# Advance Auto Parts Inc: Form 10-Q for the period ended Oct 4, 2025

- Company: [Advance Auto Parts Inc](/companies/aap.md) (CIK 1158449)
- Form: 10-Q
- Filed: 2025-10-30
- Accepted by EDGAR: Oct 30, 2025, 16:03 ET
- Period: 2025-10-04
- Accession: 0001628280-25-047523
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1158449/000162828025047523/aap-20251004.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1158449/000162828025047523/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-10-04.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-07-13 to 2025-10-04 | $2.04bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-12-29 to 2025-10-04 | $6.63bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-07-13 to 2025-10-04 | $1.16bn | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-12-29 to 2025-10-04 | $3.76bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2025-07-13 to 2025-10-04 | $881.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-12-29 to 2025-10-04 | $2.86bn | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2025-07-13 to 2025-10-04 | $826.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-12-29 to 2025-10-04 | $2.77bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2025-07-13 to 2025-10-04 | $22.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-12-29 to 2025-10-04 | −$87.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-07-13 to 2025-10-04 | −$1.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-12-29 to 2025-10-04 | −$150.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-07-13 to 2025-10-04 | −$1.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-12-29 to 2025-10-04 | $38.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-07-13 to 2025-10-04 | −$0.02 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-12-29 to 2025-10-04 | $0.63 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-07-13 to 2025-10-04 | −$0.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-12-29 to 2025-10-04 | $0.63 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-07-13 to 2025-10-04 | 60,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-12-29 to 2025-10-04 | 60,500,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-12-29 to 2025-10-04 | −$118.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-12-29 to 2025-10-04 | $159.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-12-29 to 2025-10-04 | $45.0m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2024-12-29 to 2025-10-04 | $4.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-10-04 | $3.17bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-10-04 | $7.52bn | us-gaap:AssetsCurrent |
| Total assets | at 2025-10-04 | $12.06bn | us-gaap:Assets |
| Current liabilities | at 2025-10-04 | $4.35bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-10-04 | $9.86bn | us-gaap:Liabilities |
| Long-term debt | at 2025-10-04 | $3.41bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2025-10-04 | $0 | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2025-10-04 | $2.19bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 43,251 characters.

*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 the Company’s Annual Report on Form 10-K for the year ended December 28, 2024 (filed with the SEC on February 26, 2025) which the Company refers to as the “2024 Form 10-K”), and the Company’s unaudited condensed consolidated financial statements and the notes to those statements that appear elsewhere in this report. The results of operations for the interim periods are not necessarily indicative of the operating results to be expected for the full year. Consistent with the previous fiscal year, the Company’s first quarter of the year contained sixteen weeks. The Company’s remaining quarters each consist of twelve weeks, with the exception of the fourth quarter of fiscal 2025 which consists of thirteen weeks.*

### Third Quarter Fiscal 2025 Management Overview

The Company’s financial results from continuing operations for the third quarter of 2025 includes:

- Net sales during the third quarter of fiscal 2025 were $2.0 billion, a decrease of 5.2% compared with the third quarter of fiscal 2024. Comparable store sales increased by 3.0%.
- Gross profit margin for the third quarter of 2025 was 43.3% of net sales, an increase of 100 basis points compared with the third quarter of fiscal 2024. Gross profit margin for the third quarter of 2025 was unfavorably impacted by a non-cash charge of $28 million reflecting expected future credit losses on vendor receivables due from a vendor that filed for Chapter 11 bankruptcy protection in the third quarter of 2025.
- Selling, general and administrative expenses, exclusive of restructuring and related expenses for the third quarter of fiscal 2025 were 40.6% of net sales, a decrease of (110) basis points compared with the third quarter of fiscal 2024.
- The Company generated a diluted loss per share of $0.02 during the third quarter of fiscal 2025, compared with a diluted loss per share of $0.42 for the comparable period of 2024.

### Business and Risks Update

The Company continues to make progress on the various elements of its business plan, which is focused on improving the customer experience, margin expansion, and driving consistent execution for both professional and DIY customers. In the first quarter of fiscal 2025, the Company completed all store location closures under the 2024 Restructuring Plan designed to improve the Company’s profitability and growth potential, and streamline its operations. For further information related to restructuring and related activities, see Note 3. Restructuring of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.

In the third quarter of fiscal 2025, one of the Company’s vendors, a leading auto parts supplier for the automotive aftermarket industry, filed voluntary petitions for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the Southern District of Texas. The vendor has secured short-term financing through a debtor-in-possession (“DIP”) loan, however, Chapter 11 proceedings carry inherent risks with respect to a company’s ability to continue operations and maintain adequate liquidity to satisfy current and future obligations. As a result of these events, the Company recorded a non-cash charge of $28 million to cost of sales in the third quarter of fiscal 2025, within the condensed consolidated statement of operations, reflecting estimated future credit losses on certain vendor receivables due from the vendor. The estimate was developed utilizing a probability weighted cash-flow model adjusted for risks associated with credit risk deterioration for companies that enter Chapter 11 bankruptcy proceedings. The Company currently continues to source products from the vendor, but is not a material supplier of the Company.

In August 2025, the Company completed various financing-related transactions, including the issuance of $1.95 billion in Senior Unsecured Notes with net proceeds of $1.6 billion, after giving effect to the redemption of the Company’s 5.90% Senior Notes due March 9, 2026 with the proceeds and direct transaction and closing costs. The Company also terminated its existing 2021 Credit Agreement which has been replaced by a new asset-based loan revolving credit facility (the “ABL Facility”). For further information related to these financing-related transactions, see Note 6. Long-term Debt and Fair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 and Part I, Item 2, “Liquidity and Capital Resources” of this Quarterly Report.

During fiscal 2025, new global trade tariffs were announced on imports to the U.S., including additional tariffs on various countries from which the Company directly or indirectly imports and/or sources merchandise, including Canada, China and Mexico, among others. Since the initial announcement in the first quarter of fiscal 2025, various modifications and delays to the U.S. tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures. In response to the tariffs, certain of our suppliers have increased prices. However, the impact of such increases to-date has not been material to the Company’s business, financial condition and results of operations. The ultimate impact of tariffs on the Company’s business remains uncertain. See Part II, Item 1A, “Risk Factors” of this Quarterly Report.

### Industry Update

Operating within the automotive aftermarket industry, the Company is influenced by a number of general macroeconomic factors, many of which are similar to those affecting the overall retail industry. In addition to the “*Business and Risk Update”* section included within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, these factors include, but are not limited to:

- Significant changes in U.S trade policies, including the recently enacted and/or proposed new global trade tariffs
- Inflationary pressures, including logistics and labor
- Global supply chain disruptions
- Cost of fuel
- Changes in the number of miles driven
- Unemployment rates
- Interest rates
- Consumer confidence and purchasing power
- Competition
- Changes in new car sales
- Economic and geopolitical uncertainty
- Foreign currency exchange volatility

While these factors tend to fluctuate, the Company remains confident in the long-term growth prospects for the automotive parts industry.

### Stores

The key factors used in selecting sites and market locations in which the Company operates 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 4, 2025, 26 stores were opened and 517 were closed, resulting in a total of 4,297 stores as of the end of the third fiscal quarter compared with a total of 4,788 stores as of December 28, 2024. The significant reduction in stores during fiscal 2025 relates to actions taken under the Company’s restructuring and related activities. See Note 3. Restructuring, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.

### Results of Operations

*($ in millions)*

|  | Twelve Weeks Ended October 4, 2025 |  | October 5, 2024 |  | Change(1) | Basis Points |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $2,036 | 100.0% | $2,148 | 100.0% | $(112) | — |
| Cost of sales | 1,155 | 56.7 | 1,240 | 57.7 | 85 | (100) |
| Gross profit | 881 | 43.3 | 908 | 42.3 | (27) | 100 |
| Selling, general and administrative expenses, exclusive of restructuring and related expenses | 826 | 40.6 | 895 | 41.7 | 69 | (110) |
| Restructuring and related expenses | 33 | 1.6 | 13 | 0.6 | (20) | 102 |
| Selling, general and administrative expenses | 859 | 42.2 | 908 | 42.3 | 49 | (8) |
| Operating income | 22 | 1.1 | — | — | 22 | 108 |
| Interest expense | (40) | (2.0) | (19) | (0.9) | (21) | (108) |
| Other income, net | 16 | 0.8 | 2 | 0.1 | 14 | 69 |
| Income tax (benefit) expense | (1) | — | 8 | 0.4 | 9 | (42) |
| Net loss | $(1) | —% | $(25) | (1.2)% | $24 | 111 |

*($ in millions)*

|  | Forty Weeks Ended October 4, 2025 |  | October 5, 2024 |  | Change(1) | Basis Points |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $6,628 | 100.0% | $7,098 | 100.0% | $(470) | — |
| Cost of sales | 3,764 | 56.8 | 4,037 | 56.9 | 273 | (9) |
| Gross profit | 2,864 | 43.2 | 3,061 | 43.1 | (197) | 9 |
| Selling, general and administrative expenses, exclusive of restructuring and related expenses | 2,771 | 41.8 | 2,933 | 41.3 | 162 | 49 |
| Restructuring and related expenses | 180 | 2.7 | 21 | 0.3 | (159) | 242 |
| Selling, general and administrative expenses | 2,951 | 44.5 | 2,954 | 41.6 | 3 | 291 |
| Operating (loss) income | (87) | (1.3) | 107 | 1.5 | (194) | (282) |
| Interest expense | (86) | (1.3) | (62) | (0.9) | (24) | (42) |
| Other income, net | 61 | 0.9 | 12 | 0.2 | 49 | 75 |
| Income tax (benefit) expense | (150) | (2.3) | 34 | 0.5 | 184 | (274) |
| Net income | $38 | 0.6% | $23 | 0.3% | $15 | 25 |

#### (1) Represents favorable (unfavorable) year over year change

#### Note: Sums may not equal totals due to rounding.

### Net Sales

For the twelve weeks ended October 4, 2025, net sales decreased 5.2% and comparable store sales increased 3.0% compared with the twelve weeks ended October 5, 2024. For the forty weeks ended October 4, 2025, net sales declined 6.6% and comparable store sales increased 0.7% compared with the same period in 2024. The decline in net sales for both the twelve and forty weeks ended October 4, 2025 as compared to the prior periods, was due to lower sales as a result of store closures executed under the 2024 Restructuring Plan.

The Company calculates comparable store sales based on the change in store or branch sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. The Company includes sales from relocated stores in comparable store sales from the original date of opening. Comparable store sales is intended only as supplemental information and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

### Gross Profit

For the twelve weeks ended October 4, 2025, gross profit was $881 million, or 43.3% of net sales, compared with $908 million, or 42.3% of net sales, for the twelve weeks ended October 5, 2024. For the forty weeks ended October 4, 2025 and October 5, 2024, gross profit was $2,864 million, or 43.2% of net sales, and $3,061 million, or 43.1% of net sales, respectively. The increase in gross profit as a percentage of net sales compared to both the twelve week and forty week prior comparative periods was due to more favorable product margins, driven by strategic sourcing initiatives and pricing and lower supply chain and other related costs, offset by the $28 million non-cash charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28, 2025. Gross profit as a percentage of net sales for the forty weeks ended October 4, 2025 was also adversely impacted by lower-margin liquidation sales associated with the 2024 Restructuring Plan. Total gross profit dollars decreased as a result of lower net sales stemming from store closures executed under the 2024 Restructuring Plan.

### Selling, General and Administrative Expenses, Exclusive of Restructuring and Related Expenses

For the twelve weeks ended October 4, 2025, selling, general and administrative (SG&A) expenses, exclusive of restructuring and related expenses, were $826 million, or 40.6% of net sales, compared with $895 million, or 41.7% of net sales, for the twelve weeks ended October 5, 2024. For the forty weeks ended October 4, 2025, SG&A expenses, exclusive of restructuring and related expenses, were $2,771 million, or 41.8% of net sales, compared with $2,933 million, or 41.3% of net sales, for the forty weeks ended October 5, 2024. Overall SG&A expenses decreased in both the twelve week and forty weeks ended October 4, 2025, as compared to prior comparative periods, as a result of store closures executed under the 2024 Restructuring Plan reducing overhead and operating costs. SG&A expenses as a percentage of net sales for the forty weeks ended October 5, 2024, benefited from a net gain on asset sales, see Note 7. Leases, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item1.

### Restructuring and Related Expenses

For the twelve weeks ended October 4, 2025, restructuring and related expenses were $33 million, or 1.6% of net sales, compared to $13 million, or 0.6% of net sales, in the prior year comparable period. For the forty weeks ended October 4, 2025, restructuring and related expenses were $180 million, or 2.7% of net sales, compared to $21 million, or 0.3% of net sales, in the prior year comparable period. The increase in expenses as compared to the same period in fiscal 2024, relates to the Company’s 2024 Restructuring Plan which was announced during the fourth quarter of fiscal 2024. The Company estimates that it will incur additional expenses of approximately $20 million to $30 million through the remainder of fiscal 2025 related to the active restructuring plans. The expenses for both the twelve and forty weeks ended October 4, 2025, relate to lease terminations, professional services, severance and termination costs and other exit costs. We expect that the Company’s 2024 Restructuring Plan will be substantially completed by the end of fiscal 2025 with certain expenses, primarily related to closed store and distribution center leases, expected to continue into fiscal year 2026. See Note 3. Restructuring, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1.

### Interest Expense

For the twelve weeks and the forty weeks ended October 4, 2025, interest expense increased as compared to the same periods in fiscal 2024, due to an increase in the principal amount of interest bearing long-term debt in the third quarter of fiscal 2025. For further information see Note 6. Long-term Debt and Fair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 and Part I, Item 2, “Liquidity and Capital Resources” of this Quarterly Report.

### Other Income, Net

For the twelve weeks and the forty weeks ended October 4, 2025, other income, net increased as compared to the same periods in fiscal 2024, due to higher interest income earned from higher cash and cash equivalent balances held, driven by the proceeds received from the sale of the Worldpac business in the fourth quarter of fiscal 2024 and the issuance of $1.95 billion in Senior Unsecured Notes with net proceeds of $1.6 billion,, after the redemption of the Company’s 5.90% Senior Notes due March 2026 with the proceeds and direct transaction and closing costs in the third quarter of fiscal 2025. Other income, net also includes income recognized from the transition services (“TSA Services”) agreement with Worldpac that commenced in the fourth quarter of fiscal 2024.

### Income Tax (Benefit) Expense

For the twelve weeks ended October 4, 2025 the Company’s provision for income taxes was negligible. The Company’s provision for income taxes for the twelve weeks ended October 5, 2024 was an expense of $8 million, largely attributable to a $10 million tax expense related to a book to tax difference in the stock basis of Worldpac Canada as a result of the sale of Worldpac. The Company’s provision for income taxes for the forty weeks ended October 4, 2025, was a benefit of $150 million compared with an expense of $34 million for the same period in 2024. The decrease in tax expense for the forty weeks ended October 4, 2025 was a result of a net discrete tax benefit in the first quarter of fiscal 2025 of $126 million related to certain tax benefits associated with capital loss deductions and lower income before taxes.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The Company has determined the OBBBA has an immaterial impact to the Company’s provision for income taxes and deferred tax balances.

### Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures described below to supplement the Company’s unaudited condensed consolidated financial statements prepared and presented in accordance with GAAP and to understand and evaluate the Company’s core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented as the Company believes that such non-GAAP financial measures provide useful information about the Company’s financial performance, enhance the overall understanding of the Company’s past performance and future prospects, and allow for greater transparency with respect to important metrics used by the Company’s management for financial and operational decision-making. The Company is presenting these non-GAAP metrics to provide investors insight to the information used by the Company’s management to evaluate its business and financial performance. The Company believes that these measures provide investors increased comparability of the Company’s core financial performance over multiple periods and with other companies in the same industry. The Company may make reference to certain financial measures not derived in accordance with GAAP within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report. The Company’s Non-GAAP financial measures reflect results from continuing operations, including Adjusted Net Income (loss), Adjusted Diluted Earnings (loss) Per Share (“Adjusted Diluted EPS”), Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Sales, General and Administrative expense (“Adjusted SG&A”), Adjusted SG&A Margin, Adjusted Operating Income (loss) and Adjusted Operating Income (loss) Margin, and should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing the Company’s operating performance, financial position or cash flows.

The Company has presented these non-GAAP financial measures as the company believes that the presentation of the financial results that exclude (1) transformation expenses under the Company’s turnaround plan, inclusive of the Worldpac divestiture and (2) other significant expenses, are useful and indicative of the Company's base operations because the expenses vary from period to period in terms of size, nature and significance. The income tax impact of these non-GAAP adjustments is also adjusted for using the estimated tax rate in effect for the respective non-GAAP adjustments. These measures assist in comparing the Company’s current operating results with past periods and with the operational performance of other companies in the industry. The disclosure of these measures allows investors to evaluate the Company’s 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 the Company has determined are not normal, recurring cash operating expenses necessary to operate the Company’s business and the rationale for why providing these measures is useful to investors as a supplement to the GAAP measures.

#### Transformation Expenses

Expenses incurred in connection with the Company's turnaround plan and specific transformative activities related to asset optimization that the Company does not view to be normal cash operating expenses. These expenses primarily include:

- *Restructuring and other related expenses:* Expenses relating to strategic initiatives, including severance expense, retention bonuses offered to store-level employees to help facilitate the closing of stores, incremental reserves related to the collectibility of receivables resulting from contract terminations with certain independents associated with the 2024 Restructuring Plan and third-party professionals assisting in the development and execution of the strategic initiatives.
- *Impairment and write-down of long-lived assets:* Expenses relating to the impairment of operating lease ROU assets and property and equipment, incremental depreciation as a result of accelerating long-lived assets over a shorter useful life, depreciation of long-lived assets and ROU asset amortization after store closure, and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases the Company expects to exit before the end of the contractual term, net of gains on lease terminations, in connection with the 2024 Restructuring Plan and Other Restructuring Plan.
- *Distribution network optimization:* Expenses primarily relating to the conversion of the stores and distribution centers to market hubs, including realized losses on liquidated inventory, temporary labor, nonrecurring professional service fees and team member severance.

#### Other Expenses

Expenses incurred by the Company that are not viewed as normal cash operating expenses and vary from period to period in terms of size, nature, and significance. These expenses primarily include:

- *Other professional service fees:* Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategic business review, including the Company’s transformation initiatives.
- *Worldpac post transaction-related expenses:* Expenses primarily relating to non-recurring separation activities provided by third-party professionals subsequent to the sale of Worldpac.
- *Executive turnover:* Expenses associated with executive level reorganization, including expenses for executive severance, the hiring search for leadership positions and certain compensation benefits.
- *Material weakness remediation:* Incremental expenses associated with the remediation of the Company’s previously disclosed material weaknesses in internal control over financial reporting.
- *Cybersecurity incident:* Expenses related to the response and remediation of a cybersecurity incident.
- *Other:* Includes a non-cash charge related to expected future credit losses on vendor receivables due from a vendor that filed voluntary petitions for Chapter 11 bankruptcy protection.
- *Other tax adjustments:* Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in order to provide a clearer understanding of the Company’s ongoing Non-GAAP tax rate and after-tax earnings.

The following table includes a reconciliation of this information to the most comparable GAAP measures (in millions):

|  | Classification | Twelve Weeks Ended October 4, 2025 | October 5, 2024 | Forty Weeks Ended October 4, 2025 | October 5, 2024 |
| --- | --- | ---: | ---: | ---: | ---: |
| Net income (loss) from continuing operations (GAAP) |  | $(1) | $(25) | $38 | $23 |
| **Cost of sales adjustments:** |  |  |  |  |  |
| Transformation expenses: |  |  |  |  |  |
| Distribution network optimization | Restructuring | 4 | — | 9 | — |
| Expected future credit loss related to vendor receivables(1) | Non-restructuring | 28 | — | 28 | — |
| **Selling, general and administrative adjustments:** |  |  |  |  |  |
| Transformation expenses: |  |  |  |  |  |
| Restructuring and other related expenses (2) | Restructuring | 7 | 4 | 78 | 5 |
| Impairment and write-down of long-lived assets (3) | Restructuring | 18 | — | 76 | — |
| Distribution network optimization | Restructuring | 6 | 9 | 15 | 14 |
| Other expenses: |  |  |  |  |  |
| Other professional service fees | Non-restructuring (6) | 3 | — | 12 | — |
| Worldpac post transaction-related expenses | Restructuring | 2 | — | 7 | — |
| Executive turnover | Restructuring | — | — | 4 | 2 |
| Material weakness remediation | Non-restructuring | — | 1 | 1 | 4 |
| Cybersecurity incident | Non-restructuring | — | 2 | — | 3 |
| **Other income adjustments:** |  |  |  |  |  |
| TSA services |  | (1) | — | (8) | — |
| Losses on extinguishment of debt |  | 9 | — | 9 | — |
| Provision for income taxes on adjustments (4) |  | (19) | (4) | (58) | (7) |
| Other tax (benefit) expense adjustments (5) |  | — | 10 | (126) | 10 |
| Adjusted net income (loss) (Non-GAAP) |  | $56 | $(3) | $85 | $54 |
| Diluted earnings (loss) per share from continuing operations (GAAP) |  | $(0.02) | $(0.42) | $0.63 | $0.38 |
| Adjustments, net of tax |  | 0.94 | 0.37 | 0.77 | 0.52 |
| Adjusted diluted earnings (loss) per share (Non-GAAP) (7) |  | $0.92 | $(0.05) | $1.40 | $0.90 |

*(1) Reflects a charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28, 2025.*

*(2) Restructuring and other related expenses for the* twelve weeks ended *October 4, 2025 includes $2 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan and $5 million of other related expenses associated with location closures, including the transfer of assets. Restructuring and other related expenses for the forty weeks ended October 4, 2025 includes $37 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan, $15 million of severance and other labor related costs, $7 million for reserves on independent loans and $19 million of other related expenses associated with location closures, including the transfer of assets.*

*(3) The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of $7 million and impairment charges for ROU assets and property and equipment of $11 million, net of gains on sales, for the* twelve weeks ended *October 4, 2025. The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of $55 million and impairment charges for ROU assets and property and equipment of $21 million, net of gains on sale, for the forty weeks ended October 4, 2025.*

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

*(5) Income tax (benefit) expenses included a discrete non-recurring tax benefit associated with capital loss deductions effectuated in the first quarter of fiscal 2025. The benefit has been excluded from Non-GAAP results in order to provide a clearer understanding of ongoing Non-GAAP tax rate and after-tax earnings.*

*(6) Other professional service fees in fiscal 2024 were classified as restructuring and related expenses based on the underlying activity to which they related.*

*(7) Refer to the reconciliation of diluted weighted-average common shares outstanding (GAAP) to adjusted diluted weighted-average common shares outstanding (Non-GAAP) which is the denominator utilized to calculate adjusted diluted earnings (loss) per share (Non-GAAP). Adjusted diluted weighted-average common shares outstanding (Non-GAAP) includes the dilutive impact of share-based awards as such shares are considered dilutive in consideration of the Company’s Non-GAAP earnings for the period.*

*(shares in millions)*

| Reconciliation of Adjusted Diluted Weighted-Average Common Shares Outstanding | Twelve Weeks Ended October 4, 2025 | October 5, 2024 | Forty Weeks Ended October 4, 2025 | October 5, 2024 |
| --- | ---: | ---: | ---: | ---: |
| Diluted Weighted-Average Common Shares Outstanding (GAAP) | 60.0 | 59.9 | 60.5 | 59.9 |
| Dilutive impact of share-based awards (1) | 0.9 | — | — | — |
| Adjusted Diluted Weighted-Average Common Shares Outstanding (Non-GAAP) | 60.9 | 59.9 | 60.5 | 59.9 |

(1) For the twelve weeks ended October 4, 2025, 0.5 million shares of restricted stock units (“RSUs”) were excluded from the diluted weighted-average common share count calculation as their inclusion would have been anti-dilutive.

### Liquidity and Capital Resources

### Overview

The Company’s principal sources of liquidity are cash and cash equivalents and borrowing availability under a revolving credit facility. The Company’s primary cash requirements necessary to maintain the Company’s current operations include payroll and benefits, inventory purchases, contractual obligations, capital expenditures, payment of income taxes, funding of initiatives and other operational priorities, such as restructuring and asset optimization plans. In addition, cash is required to pay the Company’s dividend and to pay interest and principle on the Company’s long-term debt when due. The following tables present selected financial information related to the Company’s liquidity (in millions):

|  | October 4, 2025 | December 28, 2024 | Change |
| --- | ---: | ---: | ---: |
| Cash and cash equivalents | $3,174 | $1,869 | $1,305 |

The increase in cash and cash equivalents was primarily due to the issuance of $1.95 billion in Senior Unsecured Notes with net proceeds of $1.6 billion, after giving effect to the redemption of the Company’s 5.90% Senior Notes due 2026 with the proceeds and direct transaction and closing costs in the third quarter of fiscal 2025, offset by net cash used in operating activities of $118 million, primarily as a result of changes in net working capital, inclusive of cash payments made in the period related to the Company’s 2024 Restructuring Plan, $137 million used for purchases of property and equipment, net of proceeds from sales, and the payment of $45 million in dividends.

In addition to cash and cash equivalents presented above, as of October 4, 2025, the Company also maintained access to $741 million in undrawn capacity through the Company’s $1.0 billion asset-based revolving credit facility (the “ABL Facility”). As of October 4, 2025 approximately $2.3 billion was designated as Qualified Cash as defined in the ABL Facility.

The Company believes that its cash and cash equivalents and sources of liquidity will satisfy its working and other capital requirements for at least the next 12 months and thereafter for the foreseeable future.

### Analysis of Cash Flows

In the fourth quarter of fiscal 2024, the Company completed the sale of Worldpac. As a result, the Company classified the results of operations and cash flows of Worldpac as discontinued operations in its condensed consolidated statements of operations and condensed consolidated statements of cash flows for prior periods presented. The Company’s cash flows from operating, investing and financing activities were as follows (in millions):

*(in millions)*

|  | Forty Weeks Ended October 4, 2025 | October 5, 2024 |
| --- | ---: | ---: |
| Net cash (used in) provided by operating activities of continuing operations | $(118) | $81 |
| Net cash provided by operating activities of discontinued operations | — | 77 |
| Net cash used in investing activities of continuing operations | (137) | (116) |
| Net cash used in investing activities of discontinued operations | — | (8) |
| Net cash provided by (used in) financing activities | 1,559 | (58) |
| Effect of exchange rate changes on cash | 1 | 12 |
| Net increase (decrease) in cash and cash equivalents | $1,305 | $(12) |

#### Operating Activities

For the forty weeks ended October 4, 2025, cash used in operating activities changed unfavorably by $199 million compared with the same period of prior year. The decrease as compared to the comparative period was due to changes in net working capital, inclusive of cash payments made in the period related to the Company’s 2024 Restructuring Plan.

#### Investing Activities

For the forty weeks ended October 4, 2025, cash flows used in investing activities increased by $21 million compared with the forty weeks ended October 5, 2024, with higher spend on property and equipment in the current period, partially offset by higher proceeds from the sale of property and equipment.

#### Financing Activities

For the forty weeks ended October 4, 2025, cash flows provided by financing activities was $1,559 million, an increase of $1,617 million as compared with the forty weeks ended October 5, 2024. The increase in cash generated from financing activities was due to the issuance of $1.95 billion in Senior Unsecured Notes with net proceeds of $1.6 billion, after giving effect to the redemption of the Company’s 5.90% Senior Notes due 2026 with the proceeds and direct transaction and closing costs.

The Company’s Board of Directors has declared a cash dividend every quarter since 2006. Any payments of dividends in the future will be at the discretion of the Company’s Board of Directors and will depend upon the Company’s results of operations, cash flows, capital requirements and other factors deemed relevant by the Board of Directors. Similar to the 2021 Credit Agreement, the Company’s new ABL Facility, as detailed further below, has certain restrictions that may limit the Company’s ability to increase the amount of the Company’s cash dividends above its current levels.

### Restructuring Activities

On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan, which was designed to improve the Company’s profitability and growth potential and streamline its operations. In fiscal 2023, the Company also announced a strategic and operational plan to streamline the Company’s supply chain by configuring a multi-echelon supply chain by leveraging current asset and operating fewer, more productive distribution centers that focus on replenishment and move more parts closer to the customer. The Company estimates that it will incur additional expenses of approximately $20 million to $30 million through the remainder of fiscal 2025, of which approximately $10 million to $20 million is expected to be cash expenses, primarily composed of lease terminations and other exit expenses and professional services, by the end of fiscal year 2025 with certain expenses, primarily related to closed store and distribution center leases, expected to continue into fiscal year 2026. For further information, see Note 3. Restructuring, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.

### Long-Term Debt

As of October 4, 2025 and December 28, 2024, the Company had outstanding long-term debt totaling $3.4 billion and $1.8 billion, respectively.

On August 4, 2025, the Company issued (i) $975 million in aggregate principal amount of 7.000% Senior Notes due 2030 (the “2030 Notes”) and (ii) $975 million in aggregate principal amount of 7.375% Senior Notes due 2033 (collectively, the “Senior Unsecured Notes”) in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”). Interest on the Senior Unsecured Notes is payable in cash on February 1 and August 1 of each year, commencing on February 1, 2026. The 2030 Notes will mature on August 1, 2030, and the 2033 Notes will mature on August 1, 2033. Net proceeds from the issuance of the Senior Unsecured Noted were approximately $1.9 billion, net of direct transaction and closing costs. The Senior Unsecured Notes are guaranteed by each of the Company’s wholly-owned domestic subsidiaries that also guarantee the ABL Facility.

In accordance with the terms of the Indenture governing the Senior Unsecured Notes, the Company may, at its option and on any one or more occasions, redeem some or all of the Senior Unsecured Notes at the redemption prices described in the Indenture. In addition, in the event of a Change of Control Triggering Event (as defined in the Indenture), the Company will be required to offer to repurchase the Senior Unsecured Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date. The Indenture also contains customary provisions for events of default and certain covenants limiting the ability of the Company and its subsidiaries to incur debt secured by liens and to enter into certain sale and lease-back transactions.

Following the closing of the issuance of the Senior Unsecured Notes, the Company utilized a portion of the net proceeds to redeem in full its outstanding $300 million in aggregate principal amount of 5.90% Senior Notes due 2026 and recorded a loss of $3 million on redemption in the third quarter of fiscal 2025 associated with this extinguishment. The remaining proceeds from the issuance are available for general corporate purposes, and, as of October 4, 2025, approximately $2.3 billion of cash and cash equivalents, was designated as qualified cash and are subject to customary “springing” control agreements, as described in the ABL Facility Agreement.

For further details, see Note 6. Long-term Debt and Fair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.

### Credit Facilities

On August 12, 2025, the Company’s $1 billion revolving credit facility (the “2021 Credit Agreement”) was terminated and replaced by the ABL Facility. The Company recorded a $6 million loss on extinguishment of the 2021 Credit Agreement during the third quarter of fiscal 2025. The ABL Facility provides for a five-year senior secured first lien asset-based revolving credit facility of up to $1 billion with an uncommitted accordion feature that provides for additional credit extensions up to $500 million. Our ability to draw upon the ABL Facility is subject to the available borrowing base. Outstanding amounts under the ABL Facility will accrue interest at a floating rate, which, at the Company’s election, can be either (i) SOFR plus an applicable margin or (ii) an alternative base rate plus an applicable margin. The applicable rate varies based on Average Historical Excess Availability (as defined in the ABL Facility Agreement) from (i) with respect to base rate loans, 0.25% to 0.75% and (b) with respect to SOFR loans, 1.25% to 1.75% and resets quarterly on a prospective basis and is, in part, derived based-upon the utilization of the facility. Interest is payable on a quarterly basis. Unused commitments under the ABL Facility will accrue an unused commitment fee of either 0.30% or 0.25% per annum, depending on average utilization.

The ABL Facility has first lien on substantially all of the accounts receivable, inventory, cash and related assets of the Company and its subsidiary guarantors thereunder. Advance Auto Parts, Inc. is the ABL Facility borrower and the guarantors are (i) each of our subsidiaries that guarantee our recently issued Senior Unsecured Notes and (ii) certain of our Canadian subsidiaries. Availability under the ABL Facility is limited to the lesser of (i) the borrowing base, equal to the sum of 90% of eligible credit card receivables, 85% of eligible trade accounts receivable, 85% of the net orderly liquidation value of eligible inventory and 100% of qualified cash (up to certain limits for the purpose of determining borrowing capacity), subject, in each case, to customary reserves established by the collateral agent under the ABL Facility from time to time, including reserves related to outstanding obligations to our suppliers that are payable to the paying agents, as a result of such suppliers electing, at their option, to utilize third-party financing, commonly referred to as supply chain financing, and debt maturity reserves, and (ii) the aggregate revolving credit commitments. The ABL Facility contains customary representations and warranties, events of default and financial, affirmative and negative covenants for facilities of this type, including but not limited to a springing financial covenant relating to a fixed charge coverage ratio, defined in the ABL Facility as the ratio of Consolidated Adjusted EBITDA minus Consolidated Capital Expenditures minus Taxes to Fixed Charges, each as defined in the ABL Facility, on a four quarter trailing basis, which requires a minimum 1:1 coverage ratio to be maintained, and restrictions on certain indebtedness, liens, investments and acquisitions, asset dispositions, restricted payments, prepayment of certain indebtedness and transactions with affiliates, subject to various thresholds and caps.

In accordance with the ABL Facility, the Company is required to hold cash and cash equivalents in designated accounts with lenders, referred to as Qualified Cash Accounts as defined in ABL Facility. These amounts are unrestricted and the Company is able to direct, and have sole control over, the manner of disposition of funds in such accounts, subject to: 1) maintaining a minimum availability under the ABL facility of at least the greater of (i) 12.5% of the Line Cap and (ii) $125 million; and 2) maintaining excess availability under the ABL Facility of at least $400 million. The Qualified Cash Accounts are subject to springing control agreements pursuant to which the cash deposited therein will become restricted in the event of default or a breach of such covenants.

As of October 4, 2025, the Company had no outstanding borrowings, $741 million of borrowing availability and $259 million letters of credit outstanding under the ABL Facility. As of December 28, 2024, the Company had no outstanding borrowings, $1 billion of borrowing availability and no letters of credit outstanding under the 2021 Credit Agreement. The Company was in compliance with its covenants related to the ABL Facility as of October 4, 2025.

As of October 4, 2025 and December 28, 2024, the Company also had $89 million and $91 million, respectively, of bilateral letters of credit issued separately from the ABL Facility and 2021 Credit Agreement, respectively, none of which were drawn upon. These bilateral letters of credit generally have a term of one year or less and primarily serve as collateral for the Company’s self-insurance policies.

For further details, see Note 6. Long-term Debt and Fair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1., respectively.

### Additional Capital Requirements

Expected working and other capital requirements, including Contractual and Off-Balance Sheet Obligations are described in the Company’s 2024 Annual Report on Form 10-K in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of October 4, 2025, other than for the changes disclosed in the “Notes to Condensed Consolidated Financial Statements”, and “Liquidity and Capital Resources” in this Quarterly Report, there have been no other material changes to the Company’s expected working and other capital requirements described in the Company’s 2024 Annual Report on Form 10-K.

## Market risk

As filed, 1,332 characters.

Interest rates on all of the Company’s long-term debt, inclusive of the August 2025 Senior Unsecured Notes, are fixed and not subject to interest rate risk. The Company’s new ABL Facility may be exposed to interest rate risk as interest on borrowings under the ABL Facility accrue interest based on either (i) SOFR plus an applicable margin or (ii) an alternative base rate plus an applicable margin, however, as of October 4, 2025, the Company had no borrowings outstanding under its ABL Facility. The Company also generates interest income on cash and cash equivalents. These interest rates as subject to changes in market conditions and interest rate risk. There was a material increase in the Company’s cash and cash equivalents during the third quarter of 2025, due to the net proceeds received from the issuance the new Senior Unsecured Notes and redemption of the previously outstanding 5.90% Senior Notes due 2026. A hypothetical 100 basis points change in interest rates would have an annualized impact of approximately $32 million based on our balance of cash and cash equivalents as of October 4, 2025.

There have been no other significant changes in the Company’s exposure to market risk since December 28, 2024. See “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2024 Form 10-K.

## Controls and procedures

As filed, 2,089 characters.

### Disclosure Controls and Procedures

Disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are management’s controls and other procedures that are designed to ensure that information required to be disclosed by management in the Company’s reports that are filed or submitted 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 management, including the Company’s 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.

Management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures as of October 4, 2025. Based on this evaluation, the principal executive officer and the principal financial officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

### Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the third quarter ended October 4, 2025, that has materially affected or is reasonably likely to materially affect its internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

### PART II. OTHER INFORMATION

None.

## Risk factors

As filed, 5,537 characters.

The Company’s future business, operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 28, 2024, which could adversely affect the Company’s business, financial condition, results of operations, cash flows and future prospects, which could in turn materially affect the price of the Company’s common stock. Except for the risk factor set forth below, there have been no material changes to the Company’s risk factors since the 2024 Form 10-K.

**An unstable global economic and geopolitical landscape increases uncertainty about key areas of doing business internationally and may have a negative impact on our business.**

During fiscal 2025, new global trade tariffs were announced on imports to the U.S., including additional tariffs on various countries from which the Company directly or indirectly imports and/or sources merchandise, including Canada, China and Mexico, among others. In response, several countries have imposed, or threatened to impose, reciprocal tariffs on imports from the U.S. and other measures. Various modifications and delays to the U.S. tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures. Additionally, the current administration has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, enforcement priorities, sanctions, treaties and tariffs. Significant uncertainty continues to exist about the future economic and political relationship between the U.S. and other countries. The ultimate impact of tariffs on the Company’s business will depend on several factors, including whether additional or incremental U.S. tariffs or other measures are announced, revised, or rescinded, to what extent other countries implement tariffs or other measures in response, and the overall magnitude and duration of these items. These developments, or the perception that any of them could occur, may have a material effect on global economic conditions, the stability of global financial markets, or global trade, and may impact the Company’s product cost, pricing, or competitive conditions, disrupt supply chains, impact the broader macroeconomic environment and consumer sentiment or otherwise negatively impact the Company’s business, financial condition and results of operations.

**Our significant level of indebtedness or a deterioration in the global credit markets could limit the cash flow available for operations and could adversely affect our ability to service our debt or obtain additional financing.**

We have a significant amount of indebtedness. Our significant level of indebtedness could restrict our operations and make it more difficult for us to satisfy our debt obligations. For example, our level of indebtedness could, among other things:

- affect our liquidity by limiting our ability to obtain additional financing for working capital;
- limit our ability to obtain financing for capital expenditures and acquisitions or make any available financing more costly;
- require us to dedicate all or a substantial portion of our cash flow to service our debt, which would reduce funds available for other business purposes, such as capital expenditures, dividends or acquisitions, or to invest in our turnaround;
- limit our flexibility in planning for or reacting to changes in the markets in which we compete;
- place us at a competitive disadvantage relative to our competitors who may have less indebtedness;
- render us more vulnerable to general adverse economic and industry conditions;
- make it more difficult for us to satisfy our financial obligations; and
- limit our ability to refinance our debt on terms as favorable as our existing debt or at all.

Furthermore, despite our current indebtedness levels, we may still incur significant additional indebtedness, which would increase the risks associated with our leverage. Although the indentures governing our indebtedness contain certain financial and other restrictive covenants, certain of such agreements restrict but do not completely prohibit us from incurring substantial additional indebtedness, including secured indebtedness, in the future. If new debt or other liabilities are added to our current debt levels, the related risks that we now face could intensify. Any failure to comply with the restrictive covenants in our debt instruments could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt, including the outstanding notes, and have a material adverse effect on our liquidity and operations.

Finally, conditions and events in the global credit markets could have a material adverse effect on our access to short- and long-term borrowings to finance our operations and the terms and cost of that debt. It is possible that one or more of the banks that provide us with financing may fail to honor the terms of our agreements or be financially unable to provide the unused credit as a result of significant deterioration in such bank’s financial condition. Any inability to obtain sufficient financing at cost-effective rates could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Filed Oct 30, 2025.
Source: SEC EDGAR, the filing index for accession 0001628280-25-047523. Last ingested by Listed: Oct 27, 2026, 16:07 ET. No prices; not investment advice.