aap-20210717

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________________________________

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

For the quarterly period ended July 17, 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 August 20, 2021, the number of shares of the registrant’s common stock outstanding was 63,000,741 shares.

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			Page

NOTE REGARDING FORWARD LOOKING STATEMENTS			1

PART I.	FINANCIAL INFORMATION

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

		Condensed Consolidated Balance Sheets	2

		Condensed Consolidated Statements of Operations	3

		Condensed Consolidated Statements of Comprehensive Income	3

		Condensed Consolidated Statements of Changes in Stockholders’ Equity	4

		Condensed Consolidated Statements of Cash Flows	6

		Notes to the Condensed Consolidated Financial Statements	7

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

	Item 4.	Controls and Procedures	21

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	23

	Item 1A.	Risk Factors	23

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

	Item 6.	Exhibits	24

SIGNATURE			25

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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PART I. FINANCIAL INFORMATION

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

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


	July 17, 2021		January 2, 2021
Assets
Current assets:
Cash and cash equivalents	$	809,287	$	834,992
Receivables, net	803,880		749,999
Inventories	4,428,115		4,538,199
Other current assets	180,589		146,811
Total current assets	6,221,871		6,270,001
Property and equipment, net of accumulated depreciation of $2,301,277 and $2,189,165	1,472,467		1,462,602
Operating lease right-of-use assets	2,441,652		2,379,987
Goodwill	994,140		993,590
Intangible assets, net	665,193		681,127
Other assets	43,402		52,329
	$	11,838,725	$	11,839,636
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,807,293	$	3,640,639
Accrued expenses	608,846		606,804
Other current liabilities	483,206		496,472
Total current liabilities	4,899,345		4,743,915
Long-term debt	1,033,686		1,032,984
Non-current operating lease liabilities	2,091,171		2,014,499
Deferred income taxes	365,978		342,445
Other long-term liabilities	146,980		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	818,126		783,709
Treasury stock, at cost	(1,973,371)		(1,394,080)
Accumulated other comprehensive loss	(23,283)		(26,759)
Retained earnings	4,480,085		4,196,634
Total stockholders’ equity	3,301,565		3,559,512
	$	11,838,725	$	11,839,636

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

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Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

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


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
	July 17, 2021		July 11, 2020		July 17, 2021		July 11, 2020
Net sales	$	2,649,415	$	2,501,380	$	5,979,785	$	5,199,262
Cost of sales, including purchasing and warehousing costs	1,460,164		1,404,666		3,305,608		2,929,815
Gross profit	1,189,251		1,096,714		2,674,177		2,269,447
Selling, general and administrative expenses	944,323		833,869		2,177,120		1,928,177
Operating income	244,928		262,845		497,057		341,270
Other, net:
Interest expense	(8,306)		(13,422)		(19,497)		(25,665)

Other income (expense), net	1,143		3,117		5,979		(2,872)
Total other, net	(7,163)		(10,305)		(13,518)		(28,537)
Income before provision for income taxes	237,765		252,540		483,539		312,733
Provision for income taxes	59,069		62,580		118,913		79,185
Net income	$	178,696	$	189,960	$	364,626	$	233,548

Basic earnings per common share	$	2.76	$	2.75	$	5.59	$	3.38
Weighted-average common shares outstanding	64,745		69,118		65,284		69,154
Diluted earnings per common share	$	2.74	$	2.74	$	5.55	$	3.37
Weighted-average common shares outstanding	65,210		69,294		65,720		69,350

Condensed Consolidated Statements of Comprehensive Income

(In thousands) (Unaudited)


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
	July 17, 2021		July 11, 2020		July 17, 2021		July 11, 2020
Net income	$	178,696	$	189,960	$	364,626	$	233,548
Other comprehensive (loss) income:
Changes in net unrecognized other postretirement costs, net of tax of $25, $26, $44 and $3	(70)		(73)		(124)		(7)
Currency translation adjustments	(1,747)		7,669		3,600		(9,363)
Total other comprehensive (loss) income	(1,817)		7,596		3,476		(9,370)
Comprehensive income	$	176,879	$	197,556	$	368,102	$	224,178

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

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

	Twelve Weeks Ended July 17, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance, April 24, 2021	65,439	$	8	$	799,934	$	(1,577,727)	$	(21,466)	$	4,300,818	$	3,501,567
Net income	—	—		—		—		—		178,696		178,696
Total other comprehensive loss	—	—		—		—		(1,817)		—		(1,817)
Restricted stock units and deferred stock units vested	21	—		—		—		—		—		—
Share-based compensation	—	—		17,331		—		—		—		17,331
Stock issued under employee stock purchase plan	6	—		869		—		—		—		869
Repurchases of common stock	(2,004)	—		—		(395,644)		—		—		(395,644)
Cash dividends declared	—	—		—		—		—		571		571
Other	37	—		(8)		—		—		—		(8)
Balance, July 17, 2021	63,499	$	8	$	818,126	$	(1,973,371)	$	(23,283)	$	4,480,085	$	3,301,565

	Twelve Weeks Ended July 11, 2020
	Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance, April 18, 2020	69,101	$	8	$	749,723	$	(960,150)	$	(51,535)	$	3,798,983	$	3,537,029
Net income	—	—		—		—		—		189,960		189,960
Total other comprehensive income	—	—		—		—		7,596		—		7,596
Restricted stock units and deferred stock units vested	42	—		—		—		—		—		—
Share-based compensation	—	—		10,029		—		—		—		10,029
Stock issued under employee stock purchase plan	6	—		783		—		—		—		783
Repurchases of common stock	(10)	—		—		(1,442)		—		—		(1,442)
Cash dividends declared ($0.25 per common share)	—	—		—		—		—		(17,436)		(17,436)
Balance, July 11, 2020	69,139	$	8	$	760,535	$	(961,592)	$	(43,939)	$	3,971,507	$	3,726,519

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

	Twenty-Eight Weeks Ended July 17, 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	—	—		—		—		—		364,626		364,626
Total other comprehensive income	—	—		—		—		3,476		—		3,476
Restricted stock units and deferred stock units vested	248	—		—		—		—		—		—
Share-based compensation	—	—		33,591		—		—		—		33,591
Stock issued under employee stock purchase plan	19	—		869		—		—		—		869
Repurchases of common stock	(3,166)	—		—		(579,291)		—		—		(579,291)
Cash dividends declared ($1.25 per common share)	—	—		—		—		—		(81,175)		(81,175)
Other	37	—		(43)		—		—		—		(43)
Balance, July 17, 2021	63,499	$	8	$	818,126	$	(1,973,371)	$	(23,283)	$	4,480,085	$	3,301,565

	Twenty-Eight Weeks Ended July 11, 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	—	—		—		—		—		233,548		233,548
Total other comprehensive loss	—	—		—		—		(9,370)		—		(9,370)
Restricted stock units and deferred stock units vested	179	—		—		—		—		—		—
Share-based compensation	—	—		23,838		—		—		—		23,838
Stock issued under employee stock purchase plan	15	—		1,518		—		—		—		1,518
Repurchases of common stock	(287)	—		—		(37,203)		—		—

SEC Form 10-Q filed by Advance Auto Parts Inc