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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 July 11, 2020

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
________________________

aap-20200711_g1.jpg
ADVANCE AUTO PARTS, INC.
(Exact name of registrant as specified in its charter)
________________________

Delaware54-2049910
(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 classTrading symbolName of each exchange on which registered
Common Stock, $0.0001 par valueAAPNew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 August 13, 2020, the number of shares of the registrant’s common stock outstanding was 69,138,763 shares.



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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, 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)
 July 11, 2020December 28, 2019
Assets
Current assets:  
Cash and cash equivalents$1,141,502 $418,665 
Receivables, net742,346 689,469 
Inventories4,358,489 4,432,168 
Other current assets153,188 155,241 
Total current assets6,395,525 5,695,543 
Property and equipment, net of accumulated depreciation of $2,096,439 and $2,037,8491,436,485 1,433,213 
Operating lease right-of-use assets2,367,527 2,365,325 
Goodwill990,396 992,240 
Intangible assets, net692,482 709,756 
Other assets48,250 52,448 
 $11,930,665 $11,248,525 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Accounts payable$3,310,073 $3,421,987 
Accrued expenses659,642 535,863 
Other current liabilities467,844 519,852 
Total current liabilities4,437,559 4,477,702 
Long-term debt1,240,340 747,320 
Noncurrent operating lease liabilities2,041,400 2,017,159 
Deferred income taxes338,086 334,013 
Other long-term liabilities146,761 123,250 
Commitments and contingencies
Stockholders’ equity:  
Preferred stock, nonvoting, $0.0001 par value  
Common stock, voting, $0.0001 par value8 8 
Additional paid-in capital760,535 735,183 
Treasury stock, at cost(961,592)(924,389)
Accumulated other comprehensive loss(43,939)(34,569)
Retained earnings3,971,507 3,772,848 
Total stockholders’ equity3,726,519 3,549,081 
 $11,930,665 $11,248,525 



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 EndedTwenty-Eight Weeks Ended
July 11, 2020July 13, 2019July 11, 2020July 13, 2019
Net sales$2,501,380 $2,332,246 $5,199,262 $5,284,283 
Cost of sales, including purchasing and warehousing costs
1,404,666 1,322,808 2,929,815 2,970,233 
Gross profit1,096,714 1,009,438 2,269,447 2,314,050 
Selling, general and administrative expenses
833,869 838,666 1,928,177 1,935,338 
Operating income262,845 170,772 341,270 378,712 
Other, net:
Interest expense(13,422)(8,675)(25,665)(23,619)
Other income (expense), net3,117 4,113 (2,872)1,874 
Total other, net(10,305)(4,562)(28,537)(21,745)
Income before provision for income taxes
252,540 166,210 312,733 356,967 
Provision for income taxes62,580 41,390 79,185 89,647 
Net income$189,960 $124,820 $233,548 $267,320 
Basic earnings per common share$2.75 $1.74 $3.38 $3.73 
Weighted average common shares outstanding69,118 71,738 69,154 71,767 
Diluted earnings per common share$2.74 $1.73 $3.37 $3.71 
Weighted average common shares outstanding
69,294 72,008 69,350 72,063 


Condensed Consolidated Statements of Comprehensive Income
(In thousands) (Unaudited)
 Twelve Weeks EndedTwenty-Eight Weeks Ended
July 11, 2020July 13, 2019July 11, 2020July 13, 2019
Net income$189,960 $124,820 $233,548 $267,320 
Other comprehensive income (loss):
Changes in net unrecognized other postretirement benefit (costs) income, net of tax of $26, $25, $3 and $8(73)(69)(7)26 
Currency translation adjustments7,669 6,626 (9,363)10,686 
Total other comprehensive income (loss)7,596 6,557 (9,370)10,712 
Comprehensive income$197,556 $131,377 $224,178 $278,032 



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 July 11, 2020
Common StockAdditional
Paid-in Capital
Treasury Stock, at CostAccumulated Other
Comprehensive Loss
Retained EarningsTotal
Stockholders’ Equity
SharesAmount
Balance, April 18, 202069,101 $8 $749,723 $(960,150)$(51,535)$3,798,983 $3,537,029 
Net income
— — — — — 189,960 189,960 
Total other comprehensive income
— — — — 7,596 — 7,596 
Restricted stock units and deferred stock units vested
42 — — — — —  
Share-based compensation
— — 10,029 — — — 10,029 
Stock issued under employee stock purchase plan
6 — 783 — — — 783 
Repurchases of common stock
(10)— — (1,442)— — (1,442)
Cash dividends declared ($0.25 per common share)
— — — — — (17,436)(17,436)
Balance, July 11, 202069,139 $8 $760,535 $(961,592)$(43,939)$3,971,507 $3,726,519 
Twelve Weeks Ended July 13, 2019
Common StockAdditional
Paid-in Capital
Treasury Stock, at CostAccumulated Other
Comprehensive Loss
Retained EarningsTotal
Stockholders’ Equity
SharesAmount
Balance, April 20, 201971,737 $8 $706,360 $(560,245)$(40,038)$3,441,138 $3,547,223 
Net income
— — — — — 124,820 124,820 
Total other comprehensive loss
— — — — 6,557 — 6,557 
Restricted stock units and deferred stock units vested
34 — — — — —  
Share-based compensation
— — 8,441 — — — 8,441 
Stock issued under employee stock purchase plan
6 — 970 — — — 970 
Repurchases of common stock
(81)— — (12,347)— — (12,347)
Cash dividends declared ($0.06 per common share)
— — — — — (4,338)(4,338)
Other
1 — (24)— — — (24)
Balance, July 13, 201971,697 $8 $715,747 $(572,592)$(33,481)$3,561,620 $3,671,302 



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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)
Twenty-Eight Weeks Ended July 11, 2020
 Common StockAdditional
Paid-in Capital
Treasury Stock, at CostAccumulated Other
Comprehensive Loss
Retained EarningsTotal
Stockholders’ Equity
 SharesAmount
Balance, December 28, 201969,232 $8 $735,183 $(924,389)$(34,569)$3,772,848 $3,549,081 
Net income
— — — — — 233,548 233,548 
Total other comprehensive loss
— — — — (9,370)— (9,370)
Restricted stock units and deferred stock units vested
179 — — — — —  
Share-based compensation
— — 23,838 — — — 23,838 
Stock issued under employee stock purchase plan
15 — 1,518 — — — 1,518 
Repurchases of common stock
(287)— — (37,203)— — (37,203)
Cash dividends declared ($0.50 per common share)
— — — — — (34,889)(34,889)
Other
 — (4)— — — (4)
Balance, July 11, 202069,139 $8 $760,535 $(961,592)$(43,939)$3,971,507 $3,726,519 
Twenty-Eight Weeks Ended July 13, 2019
 Common StockAdditional
Paid-in Capital
Treasury Stock, at CostAccumulated Other
Comprehensive Loss
Retained EarningsTotal
Stockholders’ Equity
 SharesAmount
Balance, December 29, 201872,460 $8 $694,797 $(425,954)$(44,193)$3,326,155 $3,550,813 
Net income
— — — — — 267,320 267,320 
Cumulative effect of accounting change from adoption of ASU 2016-02, net of tax(23,165)(23,165)
Total other comprehensive loss
— — — — 10,712 10,712 
Restricted stock units and deferred stock units vested
145 — — — — —  
Share-based compensation
— — 19,425 — — — 19,425 
Stock issued under employee stock purchase plan
11 — 1,648 — — — 1,648 
Repurchases of common stock
(921)— — (146,638)— — (146,638)
Cash dividends declared ($0.12 per common share)
— — — — — (8,690)(8,690)
Other
2 — (123)— — — (123)
Balance, July 13, 201971,697 $8 $715,747 $(572,592)$(33,481)$3,561,620 $3,671,302 



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 Cash Flows
(In thousands) (Unaudited)
 Twenty-Eight Weeks Ended
July 11, 2020July 13, 2019
Cash flows from operating activities:  
Net income$233,548 $267,320 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization135,221 123,257 
Share-based compensation23,838 19,425 
Loss and impairment of long-lived assets1,801 2,297 
Provision for deferred income taxes4,581 2,930 
Other940 11,719 
Net change in:
Receivables, net(55,055)(85,941)
Inventories67,894 (5,685)
Accounts payable(108,860)142,002 
Accrued expenses145,228 (21,272)
Other assets and liabilities, net(926)36,109 
Net cash provided by operating activities448,210 492,161 
Cash flows from investing activities:  
Purchases of property and equipment(140,105)(111,425)
Purchase of an indefinite-lived intangible asset(230) 
Proceeds from sales of property and equipment305 8,566 
Net cash used in investing activities(140,030)(102,859)
Cash flows from financing activities:  
Decrease in bank overdrafts (70,265)
Proceeds from borrowings on revolving credit facility500,000  
Payment on revolving credit facility(500,000) 
Proceeds from issuance of senior unsecured notes498,240  
Redemption of senior unsecured notes (310,047)
Dividends paid(39,017)(13,028)
Proceeds from the issuance of common stock
1,518 1,648 
Repurchases of common stock(37,203)(146,638)
Other, net(5,815)(236)
Net cash provided by (used in) financing activities417,723 (538,566)
Effect of exchange rate changes on cash(3,066)456 
Net increase (decrease) in cash and cash equivalents722,837 (148,808)
Cash and cash equivalents, beginning of period
418,665 896,527 
Cash and cash equivalents, end of period
$1,141,502 $747,719 
Non-cash transactions:
Accrued purchases of property and equipment$9,594 $30,068 



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
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


1. Nature of Operations and Basis of Presentation

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

As of July 11, 2020, we operated a total of 4,819 stores and 167 branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of July 11, 2020, we served 1,262 independently owned Carquest branded stores across the same geographic locations served by our stores and branches in addition to Mexico, the Bahamas, Turks and Caicos and the British Virgin Islands.

In March 2020, the World Health Organization categorized the COVID-19 outbreak as a pandemic (“the pandemic”). As a majority of our stores and facilities have remained open, we have taken additional measures to help protect the health and safety of our Team Members and customers. Such measures, among others, include the implementation of other labor-related benefits for Team Members and increased sanitation practices across Advance. Since the assumptions underpinning our long-term revenue and cash flow growth rates, operating models and business strategies have not been significantly impacted, there was no material impairment of our various assets during the twelve and twenty-eight weeks ended July 11, 2020.

The COVID-19 pandemic remains an evolving situation. If a period of decreased demand were to reoccur, it may lead to increased asset recovery and valuation risks in the future, such as impairment of goodwill, intangible assets and store and other assets. We will continue to assess the impact of the pandemic on our financial position. The extent to which the COVID-19 pandemic will impact our operations, liquidity, compliance with debt covenants or financial results in subsequent periods is uncertain, but such impact could be material.

The accounting policies followed in the presentation of interim financial results are consistent with those followed on an annual basis. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), have been condensed or omitted based upon the Securities and Exchange Commission (“SEC”) interim reporting guidance. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for 2019 as filed with the SEC on February 18, 2020.

The accompanying condensed consolidated financial statements reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the operating results to be expected for the full year. Our first quarter of the year contains sixteen weeks. Our second and third quarter of 2020 consist of twelve weeks, while our fourth quarter of 2020 contains thirteen weeks due to the 53-week fiscal year in 2020.

2. Significant Accounting Policies

Revenues

The following table summarizes disaggregated revenue from contracts with customers by product group:
Twelve Weeks EndedTwenty-Eight Weeks Ended
July 11, 2020July 13, 2019July 11, 2020July 13, 2019
Percentage of Net sales, by product group:
Parts and batteries66 %67 %66 %66 %
Accessories and chemicals22 21 21 21 
Engine maintenance11 11 12 12 
Other1 1 1 1 
Total100 %100 %100 %100 %
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Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


Recently Issued Accounting Pronouncements

During the sixteen weeks ended April 18, 2020, we adopted Financial Accounting Standard Board (“FASB”) Accounting Standards Update 2016-13 (“ASU 2016-13”), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which required us to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaced the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The adoption of ASU 2016-13 did not have a material impact on our consolidated financial statements.

During the twelve weeks ended July 11, 2020, we early adopted the SEC’s, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities rules, which simplify the disclosure requirements related to the Company’s registered securities under Rule 3-10 of Regulation S-X. The final rule also allows for the simplified disclosure to be included within Management’s Discussion and Analysis of Financial Condition and Results of Operations.

3. Inventories

Inventories are stated at the lower of cost or market. We used the last in, first out (“LIFO”) method of accounting for approximately 88% and 89% of inventories as of July 11, 2020 and December 28, 2019. Under the LIFO method, our Cost of sales reflects the costs of the most recently purchased inventories, while the inventory carrying balance represents the costs for inventories purchased in the twenty-eight weeks ended July 11, 2020 and prior years. We recorded an increase to Cost of sales of $3.1 million and $16.5 million for the twelve weeks ended July 11, 2020 and July 13, 2019, an increase to Cost of sales of $11.9 million and $42.9 million for the twenty-eights weeks ended July 11, 2020 and July 13, 2019 to state inventories at LIFO.

An actual valuation of inventory under the LIFO method is performed by us at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on our estimates of expected inventory levels and costs at the end of the year.

Inventory balances were as follows:
(in thousands)July 11, 2020December 28, 2019
Inventories at first in, first out (“FIFO”)$4,228,833 $4,290,565 
Adjustments to state inventories at LIFO129,656 141,603 
Inventories at LIFO$4,358,489 $4,432,168 

4. Intangible Assets

Our definite-lived intangible assets include customer relationships and non-compete agreements. Amortization expense was $7.3 million for the twelve weeks ended July 11, 2020 and July 13, 2019 and $17.0 million for the twenty-eight weeks ended July 11, 2020 and July 13, 2019.

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Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

5. Receivables, net

Receivables consist of the following:
(in thousands)July 11, 2020December 28, 2019
Trade$519,614 $422,403 
Vendor202,031 249,009 
Other31,177 32,306 
Total receivables752,822 703,718 
Less: allowance for doubtful accounts(10,476)(14,249)
Receivables, net$742,346 $689,469 

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

Long-term debt consists of the following:
(in thousands)July 11, 2020December 28, 2019
4.50% Senior Unsecured Notes due January 15, 2022$299,581 $299,441 
4.50% Senior Unsecured Notes due December 1, 2023448,095 447,879 
3.90% Senior Unsecured Notes due April 15, 2030492,664  
Total long-term debt$1,240,340 $747,320 
Fair value of long-term debt$1,352,000 $795,000 

Fair Value of Financial Assets and Liabilities

The fair value of our senior unsecured notes was determined using Level 2 inputs based on quoted market prices. The carrying amounts of our cash and cash equivalents, receivables, accounts payable and accrued expenses approximate their fair values due to the relatively short-term nature of these instruments.

Senior Unsecured Notes

Our 4.50% senior unsecured notes due January 15, 2022 (the “2022 Notes”) were issued in January 2012 at 99.97% of the principal amount of $300.0 million. The 2022 Notes bear interest at a rate of 4.50% per year payable semi-annually in arrears on January 15 and July 15 of each year. Our 4.50% senior unsecured notes due December 1, 2023 (the “2023 Notes”) were issued in December 2013 at 99.69% of the principal amount of $450.0 million. The 2023 Notes bear interest at a rate of 4.50% per year payable semi-annually in arrears on June 1 and December 1 of each year.

On April 16, 2020, we issued $500.0 million aggregate principal amount of senior unsecured notes (the “Original Notes”). The Original Notes were issued at 99.65% of the principal amount of $500.0 million, are due April 15, 2030 and bear interest at 3.90% per year payable semi-annually in arrears on April 15 and October 15 of each year (collectively with the 2023 Notes and 2022 Notes, referred to as our “senior unsecured notes”).

During the twelve weeks ended July 11, 2020, the Company commenced an exchange offer to exchange the Original Notes in the aggregate principal amount of $500.0 million, which were not registered under the Securities Act of 1933, as amended (the “Securities Act”), for a like principal amount of 3.90% senior unsecured notes due 2030 (the “Exchange Notes”), which have been registered under the Securities Act. The Original Notes were substantially identical to the Exchange Notes, except that the Exchange Notes are registered under the Securities Act and are not subject to the transfer restrictions and certain registration rights agreement provisions applicable to the Original Notes. On July 28, 2020, the Original Notes were successfully exchanged for the Exchange Notes.
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Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


On August 17, 2020, we notified the trustee of our intent to redeem the $300 million aggregate principal of our 2022 Notes.

Bank Debt

During the twelve weeks ended July 11, 2020, we elected to repay the $500.0 million outstanding under our revolving credit facility that we borrowed during the first quarter of 2020. As of July 11, 2020, we had no outstanding borrowings, $1.0 billion of borrowing availability and no letters of credit outstanding under the unsecured revolving credit facility (the “2017 Credit Agreement”). As of December 28, 2019, we had no outstanding borrowings, $1.0 billion of borrowing availability and no letters of credit outstanding under our unsecured revolving credit facility.

As of July 11, 2020 and December 28, 2019, we had $100.1 million and $111.6 million of bilateral letters of credit issued separately from the 2017 Credit Agreement, none of which were drawn upon. These bilateral letters of credit generally have a term of one year or less and primarily serve as collateral for our self-insurance policies.

We were in compliance with financial covenants required by our debt arrangements as of July 11, 2020.

Debt Guarantees

We are a guarantor of loans made by banks to various independently owned Carquest-branded stores that are our customers totaling $54.3 million and $26.4 million as of July 11, 2020 and December 28, 2019. These loans are collateralized by security agreements on merchandise inventory and other assets of the borrowers. The approximate value of the inventory collateralized by these agreements is $65.7 million and $50.3 million as of July 11, 2020 and December 28, 2019. We believe that the likelihood of performance under these guarantees is remote.

7. Leases

Substantially all of our leases are for facilities and vehicles. The initial term for facilities are typically 5 years to 10 years, with renewal options at 5 year intervals, with the exercise of lease renewal options at our sole discretion. Our vehicle and equipment leases are typically 3 years to 5 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating lease liabilities consist of the following:
(in thousands)July 11, 2020December 28, 2019
Total operating lease liabilities$2,472,467 $2,495,141 
Less: Current portion of operating lease liabilities(431,067)(477,982)
Noncurrent operating lease liabilities$2,041,400 $2,017,159 

The current portion of operating lease liabilities is included in Other current liabilities in the accompanying condensed consolidated balance sheets.

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Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Total lease cost is included in Cost of sales and selling, general and administrative expenses (“SG&A”) in the accompanying condensed consolidated statements of operations and is recorded net of immaterial sublease income. Total lease cost is comprised of the following:
Twelve Weeks EndedTwenty-Eight Weeks Ended
(in thousands)July 11, 2020July 13, 2019July 11, 2020July 13, 2019
Operating lease cost$119,707 $124,765 $281,512 $284,811 
Variable lease cost30,856 32,856 74,392 82,546 
Total lease cost$150,563 $157,621 $355,904 $367,357 

The future maturity of lease liabilities are as follows:
(in thousands)July 11, 2020
Remainder of 2020$262,725 
2021503,068 
2022424,431 
2023387,012 
2024308,440 
Thereafter973,223 
Total lease payments2,858,899 
Less: Imputed interest(386,432)
Total operating lease liabilities$2,472,467 

As of July 11, 2020, our operating lease payments include $86.2 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $56.9 million of legally binding minimum lease payments for leases signed, but not yet commenced.

The weighted-average remaining lease term and weighted-average discount rate for our operating leases are 7.1 years and 3.9% as of July 11, 2020. We calculated the weighted-average discount rates using incremental borrowing rates, which equal the rates of interest that we would pay to borrow funds on a fully collateralized basis over a similar term.

Other information relating to our lease liabilities is as follows:
Twenty-Eight Weeks Ended
(in thousands)July 11, 2020July 13, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$305,079 $278,323 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$219,954 $201,856 

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Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

8. Warranty Liabilities

The following table presents changes in our warranty reserves:
Twenty-Eight Weeks EndedFifty-Two Weeks Ended
(in thousands)July 11, 2020December 28, 2019
Warranty reserve, beginning of period$36,820 $45,280 
Additions to warranty reserves9,341 34,117 
Reduction and utilization of reserve(20,445)(42,577)
Warranty reserve, end of period$25,716 $36,820 
  
9. Share Repurchase Program

On November 8, 2019, our Board of Directors authorized a $700.0 million share repurchase program. This new authorization was in addition to the $400.0 million share repurchase program that was authorized by our Board of Directors in August 2019. Our share repurchase program permits the repurchase of our common stock on the open market and in privately negotiated transactions from time to time.

During the twelve weeks ended July 11, 2020, we purchased no shares of our common stock under the share repurchase program. During the twelve weeks ended July 13, 2019, we purchased 0.1 million shares of our common stock under the share repurchase program at an aggregate cost of $10.9 million, or an average price of $151.58 per share. During the twenty-eight weeks ended July 11, 2020 and July 13, 2019, we repurchased 0.2 million and 0.9 million shares of our common stock under our share repurchase program. The shares repurchased in connection with our share repurchase program during the twenty-eight weeks ended July 11, 2020 and July 13, 2019 were at an aggregate cost of $29.0 million and $138.1 million, or an average price of $128.36 and $158.98 per share. We had $861.7 million remaining under our share repurchase program as of July 11, 2020.

10. Earnings per Share

The computation of basic and diluted earnings per share are as follows:  
 Twelve Weeks EndedTwenty-Eight Weeks Ended
(in thousands, except per share data)July 11, 2020July 13, 2019July 11, 2020July 13, 2019
Numerator
Net income applicable to common shares$189,960 $124,820 $233,548 $267,320 
Denominator
Basic weighted average common shares69,118 71,738 69,154 71,767 
Dilutive impact of share-based awards176 270 196 296 
Diluted weighted average common shares (1)
69,294 72,008 69,350 72,063 
Basic earnings per common share$2.75 $1.74 $3.38 $3.73 
Diluted earnings per common share$2.74 $1.73 $3.37 $3.71 

(1)For the twelve and twenty-eight weeks ended July 11, 2020, 159 thousand and 326 thousand restricted stock units (“RSUs”) were excluded from the diluted calculation as their inclusion would have been anti-dilutive. For the twelve and twenty-eight weeks ended July 13, 2019, these anti-dilutive RSUs were insignificant.

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Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

11. Share-Based Compensation

During the twenty-eight weeks ended July 11, 2020, we granted 284 thousand time-based RSUs, 74 thousand performance-based RSUs and 37 thousand market-based RSUs. The general terms of the time-based, performance-based and market-based RSUs are similar to awards previously granted by us.

The weighted average fair values of the time-based, performance-based and market-based RSUs granted during the twenty-eight weeks ended July 11, 2020 were $134.04, $130.03 and $145.04 per share. For time-based and performance-based RSUs, the fair value of each award was determined based on the market price of our stock on the date of grant adjusted for expected dividends during the vesting period, as applicable. The fair value of each market-based RSU was determined using a Monte Carlo simulation model.

Total income tax benefit related to share-based compensation expense for the twelve and twenty-eight weeks ended July 11, 2020 was $2.5 million and $6.0 million Total income tax benefit related to share-based compensation expense for the twelve and twenty-eight weeks ended July 13, 2019 was $2.3 million and $5.0 million As of July 11, 2020, there was $84.6 million of unrecognized compensation expense related to all share-based awards that is expected to be recognized over a weighted average period of 1.7 years.

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ITEM 2.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 audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 28, 2019 (filed with the SEC on February 18, 2020), which we refer to as our 2019 Form 10-K, and our condensed consolidated financial statements and the notes to those statements that appear elsewhere in this report.

Impact of COVID-19 on Our Business

During the COVID-19 pandemic we are prioritizing protecting the health and safety of our Team Members and customers; working to drive financial performance by preserving our cash position, scrutinizing planned spending and prioritizing various initiatives; and working to help ensure that when the current period of crisis passes, our team will emerge even stronger.

In response to the COVID-19 pandemic, we have continued to take additional measures to help ensure the health and safety of our Team Members and customers. Such measures include retro-fitting our stores with plexigl