Document
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
________________________________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 6, 2018

o 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
________________________

aaplogocolornotaga29.jpg
ADVANCE AUTO PARTS, INC.
(Exact name of registrant as specified in its charter)
________________________

 Delaware
(State or other jurisdiction of
incorporation or organization)
   54-2049910
(I.R.S. Employer
Identification No.)
 5008 Airport Road
Roanoke, VA
(Address of principal executive offices)
    24012
(Zip Code)


 
(540) 362-4911
(Registrant’s telephone number, including area code)
 
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 x No o

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 x No o


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 x
Accelerated filer o
Non-accelerated filer o  (Do not check if a smaller reporting company)
Smaller reporting company o
 
Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 9, 2018, the number of shares of the registrant’s common stock outstanding was 72,893,719 shares.
 



Table of Contents

 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

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 6, 2018
 
December 30, 2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
970,006

 
$
546,937

Receivables, net
698,617

 
606,357

Inventories
4,187,082

 
4,168,492

Other current assets
168,578

 
105,106

Total current assets
6,024,283

 
5,426,892

Property and equipment, net of accumulated depreciation of $1,914,153 and $1,783,383
1,335,769

 
1,394,138

Goodwill
992,764

 
994,293

Intangible assets, net
562,698

 
597,674

Other assets
56,839

 
69,304

 
$
8,972,353

 
$
8,482,301

Liabilities and Stockholders’ Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
3,023,660

 
$
2,894,582

Accrued expenses
648,817

 
533,548

Other current liabilities
48,755

 
51,967

Total current liabilities
3,721,232

 
3,480,097

Long-term debt
1,045,398

 
1,044,327

Deferred income taxes
320,160

 
303,620

Other long-term liabilities
225,927

 
239,061

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
685,675

 
664,646

Treasury stock, at cost
(271,082
)
 
(144,600
)
Accumulated other comprehensive loss
(32,083
)
 
(24,954
)
Retained earnings
3,277,118

 
2,920,096

Total stockholders’ equity
3,659,636

 
3,415,196

 
$
8,972,353

 
$
8,482,301




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

1

Table of Contents

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 6, 2018
 
October 7, 2017
 
October 6, 2018
 
October 7, 2017
Net sales
$
2,274,982

 
$
2,182,233

 
$
7,475,482

 
$
7,336,798

Cost of sales, including purchasing and warehousing costs
1,268,055

 
1,234,525

 
4,184,713

 
4,125,318

Gross profit
1,006,927

 
947,708

 
3,290,769

 
3,211,480

Selling, general and administrative expenses
852,686

 
791,139

 
2,770,747

 
2,728,420

Operating income
154,241

 
156,569

 
520,022

 
483,060

Other, net:
 

 
 

 
 
 
 
Interest expense
(13,076
)
 
(13,314
)
 
(43,613
)
 
(45,665
)
Other income, net
5,755

 
745

 
8,998

 
8,727

Total other, net
(7,321
)
 
(12,569
)
 
(34,615
)
 
(36,938
)
Income before provision for income taxes
146,920

 
144,000

 
485,407

 
446,122

Provision for income taxes
31,077

 
48,004

 
115,002

 
155,117

Net income
$
115,843

 
$
95,996

 
$
370,405

 
$
291,005

 
 
 
 
 
 
 
 
Basic earnings per common share
$
1.57

 
$
1.30

 
$
5.01

 
$
3.94

Weighted average common shares outstanding
73,888

 
73,866

 
73,974

 
73,827

Diluted earnings per common share
$
1.56

 
$
1.30

 
$
4.99

 
$
3.93

Weighted average common shares outstanding
74,190

 
74,106

 
74,212

 
74,097

Dividends declared per common share
$
0.06

 
$
0.06

 
$
0.18

 
$
0.18



Condensed Consolidated Statements of Comprehensive Income
(In thousands) (Unaudited)
 
Twelve Weeks Ended
 
Forty Weeks Ended
 
October 6, 2018
 
October 7, 2017
 
October 6, 2018
 
October 7, 2017
Net income
$
115,843

 
$
95,996

 
$
370,405

 
$
291,005

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Changes in net unrecognized other postretirement benefit costs, net of tax of $24, $41, $80 and $137
(69
)
 
(63
)
 
(227
)
 
(211
)
Currency translation adjustments
3,900

 
2,225

 
(6,902
)
 
15,409

Total other comprehensive income (loss)
3,831

 
2,162

 
(7,129
)
 
15,198

Comprehensive income
$
119,674

 
$
98,158

 
$
363,276

 
$
306,203




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

2

Table of Contents

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
 
Forty Weeks Ended
 
October 6, 2018
 
October 7, 2017
Cash flows from operating activities:
 
 
 
Net income
$
370,405

 
$
291,005

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
183,584

 
192,753

Share-based compensation
19,265

 
28,156

Loss on disposal and impairment of long-lived assets
6,267

 
4,692

Provision (benefit) for deferred income taxes
17,029

 
(25,712
)
Other
1,686

 
2,262

Net change in:
 
 
 
Receivables, net
(93,595
)
 
(35,760
)
Inventories
(22,862
)
 
116,957

Accounts payable
131,572

 
(170,227
)
Accrued expenses
122,779

 
36,564

Other assets and liabilities, net
(54,627
)
 
(39,685
)
Net cash provided by operating activities
681,503

 
401,005

Cash flows from investing activities:
 

 
 

Purchases of property and equipment
(105,132
)
 
(160,960
)
Proceeds from sales of property and equipment
1,450

 
6,120

Other, net

 
20

Net cash used in investing activities
(103,682
)
 
(154,820
)
Cash flows from financing activities:
 

 
 

(Decrease) increase in bank overdrafts
(11,973
)
 
4,676

Borrowings under credit facilities

 
534,400

Payments on credit facilities

 
(534,400
)
Dividends paid
(17,819
)
 
(17,828
)
Proceeds from the issuance of common stock
2,290

 
3,142

Tax withholdings related to the exercise of stock appreciation rights
(490
)
 
(6,414
)
Repurchase of common stock
(126,482
)
 
(3,380
)
Other, net
814

 
(2,095
)
Net cash used in financing activities
(153,660
)
 
(21,899
)
Effect of exchange rate changes on cash
(1,092
)
 
3,838

Net increase in cash and cash equivalents
423,069

 
228,124

Cash and cash equivalents, beginning of period
546,937

 
135,178

Cash and cash equivalents, end of period
$
970,006

 
$
363,302

 
 
 
 
Non-cash transactions:
 
 
 
Accrued purchases of property and equipment
$
11,066

 
$
7,860



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

3

Table of Contents

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 include the accounts of Advance Auto Parts, Inc. (“Advance”), its wholly owned subsidiary, Advance Stores Company, Incorporated (“Advance Stores”) and its subsidiaries (collectively referred to as “Advance,” “we,” “us,” “our” or “the Company”) and have been prepared by the Company.

As of October 6, 2018, we operated a total of 4,981 stores and 139 branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of October 6, 2018, we served 1,229 independently owned Carquest branded stores (“independent stores”) across the same geographic locations served by our stores in addition to Mexico, the Bahamas, Turks and Caicos, the British Virgin Islands and the Pacific Islands.

The accounting policies followed in the presentation of interim financial results are consistent with those followed on an annual basis. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), have been condensed or omitted based upon the Securities and Exchange Commission (“SEC”) interim reporting guidance. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for 2017 as filed with the SEC on February 21, 2018.

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

Revenue for periods through December 30, 2017 was reported under Accounting Standards Codification (“ASC”) 605, Revenue Recognition (Topic 605), as described in our accounting policies in our 2017 Form 10-K. Effective December 31, 2017, we adopted ASC 606, Revenue From Contracts With Customers (Topic 606) (“ASC 606”). The results of applying Topic 606 using the modified retrospective approach were insignificant and did not have a material impact on our consolidated financial condition, results of operations, cash flows, business process, controls or systems.

ASC 606 defines a performance obligation as a promise in a contract to transfer a distinct good or service to the customer and is considered the unit of account. The majority of our contracts have one single performance obligation as the promise to transfer the individual goods is not separately identifiable from other promises in the contracts and is, therefore, not distinct. Discounts and incentives are treated as separate performance obligations. We allocate the contract’s transaction price to each of these performance obligations separately using explicitly stated amounts or our best estimate using historical data. Additionally, we estimate and record gift card breakage as redemptions occur.
In accordance with ASC 606 revenue is recognized at the time the sale is made, at which time our walk-in customers take immediate possession of the merchandise or same-day delivery is made to our Professional delivery customers, which include certain independently-owned store locations. Payment terms are established for our Professional delivery customers based on pre-established credit requirements. Payment terms vary depending on the customer and generally range from 1 to 30 days. Based on the nature of receivables, no significant financing components exist. For e-commerce sales, revenue is recognized either at the time of pick-up at one of our store locations or at the time of shipment depending on the customer's order designation. Sales are recorded net of discounts, sales incentives and rebates, sales taxes and estimated returns and allowances. We estimate the reduction to Net sales and Cost of sales for returns based on current sales levels and our historical return experience.

We provide assurance type warranty coverage primarily on batteries, brakes and struts whereby we are required to provide replacement product at no cost or a reduced cost for a set period of time.


4

Table of Contents

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



We had no material contract assets, contract liabilities or costs to obtain and fulfill contracts recorded on the Condensed Consolidated Balance Sheet as of October 6, 2018. For the twelve and forty weeks ended October 6, 2018, revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price) was insignificant. Revenue expected to be recognized in future periods related to remaining performance obligations is insignificant.

The following table summarizes disaggregated revenue from contracts with customers by product group:
 
Twelve Weeks Ended
 
Forty Weeks Ended
 
October 6, 2018
 
October 7, 2017
 
October 6, 2018
 
October 7, 2017
Percentage of Net sales, by product group:
 
 
 
 
 
 
 
Parts and batteries
67
%
 
67
%
 
66
%
 
66
%
Accessories and chemicals
19

 
19

 
20

 
19

Engine maintenance
13

 
13

 
13

 
14

Other
1

 
1

 
1

 
1

Total
100
%
 
100
%
 
100
%
 
100
%

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”). This ASU is a comprehensive new accounting standard with respect to leases that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require lessees to recognize lease assets and lease liabilities for most leases, including those leases previously classified as operating leases under current GAAP. ASU 2016-02 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in previous lease guidance. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those years; earlier adoption is permitted.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides clarifications and improvements to ASU 2016-02 including allowing entities to elect an additional transition method with which to adopt ASU 2016-02. The approved transition method enables entities to apply the transition requirements in this ASU at the effective date of ASU 2016-02 (rather than at the beginning of the earliest comparative period presented as currently required) with the effect of initially applying ASU 2016-02 recognized as a cumulative-effect adjustment to retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the year of adoption would continue to be in accordance with ASC 840, Leases (Topic 840) (“ASC 840”), including the disclosure requirements of ASC 840. Using this transition method, we plan to adopt ASU 2016-02 at the beginning of 2019.

We are in process of implementing our leasing software solution and are continuing to identify changes to our business processes, systems and controls to support adoption of the new standard in 2019. We are evaluating the impact that the new standard will have on the condensed consolidated financial statements. While we are unable to quantify the impact at this time, we expect the adoption of the new standard to result in a material increase in the assets and liabilities in the condensed consolidated financial statements. We do not expect adoption of ASU 2016-02 to have a material impact on our condensed consolidated statements of operations as the majority of our leases will remain operating in nature. As such, the expense recognition will be similar to previously required straight-line expense treatment.

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“SAB 118”). ASU 2018-05 provides guidance on accounting for the tax effects of the U.S. Tax Cuts and Jobs Act (the “Act”) pursuant to the Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740, Income Taxes (Topic 740) within a one-year measurement period from the Act enactment date, which occurred in the financial statements for the year ended December 30, 2017. During the third quarter of 2018, and in conjunction with the completion of our 2017 U.S. income tax return, we identified certain adjustments to amounts previously recorded for the remeasurement of the net deferred tax liability and nonrecurring repatriation tax on accumulated earnings of foreign subsidiaries that resulted in a net tax benefit of $5.7 million. Our analysis under SAB 118 is complete.

5

Table of Contents

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




In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718) to expand the scope of ASC 718, Compensation - Stock Compensation (Topic 718) (“ASU 2018-07”), to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We elected to early adopt ASU 2018-07 in the second quarter of 2018. The results of applying ASU 2018-07 were insignificant and did not have a material impact on our consolidated financial condition, results of operations, cash flows, business process, controls or systems.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The pronouncement is effective for years, and for interim periods within those years, beginning after December 15, 2019, with early adoption permitted. We elected to early adopt ASU 2018-15 in the third quarter of 2018 on a prospective basis. The results of applying ASU 2018-15 were insignificant and did not have a material impact on our consolidated financial condition, results of operations, cash flows, business process, controls or systems.

3.
Inventories

Inventories are stated at the lower of cost or market. We used the last in, first out (“LIFO”) method of accounting for approximately 88% of inventories as of October 6, 2018 and December 30, 2017. 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 6, 2018 and prior years. We recorded a reduction to Cost of sales of $22.0 million and of $1.0 million for the twelve weeks ended October 6, 2018 and October 7, 2017 and reductions to Cost of sales of $54.3 million and $6.5 million for the forty weeks ended October 6, 2018 and October 7, 2017 to state inventories at LIFO.

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

Inventory balances were as follows:
(in thousands)
October 6, 2018
 
December 30, 2017
Inventories at first in, first out (“FIFO”)
$
3,929,650

 
$
3,965,370

Adjustments to state inventories at LIFO
257,432

 
203,122

Inventories at LIFO
$
4,187,082

 
$
4,168,492


4.
Exit Activities and Other Initiatives

Store and Supply Chain Rationalization

During the fourth quarter of 2017, the Board of Directors approved a plan to close certain underperforming stores and begin to rationalize our supply chain costs as part of our strategy to transform the enterprise. As of October 6, 2018, total charges related to these actions are expected to total up to $70.0 million, which consist of $35.0 million relating to the early termination of lease obligations, $15.0 million of inventory and supply chain asset impairment charges, $15.0 million of other facility closure costs and $5.0 million of severance.

During the twelve weeks ended October 6, 2018, we incurred $13.9 million of early termination of lease obligations charges, $1.1 million of inventory and supply chain asset impairment charges, $5.4 million of facility closure costs and $0.8 million of severance relating to the store and supply chain rationalization. Of these costs, $20.7 million are included in SG&A and $0.5 million are included in Cost of sales in the accompanying condensed consolidated statements of operations.


6

Table of Contents

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



During the forty weeks ended October 6, 2018, we incurred $18.9 million of early termination of lease obligation charges, $7.9 million of inventory and supply chain asset impairment charges, $7.8 million of facility closure costs and $2.2 million of severance relating to the store and supply chain rationalization. Of these costs, $31.0 million are included in SG&A and $5.8 million are included in Cost of sales in the accompanying condensed consolidated statements of operations.

Total Exit Liabilities

Our total exit liabilities include liabilities recorded in connection with the initiative described above, along with liabilities associated with facility closures that have occurred as part of our normal market evaluation process. Cash payments on the closed facility lease obligations are expected to be made through 2028 and the remaining severance payments are expected to be made in 2019. Of our total exit liabilities as of October 6, 2018 and December 30, 2017, $25.7 million and $19.8 million is included in Other long-term liabilities and the remainder is included in Accrued expenses in the accompanying condensed consolidated balance sheet. A summary of our exit liabilities is presented in the following table:
(in thousands)
 
Closed Facility Lease Obligations
 
Severance
 
Total
Balance, December 30, 2017
 
$
31,570

 
$
1,645

 
$
33,215

Reserves established
 
20,365

 
5,018

 
25,383

Change in estimates
 
95

 
(251
)
 
(156
)
Cash payments
 
(11,933
)
 
(3,149
)
 
(15,082
)
Balance, October 6, 2018
 
$
40,097

 
$
3,263

 
$
43,360

 
 
 
 
 
 
 
Balance, December 31, 2016
 
$
44,265

 
$
959

 
$
45,224

Reserves established
 
7,940

 
7,927

 
15,867

Change in estimates
 
(1,116
)
 
(699
)
 
(1,815
)
Cash payments
 
(19,519
)
 
(6,542
)
 
(26,061
)
Balance, December 30, 2017
 
$
31,570

 
$
1,645

 
$
33,215


5.
Intangible Assets

Our definite-lived intangible assets include customer relationships, favorable leases and non-compete agreements. Amortization expense was $9.4 million and $10.7 million for the twelve weeks ended October 6, 2018 and October 7, 2017 and $31.3 million and $36.3 million for the forty weeks ended October 6, 2018 and October 7, 2017.

6.
Receivables, net

Receivables consist of the following:
(in thousands)
October 6, 2018
 
December 30, 2017
Trade
$
470,246

 
$
389,963

Vendor
230,422

 
220,510

Other
16,642

 
14,103

Total receivables
717,310

 
624,576

Less: allowance for doubtful accounts
(18,693
)
 
(18,219
)
Receivables, net
$
698,617

 
$
606,357



7

Table of Contents

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



7.
Long-term Debt and Fair Value of Financial Instruments

Long-term debt consists of the following:
(in thousands)
October 6, 2018
 
December 30, 2017
Total long-term debt
$
1,045,609

 
$
1,044,677

Less: current portion of long-term debt
(211
)
 
(350
)
Long-term debt, excluding current portion
$
1,045,398

 
$
1,044,327

 
 
 
 
Fair value of long-term debt
$
1,071,000

 
$
1,109,000


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. We believe the carrying value of our other long-term debt approximates fair value. 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 6, 2018 and December 30, 2017 we had no outstanding borrowings under the revolver and borrowing availability was $896.0 million and $517.6 million based on our leverage ratio. As of October 6, 2018 and December 30, 2017, we had letters of credit outstanding of $104.0 million and $111.7 million, which generally have a term of one year or less and primarily serve as collateral for our self-insurance policies. We were in compliance with all financial covenants required by our debt arrangements as of October 6, 2018.

Debt Guarantees

We are a guarantor of loans made by banks to various independently owned Carquest-branded stores that are our customers totaling $23.7 million and $24.8 million as of October 6, 2018 and December 30, 2017. 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 $55.8 million and $62.8 million as of October 6, 2018 and December 30, 2017. We believe that the likelihood of performance under these guarantees is remote.

8.
Warranty Liabilities

The following table presents changes in our warranty reserves:
 
Forty Weeks Ended
 
Fifty-Two Weeks Ended
(in thousands)
October 6, 2018
 
December 30, 2017
Warranty reserve, beginning of period
$
49,024

 
$
47,243

Additions to warranty reserves
32,274

 
50,895

Reserves utilized
(35,573
)
 
(49,114
)
Warranty reserve, end of period
$
45,725

 
$
49,024

  
9.
Share Repurchase Program

Our share repurchase program permits the repurchase of our common stock on the open market or in privately negotiated transactions from time to time. On August 8, 2018, our Board of Directors authorized a $600.0 million share repurchase

8

Table of Contents

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



program. This new authorization replaced the previous $500.0 million share repurchase program that was authorized by our Board of Directors on May 14, 2012.

During the twelve and forty weeks ended October 6, 2018, we repurchased 720 thousand shares of our common stock at an aggregate cost of $119.9 million, or an average price of $166.57 per share, in connection with our share repurchase program. We had $480.1 million remaining under our share repurchase program as of October 6, 2018. During the twelve and forty weeks ended October 7, 2017, we repurchased no shares of our common stock in connection with our prior share repurchase program.

10.
Earnings per Share

The computation of basic and diluted earnings per share are as follows:  
 
Twelve Weeks Ended
 
Forty Weeks Ended
(in thousands, except per share data)
October 6, 2018
 
October 7, 2017
 
October 6, 2018
 
October 7, 2017
Numerator
 
 
 
 
 
 
 
Net income applicable to common shares
$
115,843

 
$
95,996

 
$
370,405

 
$
291,005

Denominator
 
 
 
 
 

 
 
Basic weighted average common shares
73,888

 
73,866

 
73,974

 
73,827

Dilutive impact of share-based awards
302

 
240

 
238

 
270

Diluted weighted average common shares
74,190

 
74,106

 
74,212

 
74,097

 
 

 
 

 
 

 
 
Basic earnings per common share
$
1.57

 
$
1.30

 
$
5.01

 
$
3.94

Diluted earnings per common share
$
1.56

 
$
1.30

 
$
4.99

 
$
3.93


11.
Share-Based Compensation

During the forty weeks ended October 6, 2018, we granted 230 thousand time-based restricted stock units (“RSUs”), 72 thousand performance-based RSUs and 38 thousand market-based RSUs. The general terms of the time-based, performance-based and market-based RSUs are similar to awards previously granted by us.

The weighted average fair values of the time-based, performance-based and market-based RSUs granted during the forty weeks ended October 6, 2018 were $126.32, $117.84 and $131.96 per share. For time-based and performance-based RSUs, the fair value of each award was determined based on the market price of our stock on the date of grant adjusted for expected dividends during the vesting period, as applicable. The fair value of each market-based RSU was determined using a Monte Carlo simulation model.

Total income tax benefit related to share-based compensation expense for the twelve and forty weeks ended October 6, 2018 was $1.7 million and $4.7 million. Total income tax benefit related to share-based compensation expense for the twelve and forty weeks ended October 7, 2017 was $3.1 million and $10.5 million. As of October 6, 2018, there was $52.5 million of unrecognized compensation expense related to all share-based awards that is expected to be recognized over a weighted average period of 1.7 years.

12.
Condensed Consolidating Financial Statements

Certain 100% wholly owned domestic subsidiaries of Advance, including our Material Subsidiaries (as defined in the 2017 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 Advance to obtain funds from its Guarantor Subsidiaries. Certain of our wholly owned subsidiaries, including all of its foreign subsidiaries, do not serve as guarantors of our senior unsecured notes (“Non-Guarantor Subsidiaries”).


9

Table of Contents

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



Set forth below are condensed consolidating financial statements presenting the financial position, results of operations, and cash flows of (i) Advance, (ii) the Guarantor Subsidiaries, (iii) the Non-Guarantor Subsidiaries, and (iv) the eliminations necessary to arrive at consolidated information for Advance. Investments in subsidiaries of Advance are presented under the equity method. The statement of operations eliminations relate primarily to the sale of inventory from a Non-Guarantor Subsidiary to a Guarantor Subsidiary. The balance sheet eliminations relate primarily to the elimination of intercompany receivables and payables and subsidiary investment accounts.

Condensed Consolidating Balance Sheet
As of October 6, 2018
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
886,608

 
$
83,398

 
$

 
$
970,006

Receivables, net

 
654,001

 
44,616

 

 
698,617

Inventories

 
4,018,991

 
168,091

 

 
4,187,082

Other current assets
24,809

 
163,333

 
3,732

 
(23,296
)
 
168,578

Total current assets
24,809

 
5,722,933

 
299,837

 
(23,296
)
 
6,024,283

Property and equipment, net of accumulated depreciation
83

 
1,326,422

 
9,264

 

 
1,335,769

Goodwill

 
943,358

 
49,406

 

 
992,764

Intangible assets, net

 
519,989

 
42,709

 

 
562,698

Other assets, net
2,384

 
56,223

 
616

 
(2,384
)
 
56,839

Investment in subsidiaries
3,898,615

 
481,256

 

 
(4,379,871
)
 

Intercompany note receivable
1,048,924

 

 

 
(1,048,924
)
 

Due from intercompany, net

 

 
312,726

 
(312,726
)
 

 
$
4,974,815

 
$
9,050,181

 
$
714,558

 
$
(5,767,201
)
 
$
8,972,353

Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
2,823,263

 
$
200,397

 
$

 
$
3,023,660

Accrued expenses

 
654,607

 
17,506

 
(23,296
)
 
648,817

Other current liabilities

 
50,887

 
(2,132
)
 

 
48,755

Total current liabilities

 
3,528,757

 
215,771

 
(23,296
)
 
3,721,232

Long-term debt
1,045,398

 

 

 

 
1,045,398

Deferred income taxes

 
306,327

 
16,217

 
(2,384
)
 
320,160

Other long-term liabilities

 
224,613

 
1,314

 

 
225,927

Intercompany note payable

 
1,048,924

 

 
(1,048,924
)
 

Due to intercompany, net
269,781

 
42,945

 

 
(312,726
)
 

Commitments and contingencies

 

 

 

 

Stockholders' equity
3,659,636

 
3,898,615

 
481,256

 
(4,379,871
)
 
3,659,636

 
$
4,974,815

 
$
9,050,181

 
$
714,558

 
$
(5,767,201
)
 
$
8,972,353



10

Table of Contents

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



Condensed Consolidating Balance Sheet
As of December 30, 2017
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
23

 
$
482,620

 
$
64,317

 
$
(23
)
 
$
546,937

Receivables, net

 
567,460

 
38,897

 

 
606,357

Inventories

 
3,986,724

 
181,768

 

 
4,168,492

Other current assets

 
103,118

 
2,063

 
(75
)
 
105,106

Total current assets
23

 
5,139,922

 
287,045

 
(98
)
 
5,426,892

Property and equipment, net of accumulated depreciation
103

 
1,384,115

 
9,920

 

 
1,394,138

Goodwill

 
943,359

 
50,934

 

 
994,293

Intangible assets, net

 
551,781

 
45,893

 

 
597,674

Other assets, net
3,224

 
68,749

 
554

 
(3,223
)
 
69,304

Investment in subsidiaries
3,521,330

 
448,462

 

 
(3,969,792
)
 

Intercompany note receivable
1,048,700

 

 

 
(1,048,700
)
 

Due from intercompany, net

 

 
332,467

 
(332,467
)
 

 
$
4,573,380

 
$
8,536,388

 
$
726,813

 
$
(5,354,280
)
 
$
8,482,301

Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
2,657,792

 
$
236,790

 
$

 
$
2,894,582

Accrued expenses
1,134

 
511,841

 
20,648

 
(75
)
 
533,548

Other current liabilities

 
50,963

 
1,027

 
(23
)
 
51,967

Total current liabilities
1,134

 
3,220,596

 
258,465

 
(98
)
 
3,480,097

Long-term debt
1,044,327

 

 

 

 
1,044,327

Deferred income taxes

 
288,999

 
17,844

 
(3,223
)
 
303,620

Other long-term liabilities

 
237,019

 
2,042

 

 
239,061

Intercompany note payable

 
1,048,700

 

 
(1,048,700
)
 

Due to intercompany, net
112,723

 
219,744

 

 
(332,467
)
 

Commitments and contingencies
 
 
 
 
 
 
 
 
 
Stockholders' equity
3,415,196

 
3,521,330

 
448,462

 
(3,969,792
)
 
3,415,196

 
$
4,573,380

 
$
8,536,388

 
$
726,813

 
$
(5,354,280
)
 
$
8,482,301





11

Table of Contents

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



Condensed Consolidating Statement of Operations
For the Twelve Weeks ended October 6, 2018
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
2,190,822

 
$
115,675

 
$
(31,515
)
 
$
2,274,982

Cost of sales, including purchasing and warehousing costs

 
1,220,367

 
79,203

 
(31,515
)
 
1,268,055

Gross profit

 
970,455

 
36,472

 

 
1,006,927

Selling, general and administrative expenses
4,631

 
837,047

 
22,812

 
(11,804
)
 
852,686

Operating (loss) income
(4,631
)
 
133,408

 
13,660

 
11,804

 
154,241

Other, net:
 
 
 
 
 
 
 
 
 
Interest expense
(12,059
)
 
(1,018
)
 
1

 

 
(13,076
)
Other income (expense), net
16,759

 
(564
)
 
1,364

 
(11,804
)
 
5,755

Total other, net
4,700

 
(1,582
)
 
1,365

 
(11,804
)
 
(7,321
)
Income before provision for income taxes
69

 
131,826

 
15,025

 

 
146,920

Provision for income taxes
229

 
27,624

 
3,224

 

 
31,077

(Loss) income before equity in earnings of subsidiaries
(160
)
 
104,202

 
11,801

 

 
115,843

Equity in earnings of subsidiaries
116,003

 
11,801

 

 
(127,804
)
 

Net income
$
115,843

 
$
116,003

 
$
11,801

 
$
(127,804
)
 
$
115,843


Condensed Consolidating Statement of Operations
For the Twelve Weeks ended October 7, 2017
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
2,098,475

 
$
122,495

 
$
(38,737
)
 
$
2,182,233

Cost of sales, including purchasing and warehousing costs

 
1,185,654

 
87,608

 
(38,737
)
 
1,234,525

Gross profit

 
912,821

 
34,887

 

 
947,708

Selling, general and administrative expenses
5,806

 
777,201

 
19,751

 
(11,619
)
 
791,139

Operating (loss) income
(5,806
)
 
135,620

 
15,136

 
11,619

 
156,569

Other, net:
 
 
 
 
 
 
 
 
 
Interest (expense) income
(11,874
)
 
(1,401
)
 
(39
)
 

 
(13,314
)
Other income (expense), net
17,832

 
(4,665
)
 
(803
)
 
(11,619
)
 
745

Total other, net
5,958

 
(6,066
)
 
(842
)
 
(11,619
)
 
(12,569
)
Income before provision for income taxes
152

 
129,554

 
14,294

 

 
144,000

(Benefit) provision for income taxes
(136
)
 
45,626

 
2,514

 

 
48,004

Income before equity in earnings of subsidiaries
288

 
83,928

 
11,780

 

 
95,996

Equity in earnings of subsidiaries
95,708

 
11,781

 

 
(107,489
)
 

Net income
$
95,996

 
$
95,709

 
$
11,780

 
$
(107,489
)
 
$
95,996




12

Table of Contents

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



Condensed Consolidating Statement of Operations
For the Forty Weeks Ended October 6, 2018
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
7,197,953

 
$
405,864

 
$
(128,335
)
 
$
7,475,482

Cost of sales, including purchasing and warehousing costs

 
4,035,319

 
277,729

 
(128,335
)
 
4,184,713

Gross profit

 
3,162,634

 
128,135

 

 
3,290,769

Selling, general and administrative expenses
14,290

 
2,719,172

 
76,634

 
(39,349
)
 
2,770,747

Operating (loss) income
(14,290
)
 
443,462

 
51,501

 
39,349

 
520,022

Other, net:
 
 
 
 
 
 
 
 
 
Interest expense
(40,194
)
 
(3,419
)
 

 

 
(43,613
)
Other income (expense), net
55,007

 
(4,766
)
 
(1,894
)
 
(39,349
)
 
8,998

Total other, net
14,813

 
(8,185
)
 
(1,894
)
 
(39,349
)
 
(34,615
)
Income before provision for income taxes
523

 
435,277

 
49,607

 

 
485,407

Provision for income taxes
1,287

 
103,589

 
10,126

 

 
115,002

(Loss) income before equity in earnings of subsidiaries
(764
)
 
331,688

 
39,481

 

 
370,405

Equity in earnings of subsidiaries
371,169

 
39,481

 

 
(410,650
)
 

Net income
$
370,405

 
$
371,169

 
$
39,481

 
$
(410,650
)
 
$
370,405


Condensed Consolidating Statement of Operations
For the Forty Weeks Ended October 7, 2017
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
7,075,603

 
$
432,790

 
$
(171,595
)
 
$
7,336,798

Cost of sales, including purchasing and warehousing costs

 
3,987,575

 
309,338

 
(171,595
)
 
4,125,318

Gross profit

 
3,088,028

 
123,452

 

 
3,211,480

Selling, general and administrative expenses
25,973

 
2,678,822

 
63,017

 
(39,392
)
 
2,728,420

Operating (loss) income
(25,973
)
 
409,206

 
60,435

 
39,392

 
483,060

Other, net:
 
 
 
 
 
 
 
 
 
Interest (expense) income
(40,240
)
 
(5,424
)
 
(1
)
 

 
(45,665
)
Other income (expense), net
67,183

 
(17,430
)
 
(1,634
)
 
(39,392
)
 
8,727

Total other, net
26,943

 
(22,854
)
 
(1,635
)
 
(39,392
)
 
(36,938
)
Income before provision for income taxes
970

 
386,352

 
58,800

 

 
446,122

(Benefit) provision for income taxes
(1,752
)
 
145,923

 
10,946

 

 
155,117

Income before equity in earnings of subsidiaries
2,722

 
240,429

 
47,854

 

 
291,005

Equity in earnings of subsidiaries
288,283

 
47,855

 

 
(336,138
)
 

Net income
$
291,005

 
$
288,284

 
$
47,854

 
$
(336,138
)
 
$
291,005


13

Table of Contents

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



Condensed Consolidating Statement of Comprehensive Income
For the Twelve Weeks ended October 6, 2018

(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net income
$
115,843

 
$
116,003

 
$
11,801

 
$
(127,804
)
 
$
115,843

Other comprehensive income
3,831

 
3,831

 
3,900

 
(7,731
)
 
3,831

Comprehensive income
$
119,674

 
$
119,834

 
$
15,701

 
$
(135,535
)
 
$
119,674



Condensed Consolidating Statement of Comprehensive Income
For the Twelve Weeks ended October 7, 2017
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net income
$
95,996

 
$
95,709

 
$
11,780

 
$
(107,489
)
 
$
95,996

Other comprehensive income
2,162

 
2,162

 
2,225

 
(4,387
)
 
2,162

Comprehensive income
$
98,158

 
$
97,871

 
$
14,005

 
$
(111,876
)
 
$
98,158



Condensed Consolidating Statement of Comprehensive Income
For the Forty Weeks Ended October 6, 2018
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net income
$
370,405

 
$
371,169

 
$
39,481

 
$
(410,650
)
 
$
370,405

Other comprehensive loss
(7,129
)
 
(7,129
)
 
(6,902
)
 
14,031

 
(7,129
)
Comprehensive income
$
363,276

 
$
364,040

 
$
32,579

 
$
(396,619
)

$
363,276



Condensed Consolidating Statement of Comprehensive Income
For the Forty Weeks Ended October 7, 2017
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net income
$
291,005

 
$
288,284

 
$
47,854

 
$
(336,138
)
 
$
291,005

Other comprehensive income
15,198

 
15,198

 
15,409

 
(30,607
)
 
15,198

Comprehensive income
$
306,203

 
$
303,482

 
$
63,263

 
$
(366,745
)
 
$
306,203




14

Table of Contents

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



Condensed Consolidating Statement of Cash Flows
For the Forty Weeks Ended October 6, 2018
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net cash provided by operating activities
$

 
$
656,847

 
$
24,656

 
$

 
$
681,503

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property and equipment

 
(104,065
)
 
(1,067
)
 

 
(105,132
)
Proceeds from sales of property and equipment

 
1,406

 
44

 

 
1,450

Net cash used in investing activities

 
(102,659
)
 
(1,023
)
 

 
(103,682
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Decrease in bank overdrafts

 
(8,513
)
 
(3,460
)
 

 
(11,973
)
Dividends paid

 
(17,819
)
 

 

 
(17,819
)
Proceeds from the issuance of common stock

 
2,290

 

 

 
2,290

Tax withholdings related to the exercise of stock appreciation rights

 
(490
)
 

 

 
(490
)
Repurchase of common stock

 
(126,482
)
 

 

 
(126,482
)
Other, net
(23
)
 
814

 

 
23

 
814

Net cash used in financing activities
(23
)
 
(150,200
)
 
(3,460
)
 
23

 
(153,660
)
Effect of exchange rate changes on cash

 

 
(1,092
)
 

 
(1,092
)
Net (decrease) increase in cash and cash equivalents
(23
)
 
403,988

 
19,081

 
23

 
423,069

Cash and cash equivalents, beginning of period
23

 
482,620

 
64,317

 
(23
)
 
546,937

Cash and cash equivalents, end of period
$

 
$
886,608

 
$
83,398

 
$

 
$
970,006



15

Table of Contents

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



Condensed Consolidating Statement of Cash Flows
For the Forty Weeks Ended October 7, 2017
(In thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net cash provided by (used in) operating activities
$

 
$
406,032

 
$
(5,027
)
 
$

 
$
401,005

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property and equipment

 
(159,769
)
 
(1,191
)
 

 
(160,960
)
Proceeds from sales of property and equipment

 
6,108

 
12

 

 
6,120

Other, net

 
480

 
(460
)
 

 
20

Net cash used in investing activities

 
(153,181
)
 
(1,639
)
 

 
(154,820
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Increase in bank overdrafts

 
7,374

 
(2,698
)
 

 
4,676

Borrowings under credit facilities

 
534,400

 

 

 
534,400

Payments on credit facilities

 
(534,400
)
 

 

 
(534,400
)
Dividends paid

 
(17,828
)
 

 

 
(17,828
)
Proceeds from the issuance of common stock

 
3,142

 

 

 
3,142

Tax withholdings related to the exercise of stock appreciation rights

 
(6,414
)
 

 

 
(6,414
)
Repurchase of common stock

 
(3,380
)
 

 

 
(3,380
)
Other, net
1

 
(2,095
)
 

 
(1
)
 
(2,095
)
Net cash provided by (used in) financing activities
1

 
(19,201
)
 
(2,698
)
 
(1
)
 
(21,899
)
Effect of exchange rate changes on cash

 

 
3,838

 
(1
)
 
3,838

Net increase (decrease) in cash and cash equivalents
1

 
233,650

 
(5,526
)
 
(1
)
 
228,124

Cash and cash equivalents, beginning of period
22

 
78,543

 
56,635

 
(22
)
 
135,178

Cash and cash equivalents, end of period
$
23

 
$
312,193

 
$
51,109

 
$
(23
)
 
$
363,302



16

Table of Contents

ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 30, 2017 (filed with the Securities and Exchange Commission (“SEC”) on February 21, 2018), which we refer to as our 2017 Form 10-K, and our unaudited condensed consolidated financial statements and the notes to those statements that appear elsewhere in this report.

Certain statements in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements are usually identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “plan,” “position,” “possible,” “potential,” “probable,” “project,” “projection,” “should,” “strategy,” “will,” or similar expressions. These statements are based upon assessments and assumptions of management in light of historical results and trends, current conditions and potential future developments that often involve judgment, estimates, assumptions and projections. Forward-looking statements reflect current views about our plans, strategies and prospects, which are based on information currently available as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, in evaluating forward-looking statements, you should consider these risks and uncertainties, together with the important risks, uncertainties and contingencies described in our 2017 Form 10-K and other documents filed with the SEC, and you should not place undue reliance on those statements.

Management Overview

Net sales increased 4.3% in the third quarter of 2018, primarily driven by an increase in comparable store sales. We experienced improvement across all regions with stronger sales growth in our Southeast, Midwest, Appalachia, Northeast and Mid-Atlantic regions, as well as increased sales in several product categories.

Our gross margin expansion for the twelve weeks ended October 6, 2018 was primarily driven by our sales product mix, an improvement in inventory management related to a more disciplined approach to sourcing and utilizing inventory on hand and continued material cost optimization efforts. This improvement in margin was partially offset by increased supply chain costs due to higher fuel prices, as well as distribution center costs related to the new locations opened in the second half of 2017.

We generated diluted earnings per share (“diluted EPS”) of $1.56 during our third quarter of 2018 compared to $1.30 for the comparable period of 2017. When adjusted for the following non-operational items, our adjusted diluted earnings per share (“Adjusted EPS”) for the twelve weeks ended October 6, 2018 and October 7, 2017 were $1.89 and $1.43.
 
Twelve Weeks Ended
 
Forty Weeks Ended
 
October 6, 2018
 
October 7, 2017
 
October 6, 2018
 
October 7, 2017
GPI integration and store consolidation costs
$
0.02

 
$
0.02

 
$
0.05

 
$
0.20

GPI amortization of acquired intangible assets
$
0.09

 
$
0.08

 
$
0.30

 
$
0.26

Transformation expenses
$
0.30

 
$
0.03

 
$
0.70

 
$
0.28

Other income adjustment
$

 
$

 
$

 
$
(0.07
)
Impact of the U.S. Tax Cuts and Jobs Act
$
(0.08
)

$


$
(0.08
)

$


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


17

Table of Contents

Summary of Third Quarter Financial Results

A high-level summary of our financial results for the third quarter of 2018 includes:
 
Net sales during the third quarter of 2018 were $2.3 billion, an increase of 4.3% as compared to the third quarter of 2017, which is primarily driven by an increase in comparable store sales of 4.6%.
Operating income for the third quarter of 2018 was $154.2 million, a decrease of $2.3 million as compared to the third quarter of 2017. As a percentage of total sales, operating income was 6.8%, a decrease of 39 basis points as compared to the third quarter of 2017, which is due higher bonus and an increase in medical expenses, partially offset by lower insurance costs.
We generated operating cash flow of $681.5 million for the forty weeks ended October 6, 2018, an increase of 69.9% as compared to the same period in 2017, primarily due to a focus on managing working capital and an increase in net income.

Refer to “Results of Operations” and “Liquidity and Capital Resources” for further details of our income statement and cash flow results.

Business Update

We continue to make progress on the various elements of our strategic business plan, which is focused on improving the customer experience and driving consistent execution for both professional installers (“Professional”) and “do-it-yourself” (“DIY”) customers. To achieve these improvements, we have undertaken planned transformation actions to help build a foundation for long-term success across the entire company. These transformation actions include:

Continuous improvement of our common catalog across our Professional and DIY businesses - Advance, Carquest (“CQ”), Worldpac (“WP”) and Autopart International (“AI”) that was completed in the first half of 2018.
Development of a demand-based assortment, leveraging purchase history and look-ups from the common catalog, versus our existing push-down supply approach. This technology is a first step in moving from a supply-driven to a demand-driven assortment.
Progression in the early development of a more efficient end-to-end supply chain to deliver our broad assortment.
Continued movement towards optimizing our footprint by focusing on evaluating all of our assets by market to drive share, repurposing of our in-market store and asset base and optimizing our distribution centers.
Creation of new Professional omni-channel capabilities to reach our customers in the manner that is most desirable for them, including the launch of MyAdvance.com, an interactive, easy-to-use, mobile-friendly platform where we have combined multiple online tools and capabilities into one place.
Entered into strategic partnership with Walmart.com that will allow us to reach a much broader group of DIY customers and help drive our DIY market share growth.
Continued focus on Worldpac branch openings in 2018 to drive Professional growth while investing in online and digital to drive DIY improvements.

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. During the forty weeks ended October 6, 2018, there were no changes to the factors discussed in our 2017 Form 10-K. For a complete discussion of these factors, refer to the 2017 Form 10-K.

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 6, 2018, 18 stores and branches were opened and 81 were closed or consolidated, resulting in a total of 5,120 stores and branches as of October 6, 2018, compared to a total of 5,183 stores and branches as of December 30, 2017.


18

Table of Contents

Results of Operations

The following table sets forth certain of our operating data expressed as a percentage of net sales for the periods indicated:
 
 
Twelve Weeks Ended
 
$ Increase/(Decrease)
 
Basis Points
(in millions)
 
October 6, 2018
 
October 7, 2017
 
 
Net sales
 
$
2,275.0

 
100.0
 %
 
$
2,182.2

 
100.0
 %
 
$
92.8

 

Cost of sales
 
1,268.1

 
55.7

 
1,234.5

 
56.6

 
33.6

 
(83
)
Gross profit
 
1,006.9

 
44.3

 
947.7

 
43.4

 
59.2

 
83

Selling, general and administrative expenses
 
852.7

 
37.5

 
791.1

 
36.3

 
61.6

 
(123
)
Operating income
 
154.2

 
6.8

 
156.6

 
7.2

 
(2.4
)
 
(39
)
Interest expense
 
(13.1
)
 
(0.6
)
 
(13.3
)
 
(0.6
)
 
0.2

 

Other income, net
 
5.8

 
0.3

 
0.7

 
0.0

 
5.1

 
30

Provision for income taxes
 
31.1

 
1.4

 
48.0

 
2.2

 
(16.9
)
 
(80
)
Net income
 
$
115.8

 
5.1
 %
 
$
96.0

 
4.4
 %
 
$
19.8

 
70

Note: Table amounts may not foot due to rounding.
 
 
Forty Weeks Ended
 
$ Increase/(Decrease)
 
Basis Points
(in millions)
 
October 6, 2018
 
October 7, 2017
 
 
Net sales
 
$
7,475.5

 
100.0
 %
 
$
7,336.8

 
100.0
 %
 
$
138.7

 

Cost of sales
 
4,184.7

 
56.0

 
4,125.3

 
56.2

 
59.4

 
(25
)
Gross profit
 
3,290.8

 
44.0

 
3,211.5

 
43.8

 
79.3

 
25

Selling, general and administrative expenses
 
2,770.7

 
37.1

 
2,728.4

 
37.2

 
42.3

 
12

Operating income
 
520.0

 
7.0

 
483.1

 
6.6

 
37.0

 
37

Interest expense
 
(43.6
)
 
(0.6
)
 
(45.7
)
 
(0.6
)
 
2.1

 
4

Other income, net
 
9.0

 
0.1

 
8.7

 
0.1

 
0.3

 
0

Provision for income taxes
 
115.0

 
1.5

 
155.1

 
2.1

 
(40.1
)
 
(58
)
Net income
 
$
370.4

 
5.0
 %
 
$
291.0

 
4.0
 %
 
$
79.4

 
99

Note: Table amounts may not foot due to rounding.

Net Sales

Sales increased 4.3% during the third quarter of 2018 compared to the same period of 2017 driven by an increase in comparable store sales of 4.6% for the quarter as a result of an increase in units per transaction and average ticket value. In addition, we delivered growth across both our DIY omni-channel and Professional businesses.

For the forty weeks ended October 6, 2018, comparable stores sales increased 2.0% driven by the factors discussed above and the strong performance of certain product categories as customers invested in repairs as a result of harsh winter weather.

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.

19

Table of Contents


Gross Profit

The increase in the gross profit rate for the twelve and forty weeks ended October 6, 2018 was driven by increased Net sales by the factors previously discussed, an improvement in inventory management related to a more disciplined approach to sourcing and utilizing inventory on hand and continued material cost optimization efforts. This improvement in margin was partially offset by increased supply chain costs due to higher fuel prices, as well as distribution center costs related to the new locations opened in the second half of 2017.

Selling, general and administrative expenses (“SG&A”)

The increase in SG&A for the twelve weeks ended October 6, 2018 was primarily driven by higher bonus and medical expenses, partially offset by lower insurance claims resulting from an increased focus on vehicle and employee safety. The increase in SG&A for the forty weeks ended October 6, 2018 was driven by similar factors.

Income Taxes

Our effective income tax rate was 21.2% and 33.3% for the twelve weeks ended October 6, 2018 and October 7, 2017 and our effective income tax rate was 23.7% and 34.8% for the forty weeks ended October 6, 2018 and October 7, 2017. The decrease in the effective tax rate for both twelve and forty weeks ended October 6, 2018 was primarily related to the reduction of the federal tax rate from 35% to 21% due to the enactment of the U.S. Tax Cuts and Jobs Act (the “Act”) in December 2017, which favorably impacted our Net income for the twelve and forty weeks ended October 6, 2018 by $20.6 million or $0.27 per diluted share and $68.0 million or $0.92 per diluted share. During the third quarter of 2018, and in conjunction with the completion of our 2017 U.S. income tax return, we identified certain adjustments to amounts previously recorded for the remeasurement of the net deferred tax liability and nonrecurring repatriation tax on accumulated earnings of foreign subsidiaries that resulted in a net tax benefit of $5.7 million. Our analysis under Staff Accounting Bulletin No. 118 is complete.


20

Table of Contents

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 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) non-operational expenses associated with the integration of General Parts International, Inc. (“GPI”) and store closure and consolidation costs; (2) non-cash charges related to the acquired GPI intangibles; and (3) transformation expenses under our strategic business plan; and (4) nonrecurring impact of the Act, is 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 the integration of GPI and 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 that 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.

GPI Integration Expenses—We acquired GPI for $2.08 billion in 2014 and are in the midst of a multi-year plan to integrate the operations of GPI with Advance. This includes the integration of product brands and assortments, supply chain and information technology. The integration is being completed in phases and the nature and timing of expenses will vary from quarter to quarter over several years. The integration of product brands and assortments was primarily completed in 2015. Our focus then shifted to integrating the supply chain and information technology systems. Due to the size of the acquisition, we consider these expenses to be outside of our base business. Therefore, we believe providing additional information in the form of non-GAAP measures that exclude these costs is beneficial to the users of our financial statements in evaluating the operating performance of our base business and our sustainability once the integration is completed.

Store Closure and Consolidation Expenses—Store closure and consolidation expenses consist of expenses associated with our plans to convert and consolidate the Carquest stores acquired from GPI. The conversion and consolidation of the Carquest stores is a multi-year process that began in 2014. As of October 6, 2018, 354 Carquest stores acquired from GPI had been consolidated into existing Advance stores and 423 stores had been converted to the Advance format. While periodic store closures are common, these closures represent a significant program outside of our typical market evaluation process. We believe it is useful to provide additional non-GAAP measures that exclude these costs to provide investors greater comparability of our base business and core operating performance. We also continue to have store closures that occur as part of our normal market evaluation process and have not excluded the expenses associated with these store closures in computing our non-GAAP measures.

Transformation Expenses—We expect to recognize a significant amount of transformation expenses over the next several years as we transition from integration of our Advance/CQ businesses to a plan that involves a more holistic and integrated transformation of the entire Company, including WP and AI. These expenses will include, but are not limited to, restructuring costs, third-party professional services and other significant costs to integrate and streamline our operating structure across the enterprise. We are focused on several areas throughout Advance, such as supply chain and information technology.

U.S. Tax ReformOn December 22, 2017, the Act was signed into law. The Act amends the Internal Revenue Code of 1986 by, among other things, permanently lowering the corporate tax rate to 21% from the existing maximum rate of 35%, implementing a territorial tax system and imposing a one-time repatriation tax on deemed repatriated earnings of foreign subsidiaries. During the third quarter of 2018, and in conjunction with the completion of our 2017 U.S. income tax return, we identified certain adjustments to amounts previously recorded for the remeasurement of the net deferred tax liability and nonrecurring repatriation tax on accumulated earnings foreign subsidiaries.



21

Table of Contents

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 millions, except per share data)
 
October 6, 2018
 
October 7, 2017
 
October 6, 2018
 
October 7, 2017
Net income (GAAP)
 
$
115.8

 
$
96.0

 
$
370.4

 
$
291.0

Cost of sales adjustments:
 
 
 
 
 
 
 
 
Transformation expenses
 
0.5

 

 
5.8

 

SG&A adjustments:
 
 
 
 
 
 
 
 
GPI integration and store consolidation costs
 
1.8

 
3.6

 
4.7

 
23.3

GPI amortization of acquired intangible assets
 
8.8

 
9.1

 
29.3

 
30.5

Transformation expenses
 
28.4

 
3.0

 
63.2

 
35.7

Other income adjustment (1)
 

 

 

 
(8.9
)
Provision for income taxes on adjustments (2)
 
(9.7
)
 
(5.9
)
 
(25.2
)
 
(30.7
)
Impact of the Act
 
(5.7
)
 

 
(5.7
)
 

Adjusted net income (Non-GAAP)
 
$
140.0

 
$
105.7

 
$
442.5

 
$
341.0

 
 
 
 
 
 
 
 
 
Diluted earnings per share (GAAP)
 
$
1.56

 
$
1.30

 
$
4.99

 
$
3.93

Adjustments, net of tax
 
0.33

 
0.13

 
0.97

 
0.67

Adjusted EPS (Non-GAAP)
 
$
1.89

 
$
1.43

 
$
5.96

 
$
4.60


Note: Table amounts may not foot due to rounding.

(1) 
The adjustment to Other income for the forty weeks ended October 7, 2017 relates to income recognized from an indemnification agreement associated with the acquisition of GPI.
(2) 
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 and funding of initiatives under our strategic business plan. In addition, we may use available funds for acquisitions, to repay borrowings under our credit facility, to periodically repurchase shares of our common stock under our stock repurchase programs and for the payment of quarterly cash dividends. Historically, we have funded these 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 primary obligations for the next year.

Share Repurchase Program

Our share repurchase program permits the repurchase of our common stock on the open market or in privately negotiated transactions from time to time. On August 8, 2018, our Board of Directors authorized a $600.0 million share repurchase program. This new authorization replaced the previous $500.0 million share repurchase program which was authorized by our Board of Directors on May 14, 2012. For further information about our share repurchase program, see Note 9, Share Repurchase Program, included in our condensed consolidated financial statements.


22

Table of Contents

Analysis of Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities:
 
Forty Weeks Ended
(in millions)
October 6, 2018
 
October 7, 2017
Cash flows provided by operating activities
$
681.5

 
$
401.0

Cash flows used in investing activities
(103.7
)
 
(154.8
)
Cash flows used in financing activities
(153.7
)
 
(21.9
)
Effect of exchange rate changes on cash
(1.1
)
 
3.8

Net increase in Cash and cash equivalents
$
423.1

 
$
228.1

Note: Table amounts may not foot due to rounding.

Operating Activities

For the forty weeks ended October 6, 2018, net cash provided by operating activities increased by $280.5 million to $681.5 million compared to the comparable period of 2017. The net increase in operating cash flows compared to the prior year was primarily driven by an increase in net income and lower cash outflows resulting from our focus on working capital management.

Investing Activities

For the forty weeks ended October 6, 2018, net cash used in investing activities decreased by $51.1 million to $103.7 million compared to the comparable period of 2017. Cash used in investing activities for the forty weeks ended October 6, 2018 consisted primarily of purchases of property and equipment, which was $55.8 million lower than the comparable period of 2017 primarily driven by lower investments in new stores and the impact of disciplined capital expenditure policies implemented last year.

Our primary capital requirements relate to the funding of our new store developments and investments in our supply chain network and information technology. We lease approximately 84% of our stores. Our future capital requirements will depend in large part on the number and timing of new store developments (leased and owned locations) within a given year and the investments we make in our supply chain network and information technology. In 2018, we anticipate that our capital expenditures related to such investments will be up to $220.0 million, but may vary based on business conditions. During the forty weeks ended October 6, 2018, we opened 8 stores and 10 Worldpac branches compared to 43 stores and 4 branches during the comparable period of last year.

Financing Activities

For the forty weeks ended October 6, 2018, net cash used in financing activities was $153.7 million, an increase of $131.8 million as compared to the forty weeks ended October 7, 2017. This increase was primarily a result of returning cash to shareholders in the form of share repurchases and dividends.

Our Board of Directors has declared a $0.06 per share 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 7, 2018, our Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on January 4, 2019 to all common shareholders of record as of December 21, 2018.


23

Table of Contents

Long-Term Debt

As of October 6, 2018, 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 both stable. The current pricing grid used to determine our borrowing rate under our revolving credit facility 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, it 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.

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 6, 2018, there were no changes to the critical accounting policies discussed in our 2017 Form 10-K. For a complete discussion of our critical accounting policies, refer to the 2017 Form 10-K.

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposure to market risk since December 30, 2017. Refer to Item 7A. Quantitative and Qualitative Disclosures about Market Risk in our 2017 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 may vary over time.

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 6, 2018. 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 (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended October 6, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

24

Table of Contents

PART II.  OTHER INFORMATION
 
ITEM 1.
LEGAL PROCEEDINGS

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 its current and former officers in the United States District Court, District of Delaware. The plaintiff alleges 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.  The case is still in its preliminary stages. We strongly dispute the allegations of the complaint and intend to defend the case vigorously. 


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 6, 2018: 
(in thousands, except per share data)
 
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)
July 15, 2018 to August 11, 2018
 
3,103

 
$
146.30

 

 
$
600,000

August 12, 2018 to September 8, 2018
 
247,844

 
163.62

 
245,025

 
559,899

September 9, 2018 to October 6, 2018
 
474,900

 
168.07

 
474,900

 
480,081

Total
 
725,847

 
$
166.46

 
719,925

 
$
480,081


(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 $0.9 million, or an average price of $152.90 per share, during the twelve weeks ended October 6, 2018.
(2) 
Our share repurchase program authorizing the repurchase of up to $600.0 million in common stock was authorized by our Board of Directors on August 8, 2018 and publicly announced on August 14, 2018.

25

Table of Contents

ITEM 6.
EXHIBITS 
 
 
Incorporated by Reference
Filed
Exhibit No.
Exhibit Description
Form
Exhibit
Filing Date
Herewith
10-Q
3.1
8/14/2018
 
10-Q
3.2
5/22/2018
 
 
 
 
X
 
 
 
X
 
 
 
X
 
 
 
X
101.INS
XBRL Instance Document
 
 
 
X
101.SCH
XBRL Taxonomy Extension Schema Document
 
 
 
X
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
X
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
X
101.LAB
XBRL Taxonomy Extension Labels Linkbase Document
 
 
 
X
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
X




26

Table of Contents

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 13, 2018
 
/s/ Jeffrey W. Shepherd
 
 
Jeffrey W. Shepherd
Executive Vice President, Chief Financial Officer,
Controller and Chief Accounting Officer


S-1