Advance Auto Parts(AAP) - 2023 Q1 - Quarterly Report

Note Regarding Forward-Looking Statements This section highlights that forward-looking statements are subject to risks and uncertainties, with further details in the risk factors - Forward-looking statements are identified by specific language and are subject to risks and uncertainties that could cause actual results to differ materially from projections[12] - Key risks include leadership transition, strategic initiative timing, labor shortages, macroeconomic conditions, industry competition, demand, supply chain complexities, and business transformation challenges[12] - Readers are directed to 'Item 1A. Risk Factors' in the most recent Annual Report on Form 10-K for a comprehensive description of these risks[12] Part I. Financial Information This section presents the company's condensed consolidated financial statements and management's discussion and analysis of financial results Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Advance Auto Parts, Inc. for the sixteen weeks ended April 22, 2023, covering balance sheets, operations, comprehensive income, equity, cash flows, and notes Condensed Consolidated Balance Sheets | Metric | April 22, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total Assets | $12,182,238 | $12,018,482 | | Total Liabilities | $9,546,077 | $9,340,201 | | Total Stockholders' Equity | $2,636,161 | $2,678,281 | | Cash and Cash Equivalents | $226,499 | $269,282 | | Inventories, net | $5,015,973 | $4,915,262 | | Accounts Payable | $3,682,749 | $4,123,462 | | Long-term Debt (excluding current portion) | $1,784,596 | $1,188,283 | Condensed Consolidated Statements of Operations | Metric (Sixteen Weeks Ended) | April 22, 2023 (in thousands) | April 23, 2022 (in thousands) | Change (YoY) | | :----------------------------- | :---------------------------- | :---------------------------- | :----------- | | Net Sales | $3,417,594 | $3,374,210 | +1.3% | | Gross Profit | $1,470,663 | $1,506,520 | -2.4% | | Operating Income | $89,999 | $203,270 | -55.7% | | Net Income | $42,651 | $139,791 | -69.5% | | Basic earnings per common share | $0.72 | $2.28 | -68.4% | | Diluted earnings per common share | $0.72 | $2.26 | -68.1% | Condensed Consolidated Statements of Comprehensive Income | Metric (Sixteen Weeks Ended) | April 22, 2023 (in thousands) | April 23, 2022 (in thousands) | Change (YoY) | | :----------------------------- | :---------------------------- | :---------------------------- | :----------- | | Net Income | $42,651 | $139,791 | -69.5% | | Total Other Comprehensive Income (Loss) | $788 | $(18,438) | N/A | | Comprehensive Income | $43,439 | $121,353 | -64.2% | Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric (Sixteen Weeks Ended April 22, 2023) | Amount (in thousands) | | :------------------------------------------ | :-------------------- | | Balance at December 31, 2022 | $2,678,281 | | Net income | $42,651 | | Total other comprehensive income | $788 | | Share-based compensation | $16,524 | | Repurchases of common stock | $(12,605) | | Cash dividends declared | $(89,578) | | Balance at April 22, 2023 | $2,636,161 | - Cash dividends declared were $1.50 per common share for both the sixteen weeks ended April 22, 2023, and April 23, 2022[21] Condensed Consolidated Statements of Cash Flows | Metric (Sixteen Weeks Ended) | April 22, 2023 (in thousands) | April 23, 2022 (in thousands) | Change (YoY) | | :----------------------------- | :---------------------------- | :---------------------------- | :----------- | | Net cash used in operating activities | $(378,865) | $(54,940) | $(323,925) | | Net cash used in investing activities | $(89,671) | $(114,026) | $24,355 | | Net cash provided by (used in) financing activities | $425,660 | $(273,735) | $699,395 | | Net decrease in cash and cash equivalents | $(42,783) | $(462,695) | $419,912 | | Cash and cash equivalents, end of period | $226,499 | $138,733 | $87,766 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Nature of Operations and Basis of Presentation This note describes the company's business, operational footprint, and the accounting period structure for its financial reporting - Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider in North America, serving both professional installers and 'do-it-yourself' (DIY) customers[24] - As of April 22, 2023, the company operated 4,778 stores and 318 branches, and served 1,315 independently owned Carquest branded stores across various geographic locations[25] - The first quarter of the year consists of sixteen weeks, while the remaining three quarters each have twelve weeks[27] - An out-of-period charge of $17.3 million, related to prior year costs, was included in SG&A expenses for the sixteen weeks ended April 22, 2023, with a related tax benefit of $4.3 million[28] Note 2. Significant Accounting Policies This note outlines the key accounting principles and policies applied in the preparation of the financial statements | Product Group | Percentage of Sales (April 22, 2023) | Percentage of Sales (April 23, 2022) | | :-------------------- | :----------------------------------- | :----------------------------------- | | Parts and Batteries | 66% | 66% | | Accessories and Chemicals | 20% | 20% | | Engine Maintenance | 13% | 13% | | Other | 1% | 1% | - The company adopted ASU 2022-04 (Supplier Finance Programs) in Q1 2023, which did not materially impact its consolidated financial position, results of operations, or cash flows[30] Note 3. Inventories, net This note details the composition and valuation methods for the company's inventory assets - Approximately 92% of inventories are accounted for using the LIFO method[31] - A reduction to Cost of sales of $6.6 million was recorded for the sixteen weeks ended April 22, 2023, due to changes in the LIFO reserve, compared to an $81.5 million increase in the prior year period[31] | Inventory Metric | April 22, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------- | :---------------------------- | :------------------------------- | | Inventories at FIFO | $5,287,977 | $5,193,911 | | Adjustments to state inventories at LIFO | $(272,004) | $(278,649) | | Inventories at LIFO | $5,015,973 | $4,915,262 | Note 4. Intangible Assets This note provides information on the company's intangible assets and related amortization expenses - Amortization expense for definite-lived intangible assets was $9.2 million for the sixteen weeks ended April 22, 2023, compared to $9.5 million in the prior year[