aap-20211009

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 9, 2021

☐ 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.)

2635 East Millbrook Road, Raleigh, North Carolina 27604

(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

Not Applicable

(Former name, former address and former fiscal year, if changed since last report).

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 12, 2021, the number of shares of the registrant’s common stock outstanding was 62,355,177 shares.

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			Page

NOTE REGARDING FORWARD LOOKING STATEMENTS			1

PART I.	FINANCIAL INFORMATION

	Item 1.	Condensed Consolidated Financial Statements of Advance Auto Parts, Inc. and Subsidiaries (unaudited)	2

		Condensed Consolidated Balance Sheets	2

		Condensed Consolidated Statements of Operations	3

		Condensed Consolidated Statements of Comprehensive Income	3

		Condensed Consolidated Statements of Changes in Stockholders’ Equity	4

		Condensed Consolidated Statements of Cash Flows	6

		Notes to the Condensed Consolidated Financial Statements	7

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

	Item 4.	Controls and Procedures	22

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	24

	Item 1A.	Risk Factors	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 6.	Exhibits	25

SIGNATURE			26

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identifiable by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “plan,” “position,” “possible,” “potential,” “probable,” “project,” “should,” “strategy,” “will,” or similar language. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about our strategic initiatives, operational plans and objectives, and future business and financial performance, as well as statements regarding underlying assumptions related thereto. Forward-looking statements reflect our views based on historical results, current information and assumptions related to future developments. Except as may be required by law, we undertake no obligation to update any forward-looking statements made herein. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements. They include, among others, factors related to the timing and implementation of strategic initiatives, the highly competitive nature of our industry, demand for our products and services, complexities in our inventory and supply chain, challenges with transforming and growing our business and factors related to the current global pandemic. Please refer to “Item 1A. Risk Factors.” of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), as updated by our subsequent filings with the SEC, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.

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PART I. FINANCIAL INFORMATION

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data) (Unaudited)


	October 9, 2021		January 2, 2021
Assets
Current assets:
Cash and cash equivalents	$	604,645	$	834,992
Receivables, net	931,758		749,999
Inventories	4,450,452		4,538,199
Other current assets	174,406		146,811
Total current assets	6,161,261		6,270,001
Property and equipment, net of accumulated depreciation of $2,349,872 and $2,189,165	1,483,246		1,462,602
Operating lease right-of-use assets	2,514,375		2,379,987
Goodwill	994,562		993,590
Intangible assets, net	658,545		681,127
Other assets	52,182		52,329
	$	11,864,171	$	11,839,636
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,750,835	$	3,640,639
Accrued expenses	731,786		606,804
Other current liabilities	472,608		496,472
Total current liabilities	4,955,229		4,743,915
Long-term debt	1,034,002		1,032,984
Non-current operating lease liabilities	2,154,364		2,014,499
Deferred income taxes	375,069		342,445
Other long-term liabilities	148,972		146,281
Commitments and contingencies
Stockholders’ equity:
Preferred stock, nonvoting, $0.0001 par value	—		—
Common stock, voting, $0.0001 par value	8		8
Additional paid-in capital	835,033		783,709
Treasury stock, at cost	(2,203,584)		(1,394,080)
Accumulated other comprehensive loss	(21,826)		(26,759)
Retained earnings	4,586,904		4,196,634
Total stockholders’ equity	3,196,535		3,559,512
	$	11,864,171	$	11,839,636

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

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Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data) (Unaudited)


	Twelve Weeks Ended				Forty Weeks Ended
	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Net sales	$	2,621,229	$	2,541,928	$	8,601,014	$	7,741,190
Cost of sales, including purchasing and warehousing costs	1,438,775		1,413,457		4,744,383		4,343,272
Gross profit	1,182,454		1,128,471		3,856,631		3,397,918
Selling, general and administrative expenses	953,256		871,660		3,130,376		2,799,837
Operating income	229,198		256,811		726,255		598,081
Other, net:
Interest expense	(8,587)		(11,925)		(28,085)		(37,590)
Loss on early redemptions of senior unsecured notes	—		(48,022)		—		(48,022)
Other income (expense), net	1,810		674		7,790		(2,198)
Total other, net	(6,777)		(59,273)		(20,295)		(87,810)
Income before provision for income taxes	222,421		197,538		705,960		510,271
Provision for income taxes	52,608		50,062		171,521		129,247
Net income	$	169,813	$	147,476	$	534,439	$	381,024

Basic earnings per common share	$	2.70	$	2.14	$	8.28	$	5.51
Weighted-average common shares outstanding	62,854		68,965		64,555		69,097
Diluted earnings per common share	$	2.68	$	2.13	$	8.22	$	5.50
Weighted-average common shares outstanding	63,348		69,267		65,008		69,325

Condensed Consolidated Statements of Comprehensive Income

(In thousands) (Unaudited)


	Twelve Weeks Ended				Forty Weeks Ended
	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Net income	$	169,813	$	147,476	$	534,439	$	381,024
Other comprehensive income (loss):
Changes in net unrecognized other postretirement costs, net of tax of $25, $26, $69 and $29	(70)		(73)		(194)		(80)
Currency translation adjustments	1,527		5,298		5,127		(4,065)
Total other comprehensive income (loss)	1,457		5,225		4,933		(4,145)
Comprehensive income	$	171,270	$	152,701	$	539,372	$	376,879

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

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

	Twelve Weeks Ended October 9, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance, July 17, 2021	63,499	$	8	$	818,126	$	(1,973,371)	$	(23,283)	$	4,480,085	$	3,301,565
Net income	—	—		—		—		—		169,813		169,813
Total other comprehensive income	—	—		—		—		1,457		—		1,457
Restricted stock units and deferred stock units vested	29	—		—		—		—		—		—
Share-based compensation	—	—		16,040		—		—		—		16,040
Stock issued under employee stock purchase plan	4	—		868		—		—		—		868
Repurchases of common stock	(1,119)	—		—		(230,213)		—		—		(230,213)
Cash dividends declared ($1.00 per common share)	—	—		—		—		—		(62,994)		(62,994)
Other	—	—		(1)		—		—		—		(1)
Balance, October 9, 2021	62,413	$	8	$	835,033	$	(2,203,584)	$	(21,826)	$	4,586,904	$	3,196,535

	Twelve Weeks Ended October 3, 2020
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance, July 11, 2020	69,139	$	8	$	760,535	$	(961,592)	$	(43,939)	$	3,971,507	$	3,726,519
Net income	—	—		—		—		—		147,476		147,476
Total other comprehensive income	—	—		—		—		5,225		—		5,225
Restricted stock units and deferred stock units vested	27	—		—		—		—		—		—
Share-based compensation	—	—		11,089		—		—		—		11,089
Stock issued under employee stock purchase plan	5	—		693		—		—		—		693
Repurchases of common stock	(726)	—		—		(111,127)		—		—		(111,127)
Cash dividends declared ($0.25 per common share)	—	—		—		—		—		(17,207)		(17,207)
Other	—	—		(4)		—		—		—		(4)
Balance, October 3, 2020	68,445	$	8	$	772,313	$	(1,072,719)	$	(38,714)	$	4,101,776	$	3,762,664

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

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

	Forty Weeks Ended October 9, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance, January 2, 2021	66,361	$	8	$	783,709	$	(1,394,080)	$	(26,759)	$	4,196,634	$	3,559,512
Net income	—	—		—		—		—		534,439		534,439
Total other comprehensive income	—	—		—		—		4,933		—		4,933
Restricted stock units and deferred stock units vested	277	—		—		—		—		—		—
Share-based compensation	—	—		49,631		—		—		—		49,631
Stock issued under employee stock purchase plan	23	—		1,737		—		—		—		1,737
Repurchases of common stock	(4,285)	—		—		(809,504)		—

SEC Form 10-Q filed by Advance Auto Parts Inc