10-Q

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.

			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

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.

1

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.

2

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.

3

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.

4

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)		—		—		(809,504)
Cash dividends declared ($2.25 per common share)	—	—		—		—		—		(144,169)		(144,169)
Other	37	—		(44)		—		—		—		(44)
Balance, October 9, 2021	62,413	$	8	$	835,033	$	(2,203,584)	$	(21,826)	$	4,586,904	$	3,196,535
	Forty 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, December 28, 2019	69,232	$	8	$	735,183	$	(924,389)	$	(34,569)	$	3,772,848	$	3,549,081
Net income	—	—		—		—		—		381,024		381,024
Total other comprehensive loss	—	—		—		—		(4,145)		—		(4,145)
Restricted stock units and deferred stock units vested	206	—		—		—		—		—		—
Share-based compensation	—	—		34,927		—		—		—		34,927
Stock issued under employee stock purchase plan	20	—		2,211		—		—		—		2,211
Repurchases of common stock	(1,013)	—		—		(148,330)		—		—		(148,330)
Cash dividends declared ($0.75 per common share)	—	—		—		—		—		(52,096)		(52,096)
Other	—	—		(8)		—		—		—		(8)
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.

5

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	Forty Weeks Ended
	October 9, 2021		October 3, 2020
Cash flows from operating activities:
Net income	$	534,439	$	381,024
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	194,737		192,911
Share-based compensation	49,631		34,927
Loss and impairment of long-lived assets	7,570		1,582
Loss on early redemption of senior unsecured notes	—		48,022
Provision for deferred income taxes	32,425		8,975
Other, net	1,388		1,212
Net change in:
Receivables, net	(180,605)		(154,888)
Inventories	90,993		62,181
Accounts payable	108,393		106,831
Accrued expenses	137,395		111,136
Other assets and liabilities, net	(51,430)		15,305
Net cash provided by operating activities	924,936		809,218
Cash flows from investing activities:
Purchases of property and equipment	(190,983)		(192,632)
Purchase of an indefinite-lived intangible asset	—		(230)
Proceeds from sales of property and equipment	2,102		914
Net cash used in investing activities	(188,881)		(191,948)
Cash flows from financing activities:
Proceeds from borrowing on revolving credit facility	—		500,000
Payment on revolving credit facility	—		(500,000)
Proceeds from issuances of senior unsecured notes, net	—		847,092
Early redemptions of senior unsecured notes, net	—		(602,568)
Dividends paid	(160,925)		(56,210)
Proceeds from the issuance of common stock	1,737		2,211
Repurchases of common stock	(809,504)		(148,330)
Other, net	(46)		(8,735)
Net cash (used in) provided by financing activities	(968,738)		33,460
Effect of exchange rate changes on cash	2,336		(1,190)
Net (decrease) increase in cash and cash equivalents	(230,347)		649,540
Cash and cash equivalents, beginning of period	834,992		418,665
Cash and cash equivalents, end of period	$	604,645	$	1,068,205
Non-cash transactions:
Accrued purchases of property and equipment	$	8,632	$	16,302

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

6

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 October 9, 2021, we operated a total of 4,727 stores and 234 branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of October 9, 2021, we served 1,325 independently owned Carquest branded stores across the same geographic locations served by our stores and branches in addition to Mexico and various Caribbean islands. Our stores operate primarily under the trade names “Advance Auto Parts,” “Carquest” and “Autopart International,” and our branches operate under the “Worldpac” trade name.

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 principles. 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 2020 as filed with the SEC on February 22, 2021.

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 remaining three quarters consist of twelve weeks.

2.    Significant Accounting Policies

Revenues

The following table summarizes disaggregated revenue from contracts with customers by product group:

	Twelve Weeks Ended				Forty Weeks Ended
	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Percentage of Net sales, by product group:
Parts and batteries	68	%	67	%	66	%	66	%
Accessories and chemicals	19		20		21		21
Engine maintenance	12		12		12		12
Other	1		1		1		1
Total	100	%	100	%	100	%	100	%

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 89% of inventories as of October 9, 2021 and 88% of inventories as of January 2, 2021. 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 forty weeks ended October 9, 2021 and prior years. We recorded an increase to Cost of sales of $29.4 million and a reduction to Cost of sales of $15.9 million for the twelve weeks ended October 9, 2021 and October 3, 2020 and an increase to Cost of sales of $71.6 million and a reduction to Cost of sales of $3.9 million for the forty weeks ended October 9, 2021 and October 3, 2020 to state inventories at LIFO.

7

Advance Auto Parts, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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)	October 9, 2021		January 2, 2021
Inventories at first in, first out (“FIFO”)	$	4,366,631	$	4,382,779
Adjustments to state inventories at LIFO	83,821		155,420
Inventories at LIFO	$	4,450,452	$	4,538,199

4.    Intangible Assets

Our definite-lived intangible assets include customer relationships and non-compete agreements. Amortization expense was $7.2 million and $7.3 million for the twelve weeks ended October 9, 2021 and October 3, 2020 and $24.1 million and $24.3 million for the forty weeks ended October 9, 2021 and October 3, 2020.

5.    Receivables, net

Receivables, net consists of the following:

(in thousands)	October 9, 2021		January 2, 2021
Trade	$	585,174	$	449,403
Vendor	282,377		278,180
Other	74,528		34,345
Total receivables	942,079		761,928
Less: Allowance for doubtful accounts	(10,321)		(11,929)
Receivables, net	$	931,758	$	749,999

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

Long-term debt consists of the following:

(in thousands)	October 9, 2021		January 2, 2021
4.50% Senior Unsecured Notes due December 1, 2023	$	193,167	$	192,990
1.75% Senior Unsecured Notes due October 1, 2027	346,251		345,854
3.90% Senior Unsecured Notes due April 15, 2030	494,584		494,140
Total long-term debt	$	1,034,002	$	1,032,984
Fair value of long-term debt	$	1,103,627	$	1,145,000

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.

8

Advance Auto Parts, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Bank Debt

As of October 9, 2021 and January 2, 2021, we had no outstanding borrowings, $1.0 billion of borrowing availability and no letters of credit outstanding under our unsecured revolving credit facility (the “Credit Agreement”).

As of October 9, 2021 and January 2, 2021, we had $92.6 million and $100.0 million of bilateral letters of credit issued separately from the 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 October 9, 2021.

Senior Unsecured Notes

Our 4.50% senior unsecured notes due December 1, 2023 (the “2023 Notes”) were issued in December 2013 at 99.69% of the principal amount of $450.0 million. The 2023 Notes bear interest 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.

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

On September 29, 2020, we issued $350.0 million aggregate principal amount of senior unsecured notes (the “2027 Notes”). The 2027 Notes were issued at 99.67% of the principal amount of $350.0 million, are due October 1, 2027 and bear interest at 1.75% per year payable semi-annually in arrears on April 1 and October 1 of each year. In connection with the 2027 Notes offering, we incurred $2.9 million of debt issuance costs. Our 2023 Notes, 2027 Notes and 2030 Notes are collectively referred to herein as our “senior unsecured notes.”

Pursuant to a cash tender offer that was completed on September 29, 2020, we repurchased $256.3 million of our 2023 Notes with the net proceeds from the 2027 Notes. In connection with this tender offer, we incurred charges relating to tender premiums and debt issuance costs of $30.5 million and $1.4 million.

Debt Guarantees

We are a guarantor of loans made by banks to various independently owned Carquest-branded stores that are our customers totaling $27.7 million and $23.6 million as of October 9, 2021 and January 2, 2021. 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 $69.6 million and $57.5 million as of October 9, 2021 and January 2, 2021. 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 is 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.

9

Advance Auto Parts, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Operating lease liabilities consist of the following:

(in thousands)	October 9, 2021		January 2, 2021
Total operating lease liabilities	$	2,610,491	$	2,477,087
Less: Current portion of operating lease liabilities	(456,127)		(462,588)
Noncurrent operating lease liabilities	$	2,154,364	$	2,014,499

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

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 Ended				Forty Weeks Ended
(in thousands)	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Operating lease cost	$	124,084	$	121,869	$	410,253	$	403,381
Variable lease cost	35,144		31,469		112,864		105,862
Total lease cost	$	159,228	$	153,338	$	523,117	$	509,243

The future maturity of lease liabilities are as follows:

(in thousands)	October 9, 2021
Remainder of 2021	$	141,957
2022	503,001
2023	481,738
2024	415,170
2025	368,761
Thereafter	1,063,114
Total lease payments	2,973,741
Less: Imputed interest	(363,250)
Total operating lease liabilities	$	2,610,491

As of October 9, 2021, our operating lease payments include $66.9 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $183.8 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 7.2 years and 3.3% as of October 9, 2021. 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.

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Advance Auto Parts, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Other information relating to our lease liabilities is as follows:

	Forty Weeks Ended
(in thousands)	October 9, 2021		October 3, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	418,596	$	433,934
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	460,351	$	305,930

8.    Warranty Liabilities

The following table presents changes in our warranty reserves:

	Forty Weeks Ended		Fifty-Three Weeks Ended
(in thousands)	October 9, 2021		January 2, 2021
Warranty reserve, beginning of period	$	14,120	$	36,820
Additions to warranty reserves	8,112		14,907
Reduction and utilization of reserve	(19,077)		(37,607)
Warranty reserve, end of period	$	3,155	$	14,120

9.    Share Repurchase Program

On April 19, 2021, our Board of Directors authorized an additional $1.0 billion share repurchase program. This new authorization was incremental to the $700.0 million share repurchase program that was authorized by our Board of Directors in November 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 October 9, 2021, we repurchased 1.1 million shares of our common stock at an aggregate cost of $228.3 million, or an average price of $205.65 per share, in connection with our share repurchase program. During the twelve weeks ended October 3, 2020, we repurchased 0.7 million shares of our common stock at an aggregate cost of $109.6 million, or an average price of $153.06 per share, in connection with our share repurchase program. During the forty weeks ended October 9, 2021 and October 3, 2020, we repurchased 4.2 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 forty weeks ended October 9, 2021 and October 3, 2020 were at an aggregate cost of $791.7 million and $138.6 million, or an average price of $189.43 and $147.13 per share. We had $640.5 million remaining under our share repurchase program as of October 9, 2021.

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Advance Auto Parts, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

10.    Earnings per Share

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

	Twelve Weeks Ended				Forty Weeks Ended
(in thousands, except per share data)	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Numerator
Net income applicable to common shares	$	169,813	$	147,476	$	534,439	$	381,024
Denominator
Basic weighted-average common shares	62,854		68,965		64,555		69,097
Dilutive impact of share-based awards	494		302		453		228
Diluted weighted-average common shares (1)	63,348		69,267		65,008		69,325
Basic earnings per common share	$	2.70	$	2.14	$	8.28	$	5.51
Diluted earnings per common share	$	2.68	$	2.13	$	8.22	$	5.50

(1)For the twelve weeks ended October 9, 2021, there were no restricted stock units (“RSUs”) that were anti-dilutive. For the forty weeks ended October 9, 2021, 10,974 RSUs were excluded from the diluted calculation as their inclusion would have been anti-dilutive. For the twelve and forty weeks ended October 3, 2020, 101 thousand and 134 thousand RSUs were excluded from the diluted calculation as their inclusion would have been anti-dilutive.

11.    Share-Based Compensation

During the forty weeks ended October 9, 2021, we granted 234 thousand time-based RSUs, 63 thousand market-based RSUs and 124 thousand Stock Options. The general terms of the time-based, performance-based and market-based RSUs are similar to awards previously granted by us. We grant options to purchase common stock to certain employees under our 2014 Long-Term Incentive 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 10 years and vest one-third annually over three years. We record compensation expense for the grant date fair value of the option awards evenly over the vesting period.

The weighted-average fair values of the time-based and market-based RSUs granted during the forty weeks ended October 9, 2021 were $181.10 and $204.97 per share. For time-based RSUs, the fair value of each award was determined based on the market price of our stock on the date of grant adjusted for expected dividends during the vesting period, as applicable. The fair value of each market-based RSU was determined using a Monte Carlo simulation model.

The weighted-average fair values of stock options granted during the forty weeks ended October 9, 2021 was $47.19 per share. No stock options were granted in the twelve weeks ended October 9, 2021. The fair value was estimated on the date of grant by applying the Black-Scholes option-pricing valuation model.

Total income tax benefit related to share-based compensation expense for the twelve and forty weeks ended October 9, 2021 was $4.1 million and $12.3 million. Total income tax benefit related to share-based compensation expense for the twelve and forty weeks ended October 3, 2020 was $2.8 million and $8.8 million. As of October 9, 2021, there was $82.4 million of unrecognized compensation expense related to all share-based awards that is expected to be recognized over a weighted-average period of 1.6 years.

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Advance Auto Parts, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

12.    Subsequent Events

On February 6, 2018, a putative class action on behalf of purchasers of our securities who purchased or otherwise acquired their securities between November 14, 2016 and August 15, 2017, inclusive (the “Class Period”), was commenced against us and certain of our current and former officers in the U.S. District Court for the District of Delaware. The plaintiff alleged that the defendants failed to disclose material adverse facts about our financial well-being, business relationships, and prospects during the alleged Class Period in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On February 7, 2020, the court granted in part and denied in part our motion to dismiss. On November 6, 2020, the court granted the plaintiff’s motion for class certification. On March 15, 2021, we moved for reconsideration of the order denying in part our motion to dismiss, and on October 15, 2021, we filed a motion for summary judgment, seeking full dismissal of the case. On November 5, 2021, the parties executed a confidential binding term sheet to settle all claims. The settlement amount will be fully covered by our insurance carriers, and the settlement is subject to court approval.

On November 9, 2021, we entered into a new credit agreement that provides a $1.2 billion unsecured revolving credit facility (the “2021 Credit Agreement”) with Advance Auto Parts, Inc. as Borrower, the lenders party thereto, and Bank of America, N.A., Administrative Agent. This new revolver under the 2021 Credit Agreement replaced the revolver under the Credit Agreement. The new revolver provides for the issuance of letters of credit with a sublimit of $200.0 million. We may request that the total revolving commitment be increased by an amount not exceeding $500.0 million during the term of the 2021 Credit Agreement.

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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 January 2, 2021 (filed with the SEC on February 22, 2021), which we refer to as our 2020 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 ongoing COVID-19 pandemic, we have continued prioritizing protecting the health and safety of our team members and customers; driving financial performance by preserving our cash position, scrutinizing planned spending and prioritizing various initiatives; and ensuring that our team will emerge even stronger following the pandemic. We have continued to take additional measures to help ensure the health and safety of our team members and customers, including the continuation of social distancing practices, sanitation practices, the use of health check screenings and offering contactless delivery.

Government imposed restrictions and stay at home orders related to the pandemic occurred during the first half of 2020. These contributed to negative impacts to demand, primarily during the last six weeks of the sixteen weeks ended April 18, 2020. However, as the remainder of 2020 progressed, we experienced a significant improvement in demand, particularly in our DIY omnichannel business. This has continued in the forty weeks ended October 9, 2021, though demand in the professional business is now outpacing the DIY channel, particularly in the second and third quarters, driven partially by multiple rounds of government stimulus, consumers’ increased use of personal vehicles and the continued reopening of businesses throughout the United States. In addition, we believe the execution of prioritized internal initiatives, including our new marketing campaign and providing a variety of shopping choices for customers with our Advance Same Day® options, as well as improved store execution, all contributed to the improvement in demand. We have also continued to make progress on the development of our key supply chain initiatives, including cross-banner replenishment and our single warehouse management system.

Despite the increase in Net sales during the twelve and forty weeks ended October 9, 2021, the COVID-19 pandemic remains an evolving situation. We continue to actively monitor developments that may cause us to take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our team members, customers, suppliers and stockholders.

Management Overview

Net sales increased 3.1% in the third quarter of 2021 compared with the same period in the prior year, primarily driven by an overall channel shift back to professional and a return to stores for DIY customers. Within professional we’re seeing increasing strength in certain geographies that lagged the country last year as the gradual return to work of professional workers in large urban markets catches up with the rest of the country. Our regional strength was led by the Southwest and West, along with a strong recovery in the MidAtlantic and Northeast. Category growth was led by brakes, motor oil and filters as miles driven reliant categories improved.

We generated diluted earnings per share (“diluted EPS”) of $2.68 during our third quarter of 2021 compared with $2.13 for the comparable period of 2020. When adjusted for non-operational items in the following table, our adjusted diluted earnings per share (“Adjusted EPS”) for the twelve weeks ended October 9, 2021 and October 3, 2020 was $3.21 and $2.64.

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For the forty weeks ended October 9, 2021 and October 3, 2020, diluted EPS was $8.22 and $5.50. When adjusted for non-operational items in the following table, our Adjusted EPS for the forty weeks ended October 9, 2021 and October 3, 2020 was $9.93 and $6.59.

	Twelve Weeks Ended				Forty Weeks Ended
	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
LIFO impacts	$	0.35	$	(0.17)	$	0.82	$	(0.05)
Transformation expenses	$	0.10	$	0.09	$	0.64	$	0.39
General Parts International, Inc. (“GPI”) amortization of acquired intangible assets	$	0.08	$	0.07	$	0.25	$	0.23
Other adjustments	$	—	$	0.52	$	—	$	0.52

Refer to “Reconciliation of Non-GAAP Financial Measures” for further details of our comparable adjustments and the usefulness of such measures to investors.

Summary of Third Quarter Financial Results

A high-level summary of our financial results for the third quarter of 2021 includes:

•Net sales during the third quarter of 2021 were $2.6 billion, an increase of 3.1% compared with the third quarter of 2020, primarily driven by an increase in comparable store sales resulting from a strong recovery in our professional business.

•Gross profit margin for the third quarter of 2021 was 45.1% of Net sales, an increase of 72 basis points compared with the third quarter of 2020. This increase was primarily due to our ongoing category management initiatives, including strategic pricing, strategic sourcing and owned brand expansion as well as favorable product mix.

•SG&A expenses for the third quarter of 2021 were 36.4% of Net sales, an increase of 208 basis points compared with the third quarter of 2020.

Business and Risks Update

We continue to make progress on the various elements of our strategic 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, we have undertaken planned strategic initiatives to help build a foundation for long-term success across the organization, which include:

•Continued development of a demand-based assortment, leveraging purchase and search history from our common catalog, versus our existing push-down supply approach.

•Advancement towards optimizing our footprint by market, including consolidating our Worldpac and Autopart International businesses, to drive share, repurpose our in-market store and asset base and streamline our distribution network.

•Continued evolution of our marketing campaigns, which focus on our customers and how we serve them every day with care and speed and the launch of the iconic DieHard® brand.

•Progress in the implementation of a more efficient end-to-end supply chain process to deliver our broad assortment and to help lessen the impact of external constraints.

•Ongoing enhancement of Advance Same Day® Curbside Pick Up, Advance Same Day Home Delivery and our mobile application and e-commerce performance.

•Actively pursuing new store openings, including through lease acquisition opportunities as available and appropriate, in existing markets and new markets, as well as expansion of our independent Carquest network.

•Continued negotiations with vendors on strategic sourcing and pricing to help mitigate inflationary pressures.

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Industry Update

Operating within the automotive aftermarket industry, we are influenced by a number of general macroeconomic factors, many of which are similar to those affecting the overall retail industry. Refer to our 2020 Form 10-K, as updated by our subsequent filings with the SEC, and the “Impact of COVID-19 on Our Business” section included within this Form 10-Q.

Stores and Branches

Key factors in selecting sites and market locations in which we operate include population, demographics, traffic count, vehicle profile, number and strength of competitors’ stores and the cost of real estate. During the forty weeks ended October 9, 2021, 25 stores and branches were opened and 40 were closed or consolidated, resulting in a total of 4,961 stores and branches as of October 9, 2021, compared with a total of 4,976 stores and branches as of January 2, 2021.

Results of Operations

	Twelve Weeks Ended								$ Favorable/ (Unfavorable)		Basis Points
($ in millions)	October 9, 2021				October 3, 2020
Net sales	$	2,621.2	100.0	%	$	2,541.9	100.0	%	$	79.3	—
Cost of sales	1,438.8		54.9		1,413.5		55.6		(25.3)		(72)
Gross profit	1,182.5		45.1		1,128.5		44.4		54.0		72
SG&A	953.3		36.4		871.7		34.3		(81.6)		(208)
Operating income	229.2		8.7		256.8		10.1		(27.6)		(136)
Interest expense	(8.6)		(0.3)		(11.9)		(0.5)		3.3		14
Loss on early redemptions of senior unsecured notes	—		—		(48.0)		(1.9)		48.0		189
Other income, net	1.8		0.1		0.7		—		1.1		4
Provision for income taxes	52.6		2.0		50.1		2.0		(2.5)		(4)
Net income	$	169.8	6.5	%	$	147.5	5.8	%	$	22.3	68

	Forty Weeks Ended								$ Favorable/ (Unfavorable)		Basis Points
($ in millions)	October 9, 2021				October 3, 2020
Net sales	$	8,601.0	100.0	%	$	7,741.2	100.0	%	$	859.8	—
Cost of sales	4,744.4		55.2		4,343.3		56.1		(401.1)		(95)
Gross profit	3,856.6		44.8		3,397.9		43.9		458.7		95
SG&A	3,130.4		36.4		2,799.8		36.2		(330.6)		(23)
Operating income	726.3		8.4		598.1		7.7		128.2		72
Interest expense	(28.1)		(0.3)		(37.6)		(0.5)		9.5		16
Loss on early redemptions of senior unsecured notes	—		—		(48.0)		(0.6)		48.0		62
Other income (expense), net	7.8		0.1		(2.2)		—		10.0		12
Provision for income taxes	171.5		2.0		129.2		1.7		(42.3)		(32)
Net income	$	534.4	6.2	%	$	381.0	4.9	%	$	153.4	129

Note: Table amounts may not foot due to rounding.

Net Sales

Net sales for the twelve weeks ended October 9, 2021 increased 3.1% compared with the same period of 2020, primarily driven by a 3.1% increase in comparable store sales resulting from a strong recovery in our professional business. Our regional strength was led by the Southwest and West, along with a strong recovery in the MidAtlantic and Northeast. Category growth was led by brakes, motor oil and filters as miles driven reliant categories improved.

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For the forty weeks ended October 9, 2021, Net sales increased 11.1% compared with the same period of 2020, primarily driven by an 11.4% increase in comparable store sales resulting from a strong recovery of our professional business and an increase in demand in our DIY business compared with the same period in the prior year, which was significantly impacted by the COVID-19 pandemic.

We calculate comparable store sales based on the change in store or branch sales starting once a location has been open for 13 complete accounting periods (approximately one year) and by including e-commerce sales. Sales to independently owned Carquest stores are excluded from our comparable store sales. Acquired stores are included in our comparable store sales once the stores have completed 13 complete accounting periods following the acquisition date. We include sales from relocated stores in comparable store sales from the original date of opening.

Gross Profit

Gross profit for the twelve weeks ended October 9, 2021 was $1,182.5 million, or 45.1% of Net sales, compared with $1,128.5 million, or 44.4% of Net sales, for the twelve weeks ended October 3, 2020. This increase in Gross profit as a percentage of Net sales was primarily driven by improvements in category management, including strategic pricing, strategic sourcing and owned brand expansion as well as favorable product mix offset by inflationary costs and unfavorable channel mix.

Gross profit for the forty weeks ended October 9, 2021 was $3,856.6 million, or 44.8% of Net sales, compared with $3,397.9 million, or 43.9% of Net sales, for the forty weeks ended October 3, 2020. This increase in Gross profit as a percentage of Net sales was primarily due to improvements in net pricing, increases in vendor related funding and favorable product mix, partially offset by increased LIFO related expenses and unfavorable channel mix.

As a result of changes in our LIFO reserve, an expense of $29.4 million and a benefit of $15.9 million were included in the twelve weeks ended October 9, 2021 and October 3, 2020. An expense of $71.6 million and a benefit of $3.9 million were included in the forty weeks ended October 9, 2021 and October 3, 2020.

Selling, general and administrative expenses

SG&A expenses for the twelve weeks ended October 9, 2021 were $953.3 million, or 36.4% of Net sales, compared with $871.7 million, or 34.3% of Net sales, for the twelve weeks ended October 3, 2020. This increase of 208 basis points compared with the third quarter of 2020 was primarily driven by increased inflationary headwinds in store labor as well as higher delivery and fuel expenses associated with the recovery of the professional business. We incurred higher incentive compensation and incremental startup costs for new store openings when compared with the prior year.

SG&A expenses for the forty weeks ended October 9, 2021 were $3,130.4 million, or 36.4% of Net sales, compared with $2,799.8 million, or 36.2% of Net sales, for the forty weeks ended October 3, 2020. The increase in SG&A expenses was driven by higher labor and benefit costs, marketing initiatives and contract services.

Provision for income taxes

Our Provision for income taxes for the twelve weeks ended October 9, 2021 was $52.6 million, compared with $50.1 million for the twelve weeks ended October 3, 2020. Our effective tax rate was 23.7% and 25.3% for the twelve weeks ended October 9, 2021 and October 3, 2020.

Our Provision for income taxes for the forty weeks ended October 9, 2021 was $171.5 million, compared with $129.2 million for the forty weeks ended October 3, 2020. Our effective tax rate was 24.3% and 25.3% for the forty weeks ended October 9, 2021 and October 3, 2020.

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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 accounting principles generally accepted in the United States of America (“GAAP”). Non-GAAP financial measures, including Adjusted net income and Adjusted EPS, should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing our operating performance, financial position or cash flows. We have presented these non-GAAP financial measures as we believe that the presentation of our financial results that exclude (1) LIFO impacts; (2) transformation expenses under our strategic business plan; (3) non-cash amortization related to the acquired GPI intangible assets; and (4) other non-recurring adjustments are useful and indicative of our base operations because the expenses vary from period to period in terms of size, nature and significance and/or relate to store closure and consolidation activity in excess of historical levels. These measures assist in comparing our current operating results with past periods and with the operational performance of other companies in our industry. The disclosure of these measures allows investors to evaluate our performance using the same measures management uses in developing internal budgets and forecasts and in evaluating management’s compensation. Included below is a description of the expenses we have determined are not normal, recurring cash operating expenses necessary to operate our business and the rationale for why providing these measures is useful to investors as a supplement to the GAAP measures.

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

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

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

•Third-party professional services - Costs primarily relating to services rendered by vendors for assisting us with the development of various information technology and supply chain projects in connection with our enterprise integration initiatives.

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

GPI amortization of acquired intangible assets — As part of our acquisition of GPI, we obtained various intangible assets, including customer relationships, non-compete contracts and favorable lease agreements, which we expect to be subject to amortization through 2025.

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

	Twelve Weeks Ended				Forty Weeks Ended
(in thousands, except per share data)	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Net income (GAAP)	$	169,813	$	147,476	$	534,439	$	381,024
Cost of sales adjustments:
LIFO impacts (1)	29,410		(15,855)		71,599		(3,908)
Transformation expenses:
Other significant costs	143		79		2,611		1,627
SG&A adjustments:
GPI amortization of acquired intangible assets	6,341		6,324		21,246		21,086
Transformation expenses:
Restructuring costs	2,360		2,581		27,063		12,221
Third-party professional services	4,823		4,660		18,394		8,924
Other significant costs	1,492		1,438		7,406		13,560
Other income adjustment (2)	36		48,022		—		48,022
Provision for income taxes on adjustments (3)	(11,151)		(11,812)		(37,080)		(25,383)
Adjusted net income (Non-GAAP)	$	203,267	$	182,913	$	645,678	$	457,173
Diluted earnings per share (GAAP)	$	2.68	$	2.13	$	8.22	$	5.50
Adjustments, net of tax	0.53		0.51		1.71		1.09
Adjusted EPS (Non-GAAP)	$	3.21	$	2.64	$	9.93	$	6.59

(1)The twelve and forty weeks ended October 3, 2020 non-GAAP expenses have been adjusted to be comparable with our 2021 presentation.

(2)During the twelve and forty weeks ended October 3, 2020, we incurred charges relating to a make-whole provision and tender premiums of $46.3 million and debt issuance costs of $1.7 million resulting from the early redemption of our 2022 and 2023 Notes.

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

Liquidity and Capital Resources

Overview

Our primary cash requirements necessary to maintain our current operations include payroll and benefits, inventory purchases, contractual obligations, capital expenditures, payment of income taxes, funding of initiatives under our strategic business plan and other operational priorities. Historically, we have used available funds to repay borrowings under our credit facility, to periodically repurchase shares of our common stock under our stock repurchase program, to pay our quarterly cash dividends and for acquisitions; however, given uncertainties related to the COVID-19 pandemic, our future uses of cash may differ if our relative priorities, including the weight we place on the preservation of cash and liquidity, change. Typically, we have funded our cash requirements primarily through cash generated from operations, supplemented by borrowings under our credit facilities and notes offerings as needed. We believe funds generated from our expected results of operations, available cash and cash equivalents, and available borrowings under our credit facility will be sufficient to fund our obligations for the next year.

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Share Repurchase Program

On April 19, 2021, our Board of Directors authorized an additional $1.0 billion to our current share repurchase program. This authorization was incremental to the $700.0 million that was authorized previously by our Board of Directors in November 2019.

During the twelve weeks ended October 9, 2021, we repurchased 1.1 million shares of our common stock at an aggregate cost of $228.3 million, or an average price of $205.65 per share, in connection with our share repurchase program. During the twelve weeks ended October 3, 2020, we repurchased 0.7 million shares of our common stock at an aggregate cost of $109.6 million, or an average price of $153.06 per share, in connection with our share repurchase program. During the forty weeks ended October 9, 2021 and October 3, 2020, we repurchased 4.2 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 forty weeks ended October 9, 2021 and October 3, 2020 were at an aggregate cost of $791.7 million and $138.6 million, or an average price of $189.43 and $147.13 per share. We had $640.5 million remaining under our share repurchase program as of October 9, 2021.

Analysis of Cash Flows

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

	Forty Weeks Ended
(in thousands)	October 9, 2021		October 3, 2020
Cash flows provided by operating activities	$	924,936	$	809,218
Cash flows used in investing activities	(188,881)		(191,948)
Cash flows (used in) provided by financing activities	(968,738)		33,460
Effect of exchange rate changes on cash	2,336		(1,190)
Net (decrease) increase in Cash and cash equivalents	$	(230,347)	$	649,540

Operating Activities

For the forty weeks ended October 9, 2021, Cash flows provided by operating activities increased by $115.7 million to $924.9 million compared with the same period of the prior year. The net increase in cash flows provided by operating activities compared with the prior year was primarily driven by the increased cash generated from operations due to higher sales.

Investing Activities

For the forty weeks ended October 9, 2021, Cash flows used in investing activities decreased by $3.1 million to $188.9 million compared with the same period of the prior year. Cash used in investing activities for the forty weeks ended October 9, 2021 consisted primarily of purchases of property and equipment of $191.0 million primarily driven by investments in information technology as we remain focused on the complete back office integration throughout the enterprise and supply chain.

Financing Activities

For the forty weeks ended October 9, 2021, Cash flows used in financing activities was $968.7 million, a decrease of $1,002.2 million compared with the same period of the prior year. The change over prior year was primarily attributable to the repurchase of $791.7 million of common stock under our share repurchase program and dividends paid of $160.9 million during the forty weeks ended October 9, 2021 compared with share repurchases of $138.6 million of common stock under our share repurchase program and dividends paid of $56.2 million for the forty weeks ended October 3, 2020.

Our Board of Directors has declared a quarterly cash dividend since 2006. Any payments of dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, cash flows, capital requirements and other factors deemed relevant by our Board of Directors. On November 9, 2021, we declared a regular cash dividend of $1.00 per share to be paid on January 3, 2022 to all common stockholders of record as of December 17, 2021.

20

Long-Term Debt

As of October 9, 2021, we had a credit rating from Standard & Poor’s of BBB- and from Moody’s Investor Service of Baa2. The current outlooks by Standard & Poor’s and Moody’s are positive and stable. The current pricing grid used to determine our borrowing rate under the Credit Agreement is based on our credit ratings. If these credit ratings decline, our interest rate on outstanding balances may increase and our access to additional financing on favorable terms may be limited. In addition, declines could reduce the attractiveness of certain vendor payment programs whereby third-party institutions finance arrangements to our vendors based on our credit rating, which could result in increased working capital requirements. Conversely, if these credit ratings improve, our interest rate may decrease.

On November 9, 2021, we entered into a new credit agreement (the “2021 Credit Agreement”). For additional information on our Long-term debt and the 2021 Credit Agreement, refer to Note 6, Long-term Debt and Fair Value of Financial Instruments and Note 12, Subsequent Events of the Notes to the Condensed Consolidated Financial Statements included herein.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with GAAP. Our discussion and analysis of the financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of accounting policies in addition to certain estimates and judgments by our management. Our estimates and judgments are based on currently available information, historical results and other assumptions we believe are reasonable. Actual results could differ materially from these estimates.

During the forty weeks ended October 9, 2021, there were no changes to the critical accounting policies discussed in our 2020 Form 10-K. For a complete discussion of our critical accounting policies, refer to the 2020 Form 10-K.

Supplemental Guarantor Financial Information

The following is a description of the terms and conditions of the guarantees with respect to all senior unsecured notes for which Advance Auto Parts, Inc. (“Issuer”) is an issuer or provides full and unconditional guarantee.

Certain 100% wholly owned domestic subsidiaries of the Issuer, including our Material Subsidiaries (as defined in the Credit Agreement) serve as guarantors (“Guarantor Subsidiaries”) of our senior unsecured notes. The subsidiary guarantees related to our senior unsecured notes are full and unconditional and joint and several, and there are no restrictions on the ability of the Issuer to obtain funds from its Guarantor Subsidiaries. Certain of our wholly owned subsidiaries, including all of our foreign subsidiaries and captive insurance subsidiary, do not serve as guarantors of our senior unsecured notes (“Non-Guarantor Subsidiaries”).

The following tables present summarized financial information for the Issuer and Guarantor Subsidiaries on a combined basis after elimination of (i) intercompany transactions and balances among the Issuer and the Guarantor Subsidiaries and (ii) equity in earnings from and investments in any subsidiaries that are a Non-Guarantor Subsidiary.

21

Summarized Financial Information

Balance Sheets
	Issuer and Guarantor Subsidiaries
(in millions)	October 9, 2021		January 2, 2021
Assets
Current assets (1)	$	5,472.8	$	5,796.3
Non-current assets (2)	$	5,519.7	$	5,395.4
Liabilities
Current liabilities	$	4,674.5	$	4,539.1
Intercompany payables, net due to Non-Guarantor Subsidiaries	$	173.0	$	290.7
Other non-current liabilities	$	3,560.4	$	3,401.7

(1)Current assets includes $4,214.0 million and $4,318.6 million of Inventories as of October 9, 2021 and January 2, 2021.

(2)Non-current assets includes $1,564.4 million and $1,585.9 million of Goodwill and Intangible assets, net as of October 9, 2021 and January 2, 2021.

Statements of Operations
	Issuer and Guarantor Subsidiaries
	Forty Weeks Ended		Fifty-Three Weeks Ended
(in millions)	October 9, 2021		January 2, 2021
Net sales	$	8,276.9	$	9,735.8
Gross profit	$	3,704.9	$	4,335.1
Operating income	$	718.4	$	687.8
Income before provision for income taxes	$	696.1	$	598.0
Net income	$	527.8	$	453.4

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposure to market risk since January 2, 2021. Refer to “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our 2020 Form 10-K.

ITEM 4.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are our controls and other procedures that are designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Internal controls over financial reporting, no matter how well designed, have inherent limitations, including the possibility of human error and the override of controls. Therefore, even those systems determined to be effective can provide only “reasonable assurance” with respect to the reliability of financial reporting and financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of our internal controls may vary over time.

22

Our management evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures as of October 9, 2021. Based on this evaluation, our principal executive officer and our principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our quarter ended October 9, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

23

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Please refer to Note 12, Subsequent Events of the Notes to the Condensed Consolidated Financial Statements included herein for material legal proceedings.

ITEM 1A.RISK FACTORS

Please refer to “Item 1A. Risk Factors” found in our 2020 Form 10-K filed for the year ended January 2, 2021, as updated by our subsequent filings with the SEC, for risks that, if they were to occur, could materially adversely affect our business, financial condition, results of operations, cash flows and future prospects, which could in turn materially affect the price of our common stock.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth the information with respect to repurchases of our common stock for the quarter ended October 9, 2021:

	Total Number of Shares Purchased (1)	Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) (in thousands)
July 18, 2021 to August 14, 2021	382,871	$	209.15	382,707	$	788,800
August 15, 2021 to September 11, 2021	652,631	$	204.42	643,687	$	657,247
September 12, 2021 to October 9, 2021	84,010	$	199.46	83,936	$	640,505
Total	1,119,512	$	205.67	1,110,330

(1)The aggregate cost of repurchasing shares in connection with the net settlement of shares issued as a result of the vesting of restricted stock units was $1.9 million, or an average price of $207.68 per share, during the twelve weeks ended October 9, 2021.

(2)On April 19, 2021, our Board of Directors authorized an additional $1.0 billion share repurchase program. This new authorization was incremental to the $700.0 million share repurchase program that was authorized by our Board of Directors in November 2019.

24

ITEM 6.EXHIBITS

		Incorporated by Reference			Filed
Exhibit No.	Exhibit Description	Form	Exhibit	Filing Date	Herewith
3.1	Restated Certificate of Incorporation of Advance Auto Parts, Inc., effective May 24, 2017.	10-Q	3.1	8/14/2018
3.2	Amended and Restated Bylaws of Advance Auto Parts, Inc., effective August 12, 2020.	10-Q	3.2	8/18/2020
10.1	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
10.2	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
22.1	List of the Issuer and its Guarantor Subsidiaries.				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	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.				X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.				X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.				X
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document.				X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.				X
104.1	Cover Page Interactive Data file (Embedded within Inline XBRL Documents and Included in Exhibit 101.)

25

SIGNATURE

Pursuant to the requirements 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.
Date: November 16, 2021	/s/ Jeffrey W. Shepherd
	Jeffrey W. Shepherd Executive Vice President, Chief Financial Officer

26

EX-22.1

Exhibit 22.1

List of the Issuer and its Guarantor Subsidiaries

As of October 9, 2021, the following subsidiaries of Advance Auto Parts, Inc. (the “Issuer”) guarantee the 4.50% senior unsecured notes due December 1, 2023 (the “2023 Notes”), the 1.75% senior unsecured notes due October 1, 2027 (the “2027 Notes”) and the 3.90% senior unsecured notes due April 15, 2030 (the “2030 Notes”), each issued by the Issuer:

Entity	Jurisdiction of Incorporation or Organization	2023 Notes	2027 Notes	2030 Notes
Advance Auto Parts, Inc.	Delaware	Issuer	Issuer	Issuer
AAP Financial Services, Inc.	Virginia	Guarantor	Guarantor	Guarantor
Advance Auto Business Support, LLC	Virginia	Guarantor	Guarantor	Guarantor
Advance Auto Innovations, LLC	Virginia	Guarantor	Guarantor	Guarantor
Advance e-Service Solutions, Inc.	Virginia	Guarantor	Guarantor	Guarantor
Advance Patriot, Inc.	Delaware	Guarantor	Guarantor	Guarantor
Advance Stores Company, Incorporated	Virginia	Guarantor	Guarantor	Guarantor
Advance Trucking Corporation	Virginia	Guarantor	Guarantor	Guarantor
Autopart International, Inc.	Massachusetts	Guarantor	Guarantor	Guarantor
B.W.P. Distributors, Inc.	New York	Guarantor	Guarantor	Guarantor
Crossroads Global Trading Corp.	Virginia	Guarantor	Guarantor	Guarantor
Discount Auto Parts, LLC	Virginia	Guarantor	Guarantor	Guarantor
Driverside, Inc.	Delaware	Guarantor	Guarantor	Guarantor
E-Advance, LLC	Virginia	Guarantor	Guarantor	Guarantor
General Parts Distribution LLC	North Carolina	Guarantor	Guarantor	Guarantor
General Parts International, Inc.	North Carolina	Guarantor	Guarantor	Guarantor
General Parts, Inc.	North Carolina	Guarantor	Guarantor	Guarantor
Golden State Supply LLC	Nevada	Guarantor	Guarantor	Guarantor
GPI Technologies LLC	Delaware	Guarantor	Guarantor	Guarantor
Lee Holdings NC, Inc.	Delaware	Guarantor	Guarantor	Guarantor
MotoLogic, Inc.	Delaware	Guarantor	Guarantor	Guarantor
Straus-Frank Enterprises, LLC	Texas	Guarantor	Guarantor	Guarantor
Western Auto of Puerto Rico, Inc.	Delaware	Guarantor	Guarantor	Guarantor
Western Auto of St. Thomas, Inc.	Delaware	Guarantor	Guarantor	Guarantor
WORLDPAC Puerto Rico, LLC	Delaware	Guarantor	Guarantor	Guarantor
WORLDPAC, Inc.	Delaware	Guarantor	Guarantor	Guarantor
Worldwide Auto Parts, Inc.	California	Guarantor	Guarantor	Guarantor

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas R. Greco, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Advance Auto Parts, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 16, 2021

/s/ Thomas R. Greco

Thomas R. Greco

President and Chief Executive Officer and Director

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey W. Shepherd, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Advance Auto Parts, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 16, 2021

/s/ Jeffrey W. Shepherd

Jeffrey W. Shepherd

Executive Vice President, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas R. Greco, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and 18 U.S.C. Section 1350, that, to my knowledge, the Quarterly Report on Form 10-Q of Advance Auto Parts, Inc. for the quarterly period ended October 9, 2021 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that the information contained in such Report fairly presents in all material respects the financial condition and results of operations of the Company. The foregoing certification is being furnished to the Securities and Exchange Commission as part of the accompanying Report.

Date: November 16, 2021	/s/ Thomas R. Greco
	Thomas R. Greco
	President and Chief Executive Officer and Director

I, Jeffrey W. Shepherd, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and 18 U.S.C. Section 1350, that, to my knowledge, the Quarterly Report on Form 10-Q of Advance Auto Parts, Inc. for the quarterly period ended October 9, 2021 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that the information contained in such Report fairly presents in all material respects the financial condition and results of operations of the Company. The foregoing certification is being furnished to the Securities and Exchange Commission as part of the accompanying Report.

Date: November 16, 2021	/s/ Jeffrey W. Shepherd
	Jeffrey W. Shepherd
	Executive Vice President, Chief Financial Officer

XML

Cover Page - shares	9 Months Ended
	Oct. 09, 2021	Nov. 12, 2021
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Oct. 09, 2021
Document Transition Report	false
Entity File Number	001-16797
Entity Registrant Name	ADVANCE AUTO PARTS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	54-2049910
Entity Address, Address Line One	2635 East Millbrook Road
Entity Address, City or Town	Raleigh
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	27604
City Area Code	540
Local Phone Number	362-4911
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	AAP
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		62,355,177
Entity Central Index Key	0001158449
Current Fiscal Year End Date	--01-01
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 09, 2021	Jan. 02, 2021
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
Total assets	11,864,171	11,839,636
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
Noncurrent 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	0	0
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
Liabilities and Stockholders' Equity, Total	$ 11,864,171	$ 11,839,636

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Oct. 09, 2021	Jan. 02, 2021
Statement of Financial Position [Abstract]
Accumulated depreciation	$ 2,349,872	$ 2,189,165
Preferred stock par value (in usd per share)	$ 0.0001	$ 0.0001
Common stock par value (in usd per share)	$ 0.0001	$ 0.0001

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020
Income Statement [Abstract]
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	0	(48,022)	0	(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 (in dollars per 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 (in dollars per share)	$ 2.68	$ 2.13	$ 8.22	$ 5.50
Weighted-average common shares outstanding	63,348	69,267	65,008	69,325

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020
Statement of Comprehensive Income [Abstract]
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

XML

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020
Statement of Comprehensive Income [Abstract]
Changes in net unrecognized other postretirement costs, tax	$ 25	$ 26	$ 69	$ 29

XML

Condensed Consolidated Statements of Changes in Stockholders’ Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Treasury Stock, at Cost	Accumulated Other Comprehensive Loss	Retained Earnings
Balance (in shares) at Dec. 28, 2019		69,232
Balance at Dec. 28, 2019	$ 3,549,081	$ 8	$ 735,183	$ (924,389)	$ (34,569)	$ 3,772,848
Net income	381,024					381,024
Total other comprehensive income (loss)	(4,145)				(4,145)
Restricted stock and deferred stock units vested (in shares)		206
Restricted stock units and deferred stock units vested	0
Share-based compensation	34,927		34,927
Stock issued under employee stock purchase plan (in shares)		20
Stock issued under employee stock purchase plan	2,211		2,211
Repurchases of common stock (in shares)		(1,013)
Repurchases of common stock	(148,330)			(148,330)
Cash dividends declared	(52,096)					(52,096)
Other (in shares)		0
Other	(8)		(8)
Balance (in shares) at Oct. 03, 2020		68,445
Balance at Oct. 03, 2020	3,762,664	$ 8	772,313	(1,072,719)	(38,714)	4,101,776
Balance (in shares) at Jul. 11, 2020		69,139
Balance at Jul. 11, 2020	3,726,519	$ 8	760,535	(961,592)	(43,939)	3,971,507
Net income	147,476					147,476
Total other comprehensive income (loss)	5,225				5,225
Restricted stock and deferred stock units vested (in shares)		27
Restricted stock units and deferred stock units vested	0
Share-based compensation	11,089		11,089
Stock issued under employee stock purchase plan (in shares)		5
Stock issued under employee stock purchase plan	693		693
Repurchases of common stock (in shares)		(726)
Repurchases of common stock	(111,127)			(111,127)
Cash dividends declared	(17,207)					(17,207)
Other (in shares)		0
Other	(4)		(4)
Balance (in shares) at Oct. 03, 2020		68,445
Balance at Oct. 03, 2020	3,762,664	$ 8	772,313	(1,072,719)	(38,714)	4,101,776
Balance (in shares) at Jan. 02, 2021		66,361
Balance at Jan. 02, 2021	3,559,512	$ 8	783,709	(1,394,080)	(26,759)	4,196,634
Net income	534,439					534,439
Total other comprehensive income (loss)	4,933				4,933
Restricted stock and deferred stock units vested (in shares)		277
Restricted stock units and deferred stock units vested	0
Share-based compensation	49,631		49,631
Stock issued under employee stock purchase plan (in shares)		23
Stock issued under employee stock purchase plan	1,737		1,737
Repurchases of common stock (in shares)		(4,285)
Repurchases of common stock	(809,504)			(809,504)
Cash dividends declared	(144,169)					(144,169)
Other (in shares)		37
Other	(44)		(44)
Balance (in shares) at Oct. 09, 2021		62,413
Balance at Oct. 09, 2021	3,196,535	$ 8	835,033	(2,203,584)	(21,826)	4,586,904
Balance (in shares) at Jul. 17, 2021		63,499
Balance at Jul. 17, 2021	3,301,565	$ 8	818,126	(1,973,371)	(23,283)	4,480,085
Net income	169,813					169,813
Total other comprehensive income (loss)	1,457				1,457
Restricted stock and deferred stock units vested (in shares)		29
Restricted stock units and deferred stock units vested	0
Share-based compensation	16,040		16,040
Stock issued under employee stock purchase plan (in shares)		4
Stock issued under employee stock purchase plan	868		868
Repurchases of common stock (in shares)		(1,119)
Repurchases of common stock	(230,213)			(230,213)
Cash dividends declared	(62,994)					(62,994)
Other (in shares)		0
Other	(1)		(1)
Balance (in shares) at Oct. 09, 2021		62,413
Balance at Oct. 09, 2021	$ 3,196,535	$ 8	$ 835,033	$ (2,203,584)	$ (21,826)	$ 4,586,904

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Condensed Consolidated Statements of Changes in Stockholders’ Equity (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020
Statement of Stockholders' Equity [Abstract]
Cash dividends declared (per common share)	$ 1.00	$ 0.25	$ 2.25	$ 0.75

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020
Cash flows from operating activities:
Net income	$ 534,439	$ 381,024
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	194,737	192,911
Share-based compensation	49,631	34,927
Loss and impairment of long-lived assets	7,570	1,582
Loss on early redemption of senior unsecured notes	0	48,022
Provision for deferred income taxes	32,425	8,975
Other	1,388	1,212
Net change in:
Receivables, net	(180,605)	(154,888)
Inventories	90,993	62,181
Accounts payable	108,393	106,831
Accrued expenses	137,395	111,136
Other assets and liabilities, net	(51,430)	15,305
Net cash provided by operating activities	924,936	809,218
Cash flows from investing activities:
Purchases of property and equipment	(190,983)	(192,632)
Purchase of an indefinite-lived intangible asset	0	(230)
Proceeds from sales of property and equipment	2,102	914
Net cash used in investing activities	(188,881)	(191,948)
Cash flows from financing activities:
Proceeds from borrowing on revolving credit facility	0	500,000
Payment on revolving credit facility	0	(500,000)
Proceeds from issuances of senior unsecured notes, net	0	847,092
Early redemptions of senior unsecured notes, net	0	(602,568)
Dividends paid	(160,925)	(56,210)
Proceeds from the issuance of common stock	1,737	2,211
Repurchases of common stock	(809,504)	(148,330)
Other, net	(46)	(8,735)
Net cash (used in) provided by financing activities	(968,738)	33,460
Effect of exchange rate changes on cash	2,336	(1,190)
Net (decrease) increase in cash and cash equivalents	(230,347)	649,540
Cash and cash equivalents, beginning of period	834,992	418,665
Cash and cash equivalents, end of period	604,645	1,068,205
Non-cash transactions:
Accrued purchases of property and equipment	$ 8,632	$ 16,302

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Nature of Operations and Basis of Presentation

9 Months Ended

Oct. 09, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations and Basis of Presentation

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 October 9, 2021, we operated a total of 4,727 stores and 234 branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of October 9, 2021, we served 1,325 independently owned Carquest branded stores across the same geographic locations served by our stores and branches in addition to Mexico and various Caribbean islands. Our stores operate primarily under the trade names “Advance Auto Parts,” “Carquest” and “Autopart International,” and our branches operate under the “Worldpac” trade name.

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 principles. 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 2020 as filed with the SEC on February 22, 2021.

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 remaining three quarters consist of twelve weeks

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Significant Acounting Policies

9 Months Ended

Oct. 09, 2021

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

Revenues

The following table summarizes disaggregated revenue from contracts with customers by product group:

	Twelve Weeks Ended				Forty Weeks Ended
	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Percentage of Net sales, by product group:
Parts and batteries	68	%	67	%	66	%	66	%
Accessories and chemicals	19		20		21		21
Engine maintenance	12		12		12		12
Other	1		1		1		1
Total	100	%	100	%	100	%	100	%

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Inventories

9 Months Ended

Oct. 09, 2021

Inventory Disclosure [Abstract]

Inventories

InventoriesInventories are stated at the lower of cost or market. We used the last in, first out (“LIFO”) method of accounting for approximately 89% of inventories as of October 9, 2021 and 88% of inventories as of January 2, 2021. 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 forty weeks ended October 9, 2021 and prior years. We recorded an increase to Cost of sales of $29.4 million and a reduction to Cost of sales of $15.9 million for the twelve weeks ended October 9, 2021 and October 3, 2020 and an increase to Cost of sales of $71.6 million and a reduction to Cost of sales of $3.9 million for the forty weeks ended October 9, 2021 and October 3, 2020 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)	October 9, 2021		January 2, 2021
Inventories at first in, first out (“FIFO”)	$	4,366,631	$	4,382,779
Adjustments to state inventories at LIFO	83,821		155,420
Inventories at LIFO	$	4,450,452	$	4,538,199

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Intangible Assets	9 Months Ended
	Oct. 09, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible Assets	Intangible AssetsOur definite-lived intangible assets include customer relationships and non-compete agreements. Amortization expense was $7.2 million and $7.3 million for the twelve weeks ended October 9, 2021 and October 3, 2020 and $24.1 million and $24.3 million for the forty weeks ended October 9, 2021 and October 3, 2020.

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Receivables, net

9 Months Ended

Oct. 09, 2021

Receivables [Abstract]

Receivables, net

Receivables, net

Receivables, net consists of the following:

(in thousands)	October 9, 2021		January 2, 2021
Trade	$	585,174	$	449,403
Vendor	282,377		278,180
Other	74,528		34,345
Total receivables	942,079		761,928
Less: Allowance for doubtful accounts	(10,321)		(11,929)
Receivables, net	$	931,758	$	749,999

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Long-term Debt and Fair Value of Financial Instruments

9 Months Ended

Oct. 09, 2021

Debt Disclosure [Abstract]

Long-term Debt and Fair Value of Financial Instruments

Long-term Debt and Fair Value of Financial Instruments

Long-term debt consists of the following:

(in thousands)	October 9, 2021		January 2, 2021
4.50% Senior Unsecured Notes due December 1, 2023	$	193,167	$	192,990
1.75% Senior Unsecured Notes due October 1, 2027	346,251		345,854
3.90% Senior Unsecured Notes due April 15, 2030	494,584		494,140
Total long-term debt	$	1,034,002	$	1,032,984
Fair value of long-term debt	$	1,103,627	$	1,145,000

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.

Bank Debt

As of October 9, 2021 and January 2, 2021, we had no outstanding borrowings, $1.0 billion of borrowing availability and no letters of credit outstanding under our unsecured revolving credit facility (the “Credit Agreement”).

As of October 9, 2021 and January 2, 2021, we had $92.6 million and $100.0 million of bilateral letters of credit issued separately from the 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 October 9, 2021.

Senior Unsecured Notes

Our 4.50% senior unsecured notes due December 1, 2023 (the “2023 Notes”) were issued in December 2013 at 99.69% of the principal amount of $450.0 million. The 2023 Notes bear interest 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.

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

On September 29, 2020, we issued $350.0 million aggregate principal amount of senior unsecured notes (the “2027 Notes”). The 2027 Notes were issued at 99.67% of the principal amount of $350.0 million, are due October 1, 2027 and bear interest at 1.75% per year payable semi-annually in arrears on April 1 and October 1 of each year. In connection with the 2027 Notes offering, we incurred $2.9 million of debt issuance costs. Our 2023 Notes, 2027 Notes and 2030 Notes are collectively referred to herein as our “senior unsecured notes.”

Pursuant to a cash tender offer that was completed on September 29, 2020, we repurchased $256.3 million of our 2023 Notes with the net proceeds from the 2027 Notes. In connection with this tender offer, we incurred charges relating to tender premiums and debt issuance costs of $30.5 million and $1.4 million.

Debt Guarantees

We are a guarantor of loans made by banks to various independently owned Carquest-branded stores that are our customers totaling $27.7 million and $23.6 million as of October 9, 2021 and January 2, 2021. 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 $69.6 million and $57.5 million as of October 9, 2021 and January 2, 2021. We believe that the likelihood of performance under these guarantees is remote.

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Leases

9 Months Ended

Oct. 09, 2021

Leases [Abstract]

Leases

LeasesSubstantially all of our leases are for facilities and vehicles. The initial term for facilities is 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)	October 9, 2021		January 2, 2021
Total operating lease liabilities	$	2,610,491	$	2,477,087
Less: Current portion of operating lease liabilities	(456,127)		(462,588)
Noncurrent operating lease liabilities	$	2,154,364	$	2,014,499

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

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 Ended				Forty Weeks Ended
(in thousands)	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Operating lease cost	$	124,084	$	121,869	$	410,253	$	403,381
Variable lease cost	35,144		31,469		112,864		105,862
Total lease cost	$	159,228	$	153,338	$	523,117	$	509,243

The future maturity of lease liabilities are as follows:

(in thousands)	October 9, 2021
Remainder of 2021	$	141,957
2022	503,001
2023	481,738
2024	415,170
2025	368,761
Thereafter	1,063,114
Total lease payments	2,973,741
Less: Imputed interest	(363,250)
Total operating lease liabilities	$	2,610,491

As of October 9, 2021, our operating lease payments include $66.9 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $183.8 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 7.2 years and 3.3% as of October 9, 2021. 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:

	Forty Weeks Ended
(in thousands)	October 9, 2021		October 3, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	418,596	$	433,934
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	460,351	$	305,930

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Warranty Liabilities

9 Months Ended

Oct. 09, 2021

Product Warranties Disclosures [Abstract]

Warranty Liabilities

Warranty Liabilities

The following table presents changes in our warranty reserves:

	Forty Weeks Ended		Fifty-Three Weeks Ended
(in thousands)	October 9, 2021		January 2, 2021
Warranty reserve, beginning of period	$	14,120	$	36,820
Additions to warranty reserves	8,112		14,907
Reduction and utilization of reserve	(19,077)		(37,607)
Warranty reserve, end of period	$	3,155	$	14,120

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Share Repurchase Program

9 Months Ended

Oct. 09, 2021

Stock Repurchases: [Abstract]

Share Repurchase Program

Share Repurchase Program

On April 19, 2021, our Board of Directors authorized an additional $1.0 billion share repurchase program. This new authorization was incremental to the $700.0 million share repurchase program that was authorized by our Board of Directors in November 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 October 9, 2021, we repurchased 1.1 million shares of our common stock at an aggregate cost of $228.3 million, or an average price of $205.65 per share, in connection with our share repurchase program. During the twelve weeks ended October 3, 2020, we repurchased 0.7 million shares of our common stock at an aggregate cost of $109.6 million, or an average price of $153.06 per share, in connection with our share repurchase program. During the forty weeks ended October 9, 2021 and October 3, 2020, we repurchased 4.2 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 forty weeks ended October 9, 2021 and October 3, 2020 were at an aggregate cost of $791.7 million and $138.6 million, or an average price of $189.43 and $147.13 per share. We had $640.5 million remaining under our share repurchase program as of October 9, 2021.

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Earnings per Share

9 Months Ended

Oct. 09, 2021

Earnings Per Share [Abstract]

Earnings Per Share

Earnings per Share

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

	Twelve Weeks Ended				Forty Weeks Ended
(in thousands, except per share data)	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Numerator
Net income applicable to common shares	$	169,813	$	147,476	$	534,439	$	381,024
Denominator
Basic weighted-average common shares	62,854		68,965		64,555		69,097
Dilutive impact of share-based awards	494		302		453		228
Diluted weighted-average common shares (1)	63,348		69,267		65,008		69,325
Basic earnings per common share	$	2.70	$	2.14	$	8.28	$	5.51
Diluted earnings per common share	$	2.68	$	2.13	$	8.22	$	5.50

(1)For the twelve weeks ended October 9, 2021, there were no restricted stock units (“RSUs”) that were anti-dilutive. For the forty weeks ended October 9, 2021, 10,974 RSUs were excluded from the diluted calculation as their inclusion would have been anti-dilutive. For the twelve and forty weeks ended October 3, 2020, 101 thousand and 134 thousand RSUs were excluded from the diluted calculation as their inclusion would have been anti-dilutive.

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Share-Based Compensation

9 Months Ended

Oct. 09, 2021

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Share-Based Compensation

During the forty weeks ended October 9, 2021, we granted 234 thousand time-based RSUs, 63 thousand market-based RSUs and 124 thousand Stock Options. The general terms of the time-based, performance-based and market-based RSUs are similar to awards previously granted by us. We grant options to purchase common stock to certain employees under our 2014 Long-Term Incentive 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 10 years and vest one-third annually over three years. We record compensation expense for the grant date fair value of the option awards evenly over the vesting period.

The weighted-average fair values of the time-based and market-based RSUs granted during the forty weeks ended October 9, 2021 were $181.10 and $204.97 per share. For time-based RSUs, the fair value of each award was determined based on the market price of our stock on the date of grant adjusted for expected dividends during the vesting period, as applicable. The fair value of each market-based RSU was determined using a Monte Carlo simulation model.

The weighted-average fair values of stock options granted during the forty weeks ended October 9, 2021 was $47.19 per share. No stock options were granted in the twelve weeks ended October 9, 2021. The fair value was estimated on the date of grant by applying the Black-Scholes option-pricing valuation model.

Total income tax benefit related to share-based compensation expense for the twelve and forty weeks ended October 9, 2021 was $4.1 million and $12.3 million. Total income tax benefit related to share-based compensation expense for the twelve and forty weeks ended October 3, 2020 was $2.8 million and $8.8 million. As of October 9, 2021, there was $82.4 million of unrecognized compensation expense related to all share-based awards that is expected to be recognized over a weighted-average period of 1.6 years.

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Subsequent Events	9 Months Ended
	Oct. 09, 2021
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsOn February 6, 2018, a putative class action on behalf of purchasers of our securities who purchased or otherwise acquired their securities between November 14, 2016 and August 15, 2017, inclusive (the “Class Period”), was commenced against us and certain of our current and former officers in the U.S. District Court for the District of Delaware. The plaintiff alleged that the defendants failed to disclose material adverse facts about our financial well-being, business relationships, and prospects during the alleged Class Period in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On February 7, 2020, the court granted in part and denied in part our motion to dismiss. On November 6, 2020, the court granted the plaintiff’s motion for class certification. On March 15, 2021, we moved for reconsideration of the order denying in part our motion to dismiss, and on October 15, 2021, we filed a motion for summary judgment, seeking full dismissal of the case. On November 5, 2021, the parties executed a confidential binding term sheet to settle all claims. The settlement amount will be fully covered by our insurance carriers, and the settlement is subject to court approval.On November 9, 2021, we entered into a new credit agreement that provides a $1.2 billion unsecured revolving credit facility (the “2021 Credit Agreement”) with Advance Auto Parts, Inc. as Borrower, the lenders party thereto, and Bank of America, N.A., Administrative Agent. This new revolver under the 2021 Credit Agreement replaced the revolver under the Credit Agreement. The new revolver provides for the issuance of letters of credit with a sublimit of $200.0 million. We may request that the total revolving commitment be increased by an amount not exceeding $500.0 million during the term of the 2021 Credit Agreement.

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Significant Acounting Policies (Policies)

9 Months Ended

Oct. 09, 2021

Accounting Policies [Abstract]

Revenues

Revenues

The following table summarizes disaggregated revenue from contracts with customers by product group:

	Twelve Weeks Ended				Forty Weeks Ended
	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Percentage of Net sales, by product group:
Parts and batteries	68	%	67	%	66	%	66	%
Accessories and chemicals	19		20		21		21
Engine maintenance	12		12		12		12
Other	1		1		1		1
Total	100	%	100	%	100	%	100	%

Inventories

Inventories are stated at the lower of cost or market.

Leases

Substantially all of our leases are for facilities and vehicles. The initial term for facilities is 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.The current portion of operating lease liabilities is included in Other current liabilities in the accompanying condensed consolidated balance sheets.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.

Fair Value Measurement

For time-based RSUs, the fair value of each award was determined based on the market price of our stock on the date of grant adjusted for expected dividends during the vesting period, as applicable. The fair value of each market-based RSU was determined using a Monte Carlo simulation model. The weighted-average fair values of stock options granted during the forty weeks ended October 9, 2021 was $47.19 per share. No stock options were granted in the twelve weeks ended October 9, 2021. The fair value was estimated on the date of grant by applying the Black-Scholes option-pricing valuation model.

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Significant Acounting Policies (Tables)

9 Months Ended

Oct. 09, 2021

Accounting Policies [Abstract]

Revenue from External Customers by Products and Services

The following table summarizes disaggregated revenue from contracts with customers by product group:

	Twelve Weeks Ended				Forty Weeks Ended
	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Percentage of Net sales, by product group:
Parts and batteries	68	%	67	%	66	%	66	%
Accessories and chemicals	19		20		21		21
Engine maintenance	12		12		12		12
Other	1		1		1		1
Total	100	%	100	%	100	%	100	%

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Inventories (Tables)

9 Months Ended

Oct. 09, 2021

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory balances were as follows:

(in thousands)	October 9, 2021		January 2, 2021
Inventories at first in, first out (“FIFO”)	$	4,366,631	$	4,382,779
Adjustments to state inventories at LIFO	83,821		155,420
Inventories at LIFO	$	4,450,452	$	4,538,199

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Receivables, net (Tables)

9 Months Ended

Oct. 09, 2021

Receivables [Abstract]

Schedule of Accounts Receivable

Receivables, net consists of the following:

(in thousands)	October 9, 2021		January 2, 2021
Trade	$	585,174	$	449,403
Vendor	282,377		278,180
Other	74,528		34,345
Total receivables	942,079		761,928
Less: Allowance for doubtful accounts	(10,321)		(11,929)
Receivables, net	$	931,758	$	749,999

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Long-term Debt and Fair Value of Financial Instruments (Tables)

9 Months Ended

Oct. 09, 2021

Debt Disclosure [Abstract]

Schedule of Debt

Long-term debt consists of the following:

(in thousands)	October 9, 2021		January 2, 2021
4.50% Senior Unsecured Notes due December 1, 2023	$	193,167	$	192,990
1.75% Senior Unsecured Notes due October 1, 2027	346,251		345,854
3.90% Senior Unsecured Notes due April 15, 2030	494,584		494,140
Total long-term debt	$	1,034,002	$	1,032,984
Fair value of long-term debt	$	1,103,627	$	1,145,000

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Leases (Tables)

9 Months Ended

Oct. 09, 2021

Leases [Abstract]

Schedule of Operating Lease Liabilities

Operating lease liabilities consist of the following:

(in thousands)	October 9, 2021		January 2, 2021
Total operating lease liabilities	$	2,610,491	$	2,477,087
Less: Current portion of operating lease liabilities	(456,127)		(462,588)
Noncurrent operating lease liabilities	$	2,154,364	$	2,014,499

Lease, Cost

Total lease cost is comprised of the following:

	Twelve Weeks Ended				Forty Weeks Ended
(in thousands)	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Operating lease cost	$	124,084	$	121,869	$	410,253	$	403,381
Variable lease cost	35,144		31,469		112,864		105,862
Total lease cost	$	159,228	$	153,338	$	523,117	$	509,243

Lessee, Operating Lease, Liability, Maturity

The future maturity of lease liabilities are as follows:

(in thousands)	October 9, 2021
Remainder of 2021	$	141,957
2022	503,001
2023	481,738
2024	415,170
2025	368,761
Thereafter	1,063,114
Total lease payments	2,973,741
Less: Imputed interest	(363,250)
Total operating lease liabilities	$	2,610,491

Schedule of Other Information Relating to Lease Liabilities

Other information relating to our lease liabilities is as follows:

	Forty Weeks Ended
(in thousands)	October 9, 2021		October 3, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	418,596	$	433,934
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	460,351	$	305,930

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Warranty Liabilities (Tables)

9 Months Ended

Oct. 09, 2021

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability

The following table presents changes in our warranty reserves:

	Forty Weeks Ended		Fifty-Three Weeks Ended
(in thousands)	October 9, 2021		January 2, 2021
Warranty reserve, beginning of period	$	14,120	$	36,820
Additions to warranty reserves	8,112		14,907
Reduction and utilization of reserve	(19,077)		(37,607)
Warranty reserve, end of period	$	3,155	$	14,120

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Earnings per Share (Tables)

9 Months Ended

Oct. 09, 2021

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

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

	Twelve Weeks Ended				Forty Weeks Ended
(in thousands, except per share data)	October 9, 2021		October 3, 2020		October 9, 2021		October 3, 2020
Numerator
Net income applicable to common shares	$	169,813	$	147,476	$	534,439	$	381,024
Denominator
Basic weighted-average common shares	62,854		68,965		64,555		69,097
Dilutive impact of share-based awards	494		302		453		228
Diluted weighted-average common shares (1)	63,348		69,267		65,008		69,325
Basic earnings per common share	$	2.70	$	2.14	$	8.28	$	5.51
Diluted earnings per common share	$	2.68	$	2.13	$	8.22	$	5.50

(1)For the twelve weeks ended October 9, 2021, there were no restricted stock units (“RSUs”) that were anti-dilutive. For the forty weeks ended October 9, 2021, 10,974 RSUs were excluded from the diluted calculation as their inclusion would have been anti-dilutive. For the twelve and forty weeks ended October 3, 2020, 101 thousand and 134 thousand RSUs were excluded from the diluted calculation as their inclusion would have been anti-dilutive.

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Nature of Operations and Basis of Presentation (Details)	Oct. 09, 2021 store
Stores [Member]
Basis of Presentation [Line Items]
Number of Stores	4,727
Branches [Member]
Basis of Presentation [Line Items]
Number of Stores	234
Independently owned Carquest store locations [Member]
Basis of Presentation [Line Items]
Number of Stores	1,325

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Significant Acounting Policies (Details)	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020
Revenue from External Customer [Line Items]
Percentage Of Sales By Product Group	100.00%	100.00%	100.00%	100.00%
Parts and Batteries [Member]
Revenue from External Customer [Line Items]
Percentage Of Sales By Product Group	68.00%	67.00%	66.00%	66.00%
Accessories and Chemicals [Member]
Revenue from External Customer [Line Items]
Percentage Of Sales By Product Group	19.00%	20.00%	21.00%	21.00%
Engine Maintenance [Member]
Revenue from External Customer [Line Items]
Percentage Of Sales By Product Group	12.00%	12.00%	12.00%	12.00%
Other [Member]
Revenue from External Customer [Line Items]
Percentage Of Sales By Product Group	1.00%	1.00%	1.00%	1.00%

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Inventories (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020	Jan. 02, 2021
Inventory [Line Items]
Percentage of LIFO Inventory	89.00%		89.00%		88.00%
Inventory, LIFO Reserve, Effect on Income, Net	$ 29,400	$ 15,900	$ 71,600	$ 3,900
Inventories at first in, first out (“FIFO”)	4,366,631		4,366,631		$ 4,382,779
Adjustments to state inventories at LIFO	83,821		83,821		155,420
Inventories at LIFO	$ 4,450,452		$ 4,450,452		$ 4,538,199

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Intangible Assets (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 7.2	$ 7.3	$ 24.1	$ 24.3

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Receivables, net (Details) - USD ($) $ in Thousands	Oct. 09, 2021	Jan. 02, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total receivables	$ 942,079	$ 761,928
Less: Allowance for doubtful accounts	(10,321)	(11,929)
Receivables, net	931,758	749,999
Trade Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total receivables	585,174	449,403
Accounts Receivable, Vendor [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total receivables	282,377	278,180
Accounts Receivable, Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total receivables	$ 74,528	$ 34,345

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Long-term Debt and Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Oct. 09, 2021	Jan. 02, 2021	Sep. 29, 2020	Apr. 16, 2020	Dec. 03, 2013
Debt Instrument [Line Items]
Fair value of long-term debt	$ 1,103,627	$ 1,145,000
Guarantor Obligations, Maximum Exposure	27,700	23,600
Guarantor Obligation, Collateral Amount	69,600	57,500
Long-term debt	1,034,002	1,032,984
ChargesRelatingtoDebtIssuanceCostsfrom2023SeniorUnsecuredNotes			$ 1,400
ChargesRelatingtoTenderPremiumsof2023SeniorUnsecuredNotesAgreement			30,500
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Letters of Credit Outstanding, Amount	0	0
Line of Credit Facility, Remaining Borrowing Capacity	1,000,000
4.50% senior unsecured notes (2023 Notes) [Member] [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage					4.50%
Debt Issuance, Percentage Of Principal					99.69%
Debt Instrument, Repurchased Face Amount			$ 256,300
Debt Instrument, Face Amount					$ 450,000
1.75% senior unsecured notes (2027 Notes)
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			1.75%
Debt Issuance, Percentage Of Principal			99.67%
Debt Issuance Costs, Gross			$ 2,900
Debt Instrument, Face Amount			$ 350,000
3.90% senior unsecured notes (2030 Notes)
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage				3.90%
Debt Issuance, Percentage Of Principal				99.65%
Debt Instrument, Face Amount				$ 500,000
Bilateral Letter of Credit Facility [Member]
Debt Instrument [Line Items]
Letters of Credit Outstanding, Amount	92,600	100,000
Senior Notes [Member] | 4.50% senior unsecured notes (2023 Notes) [Member] [Member]
Debt Instrument [Line Items]
Long-term debt	193,167	192,990
Senior Notes [Member] | 1.75% senior unsecured notes (2027 Notes)
Debt Instrument [Line Items]
Long-term debt	346,251	345,854
Senior Notes [Member] | 3.90% senior unsecured notes (2030 Notes)
Debt Instrument [Line Items]
Long-term debt	$ 494,584	$ 494,140

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Leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020	Jan. 02, 2021
Lessee, Lease, Description [Line Items]
Total operating lease liabilities	$ 2,610,491		$ 2,610,491		$ 2,477,087
Less: Current portion of operating lease liabilities	456,127		456,127		462,588
Noncurrent operating lease liabilities	2,154,364		2,154,364		$ 2,014,499
Operating lease cost	124,084	$ 121,869	410,253	$ 403,381
Variable lease cost	35,144	31,469	112,864	105,862
Total lease cost	159,228	$ 153,338	523,117	509,243
Remainder of 2021	141,957		141,957
2022	503,001		503,001
2022	481,738		481,738
2023	415,170		415,170
2024	368,761		368,761
Thereafter	1,063,114		1,063,114
Total lease payments	2,973,741		2,973,741
Less: Imputed interest	(363,250)		(363,250)
Lessee option to extend reasonably certain of being exercised	66,900		66,900
Operating lease legally binding minimum payments for lease that have not yet commenced	$ 183,800		$ 183,800
Operating Lease, Weighted Average Remaining Lease Term	7 years 2 months 12 days		7 years 2 months 12 days
Operating Lease, Weighted Average Discount Rate, Percent	3.30%		3.30%
Cash paid for amounts included in the measurement of lease liabilities:			$ 418,596	433,934
Right-of-use assets obtained in exchange for lease obligations:			$ 460,351	$ 305,930
Real Estate [Member]
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Renewal Term	5 years		5 years
Real Estate [Member] | Minimum [Member]
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Term of Contract	5 years		5 years
Real Estate [Member] | Maximum [Member]
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Term of Contract	10 years		10 years
Equipment [Member] | Minimum [Member]
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Term of Contract	3 years		3 years
Equipment [Member] | Maximum [Member]
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Term of Contract	5 years		5 years

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Warranty Liabilities (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Oct. 09, 2021	Jan. 02, 2021
Movement in Standard Product Warranty Accrual [Roll Forward]
Warranty reserve, beginning of period	$ 14,120	$ 36,820
Additions to warranty reserves	8,112	14,907
Reduction and utilization of reserve	(19,077)	(37,607)
Warranty reserve, end of period	$ 3,155	$ 14,120

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Share Repurchase Program (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020	Apr. 19, 2021	Nov. 08, 2019
Class of Stock [Line Items]
Treasury Stock, Shares, Acquired as Part of Authorized Plan	1,100	700	4,200	900
Payments for Repurchase of Common Stock	$ 228.3	$ 109.6	$ 791.7	$ 138.6
Acquired, Average Cost Per Share, Acquired as Part of Plan	$ 205.65	$ 153.06	$ 189.43	$ 147.13
Share Repurchase Program, Remaining Authorized Repurchase Amount	$ 640.5		$ 640.5
August 2019 Share Repurchase Program [Member]
Class of Stock [Line Items]
Stock Repurchase Program, Authorized Amount					$ 1,000.0	$ 700.0

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Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020
Earnings Per Share [Abstract]
Net income applicable to common shares	$ 169,813	$ 147,476	$ 534,439	$ 381,024
Basic weighted-average common shares (in shares)	62,854,000	68,965,000	64,555,000	69,097,000
Dilutive impact of share-based awards (in shares)	494,000	302,000	453,000	228,000
Diluted weighted-average common shares (in shares)	63,348,000	69,267,000	65,008,000	69,325,000
Basic earnings per common share (in dollars per share)	$ 2.70	$ 2.14	$ 8.28	$ 5.51
Diluted earnings per common share (in dollars per share)	$ 2.68	$ 2.13	$ 8.22	$ 5.50
RSUs
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	0	101,000	10,974	134,000

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Share-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Oct. 09, 2021	Oct. 03, 2020	Oct. 09, 2021	Oct. 03, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted (in shares)	0		124,000
Weighted-average fair values of stock options granted (in dollars per share)			$ 47.19
Tax benefit from compensation expense	$ 4.1	$ 2.8	$ 12.3	$ 8.8
Unrecognized compensation expense	$ 82.4		$ 82.4
Unrecognized compensation expense, period for recognition			1 year 7 months 6 days
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants in period (in shares)			234,000
Weighted average grant date fair value (in dollars per share)			$ 181.10
Market-based RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants in period (in shares)			63,000
Weighted average grant date fair value (in dollars per share)			$ 204.97
Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period			10 years
Vesting period			3 years

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Subsequent Events (Details) - Subsequent Event - 2021 Credit Agreement - Unsecured Debt	Nov. 09, 2021 USD ($)
Subsequent Event [Line Items]
Maximum borrowing capacity	$ 1,200,000,000
Maximum possible increase	500,000,000
Letter of Credit
Subsequent Event [Line Items]
Maximum borrowing capacity	$ 200,000,000