2 million, respectively, 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 the Company’s self-insurance policies.
Senior Unsecured Notes
The Company’s 3.90% senior unsecured notes due April 15, 2030 (the “Original Notes”) were issued April 16, 2020, at 99.65%
of the principal amount of $500.0 million, and were not registered under the Securities Act of 1933, as amended (the
“Securities Act”). 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, the Company 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, 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.
The Company’s 1.75% senior unsecured notes due October 1, 2027 (the “2027 Notes”) were issued September 29, 2020, at
99.67% of the principal amount of $350.0 million. The 2027 Notes bear interest, payable semi-annually in arrears on April 1
and October 1, at a rate of 1.75% per year. In connection with the 2027 Notes offering, the Company incurred $2.9 million of
debt issuance costs.
The Company’s 3.50% senior unsecured notes due March 15, 2032 (the “2032 Notes”) were issued March 4, 2022, at 99.61%
of the principal amount of $350.0 million. 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, the Company incurred $3.2 million of
debt issuance costs.
The Company’s 5.90% senior unsecured notes due March 9, 2026 (the “2026 Notes”) were issued March 9, 2023, at 99.94% of
the principal amount of $300.0 million. The 2026 Notes bear interest, payable semi-annually in arrears on March 9 and
September 9, at a rate of 5.90% per year. In connection with the 2026 Notes offering, the Company incurred $1.6 million of
debt issuance costs.
The Company’s 5.95% senior unsecured notes due March 9, 2028 (the “2028 Notes”) were issued March 9, 2023, at 99.92% of
the principal amount of $300.0 million. The 2028 Notes bear interest, payable semi-annually in arrears on March 9 and
September 9, at a rate of 5.95% per year. In connection with the 2028 Notes offering, the Company incurred $1.9 million of
debt issuance costs.
59
The Company’s 2026 Notes, 2027 Notes, 2028 Notes, 2030 Notes and 2032 Notes are collectively referred to herein as the
Company’s “senior unsecured notes” or the “Notes.” The terms of the 2026 Notes, 2027 Notes, 2028 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.
The Company 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), the Company will be required to offer to repurchase the Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest to the repurchase date. 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 the ability
to incur debt secured by liens and to enter into certain sale and lease-back transactions.
Future Payments
As of December 28, 2024, the aggregate future annual maturities of long-term debt instruments were as follows:
Year
Amount
2025
$
—
2026
300,000
2027
350,000
2028
300,000
2029
—
Thereafter
850,000
$
1,800,000
Debt Guarantees
The Company is a guarantor of loans made by banks to various independently-owned Carquest-branded stores that are
customers of the Company totaling $98.4 million as of December 28, 2024 and $106.9 million as of December 30, 2023. 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 $181.3 million as of December 28, 2024 and $221.2 million as
of December 30, 2023. The Company continuously assesses the likelihood of performance under these guarantees and
believes that performance is remote as of December 28, 2024.
60
8.
Property and Equipment
Property and equipment consisted of the following:
Useful Lives
December 28,
2024
December 30,
2023
Land and land improvements (1)
30 years
$
470,906 $
470,890
Buildings
10 - 30 years
555,534
543,467
Building and leasehold improvements
1 - 30 years
811,158
780,337
Furniture, fixtures and equipment
3 - 20 years
2,497,278
2,369,175
Vehicles
8 years
14,526
14,536
Construction in progress
45,183
106,788
4,394,585
4,285,193
Less: Accumulated depreciation
(3,060,247)
(2,729,208)
Property and equipment, net
$
1,334,338 $
1,555,985
(1) Land is deemed to have an indefinite life.
As of December 28, 2024 and December 30, 2023, the Company had capitalized software costs of $1.03 billion and $960.4
million, respectively, and accumulated depreciation of $767.2 million and $677.9 million, respectively. Depreciation expense
relating to property and equipment was $279.6 million, $256.2 million and $233.4 million for 2024, 2023 and 2022,
respectively.
As of December 28, 2024, the Company recorded $143.8 million of non-cash asset impairment and write-down charges,
including impairment and incremental depreciation as a result of accelerating assets over a shorter useful life in connection
with the 2024 Restructuring Plan and the Other Restructuring Plan which is included in restructuring and related expenses
within the accompanying Consolidated Statements of Operations. Refer to Note 3. Restructuring of the notes to the
Consolidated Financial Statements included herein.
9.
Leases and Other Commitments
Leases
Substantially all of the Company’s leases are for facilities and vehicles. The initial term for facilities is typically five to ten years,
with renewal options at five-year intervals, with the exercise of lease renewal options at the Company’s sole discretion. The
Company’s vehicle and equipment leases are typically three to six years. The Company’s lease agreements do not contain any
material residual value guarantees or material restrictive covenants.
Operating lease liabilities consisted of the following:
December 28,
2024
December 30,
2023
Total operating lease liabilities
$
2,358,693 $
2,423,183
Less: Current portion of operating lease liabilities
(461,528)
(383,275)
Non-current operating lease liabilities
$
1,897,165 $
2,039,908
The current portion of operating lease liabilities was included in other current liabilities in the accompanying Consolidated
Balance Sheets.
61
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 of the following:
Year Ended
December 28,
2024
December 30,
2023
Operating lease cost
$
541,299 $
496,770
Variable lease cost
152,236
143,134
Total lease cost
$
693,535 $
639,904
The future maturity of lease liabilities are as follows:
Year
Amount
2025
$
546,844
2026
466,335
2027
418,156
2028
331,740
2029
298,621
Thereafter
648,745
Total lease payments
2,710,441
Less: Imputed interest
(351,748)
Total operating lease liabilities
$
2,358,693
Operating lease liabilities included $16.7 million related to options to extend lease terms that are reasonably certain of being
exercised and excluded $66.5 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 the Company’s operating leases were 6.5
years and 4.2% as of December 28, 2024. The Company calculated the weighted average discount rates using incremental
borrowing rates, which equal the rates of interest that the Company would pay to borrow funds on a fully collateralized basis
over a similar term.
As of December 28, 2024, the Company recorded $65.4 million of non-cash asset impairment and write-down charges,
including impairment and incremental lease abandonment expenses as a result of accelerated amortization on leases the
Company expects to exit before the end of the contractual term, net of gains on lease terminations which is included in
restructuring and related expenses within the accompanying Consolidated Statements of Operations. Refer to Note 3.
Restructuring of the Notes to the Consolidated Financial Statements included herein.
Other information relating to the Company’s lease liabilities were as follows:
Year Ended
December 28,
2024
December 30,
2023
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows from operating leases
$
490,818 $
526,399
Right-of-use assets obtained in exchange for
lease obligations:
Operating leases
$
339,734 $
388,200
62
Other Commitments
The Company has entered into certain arrangements which require the future purchase of goods or services. The Company’s
obligations primarily consist of payments for the purchase of hardware, software and maintenance. As of December 28, 2024,
future payments of these arrangements were $147.5 million and were not accrued in the Company’s Consolidated Balance
Sheet.
During the first quarter of 2024, the Company entered into a sale-leaseback transaction where the Company sold a building
and land and entered into a three-year lease of the property upon the sale. This transaction resulted in a gain of $22.3 million
and is included in SG&A on the Consolidated Statement of Operations.
10. Accrued Expenses
Accrued expenses consisted of the following:
December 28,
2024
December 30,
2023
Payroll and related benefits
$
163,210 $
149,763
Taxes payable
230,295
109,629
Self-insurance reserves
71,912
70,860
Inventory related accruals
67,096
53,636
Accrued rebates
45,706
47,318
Accrued professional services/legal
41,593
14,109
Capital expenditures
14,841
5,207
Other
149,982
165,545
Total accrued expenses
$
784,635 $
616,067
11. Share Repurchase Program
In February 2022, the Company’s Board of Directors authorized an additional $1.0 billion toward the existing share repurchase
program. Previously in April 2021 and November 2019, the Company’s Board of Directors authorized $1.0 billion and $700.0
million for the Company’s share repurchase program. The Company’s share repurchase program permitted the repurchase of
the Company’s common stock on the open market and in privately negotiated transactions from time to time. The Board of
Directors were able to increase or otherwise modify, renew, suspend or terminate the share repurchase program without
prior notice. However, Amendment No. 5 to the Company’s 2021 Credit Agreement generally prohibits open market share
repurchases.
During 2024 and 2023, the Company did not repurchase any shares of the Company’s common stock under the Company’s
share repurchase program. The Company had $947.3 million remaining under the Company’s share repurchase program as of
December 28, 2024 and December 30, 2023.
63
12. Earnings per Share
The computations of basic and diluted earnings per share were as follows:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Numerator
Net (loss) income from continuing operations
$
(586,955) $
(30,024) $
360,536
Net income from discontinued operations
251,167
59,759
103,866
Net (loss) income
$
(335,788) $
29,735 $
464,402
Denominator
Basic weighted average common shares
59,647
59,432
60,351
Dilutive impact of share-based awards
255
176
366
Diluted weighted average common shares(1)
59,902
59,608
60,717
Basic (loss) earnings per common share from
continuing operations
$
(9.84) $
(0.51) $
5.97
Basic earnings per common share from
discontinued operations
4.21
1.01
1.73
Basic (loss) earnings per common share
$
(5.63) $
0.50 $
7.70
Diluted (loss) earnings per common share from
continuing operations
$
(9.80) $
(0.50) $
5.94
Diluted earnings per common share from
discontinued operations
4.19
1.00
1.71
Diluted earnings (loss) per common share
$
(5.61) $
0.50 $
7.65
(1) For 2024, 2023 and 2022, restricted stock units (“RSUs”) excluded from the diluted calculation as their inclusion would have
been anti-dilutive were 472 thousand, 299 thousand and 115 thousand, respectively.
64
13. Income Taxes
Provision for Income Taxes
Provision for income taxes consisted of the following:
Current
Deferred
Total
2024
Federal
$
2,077 $
(171,881) $
(169,804)
State
3,447
(30,782)
(27,335)
Foreign
16,609
(613)
15,996
$
22,133 $
(203,276) $
(181,143)
2023
Federal
$
2,806 $
(28,584) $
(25,778)
State
1,919
(8,464)
(6,545)
Foreign
15,296
(127)
15,169
$
20,021 $
(37,175) $
(17,154)
2022
Federal
$
46,579 $
18,935 $
65,514
State
8,319
4,982
13,301
Foreign
21,948
(1,106)
20,842
$
76,846 $
22,811 $
99,657
The provision for income taxes differed from the amount computed by applying the federal statutory income tax rate due to:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Income before provision for income taxes at
statutory U.S. federal income tax rate (21%
for 2024, 2023 and 2022)
$
(161,254) $
(9,907) $
96,640
State income taxes, net of federal income tax
(21,661)
(6,036)
10,508
Other, net
1,772
(1,211)
(7,491)
Provision for income taxes
$
(181,143) $
(17,154) $
99,657
65
Deferred Income Tax Assets (Liabilities)
Temporary differences that give rise to significant deferred income tax assets (liabilities) were as follows:
December 28,
2024
December 30,
2023
Deferred income tax assets:
Accrued expenses not currently deductible for tax
$
38,738 $
22,021
Share-based compensation
10,878
10,698
Accrued medical and workers compensation
5,877
9,704
Net operating loss carryforwards
1,994
3,273
Operating lease liabilities
598,596
668,557
Other, net
9,141
13,886
Total deferred income tax assets before valuation allowances
665,224
728,139
Less: Valuation allowance
(4,810)
(5,179)
Total deferred income tax assets
660,414
722,960
Deferred income tax liabilities:
Property and equipment
(8,758)
(89,156)
Inventories
(182,319)
(216,666)
Intangible assets
(91,757)
(133,715)
Operating lease right-of-use assets
(570,251)
(639,058)
Total deferred income tax liabilities
(853,085)
(1,078,595)
Net deferred income tax liabilities
$
(192,671) $
(355,635)
As of December 28, 2024 and December 30, 2023, the Company’s net operating loss (“NOL”) carryforwards comprised state
NOLs of $105.7 million and $102.2 million, respectively. 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 the Company has recorded a valuation allowance of $1.8 million as of December 28, 2024 and $2.9
million as of December 30, 2023. In addition, the Company recorded a $3.0 million valuation allowance on foreign tax credit
carryforwards as of December 28, 2024. The amount of deferred income tax assets realizable could change in the future if
projections of future taxable income change.
The Company has not recorded deferred taxes when earnings from foreign operations are considered to be indefinitely
invested outside of the U.S. As of December 28, 2024 and December 30, 2023, these accumulated net earnings generated by
foreign operations were $93.4 million and $80.3 million, respectively, 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.
66
Unrecognized Tax Benefits
The following table summarizes the activity of the Company’s gross unrecognized tax benefits:
December 28,
2024
December 30,
2023
December 31,
2022
Unrecognized tax benefits, beginning of period
$
11,190 $
15,211 $
20,979
Increases related to prior period tax positions
6,328
245
75
Decreases related to prior period tax positions
—
—
(261)
Increases related to current period tax
positions
375
563
928
Settlements
—
—
(256)
Expiration of statute of limitations
(2,393)
(4,829)
(6,254)
Unrecognized tax benefits, end of period
$
15,500 $
11,190 $
15,211
As of December 28, 2024, December 30, 2023 and December 31, 2022, the entire amount of unrecognized tax benefits, if
recognized, would reduce the Company’s annual effective tax rate of 23.6%, 36.4% and 21.7%, respectively. During 2024, the
Company recorded income tax-related interest and penalty expense of $0.6 million, and in 2023 and 2022, the Company
recorded income tax-related interest and penalty benefits of $0.2 million and $0.6 million, respectively, due to uncertain tax
positions included in the Provision for income taxes in the accompanying Consolidated Statements of Operations. As of
December 28, 2024 and December 30, 2023, the Company recorded a liability for potential interest of $3.1 million and $2.5
million, respectively, and for potential penalties of $0.03 million and $0.1 million, respectively. The Company does not provide
for any penalties associated with tax contingencies unless considered probable of assessment. The Company does not expect
the unrecognized tax benefits to change significantly over the next 12 months. With few exceptions, the Company is no longer
subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2021.
14. Contingencies
Currently and from time to time, the Company is subject to litigation, claims and other disputes, including legal and regulatory
proceedings, arising in the normal course of business. The Company records a loss contingency liability when a loss is
considered probable and the amount can be reasonably estimated. Although the final outcome of 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 the Company’s consolidated financial position, results of operations or cash
flows.
On October 9, 2023, and October 27, 2023, two putative class actions on behalf of purchasers of the Company’s securities
who purchased or otherwise acquired their securities between November 16, 2022, and May 30, 2023, inclusive (the “Class
Period”), were commenced against the Company and certain of the Company’s former officers in the United States District
Court for the Eastern District of North Carolina. The plaintiffs allege that the defendants made certain false and materially
misleading statements during the alleged Class Period in violation of Section 10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 promulgated thereunder. These cases were consolidated on February 9, 2024, and the court-appointed lead
plaintiff filed a consolidated and amended complaint on April 22, 2024. The consolidated and amended complaint proposes a
Class Period of November 16, 2022 to November 15, 2023, and alleges that defendants made false and misleading statements
in connection with (a) the Company’s 2023 guidance and (b) certain accounting issues previously disclosed by the Company.
On June 21, 2024, defendants filed a motion to dismiss the consolidated and amended complaint. On January 23, 2025, the
motion to dismiss was granted by the United States District Court for the Eastern District of North Carolina. On February 21,
2025, plaintiffs filed an appeal to the 4th Circuit Court of Appeals. The Company strongly disputes the allegations and intends
to defend the case vigorously.
On January 17, 2024, February 20, 2024, and February 26, 2024, derivative shareholder complaints were commenced against
the Company’s directors and certain former officers alleging derivative liability for the allegations made in the securities class
action complaints noted above. On April 9, 2024, the court consolidated these actions and appointed co-lead counsel. On June
10, 2024, the court issued a stay order on the consolidated derivative complaint pending resolution of the motion to dismiss
for the underlying securities class action complaint.
67
15. Benefit Plans
401(k) Plan
The Company maintains a defined contribution benefit plan, which covers substantially all team members after one year of
service and who have attained the age of 21. The plan allows for team member salary deferrals, which are matched at the
Company’s discretion. Company contributions to these plans were $22.7 million, $22.5 million and $20.9 million in 2024, 2023
and 2022, respectively.
Deferred Compensation
The Company maintains a non-qualified deferred compensation plan for certain team members. This plan provides for a
minimum and maximum deferral percentage of the team member’s base salary and bonus as determined by the Retirement
Plan Committee. The Company established and maintained a deferred compensation liability for this plan. As of December 28,
2024 and December 30, 2023, these liabilities were $14.7 million and $14.3 million, respectively, and were included within
Accrued Expenses in the Consolidated Balance Sheets.
16. Share-Based Compensation
Overview
The Company grants share-based compensation awards to the Company’s team members and members of the Company’s
Board of Directors as provided for under the 2023 Omnibus Incentive Compensation Plan (“2023 Plan”), approved on May 24,
2023, which replaced the Company’s 2014 Long-Term Incentive Plan. In 2024, 2023 and 2022, the Company granted share-
based compensation in the form of RSUs or deferred stock units (“DSUs”). The Company’s 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 2024, 2023 and 2022, the Company also granted options to purchase common stock to certain employees under the
Company’s 2023 Plan. 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. The Company records
compensation expense for the grant date fair value of the option awards evenly over the vesting period.
At December 28, 2024, there were 1.7 million shares of common stock available for future issuance under the 2023 Plan
based on management’s current estimate of the probable vesting outcome for performance-based awards. Shares forfeited
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 the Company’s 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 the Company’s
common stock on the date of grant. Performance-based awards generally may vest following a three-year period subject to
the achievement of certain financial goals as specified in the grant agreements. Depending on the Company’s results during
the three-year performance period, the actual number of awards vesting at the end of the period generally ranges from 0% to
200% of the performance award. 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 the Company believes were probable of
vesting at December 28, 2024.
There were no performance-based RSUs granted during 2024. There were 22 thousand performance-based RSUs granted
during 2023 and no performance-based RSUs granted during 2022. 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 28,
68
2024. Compensation expense for performance-based awards of $6.4 million, $5.6 million and $10.8 million in 2024, 2023 and
2022, respectively, 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:
2024
2023
2022
Risk-free interest rate(1)
4.4%
4.6%
1.6%
Expected dividend yield
—%
—%
—%
Expected stock price volatility(2)
58.4%
37.4%
34.6%
(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 the Company’s stock prices and the Company’s peer group.
Additionally, the Company estimated a liquidity discount of 20.07% using the Chaffe Model to adjust the fair value for the
post-vest restrictions. Vesting of market-based RSUs depends on the Company’s relative total shareholder return among a
designated group of peer companies during a three-year period and will be subject to a one-year holding period after vesting.
The following table summarizes activity for time-based, performance-based and market-based RSUs in 2024 (inclusive of
discontinued operations related activity):
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 December 30, 2023
700 $
109.56
— $
—
123 $
180.63
Granted
571 $
71.86
— $
—
149 $
113.31
Change in units based on performance
— $
—
— $
—
— $
—
Vested (1)
(302) $
114.19
(1) $
130.03
(50) $
200.24
Forfeited
(236) $
77.81
1 $
130.03
(51) $
140.83
Nonvested at December 28, 2024
733 $
84.50
— $
—
171 $
128.04
(1) The vested shares of market-based RSUs were not exercised due to low multiplier effect for 2020 awards.
The following table summarizes certain information concerning activity for time-based, performance-based and market-based
RSUs:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Time-based:
Weighted average fair value of RSUs granted
$
71.86 $
89.81 $
196.61
Total grant date fair value of RSUs vested
$
34,497 $
33,125 $
34,685
Performance-based:
Weighted average fair value of RSUs granted
$
— $
135.13 $
—
Total grant date fair value of RSUs vested
$
88 $
14,711 $
12,460
Market-based:
Weighted average fair value of RSUs granted
$
113.31 $
139.75 $
205.52
Total grant date fair value of RSUs vested
$
10,038 $
4,400 $
3,695
69
As of December 28, 2024, the maximum potential payout under the Company’s currently outstanding market-based RSUs
were 341 thousand units.
Stock Options
In 2024, the Company granted 203 thousand stock options where the weighted average fair value of stock options granted
was $30.60 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 28, 2024 (inclusive of discontinued
operations related activity):
Number of
Awards
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Life
(Years)
Aggregate
Intrinsic Value
Outstanding at December 30, 2023
417 $
124.59
Granted
203 $
78.72
Exercised
— $
—
Forfeited
(101) $
134.87
Outstanding at December 28, 2024
519 $
104.61
8.1
$
—
Exercisable at December 28, 2024
198 $
142.66
6.8
$
—
The following table presents the range of the weighted-average assumptions used in determining the fair values of options
granted:
Year Ended
December 28, 2024
Risk-free interest rate (1)
4.1%
–
4.2%
Expected life (2)
6 years
Expected volatility (3)
41.6%
–
42.6%
Expected dividend yield (4)
1.4%
–
1.5%
(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 the Company does not
have sufficient historical data, the Company 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. The
Company utilized historical trends and the implied volatility of the Company’s publicly traded financial instruments in
developing the volatility estimate for the Company’s stock options.
(4) The expected dividend yield is calculated based on the Company’s 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 2024, 2023 and 2022 was $10.0 million, $10.1
million and $11.7 million, respectively.
As of December 28, 2024, there was $61.0 million of unrecognized compensation expense related to all share-based awards
that were expected to be recognized over a weighted average period of 1.52 years.
70
Deferred Stock Units
The Company grants share-based awards annually to the Company’s Board of Directors in connection with the Company’s
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 the Company’s 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.
The Company granted 29 thousand, 74 thousand and nine thousand DSUs in 2024, 2023 and 2022, respectively. The weighted
average fair value of DSUs granted during 2024, 2023 and 2022 was $65.21, $66.60 and $193.05, respectively. The DSUs were
awarded at a price equal to the market price of the Company’s underlying common stock on the date of the grant. For 2024,
2023 and 2022, the Company recognized $3.3 million, $3.4 million and $1.7 million, respectively, of share-based
compensation expense for these DSU grants.
Employee Stock Purchase Plan
The Company also offers an employee stock purchase plan (“ESPP”). Under the ESPP, eligible team members may elect salary
deferrals to purchase the Company’s common stock at a discount of 10% from its fair market value on the date of purchase.
There are annual limitations on the amounts a team member may elect of either $25 thousand per team member or 10% of
compensation, whichever is less. As of December 28, 2024, there were 2.4 million shares available to be issued under the
ESPP.
17. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of tax, consisted of the following:
Unrealized
Gain (Loss) on
Postretirement
Plan
Foreign
Currency
Translation
Accumulated
Other
Comprehensive
(Loss) Income
Balance, January 1, 2022
$
906 $
(27,965) $
(27,059)
2022 activity
(186)
(17,450)
(17,636)
Balance, December 31, 2022
720
(45,415)
(44,695)
2023 activity
82
(7,619)
(7,537)
Balance, December 30, 2023
802
(53,034)
(52,232)
2024 activity
(149)
5,235
5,086
Balance, December 28, 2024
$
653 $
(47,799) $
(47,146)
18. Supplier Finance Programs
The Company maintains supply chain financing agreements with third-party financial institutions to provide the Company’s
suppliers with enhanced receivables options. Through these agreements, the Company’s suppliers, at their sole discretion,
may elect to sell their receivables due from the Company to the third-party financial institution at terms negotiated between
the supplier and the third-party financial institution. The Company does not provide any guarantees to any third party in
connection with these financing arrangements. The Company’s obligations to its suppliers, including amounts due and
scheduled payment terms, are not impacted, and no assets are pledged under the agreements. All outstanding amounts due
to third-party financial institutions related to suppliers participating in such financing arrangements are recorded within
accounts payable and represent obligations outstanding under these supplier finance programs for invoices that were
confirmed as valid and owed to the third-party financial institutions in the Company’s Consolidated Balance Sheets. As of
December 28, 2024 and December 30, 2023, the Company’s accounts payable to suppliers participating in these financing
arrangements were $3.2 billion and $3.4 billion, respectively.
71
The Company’s confirmed obligations to suppliers participating in these financing arrangements consist of the following:
December 28,
2024
Confirmed obligations outstanding at the beginning of the year
$
3,360,733
Invoices confirmed during the year
3,294,260
Confirmed invoices paid during the year
(3,455,823)
Confirmed obligations outstanding at the end of the year
$
3,199,170
72
19. Segment Reporting
Following the sale of the Worldpac business in November 2024, the Company has one reportable segment as the two
remaining operating segments, “Advance Auto Parts/Carquest U.S.” and “Carquest Canada,” are aggregated due to their
economic and operational similarities. Both operating segments sell similar products across channels, operate in markets with
parallel (or similar) economic conditions, sell to related customer bases, leverage similar methods to distribute products and
provide services to its customers. The accounting policies of both operating segments are the same as those described in the
summary of significant accounting policies. Due to the assessed quantitative and qualitative economic and operational
similarities between the operating segments, management does not believe there would be additional value gained from
disaggregated disclosure.
The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer, who regularly reviews financial
information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance for
the Company’s single reportable segment. The CODM primarily focuses on net income to evaluate its reportable segment. The
CODM also uses net income for evaluating pricing strategy and to assess the performance for determining the compensation
of certain employees. Significant segment expenses reviewed, which represent the difference between segment revenue and
segment net income, consisted of the following:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Net sales
$
9,094,327 $
9,209,075 $
9,148,874
Less:
Cost of sales
$
5,685,807 $
5,348,966 $
4,916,004
SG&A (1)
3,535,680
3,535,805
3,459,925
Restructuring and related expenses
308,902
15,987
—
Depreciation and amortization expense (2)
277,244
269,430
248,327
Interest expense
81,033
87,989
50,841
Other segment items (3)
(26,241)
(1,924)
13,584
Provision for income taxes
(181,143)
(17,154)
99,657
Net (loss) income from continuing operations
$
(586,955) $
(30,024) $
360,536
(1) SG&A excludes Restructuring and related expenses and depreciation and amortization.
(2) The 2024 amount has been reduced by depreciation and amortization related to restructuring which is included in
Restructuring and related expenses.
(3) Other segment items consist of selling, general and administrative expenses, primarily labor related expenses, rent and
occupancy, and loss on early redemption of senior unsecured notes, and other income (expense), net, included in Total other,
net, in the accompanying Consolidated Statements of Operations.
The following table presents the Company’s net sales disaggregated by geographical area:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
United States
$
8,799,654 $
8,914,189 $
8,857,185
Canada
294,673
294,886
291,689
Total
$
9,094,327 $
9,209,075 $
9,148,874
No asset information has been provided for the reportable segment as the CODM does not regularly review asset information
by reportable segment. As of December 28, 2024 and December 30, 2023, assets held in the U.S. accounted for 96% and 97%
of total assets.
There were no major customers individually accounting for 10% or more of consolidated net revenues.
73
20. Discontinued Operations
On August 22, 2024, the Company entered into a definitive purchase agreement to sell Worldpac for $1.5 billion, with
customary purchase price adjustments for working capital and other items. The transaction closed on November 1, 2024. Net
proceeds from the transaction after paying expenses and excluding the impact of taxes were approximately $1.47 billion. The
Company’s sale of Worldpac was progress towards the changing landscape of the business with increased focus on the
Advance blended-box model. The Company classified the results of operations and cash flows of Worldpac as discontinued
operations in its Consolidated Statements of Operations and Consolidated Statements of Cash Flows for all periods presented.
The related assets and liabilities associated with the discontinued operations are not included in the Consolidated Balance
Sheet as of December 28, 2024. Additionally, beginning August 22, 2024, the Company ceased recording depreciation and
amortization for Worldpac’s finite-lived intangible assets and operating lease ROU assets.
In connection with the Worldpac divestiture, the Company agreed to provide letters of credit in the aggregate amount of up
to $200 million, issued under its unsecured revolving credit facility, for up to twelve months after closing of the transaction as
credit support for Worldpac’s new supply chain financing program, which letter of credit exposure will reduce to zero no later
than 24 months after closing.
Additionally, the Company and Worldpac entered into a Transition Services Agreement and Reverse Transition Services
Agreement, pursuant to which the two entities will provide certain services to each other during the post-closing period. The
minimum terms of the agreements are for twelve months, which may be extended by the Company and Worldpac for up to
two three-month extension periods.
The following table represents the major classes of assets and liabilities of discontinued operations as of December 30, 2023:
December 30,
2023
Carrying amounts of the major classes of assets included in
discontinued operations:
Cash
$
15,422
Receivables, net
190,613
Inventories
964,133
Other current assets
35,305
Property and equipment, net of accumulated depreciation
92,561
Operating lease right-of-use assets
231,703
Other intangible assets, net
174,180
Goodwill
390,584
Other noncurrent assets
911
Total assets of held for sale
$
2,095,412
Carrying amounts of the major classes of liabilities included in
discontinued operations:
Accounts payable
$
651,895
Accrued expenses
55,170
Other current liabilities
61,786
Noncurrent operating lease liabilities
175,858
Deferred income taxes
6,907
Other noncurrent liabilities
986
Total liabilities held for sale
$
952,602
74
The following table presents the major components of discontinued operations in the Company's Consolidated Statements of
Operations:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Major classes of line items constituting income of discontinued
operations before provision for income taxes:
Net Sales
$
1,796,525 $
2,078,532 $
2,005,848
Cost of sales, including purchasing and warehousing costs
1,194,149
1,415,139
1,306,483
Gross profit
602,376
663,393
699,365
Selling, general and administrative expenses
502,733
587,903
553,730
Operating income
99,643
75,490
145,635
Other, net:
Interest expense
(422)
(66)
(219)
Other (expense) income, net
(2,976)
3,601
(1,247)
Gain on divestiture
349,477
—
—
Total other, net
346,079
3,535
(1,466)
Income before provision for income taxes
445,722
79,025
144,169
Provision for income taxes
194,555
19,266
40,303
Net income from discontinued operations
$
251,167 $
59,759 $
103,866
75
Advance Auto Parts, Inc.
Schedule II - Valuation and Qualifying Accounts
(in thousands)
Allowance for credit losses
Balance at
Beginning of
Period
Charges to
Expenses
Deductions
Balance at End
of Period
December 31, 2022
$
6,874 $
16,967 $
(10,938) $
12,903
December 30, 2023
$
12,903 $
20,345 $
(9,632) $
23,616
December 28, 2024
$
23,616 $
107,032 $
(72,856) $
57,792
For the year ended December 28, 2024, the allowance for credit losses increased $34.2 million, primarily due to incremental
reserves established as a result of the 2024 Restructuring Plan. Refer to Note 6. Receivables, net, of the Notes to the
Consolidated Financial Statements included herein.
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.
76
EXHIBIT INDEX
3.1
Composite Restated Certificate of Incorporation of Advance
Auto Parts, Inc., effective August 9, 2024.
10-Q
3.1
8/22/2024
3.2
Amended and Restated Bylaws of Advance Auto Parts, Inc.,
effective August 8, 2023.
8-K
3.1
8/14/2023
4.0
Description of Securities Registered under Section 12 of the
Securities Exchange Act of 1934, as amended.
10-K
4.0
2/18/2020
4.1
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.
8-K
4.1
4/29/2010
4.2
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.
8-K
10.45
6/3/2011
4.3
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.
8-K
4.4
1/17/2012
4.4
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.
8-K
4.5 12/21/2012
4.5
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.
8-K
4.6
4/19/2013
4.6
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.
8-K
4.7
12/9/2013
4.7
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.
10-Q
4.11
5/28/2014
4.8
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.
8-K
4.1
4/17/2020
4.9
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.
8-K
4.6
9/30/2020
4.10
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.
8-K
4.1
3/4/2022
4.11
Tenth Supplemental Indenture, dated as of March 9, 2023,
among Advance Auto Parts, Inc., Advance Stores Company,
Incorporated and Computershare Trust Company, N.A., as
successor to Wells Fargo Bank, National Association, as
Trustee.
8-K
4.1
3/9/2023
4.12
Form of 5.900% Notes due 2026 (included in Exhibit 4.11)
8-K
4.1
3/9/2023
4.13
Form of 1.750% Notes due 2027 (included in Exhibit 4.9)
8-K
4.6
9/30/2020
4.14
Form of 5.950% Notes due 2028 (included in Exhibit 4.11)
8-K
4.1
3/9/2023
4.15
Form of 3.900% Notes due 2030 (included in Exhibit 4.8)
8-K
4.1
4/17/2020
Incorporated by Reference
Filed
Exhibit No.
Exhibit Description
Form
Exhibit
Filing Date
Herewith
77
4.16
Form of 3.500% Notes due 2032 (included in Exhibit 4.10).
8-K
4.1
3/4/2022
10.1
Form of Indemnification Agreement with Directors and
Officers.
10-Q
10.4 11/14/2024
10.2*
Deferred Stock Unit Plan for Non-Employee Directors and
Selected Executives (as amended and restated effective
August 7, 2024).
10-Q
10.3 11/14/2024
10.3*
Form of 2024 Advance Auto Parts, Inc. Performance-Based
Restricted Stock Unit Award Agreement.
10-Q
10.3
5/30/2024
10.4*
Form of 2024 Advance Auto Parts, Inc. Time-Based
Restricted Stock Unit Award Agreement.
10-Q
10.4
5/30/2024
10.5*
Form of 2024 Advance Auto Parts, Inc. Time-Based
Nonqualified Option Award Agreement.
10-Q
10.5
5/30/2024
10.6*
Advance Auto Parts, Inc. Executive Incentive Award Plan
10-K
10.8
3/12/2024
10.7*
Advance Auto Parts, Inc. 2014 Long-Term Incentive Plan (as
amended effective August 7, 2018).
10-K
10.57
2/9/2019
10.8*
Form of 2022 Advance Auto Parts, Inc. Time-Based
Restricted Stock Unit Award Agreement.
10-Q
10.2
5/24/2022
10.9*
Form of 2022 Advance Auto Parts, Inc. Performance-Based
Restricted Stock Unit Award Agreement.
10-Q
10.3
5/24/2022
10.10*
Form of 2022 Advance Auto Parts, Inc. Nonqualified Stock
Option Award Agreement.
10-Q
10.4
5/24/2022
10.11*
Form of 2023 Advance Auto Parts, Inc. Performance-Based
Restricted Stock Unit Award Agreement under the 2014
Plan.
10-Q
10.3
6/6/2023
10.12*
Form of 2023 Advance Auto Parts, Inc. Performance-Based
Restricted Stock Unit Award Agreement under the 2014 Plan
(CEO).
10-Q
10.4
6/6/2023
10.13*
Form of 2023 Advance Auto Parts, Inc. Nonqualified Stock
Option Award Agreement under the 2014 Plan.
10-Q
10.5
6/6/2023
10.14*
Advance Auto Parts, Inc. 2023 Omnibus Incentive
Compensation Plan.
10-Q
10.1
6/6/2023
10.15*
Form of 2023 Advance Auto Parts, Inc. Time-Based
Restricted Stock Unit Award Agreement under the 2023
Plan.
10-Q
10.6
6/6/2023
10.16*
Form of 2023 Advance Auto Parts, Inc. Performance-Based
Restricted Stock Unit Award Agreement under the 2023
Plan.
10-Q
10.7
6/6/2023
10.17*
Form of 2023 Advance Auto Parts, Inc. Nonqualified Stock
Option Award Agreement under the 2023 Plan.
10-Q
10.8
6/6/2023
10.18*
Advance Auto Parts, Inc. Deferred Compensation Program,
as amended and restated effective January 1, 2021.
10-K
10.45
2/22/2021
10.19*
Description of Non-Employee Director Compensation.
10-K
10.24
3/12/2024
10.20*
Employment Agreement effective October 2, 2022 between
Advance Auto Parts, Inc. and Herman Word, Jr.
10-K
10.31
3/12/2024
10.21*
Amendment effective September 13, 2024 to Employment
Agreement effective October 2, 2022 between Advance
Auto Parts, Inc. and Herman Word, Jr.
8-K
10.1
9/13/2024
10.22*
Employment Agreement effective August 21, 2023 between
Advance Auto Parts, Inc. and Shane M. O'Kelly.
8-K
10.01
8/23/2023
10.23*
Employment Agreement effective November 13, 2023
between Advance Auto Parts, Inc. and Ryan P. Grimsland.
8-K
10.01 11/15/2023
Incorporated by Reference
Filed
Exhibit No.
Exhibit Description
Form
Exhibit
Filing Date
Herewith
78
10.24
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.
8-K
10.1 11/15/2021
10.25
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.
8-K
10.2 11/15/2021
10.26
Amendment No. 1 to the Credit Agreement Dated as of
February 27, 2023
10-K
10.29 02/28/2023
10.27
Amendment No. 2 to the Credit Agreement Dated as of
August 21, 2023
10-Q
10.1
8/23/2023
10.28
Amendment No. 3 to the Credit Agreement Dated as of
November 20, 2023
10-Q
10.5 11/21/2023
10.29
Amendment No. 4 to the Credit Agreement Dated as of
February 26, 2024
8-K
10.1
2/28/2024
10.30
Amendment No. 5 to the Credit Agreement Dated as of
November 13, 2024
8-K
10.1 11/14/2024
10.31
Amendment No. 6 to the Credit Agreement Dated as of
February 25, 2025
8-K
10.1
2/26/2025
10.32
Advance Auto Parts, Inc. Cooperation Agreement.
8-K
10.1
3/12/2024
10.33*
Employment Agreement effective January 4, 2015 between
Advance Auto Parts, Inc. and Tammy Finley
X
10.34*
Employment Agreement effective August 12, 2015 between
Advance Auto Parts, Inc. and Tammy Finley First
Amendment
X
10.35*
Employment Agreement effective December 12, 2022
between Advance Auto Parts, Inc. and Szilagyi Fully Executed
X
10.36
Sale and Purchase Agreement, dated August 22, 2024,
between Advance Auto Parts, Inc. and Wheels Bid co, Inc.
8-K
10.1
8/22/2024
19.1
Advance Auto Parts, Inc. Insider Trading Policy
10-K
10.39
3/12/2024
21.1
Subsidiaries of Advance Auto Parts, Inc.
X
22.1
List of Issuers and its Guarantor Subsidiaries
X
23.1
Consent of Deloitte & Touche LLP.
X
31.1
Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
X
32.1
Certifications of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
X
97.1
Clawback Policy
X
101.INS
XBRL Instance Document.
X
101.SCH
XBRL Taxonomy Extension Schema Document.
X
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
X
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
X
101.LAB
XBRL Taxonomy Extension Labels Linkbase Document.
X
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
X
104.1
Cover Page Interactive Data File (Embedded within the Inline
XBRL document and included in Exhibit).
X
Incorporated by Reference
Filed
Exhibit No.
Exhibit Description
Form
Exhibit
Filing Date
Herewith
*Indicates a management contract or compensatory plan.
79
Item 16. Form 10-K Summary.
None.
80
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.
ADVANCE AUTO PARTS, INC.
Dated: February 26, 2025
By:
/s/ Ryan P. Grimsland
Ryan P. Grimsland
Executive Vice President, Chief Financial 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/ Shane M. O’Kelly
President and Chief Executive Officer and Director
February 26, 2025
Shane M. O’Kelly
(Principal Executive Officer)
/s/ Ryan P. Grimsland
Executive Vice President, Chief Financial Officer
February 26, 2025
Ryan P. Grimsland
(Principal Financial Officer)
/s/ Michael P. Beland
Senior Vice President, Controller and Chief Accounting Officer
February 26, 2025
Michael P. Beland
(Principal Accounting Officer)
/s/ Eugene I. Lee, Jr.
Chairman and Director
February 26, 2025
Eugene I. Lee, Jr.
/s/ Carla J. Bailo
Director
February 26, 2025
Carla J. Bailo
/s/ John F. Ferraro
Director
February 26, 2025
John F. Ferraro
/s/ Joan M. Hilson
Director
February 26, 2025
Joan M. Hilson
/s/ Jeffrey J. Jones II
Director
February 26, 2025
Jeffrey J. Jones II
/s/ Douglas A. Pertz
Director
February 26, 2025
Douglas A. Pertz
/s/ Gregory L. Smith
Director
February 26, 2025
Gregory L. Smith
/s/ Thomas W. Seboldt
Director
February 26, 2025
Thomas W. Seboldt
/s/ Sherice R. Torres
Director
February 26, 2025
Sherice R. Torres
/s/ A. Brent Windom
Director
February 26, 2025
A. Brent Windom
81
(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 14, 2025 at 8:30 a.m. ET
www.virtualshareholdermeeting.com/AAP2025
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.
Eugene I. Lee, Jr.
Chair of the Board, Advance Auto
Parts, Inc. and Former Chairman
and Chief Executive Officer,
DardenRestaurants, Inc.
Carla J. Bailo ^ ◊
President and Chief Executive
Officer, ECOS Consulting, LLC
John F. Ferraro ^
Former Global Chief Operating
Officer, Ernst & Young; Audit
Committee Chair
Joan M. Hilson ^ √
Chief Operating & Financial
Officer, Signet Jewelers, Ltd.;
Finance Committee Chair
Jeffrey J. Jones II † ◊
President, Chief Executive Officer,
H&R Block, Inc.; Compensation
Committee Chair
Shane M. O’Kelly
President and Chief Executive
Officer, Advance Auto Parts, Inc.
Douglas A. Pertz † ◊
Former President and Chief
Executive Officer, The Brink’s
Company; Nominating and
Corporate Governance
Committee Chair
Thomas W. Seboldt ◊
President, Seboldt Consulting
Services, LLC
Gregory L. Smith ^ √
Executive Vice President,
Enterprise Operations,
Medtronic plc
Sherice R. Torres † √
Former Chief Marketing Officer,
ChargePoint, Inc.
A. Brent Windom † √
President, Windom Consulting, LLC
^ Audit Committee
† Compensation Committee
◊ Nominating and Corporate Governance Committee
√ Finance Committee
Shane O’Kelly*
President and
Chief Executive Officer
Shweta Bhatia*
Executive Vice President,
Chief Technology Officer
Ryan Grimsland*
Executive Vice President,
Chief Financial Officer
Kristen Soler*
Executive Vice President,
Chief Human Resources Officer
Bruce Starnes*
Executive Vice President,
Chief Merchant
Stephen Szilagyi*
Executive Vice President,
Supply Chain
Jeff Vining*
Executive Vice President,
General Counsel and
Corporate Secretary
Herman Word, Jr.*
Executive Vice President,
Professional, Canada and
Independents
Michael Beland*
Senior Vice President,
Controller and Chief
Accounting Officer
Todd Davenport
Senior Vice President,
Real Estate and Development
Jason Hand*
Senior Vice President,
U.S. Stores
* Denotes Executive Officer
1 As of March 17, 2025
E X E C U T I V E T E A M
1
B O A R D O F D I R E C T O R S
1
4200 SIX FORKS ROAD | RALEIGH, NORTH CAROLINA 27609
877.238.2623 | ADVANCEAUTOPARTS.COM