Advance Auto Parts, Inc. (NYSE:AAP) Q1 2022 Earnings Conference Call May 24, 2022 8:00 AM ET Company Participants Elisabeth Eisleben - SVP Communications and IR Tom Greco - President and CEO Jeff Shepherd - EVP and CFO Conference Call Participants Simeon Gutman - Morgan Stanley Christopher Horvers - JPMorgan Michael Lasser - UBS Bret Jordan - Jefferies Michael Montani - Evercore ISI Daniel Imbro - Stephens Operator Welcome to the Advance Auto Parts First Quarter 2022 Conference Call. Before we begin, Elisab ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) Advance Auto Parts reported a slight increase in net sales to $3.37 billion, but a decrease in net income to $139.8 million, with operating cash flow turning negative due to working capital changes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased to $12.00 billion, driven by reduced cash, while total liabilities marginally increased and stockholders' equity declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 23, 2022 | January 1, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $138,733 | $601,428 | | Inventories | $4,778,849 | $4,659,018 | | Total current assets | $6,057,780 | $6,275,476 | | Total assets | $12,002,481 | $12,194,209 | | **Liabilities & Equity** | | | | Accounts payable | $3,942,388 | $3,922,007 | | Long-term debt | $1,187,170 | $1,034,320 | | Total liabilities | $9,092,801 | $9,065,918 | | Total stockholders' equity | $2,909,680 | $3,128,291 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net sales increased 1.3% to $3.37 billion, but operating income and net income decreased to $203.3 million and $139.8 million respectively, leading to lower diluted EPS Statement of Operations Summary (in thousands, except per share data) | Metric | Sixteen Weeks Ended April 23, 2022 | Sixteen Weeks Ended April 24, 2021 | | :--- | :--- | :--- | | Net sales | $3,374,210 | $3,330,370 | | Gross profit | $1,506,520 | $1,484,926 | | Operating income | $203,270 | $252,129 | | Net income | $139,791 | $185,930 | | Diluted EPS | $2.26 | $2.81 | - The company recorded a **$7.4 million loss** on early redemption of senior unsecured notes, absent in the prior year period[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities resulted in a **$54.9 million net cash outflow**, a significant reversal from the prior year, with increased cash usage in investing and financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Sixteen Weeks Ended April 23, 2022 | Sixteen Weeks Ended April 24, 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(54,940) | $329,932 | | Net cash used in investing activities | $(114,026) | $(70,294) | | Net cash used in financing activities | $(273,735) | $(216,689) | | Net (decrease) increase in cash | $(462,695) | $45,241 | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail operations, accounting policies, and financial activities, including store count, LIFO impact, debt issuance, and share repurchases - As of April 23, 2022, the company operated **4,687 stores** and **311 branches** under "Advance Auto Parts" and "Carquest" trade names[21](index=21&type=chunk) - The LIFO method, applied to **90.3% of inventories**, increased Cost of Sales by **$81.5 million** in Q1 2022, compared to $3.1 million in Q1 2021[26](index=26&type=chunk) - Total long-term debt increased to **$1.19 billion** from $1.03 billion, driven by issuing **$350 million** in 3.50% Senior Unsecured Notes due 2032 and redeeming $193.2 million of 4.50% notes due 2023[31](index=31&type=chunk)[34](index=34&type=chunk)[36](index=36&type=chunk) - The company repurchased **1.1 million shares** for **$248.2 million** in Q1 2022, with **$1.3 billion** remaining under the repurchase authorization[48](index=48&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales increased 1.3%, but gross profit margin remained flat, while SG&A expenses rose, leading to decreased GAAP EPS but increased Adjusted EPS, with operating cash flow significantly impacted by working capital [Management Overview and Results of Operations](index=15&type=section&id=Management%20Overview%20and%20Results%20of%20Operations) Net sales grew 1.3% with 0.6% comparable store sales growth, gross profit margin remained flat at 44.6%, and SG&A expenses increased to 38.6% of sales due to inflation, reducing operating income - Net sales increased **1.3%** in Q1 2022, driven by professional and independent businesses, with comparable store sales up **0.6%**[58](index=58&type=chunk)[61](index=61&type=chunk)[66](index=66&type=chunk) - Gross profit margin was flat at **44.6% of Net sales**, with strategic pricing offset by LIFO expense, inflationary costs, and unfavorable product mix[61](index=61&type=chunk)[67](index=67&type=chunk) - SG&A as a percentage of Net sales increased by **161 basis points to 38.6%**, primarily due to inflationary cost increases in store labor, fuel, and delivery, and new store openings[61](index=61&type=chunk)[68](index=68&type=chunk) GAAP vs. Adjusted EPS | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $2.26 | $2.81 | | Adjusted EPS (Non-GAAP) | $3.57 | $3.34 | [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow significantly decreased to a **$54.9 million use of cash** due to working capital changes, while the company issued new senior notes, repurchased shares, and declared a dividend - Cash flow from operating activities decreased by **$384.9 million** to a use of **$54.9 million**, primarily due to increased cash used by Inventories and Receivables, and decreased cash from Accounts Payable[82](index=82&type=chunk) - The company issued **$350.0 million** of 3.50% senior unsecured notes due 2032 and redeemed the remaining **$193.2 million** of its 4.50% notes due 2023[80](index=80&type=chunk)[87](index=87&type=chunk) - During the quarter, **1.1 million shares** were repurchased for **$248.2 million**, with an additional **$1 billion** authorized, leaving **$1.3 billion** available for repurchase[81](index=81&type=chunk) - A regular cash dividend of **$1.50 per share** was declared on May 18, 2022[86](index=86&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No significant changes in market risk exposure have occurred since January 1, 2022, with further details available in the 2021 Form 10-K - There were no significant changes in the company's exposure to market risk since the fiscal year-end of January 1, 2022[91](index=91&type=chunk) [Item 4. Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of April 23, 2022, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that disclosure controls and procedures were effective at a reasonable assurance level as of April 23, 2022[93](index=93&type=chunk) - No material changes occurred to the company's internal control over financial reporting during the quarter ended April 23, 2022[94](index=94&type=chunk) [PART II. OTHER INFORMATION](index=23&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=23&type=section&id=Item%201.%20Legal%20Proceedings) A **$49.3 million class action settlement**, fully covered by insurance, received preliminary court approval and awaits finalization - A settlement agreement for **$49.3 million** in a class action lawsuit will be fully covered by the company's insurance carriers[96](index=96&type=chunk) - The settlement received preliminary court approval on January 11, 2022, and remains subject to final court approval[96](index=96&type=chunk) [Item 1A. Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) No new risk factors were identified, with a comprehensive discussion of potential business risks available in the 2021 Form 10-K - The company refers to "Item 1A. Risk Factors" in its 2021 Form 10-K for a description of risks that could materially adversely affect its business[97](index=97&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **1.16 million shares** for an average of **$229.37 per share** during the quarter, with an additional **$1 billion** authorized for the repurchase program Share Repurchases for the Quarter Ended April 23, 2022 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2 - Jan 29, 2022 | 646,647 | $235.05 | | Jan 30 - Feb 26, 2022 | 430,251 | $225.67 | | Feb 27 - Mar 26, 2022 | 77,970 | $203.17 | | Mar 27 - Apr 23, 2022 | 1,365 | $202.68 | | **Total** | **1,156,233** | **$229.37** | - On February 8, 2022, the Board of Directors authorized an additional **$1 billion** for the share repurchase program[99](index=99&type=chunk) [Item 6. Exhibits](index=24&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including debt agreements, stock award forms, and officer certifications - Exhibits filed include the Ninth Supplemental Indenture for the 3.500% Notes due 2032, various employee stock award agreements, and CEO and CFO certifications[101](index=101&type=chunk)

Advance Auto Parts, Inc. (NYSE:AAP) Q4 2021 Earnings Conference Call February 15, 2022 8:00 AM ET Company Participants Elisabeth Eisleben - SVP Communications and IR Tom Greco - President and CEO Jeff Shepherd - EVP and CFO Conference Call Participants Chris Horvers - JPMorgan Michael Lasser - UBS Liz Suzuki - Bank of America Merrill Lynch Seth Basham - Wedbush Greg Melich - Evercore ISI Scot Ciccarelli - Truist Securities Simeon Gutman - Morgan Stanley Michael Baker - D.A. Davidson Kate McShane - Goldman ...

Advance Auto Parts, Inc. (NYSE:AAP) Q3 2021 Earnings Conference Call November 16, 2021 8:00 AM ET Company Participants Elisabeth Eisleben – Senior Vice President Communications and Investor Relations Tom Greco – President and Chief Executive Officer Jeff Shepherd – Executive Vice President and Chief Financial Officer Conference Call Participants Michael Lasser – UBS Mitch Ingles – Raymond James Unidentified Analyst – JPMorgan Jackie Sussman – Morgan Stanley Zachary Fadem – Wells Fargo Bret Jordan – Jefferie ...

Table of Contents 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. (NYSE:AAP) Q2 2021 Earnings Conference Call August 24, 2021 8:00 AM ET Company Participants Tom Greco – President and CEO Elisabeth Eisleben – Senior Vice President Communications and Investor Relations Jeff Shepherd – Executive Vice President and CFO Conference Call Participants Simeon Gutman – Morgan Stanley Christopher Horvers – JP Morgan Jason Hobbs – Bank of America Steven Sycuan – Citigroup Kate McShane – Goldman Sachs Bret Jordan – Jefferies Daniel Imbro – Stephens Michael Mo ...

Advance Auto Parts, Inc. (NYSE:AAP) Q1 2021 Results Earnings Conference Call June 2, 2021 8:00 AM ET Company Participants Elisabeth Eisleben - Senior Vice President, Communications and Investor Relations Tom Greco - President and Chief Executive Officer Jeff Shepherd - Executive Vice President and Chief Financial Officer Conference Call Participants Christopher Horvers - JPMorgan Michael Lasser - UBS Simeon Gutman - Morgan Stanley Kate McShane - Goldman Sachs Greg Melich - Evercore ISI Bret Jordan - Jefferi ...

Growth Strategy - The company is focusing on increasing sales to both Professional and DIY customers as part of its growth strategy[26] - Significant investments are being made to implement strategic initiatives aimed at expanding margins and increasing return on invested capital[26] - The company plans to continue expanding its market presence through new store openings and online business growth[26] - Future acquisitions and strategic partnerships are part of the growth strategy, but they carry integration risks that could affect profitability[28] Omnichannel and E-commerce - Omnichannel growth is a priority, with investments in e-commerce and customer experience enhancements[28] Operational Efficiency - Supply chain efficiency is critical for business expansion, with ongoing efforts to optimize inventory management[30] - The company is implementing a new enterprise resource planning (ERP) system, which requires substantial investment and may face delays[30] Human Resources - Attracting and retaining qualified personnel is essential for operational success, with competitive labor market conditions posing challenges[35] Legal and Regulatory Risks - The company is subject to various legal and regulatory risks, which could result in significant costs and impact financial performance[36] - The company faces increased costs and operational challenges due to compliance with stricter data privacy laws, such as the California Consumer Privacy Act[38] Market and Economic Risks - Geopolitical changes and trade regulations may adversely affect the cost and availability of inventory sourced outside the United States, impacting sales and profitability[48] - The company’s financial condition may be adversely affected by economic volatility, including inflation and changes in consumer spending behavior[48] - Competition in the automotive aftermarket industry is intense, with pressures on pricing and product availability impacting revenue and profitability[45] Cybersecurity and Technology Risks - The company has not experienced a material cyber-security breach to date, but acknowledges ongoing risks and potential operational impacts from future breaches[38] - The company relies heavily on its computer systems and those of its partners, with potential interruptions posing risks to transaction processing and inventory management[40] Infrastructure - The company has 51 distribution centers across 32 U.S. states and 4 Canadian provinces, totaling 7,304 thousand square feet, with 4,401 thousand square feet owned[54] - The company operates 4,809 stores and branches in 49 U.S. states and 2 U.S. territories, along with 167 stores in 9 Canadian provinces, covering 34,755 thousand square feet, with 6,307 thousand square feet owned[54] Financial Position - The company had no borrowings outstanding under its revolving credit facility as of January 2, 2021, and December 28, 2019[103] - The company is subject to interest rate risk based on adjusted LIBOR or an alternate base rate for its revolving credit facility[103] - The company's level of indebtedness could restrict operations and limit flexibility in financing and capital expenditures[52] - Deteriorating credit markets could adversely affect the company's access to financing and increase interest expenses[52] - The company's share repurchase program and dividend payments may fluctuate based on cash flow priorities, operational spending, and capital expenditures[52] - The company has a large customer base, which limits concentration of credit risk and has historically not experienced significant credit losses[103] - Foreign currency transactions did not significantly impact net income during 2020, 2019, and 2018[103] Disruptions and Challenges - The company experienced significant operational disruptions due to the COVID-19 pandemic, impacting demand for products and availability of labor[42] - The company is vulnerable to fluctuations in crude oil prices, which could increase operational costs and negatively impact customer disposable income[38] - The company’s sales and profit margins may be negatively affected if imported goods become difficult to obtain due to business interruptions[38] - The company’s ability to meet customer expectations may be compromised by factors beyond its control, including natural disasters and pandemics[48] Litigation Risks - The company may face securities class action litigation due to stock price volatility, which could divert resources and impact business operations[49]