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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 April 24, 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
________________________

AAP-20210424_G1.JPG
ADVANCE AUTO PARTS, INC.
(Exact name of registrant as specified in its charter)
________________________

Delaware 54-2049910
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

2635 East Millbrook Road, Raleigh, North Carolina 27604
(Address of principal executive offices) (Zip Code)
 
(540) 362-4911
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Trading symbol Name of each exchange on which registered
Common Stock, $0.0001 par value AAP New York Stock Exchange
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report).

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of May 28, 2021, the number of shares of the registrant’s common stock outstanding was 65,438,870 shares.


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NOTE REGARDING FORWARD LOOKING STATEMENTS

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

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share data) (Unaudited)
  April 24, 2021 January 2, 2021
Assets
Current assets:    
Cash and cash equivalents $ 880,233  $ 834,992 
Receivables, net 804,826  749,999 
Inventories 4,476,656  4,538,199 
Other current assets 149,003  146,811 
Total current assets 6,310,718  6,270,001 
Property and equipment, net of accumulated depreciation of $2,255,213 and $2,189,165
1,463,990  1,462,602 
Operating lease right-of-use assets 2,378,964  2,379,987 
Goodwill 994,530  993,590 
Intangible assets, net 672,455  681,127 
Other assets 47,831  52,329 
  $ 11,868,488  $ 11,839,636 
Liabilities and Stockholders’ Equity    
Current liabilities:    
Accounts payable $ 3,737,853  $ 3,640,639 
Accrued expenses 603,327  606,804 
Other current liabilities 451,243  496,472 
Total current liabilities 4,792,423  4,743,915 
Long-term debt 1,033,369  1,032,984 
Non-current operating lease liabilities 2,035,785  2,014,499 
Deferred income taxes 357,343  342,445 
Other long-term liabilities 148,001  146,281 
Commitments and contingencies
Stockholders’ equity:    
Preferred stock, nonvoting, $0.0001 par value
—  — 
Common stock, voting, $0.0001 par value
8  8 
Additional paid-in capital 799,934  783,709 
Treasury stock, at cost (1,577,727) (1,394,080)
Accumulated other comprehensive loss (21,466) (26,759)
Retained earnings 4,300,818  4,196,634 
Total stockholders’ equity 3,501,567  3,559,512 
  $ 11,868,488  $ 11,839,636 


The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
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Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data) (Unaudited)
  Sixteen Weeks Ended
April 24, 2021 April 18, 2020
Net sales $ 3,330,370  $ 2,697,882 
Cost of sales, including purchasing and warehousing costs
1,845,444  1,525,149 
Gross profit 1,484,926  1,172,733 
Selling, general and administrative expenses
1,232,797  1,094,308 
Operating income 252,129  78,425 
Other, net:
Interest expense (11,191) (12,243)
Other income (expense), net 4,836  (5,989)
Total other, net (6,355) (18,232)
Income before provision for income taxes 245,774  60,193 
Provision for income taxes 59,844  16,605 
Net income $ 185,930  $ 43,588 
Basic earnings per common share $ 2.83  $ 0.63 
Weighted average common shares outstanding 65,688  69,181 
Diluted earnings per common share $ 2.81  $ 0.63 
Weighted average common shares outstanding 66,102  69,392 


Condensed Consolidated Statements of Comprehensive Income
(In thousands) (Unaudited)
  Sixteen Weeks Ended
April 24, 2021 April 18, 2020
Net income $ 185,930  $ 43,588 
Other comprehensive income (loss):
Changes in net unrecognized other postretirement (costs) benefits, net of tax of $19 and $23 (54) 66 
Currency translation adjustments 5,347  (17,032)
Total other comprehensive income (loss) 5,293  (16,966)
Comprehensive income $ 191,223  $ 26,622 



The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
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Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except per share data) (Unaudited)
Sixteen Weeks Ended April 24, 2021
  Common Stock Additional
Paid-in Capital 		Treasury Stock, at Cost Accumulated Other
Comprehensive Loss 		Retained Earnings Total
Stockholders’ Equity
  Shares Amount
Balance, January 2, 2021 66,361  $ 8  $ 783,709  $ (1,394,080) $ (26,759) $ 4,196,634  $ 3,559,512 
Net income
—  —  —  —  —  185,930  185,930 
Total other comprehensive income —  —  —  —  5,293  —  5,293 
Restricted stock units and deferred stock units vested
227  —  —  —  —  —  — 
Share-based compensation
—  —  16,260  —  —  —  16,260 
Stock issued under employee stock purchase plan
13  —  —  —  —  —  — 
Repurchases of common stock
(1,162) —  —  (183,647) —  —  (183,647)
Cash dividends declared ($1.00 per common share)
—  —  —  —  —  (81,746) (81,746)
Other
—  —  (35) —  —  —  (35)
Balance, April 24, 2021 65,439  $ 8  $ 799,934  $ (1,577,727) $ (21,466) $ 4,300,818  $ 3,501,567 
Sixteen Weeks Ended April 18, 2020
  Common Stock Additional
Paid-in Capital 		Treasury Stock, at Cost Accumulated Other
Comprehensive Loss 		Retained Earnings Total
Stockholders’ Equity
  Shares Amount
Balance, December 28, 2019 69,232  $ 8  $ 735,183  $ (924,389) $ (34,569) $ 3,772,848  $ 3,549,081 
Net income
—  —  —  —  —  43,588  43,588 
Total other comprehensive loss —  —  —  —  (16,966) —  (16,966)
Restricted stock units and deferred stock units vested 137  —  —  —  —  —  — 
Share-based compensation —  —  13,809  —  —  —  13,809 
Stock issued under employee stock purchase plan 9  —  735  —  —  —  735 
Repurchases of common stock (277) —  —  (35,761) —  —  (35,761)
Cash dividends declared ($0.25 per common share)
—  —  —  —  —  (17,453) (17,453)
Other —  —  (4) —  —  —  (4)
Balance, April 18, 2020 69,101  $ 8  $ 749,723  $ (960,150) $ (51,535) $ 3,798,983  $ 3,537,029 



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

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Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
  Sixteen Weeks Ended
April 24, 2021 April 18, 2020
Cash flows from operating activities:    
Net income $ 185,930  $ 43,588 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 77,253  78,579 
Share-based compensation 16,260  13,809 
Loss and impairment of long-lived assets 4,732  981 
Provision for deferred income taxes 14,660  146 
Other, net 543  434 
Net change in:
Receivables, net (53,982) 59,303 
Inventories 63,883  (104,899)
Accounts payable 96,094  (112,459)
Accrued expenses (50,949) (1,824)
Other assets and liabilities, net (24,492) 33,250 
Net cash provided by operating activities 329,932  10,908 
Cash flows from investing activities:    
Purchases of property and equipment (70,884) (82,973)
Purchase of an indefinite-lived intangible asset —  (230)
Proceeds from sales of property and equipment 590  71 
Net cash used in investing activities (70,294) (83,132)
Cash flows from financing activities:    
Proceeds from borrowing on revolving credit facility —  500,000 
Proceeds from issuances of senior unsecured notes, net —  498,240 
Dividends paid (33,146) (21,593)
Proceeds from the issuance of common stock
—  735 
Repurchases of common stock (183,647) (35,761)
Other, net 104  (4,763)
Net cash (used in) provided by financing activities (216,689) 936,858 
Effect of exchange rate changes on cash 2,292  (3,461)
Net increase in cash and cash equivalents 45,241  861,173 
Cash and cash equivalents, beginning of period
834,992  418,665 
Cash and cash equivalents, end of period
$ 880,233  $ 1,279,838 
Non-cash transactions:
Accrued purchases of property and equipment $ 3,505  $ 25,080 


The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
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Advance Auto Parts, Inc. and Subsidiaries
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 have been prepared by us and include the accounts of Advance Auto Parts, Inc., its wholly owned subsidiaries, Advance Stores Company, Incorporated (“Advance Stores”) and Neuse River Insurance Company, Inc., and their subsidiaries (collectively referred to as “Advance,” “we,” “us” or “our”).

As of April 24, 2021, we operated a total of 4,793 stores and 178 branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of April 24, 2021, we served 1,285 independently owned Carquest branded stores across the same geographic locations served by our stores and branches in addition to Mexico and various Caribbean islands. Our stores operate primarily under the trade names “Advance Auto Parts,” “Carquest” and “Autopart International,” and our branches operate under the “Worldpac” trade name.

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 principles. 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 2020 as filed with the SEC on February 22, 2021.

The accompanying condensed consolidated financial statements reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. 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

The following table summarizes disaggregated revenue from contracts with customers by product group:
Sixteen Weeks Ended
April 24, 2021 April 18, 2020
Percentage of Net sales, by product group:
Parts and batteries 66  % 66  %
Accessories and chemicals 21  21 
Engine maintenance 12  12 
Other 1  1 
Total 100  % 100  %


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 April 24, 2021 and January 2, 2021. 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 sixteen weeks ended April 24, 2021 and prior years. We recorded an increase to Cost of sales of $3.1 million and $8.8 million for the sixteen weeks ended April 24, 2021 and April 18, 2020 to state inventories at LIFO.

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

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

Inventory balances were as follows:
(in thousands) April 24, 2021 January 2, 2021
Inventories at first in, first out (“FIFO”) $ 4,324,383  $ 4,382,779 
Adjustments to state inventories at LIFO 152,273  155,420 
Inventories at LIFO $ 4,476,656  $ 4,538,199 

4.    Intangible Assets

Our definite-lived intangible assets include customer relationships and non-compete agreements. Amortization expense was $9.7 million for the sixteen weeks ended April 24, 2021 and April 18, 2020.

5.    Receivables, net

Receivables consist of the following:
(in thousands) April 24, 2021 January 2, 2021
Trade $ 539,584  $ 449,403 
Vendor 249,976  278,180 
Other 25,414  34,345 
Total receivables 814,974  761,928 
Less: Allowance for doubtful accounts (10,148) (11,929)
Receivables, net $ 804,826  $ 749,999 

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

Long-term debt consists of the following:
(in thousands) April 24, 2021 January 2, 2021
4.50% Senior Unsecured Notes due December 1, 2023
$ 193,060  $ 192,990 
1.75% Senior Unsecured Notes due October 1, 2027
345,992  345,854 
3.90% Senior Unsecured Notes due April 15, 2030
494,317  494,140 
Total long-term debt $ 1,033,369  $ 1,032,984 
Fair value of long-term debt $ 1,106,000  $ 1,145,000 

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. 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.

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

Bank Debt

As of April 24, 2021 and January 2, 2021, we had no outstanding borrowings, $1.0 billion of borrowing availability and no letters of credit outstanding under our unsecured revolving credit facility (the “Credit Agreement”).

As of April 24, 2021 and January 2, 2021, we had $100.0 million of bilateral letters of credit issued separately from the Credit Agreement, 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 our self-insurance policies.

We were in compliance with financial covenants required by our debt arrangements as of April 24, 2021.

Senior Unsecured Notes

Our 4.50% senior unsecured notes due December 1, 2023 (the “2023 Notes”) were issued in December 2013 at 99.69% of the principal amount of $450.0 million. The 2023 Notes bear interest at a rate of 4.50% per year payable semi-annually in arrears on June 1 and December 1 of each year.

On April 16, 2020, we issued $500.0 million aggregate principal amount of senior unsecured notes (the “Original Notes”). The Original Notes were issued at 99.65% of the principal amount of $500.0 million, are due April 15, 2030 and bear interest at 3.90% per year payable semi-annually in arrears on April 15 and October 15 of each year.

On July 28, 2020, we completed an exchange offer whereby the Original Notes in the aggregate principal amount of $500.0 million, which were not registered under the Securities Act of 1933, as amended (the “Securities Act”), were exchanged for a like principal amount of 3.90% senior unsecured notes due 2030 (the “Exchange Notes” or “2030 Notes”), which have been registered under the Securities Act. The Original Notes were substantially identical to the Exchange Notes, except that the Exchange Notes are registered under the Securities Act and are not subject to the transfer restrictions and certain registration rights agreement provisions applicable to the Original Notes.

On September 29, 2020, we issued $350.0 million aggregate principal amount of senior unsecured notes (the “2027 Notes”). The 2027 Notes were issued at 99.67% of the principal amount of $350.0 million, are due October 1, 2027 and bear interest at 1.75% per year payable semi-annually in arrears on April 1 and October 1 of each year. In connection with the 2027 Notes offering, we incurred $2.9 million of debt issuance costs. Our 2023 Notes, 2027 Notes and 2030 Notes are collectively referred to herein as our “senior unsecured notes.”

Pursuant to a cash tender offer that was completed on September 29, 2020, we repurchased $256.3 million of our 2023 Notes with the net proceeds from the 2027 Notes. In connection with this tender offer, we incurred charges relating to tender premiums and debt issuance costs of $30.5 million and $1.4 million.

Debt Guarantees

We are a guarantor of loans made by banks to various independently owned Carquest-branded stores that are our customers totaling $73.7 million and $23.6 million as of April 24, 2021 and January 2, 2021. 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 $61.9 million and $57.5 million as of April 24, 2021 and January 2, 2021. We believe that the likelihood of performance under these guarantees is remote.

7. Leases

Substantially all of our leases are for facilities and vehicles. The initial term for facilities is typically 5 years to 10 years, with renewal options at 5 year intervals, with the exercise of lease renewal options at our sole discretion. Our vehicle and equipment leases are typically 3 years to 5 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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

Operating lease liabilities consist of the following:
(in thousands) April 24, 2021 January 2, 2021
Total operating lease liabilities $ 2,460,951  $ 2,477,087 
Less: Current portion of operating lease liabilities (425,166) (462,588)
Noncurrent operating lease liabilities $ 2,035,785  $ 2,014,499 

The current portion of operating lease liabilities is included in Other current liabilities in the accompanying condensed consolidated balance sheets.

Total lease cost is included in Cost of sales and Selling, general and administrative expenses (“SG&A”) in the accompanying condensed consolidated statements of operations and is recorded net of immaterial sublease income. Total lease cost is comprised of the following:
Sixteen Weeks Ended
(in thousands) April 24, 2021 April 18, 2020
Operating lease cost $ 161,984  $ 161,805 
Variable lease cost 43,525  43,537 
Total lease cost $ 205,509  $ 205,342 

The future maturity of lease liabilities are as follows:
(in thousands) April 24, 2021
Remainder of 2021 $ 367,689 
2022 474,071 
2023 436,532 
2024 361,383 
2025 315,001 
Thereafter 852,365 
Total lease payments 2,807,041 
Less: Imputed interest (346,090)
Total operating lease liabilities $ 2,460,951 

As of April 24, 2021, our operating lease payments include $95.2 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $79.3 million of legally binding minimum lease payments for leases signed, but not yet commenced.

The weighted-average remaining lease term and weighted-average discount rate for our operating leases are 7.0 years and 3.4% as of April 24, 2021. We calculated the weighted-average discount rates using incremental borrowing rates, which equal the rates of interest that we would pay to borrow funds on a fully collateralized basis over a similar term.

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

Other information relating to our lease liabilities is as follows:
Sixteen Weeks Ended
(in thousands) April 24, 2021 April 18, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 185,083  $ 167,273 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 118,448  $ 85,491 

8.    Warranty Liabilities

The following table presents changes in our warranty reserves:
Sixteen Weeks Ended Fifty-Three Weeks Ended
(in thousands) April 24, 2021 January 2, 2021
Warranty reserve, beginning of period $ 14,120  $ 36,820 
Additions to warranty reserves 2,724  14,907 
Reduction and utilization of reserve (9,525) (37,607)
Warranty reserve, end of period $ 7,319  $ 14,120 
  
9.    Share Repurchase Program

On April 19, 2021, our Board of Directors authorized an additional $1.0 billion to our current share repurchase program. This authorization was incremental to the $700.0 million that was authorized previously by our Board of Directors in November 2019. Our share repurchase program permits the repurchase of our common stock on the open market and in privately negotiated transactions from time to time.

During the sixteen weeks ended April 24, 2021, we repurchased 1.1 million shares of our common stock at an aggregate cost of $170.4 million, or an average price of $157.84 per share, in connection with our share repurchase program. During the sixteen weeks ended April 18, 2020, we purchased 0.2 million shares of our common stock under the share repurchase program at an aggregate cost of $29.0 million, or an average price of $128.36 per share. We had $1.3 billion remaining under our share repurchase program as of April 24, 2021.

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

10.    Earnings per Share

The computations of basic and diluted earnings per share are as follows:  
  Sixteen Weeks Ended
(in thousands, except per share data) April 24, 2021 April 18, 2020
Numerator
Net income applicable to common shares $ 185,930  $ 43,588 
Denominator
Basic weighted average common shares 65,688  69,181 
Dilutive impact of share-based awards 414  211 
Diluted weighted average common shares (1)
66,102  69,392 
Basic earnings per common share $ 2.83  $ 0.63 
Diluted earnings per common share $ 2.81  $ 0.63 

(1)For the sixteen weeks ended April 24, 2021 and April 18, 2020, 43 thousand and 271 thousand restricted stock units (“RSUs”) were excluded from the diluted calculation as their inclusion would have been anti-dilutive.

11.    Share-Based Compensation

During the sixteen weeks ended April 24, 2021, we granted 174 thousand time-based RSUs, 63 thousand market-based RSUs and 124 thousand stock options. The general terms of the time-based and market-based RSUs are similar to awards previously granted by us. We grant options to purchase common stock to certain employees under our 2014 Long-Term Incentive Plan. The options are granted at an exercise price equal to the closing market price of the Advance's common stock on the date of the grant, expire after 10 years and vest one-third annually over three years. We record compensation expense for the grant date fair value of the option awards evenly over the vesting period.

The weighted average fair values of time-based and market-based RSUs granted during the sixteen weeks ended April 24, 2021 were $175.45 and $204.97 per share. For time-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.

The weighted average fair values of stock options granted during the sixteen weeks ended April 24, 2021 was $47.19. The fair value was estimated on the date of grant by applying the Black-Scholes option-pricing valuation model. The following table presents the weighted average assumptions used in determining the fair value of options granted:

Sixteen Weeks Ended
April 24, 2021
Risk free interest rate (1)
1.02%
Expected life (2)
6 years
Expected volatility (3)
35.78%
Expected dividend yield (4)
2.48%
(1) The risk-free interest rate is based on the yield in effect at grant for zero-coupon U.S. Treasury notes with maturities equivalent to the expected term of the stock options.
(2) The expected term represents the period of time options granted are expected to be outstanding. As we do not have sufficient historical data, we utilized the simplified method provided by the SEC to calculate the expected term as the average of the contractual term and vesting period.
(3) Expected volatility is the measure of the amount by which the stock price has fluctuated or is expected to fluctuate. We utilized historical trends and the implied volatility of our publicly traded financial instruments in developing the volatility estimate for our stock options.
(4) The expected dividend yield is calculated based on our expected quarterly dividend and the 3 month average stock price as of the grant date.

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

Total income tax benefit related to share-based compensation expense for the sixteen weeks ended April 24, 2021 was $3.9 million. As of April 24, 2021, there was $94.5 million of unrecognized compensation expense related to all share-based awards that is expected to be recognized over a weighted average period of 1.8 years.
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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 January 2, 2021 (filed with the SEC on February 22, 2021), which we refer to as our 2020 Form 10-K, and our condensed consolidated financial statements and the notes to those statements that appear elsewhere in this report.

Impact of COVID-19 on Our Business

During the COVID-19 pandemic we are prioritizing protecting the health and safety of our Team Members and customers; working to drive financial performance by preserving our cash position, scrutinizing planned spending and prioritizing various initiatives; and working to help ensure that our team will emerge even stronger following the completion of the pandemic. We have continued to take additional measures to help ensure the health and safety of our Team Members and customers, including the continuation of certain labor-related benefits for Team Members, social distancing practices, sanitation practices, the use of health check screenings and offering contactless delivery.

Government imposed restrictions and stay at home orders related to the pandemic occurred during our first quarter of 2020. These contributed to negative impacts to demand, primarily during the last six weeks of the sixteen weeks ended April 18, 2020. However, as the remainder of 2020 progressed, we experienced a significant improvement in demand, particularly in our DIY omnichannel business. This has continued in the first quarter of 2021, driven by external factors such as a second round of government stimulus, consumers’ increased use of personal vehicles and other factors that may have contributed to an increase in DIY automotive projects. In addition, we believe the execution of prioritized internal initiatives, including our new marketing campaign and providing a variety of shopping choices for customers with our Advance Same Day® options, as well as improved store execution, all contributed to the improvement in demand. We have also continued to make progress on the development of our key supply chain initiatives, including cross-banner replenishment and our single warehouse management system.

Despite the increase in Net sales during the sixteen weeks ended April 24, 2021, the COVID-19 pandemic remains an evolving situation. We continue to actively monitor developments that may cause us to take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our Team Members, customers, suppliers and stockholders.

Management Overview

Net sales increased 23.4% in the first quarter of 2021 as compared to the same period in the prior year, primarily driven by an increase in comparable store sales resulting from growth in our DIY omnichannel and Professional business. We experienced over 20% comparable store sales growth across every region, with the Midwest, Northeast and Southwest regions having the strongest growth. While all product categories showed solid performance, batteries were again one of the strongest.

We generated Diluted earnings per share (“Diluted EPS”) of $2.81 during our first quarter of 2021 compared to $0.63 for the comparable period of 2020. When adjusted for the non-operational items included in the table below, our Adjusted diluted earnings per share (“Adjusted EPS”) for the sixteen weeks ended April 24, 2021 and April 18, 2020 were $3.34 and $1.00.

Sixteen Weeks Ended
April 24, 2021 April 18, 2020
Transformation expenses $ 0.40  $ 0.19 
General Parts International, Inc. (“GPI”) amortization of acquired intangible assets 0.10  0.09 
LIFO impacts 0.03  0.09 

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

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Summary of First Quarter Financial Results

A high-level summary of our financial results for the first quarter of 2021 includes:
 
•Net sales during the first quarter of 2021 were $3.3 billion, an increase of 23.4% as compared to the first quarter of 2020, primarily driven by an increase in comparable store sales of 24.7%, led by growth in both our DIY omnichannel and Professional business.
•Gross profit margin for the first quarter of 2021 was 44.6% of Net sales, an increase of 112 basis points as compared to the first quarter of 2020. This increase was primarily driven by an increase in net sales, as well as due to improvements in material costs, supply chain leverage, channel mix and favorable pricing actions. These improvements were slightly offset by unfavorable product mix and headwinds associated with shrink and defectives.
•SG&A expenses for the first quarter of 2021 were 37.0% of Net sales, a favorable impact of 354 basis points as compared to the first quarter of 2020. This favorable impact was driven by fixed cost leverage, primarily related to payroll, as well as lower insurance and claims related expenses attributable to our continued focus on safety. The savings were partially offset by an increase in field bonus, marketing investments and an increase in third-party and service contracts related to our information technology transformational plans.

Business and Risks 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 and DIY customers. To achieve these improvements, we have undertaken planned strategic initiatives to help build a foundation for long-term success across the organization, which include:

•Continued development of a demand-based assortment, leveraging purchase and search history from our common catalog, versus our existing push-down supply approach.
•Advancement towards optimizing our footprint by market, including consolidating our Worldpac and Autopart International businesses, to drive share, repurpose our in-market store and asset base and streamline our distribution network.
•Continued evolution of our marketing campaigns, which focus on our customers and how we serve them every day with care and speed and the launch of the iconic DieHard® brand.
•Progress in the implementation of a more efficient end-to-end supply chain to deliver our broad assortment.
•Ongoing enhancement of Advance Same Day® Curbside Pick Up, Advance Same Day Home Delivery and our mobile application and e-commerce performance.
•Actively pursuing new store openings in 2021, including through lease acquisition opportunities as available and appropriate, in existing markets and new markets, as well as expansion of our independent Carquest network.

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. Refer to our 2020 Form 10-K, as updated by our subsequent filings with the SEC, and the “Impact of COVID-19 on Our Business” section included within this Form 10-Q for further discussion of these factors.

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 sixteen weeks ended April 24, 2021, 9 stores and branches were opened and 14 were closed or consolidated, resulting in a total of 4,971 stores and branches as of April 24, 2021, compared to a total of 4,976 stores and branches as of January 2, 2021.

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Results of Operations

Sixteen Weeks Ended $ Increase/(Decrease) Basis Points
($ in millions) April 24, 2021 April 18, 2020
Net sales $ 3,330.4  100.0  % $ 2,697.9  100.0  % $ 632.5  — 
Cost of sales
1,845.4  55.4  1,525.1  56.5  320.3  (112)
Gross profit 1,484.9  44.6  1,172.7  43.5  312.2  112 
SG&A 1,232.8  37.0  1,094.3  40.6  138.5  (354)
Operating income 252.1  7.6  78.4  2.9  173.7  466 
Interest expense (11.2) (0.3) (12.2) (0.5) 1.0  12 
Other income (expense), net 4.8  0.1  (6.0) (0.2) 10.8  37 
Provision for income taxes 59.8  1.8  16.6  0.6  43.2  118 
Net income $ 185.9  5.6  % $ 43.6  1.6  % $ 142.3  397 
Note: Table amounts may not foot due to rounding.

Net Sales

Net sales for the sixteen weeks ended April 24, 2021 increased 23.4% as compared to the same period of 2020, primarily driven by an increase in comparable store sales resulting from growth in both our DIY omnichannel and Professional business. We experienced over 20% comparable store sales growth across every region, with the Midwest, Northeast and Southwest regions having the strongest growth. While all product categories showed solid performance, batteries were again one of the strongest.

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.

Gross Profit

Gross profit for the sixteen weeks ended April 24, 2021 was $1.5 billion, or 44.6%, of Net sales, as compared to $1.2 billion, or 43.5%, of Net sales for the sixteen weeks ended April 18, 2020. This increase in Gross profit as a percentage of Net sales was primarily driven by an increase in net sales, as well as due to improvements in material costs, supply chain leverage, channel mix and favorable pricing actions. These improvements were slightly offset by unfavorable product mix and headwinds associated with shrink and defectives.

As a result of changes in our LIFO reserve, an expense of $3.1 million and $8.8 million was included in the sixteen weeks ended April 24, 2021 and April 18, 2020.

Selling, general and administrative expenses

SG&A expenses for the sixteen weeks ended April 24, 2021 were $1.2 billion, or 37.0% of Net sales, as compared to $1.1 billion, or 40.6% of Net sales, for the sixteen weeks ended April 18, 2020. This decrease in SG&A expenses as a percentage of Net sales was driven by fixed cost leverage, primarily related to payroll, as well as lower insurance and claims related expenses attributable to our continued focus on safety. The savings were partially offset by an increase in field bonus, marketing investments and an increase in third-party and service contracts related to our information technology transformational plans.

Provision for income taxes

Our Provision for income taxes for the sixteen weeks ended April 24, 2021 was $59.8 million, as compared to $16.6 million for the sixteen weeks ended April 18, 2020. Our effective tax rate was 24.3% and 27.6% for the sixteen weeks ended April 24, 2021 and April 18, 2020.

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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, including Adjusted net income and Adjusted EPS, 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) LIFO impacts; (2) transformation expenses under our strategic business plan; (3) non-cash amortization related to the acquired GPI intangible assets; and (4) other non-recurring adjustments are 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 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 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.

LIFO impacts — Beginning the first quarter of 2021, to assist in comparing our current operating results with the operational performance of other companies in our industry, the impact of LIFO on our results of operations is a reconciling item to arrive at non-GAAP financial measures.

Transformation expenses — Costs incurred in connection with our business plan that focuses on specific transformative activities that relate to the integration and streamlining of our operating structure across the enterprise, that we do not view to be normal cash operating expenses. These expenses include, but not be limited to the following:

•Restructuring costs - Costs primarily relating to the early termination of lease obligations, asset impairment charges, other facility closure costs and Team Member severance in connection with our voluntary retirement program and continued optimization of our organization.
•Third-party professional services - Costs primarily relating to services rendered by vendors for assisting us with the development of various information technology and supply chain projects in connection with our enterprise integration initiatives.
•Other significant costs - Costs primarily relating to accelerated depreciation of various legacy information technology and supply chain systems in connection with our enterprise integration initiatives and temporary off-site workspace for project teams who are primarily working on the development of specific transformative activities that relate to the integration and streamlining of our operating structure across the enterprise.

GPI amortization of acquired intangible assets — As part of our acquisition of GPI, we obtained various intangible assets, including customer relationships, non-compete contracts and favorable lease agreements, which we expect to be subject to amortization through 2025.

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We have included a reconciliation of this information to the most comparable GAAP measures in the following table:

Sixteen Weeks Ended
(in thousands, except per share data) April 24, 2021 April 18, 2020
Net income (GAAP) $ 185,930  $ 43,588 
Cost of sales adjustments:
Transformation expenses:
LIFO impacts (1)
3,147  8,837 
Other significant costs 2,303  1,253 
SG&A adjustments:
GPI amortization of acquired intangible assets
8,547  8,443 
Transformation expenses:
Restructuring costs 20,742  4,064 
Third-party professional services 8,034  2,983 
Other significant costs 3,883  9,160 
Other income adjustment (36) — 
Provision for income taxes on adjustments (2)
(11,655) (8,685)
Adjusted net income (Non-GAAP) $ 220,895  $ 69,643 
Diluted earnings per share (GAAP) $ 2.81  $ 0.63 
Adjustments, net of tax 0.53  0.37 
Adjusted EPS (Non-GAAP) $ 3.34  $ 1.00 

(1)The sixteen weeks ended April 18, 2020 non-GAAP expenses have been adjusted for the $8.8 million LIFO reserve to be comparable with our 2021 presentation.
(2)The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments.

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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, funding of initiatives under our strategic business plan and other operational priorities. Historically, we have used available funds to repay borrowings under our credit facility, to periodically repurchase shares of our common stock under our stock repurchase program, to pay our quarterly cash dividends and for acquisitions; however, given uncertainties related to the COVID-19 pandemic, our future uses of cash may differ if our relative priorities, including the weight we place on the preservation of cash and liquidity, change. Typically, we have funded our cash 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 obligations for the next year.

Share Repurchase Program

On April 19, 2021, our Board of Directors authorized an additional $1.0 billion to our current share repurchase program. This authorization was incremental to the $700.0 million that was authorized previously by our Board of Directors in November 2019.

During the sixteen weeks ended April 24, 2021, we repurchased 1.1 million shares of our common stock at an aggregate cost of $170.4 million, or an average price of $157.84 per share, in connection with our share repurchase program. During the sixteen weeks ended April 18, 2020, we repurchased 0.2 million shares of our common stock under the share repurchase program at an aggregate cost of $29.0 million, or an average price of $128.36 per share. We had $1.3 billion remaining under our share repurchase program as of April 24, 2021.

Analysis of Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities:
Sixteen Weeks Ended
(in thousands) April 24, 2021 April 18, 2020
Cash flows provided by operating activities $ 329,932  $ 10,908 
Cash flows used in investing activities (70,294) (83,132)
Cash flows (used in) provided by financing activities (216,689) 936,858 
Effect of exchange rate changes on cash 2,292  (3,461)
Net increase in Cash and cash equivalents $ 45,241  $ 861,173 

Operating Activities

For the sixteen weeks ended April 24, 2021, net cash provided by operating activities increased by $319.0 million to $329.9 million compared to the same period of the prior year. The net increase in cash flows provided by operating activities compared to the prior year was primarily driven by the increased cash generated from operations and improvements in working capital. In the current year, working capital included an increase in cash provided by Accounts payable and Inventories, partially offset by a decrease in cash provided by Accrued expenses and Receivables, net.

Investing Activities

For the sixteen weeks ended April 24, 2021, net cash used in investing activities decreased by $12.8 million to $70.3 million compared to the same period of the prior year. Cash used in investing activities for the sixteen weeks ended April 24, 2021 consisted primarily of purchases of property and equipment, which was $12.1 million lower than the comparable period of 2020. Investments in 2021 included supply chain and e-commerce, as well as information technology as we remain focused on the complete back office integration throughout the enterprise.

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Financing Activities

For the sixteen weeks ended April 24, 2021, net cash used in financing activities was $216.7 million, a decrease of $1.2 billion as compared to the same period of the prior year. The net cash used in financing activities during the sixteen weeks ended April 24, 2021 was primarily the result of the repurchase of $170.4 million of common stock under our share repurchase program and dividends paid of $33.1 million. The decrease compared to the first quarter of 2020 was primarily due to the issuance of $500.0 million aggregate principal amount of senior unsecured notes and borrowing $500.0 million under the Credit Agreement during the sixteen weeks ended April 18, 2020.

Our Board of Directors has declared a 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 April 19, 2021, our Board of Directors declared a regular cash dividend of $1.00 per share to be paid on July 2, 2021 to all common stockholders of record as of June 18, 2021.

Long-Term Debt

As of April 24, 2021, 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 the Credit Agreement 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, declines 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.

For additional information on transactions entered into relating to Long-term debt during the sixteen weeks ended April 24, 2021, refer to Note 6, Long-term Debt and Fair Value of Financial Instruments of the Notes to the Condensed Consolidated Financial Statements included herein.

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 sixteen weeks ended April 24, 2021, there were no changes to the critical accounting policies discussed in our 2020 Form 10-K. For a complete discussion of our critical accounting policies, refer to the 2020 Form 10-K.

Supplemental Guarantor Financial Information

The following is a description of the terms and conditions of the guarantees with respect to all senior unsecured notes for which Advance Auto Parts, Inc. (“Issuer”) is an issuer or provides full and unconditional guarantee.

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

The following tables present summarized financial information for the Issuer and Guarantor Subsidiaries on a combined basis after elimination of (i) intercompany transactions and balances among the Issuer and the Guarantor Subsidiaries and (ii) equity in earnings from and investments in any subsidiaries that are a Non-Guarantor Subsidiary.

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Summarized Financial Information


Balance Sheets
Issuer and Guarantor Subsidiaries
(in millions) April 24, 2021 January 2, 2021
Assets
Current assets (1)
$ 5,820.2  $ 5,796.3 
Non-current assets (2)
5,375.7  5,395.4 
Liabilities
Current liabilities $ 4,462.6  $ 4,539.1 
Intercompany payables, net due to Non-Guarantor Subsidiaries 298.3  290.7 
Other non-current liabilities 3,437.2  3,401.7 
(1)Current assets includes $4,250.4 million and $4,318.6 million of Inventories as of April 24, 2021 and January 2, 2021.
(2)Non-current assets includes $1,577.3 million and $1,585.9 million of Goodwill and Intangible assets, net as of April 24, 2021 and January 2, 2021.

Statements of Operations
Issuer and Guarantor Subsidiaries
Sixteen Weeks Ended Fifty-Three Weeks Ended
(in millions) April 24, 2021 January 2, 2021
Net sales $ 3,217.1  $ 9,735.8 
Gross profit 1,434.6  4,335.1 
Operating income 298.5  687.8 
Income before provision for income taxes 290.0  598.0 
Net income 221.5  453.4 


ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposure to market risk since January 2, 2021. Refer to Item 7A. Quantitative and Qualitative Disclosures about Market Risk in our 2020 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 of our internal controls may vary over time.

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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 April 24, 2021. 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 that occurred during our quarter ended April 24, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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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 our current and former officers in the U.S. District Court for the 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. On February 7, 2020 the court granted in part and denied in part our motion to dismiss. The surviving claims are subject to discovery. On November 6, 2020 the court granted plaintiff’s motion for class certification. We strongly dispute the allegations of the complaint and will continue to defend the case vigorously. On March 15, 2021, we moved for reconsideration of the order denying in part our motion to dismiss. This motion is pending before the court. On February 17, 2021, a derivative complaint filed on April 29, 2020 in the U.S. District Court for the District of Delaware was dismissed with prejudice. A second derivative claim filed on August 13, 2020 in the Delaware Court of Chancery was voluntarily dismissed on March 30, 2021.

ITEM 1A. RISK FACTORS

Please refer to “Item 1A. Risk Factors.” found in our 2020 Form 10-K filed for the year ended January 2, 2021 for risks that, if they were to occur, could materially adversely affect our business, financial condition, results of operations, cash flows and future prospects, which could in turn materially affect the price of our common stock.


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 April 24, 2021: 
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) (in thousands)
January 3, 2021 to January 30, 2021 365,720  $ 158.40  365,685  $ 1,374,309 
January 31, 2021 to February 27, 2021 602,737  156.14  596,642  $ 1,281,184 
February 28, 2021 to March 27, 2021 190,324  165.16  117,073  $ 1,261,864 
March 28, 2021 to April 24, 2021 932  184.38  —  $ 1,261,864 
Total 1,159,713  $ 158.36  1,079,400  $ 1,261,864 

(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 $13.3 million, or an average price of $165.32 per share, during the sixteen weeks ended April 24, 2021.
(2)On April 19, 2021, our Board of Directors authorized a $1.0 billion share repurchase program. This new authorization was in addition to the $700.0 million share repurchase program that was authorized by our Board of Directors in November 2019.
22
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ITEM 6.EXHIBITS 


    Incorporated by Reference
Exhibit No. Exhibit Description Form Exhibit Filing Date
3.1
10-Q 3.1 8/14/2018
3.2
10-Q 3.2 8/18/2020
4.1
8-K 4.1 4/29/2010
4.2
8-K 10.45 6/03/2011
4.3
8-K 4.5 12/21/2012
4.4
8-K 4.6 4/19/2013
4.5
10-Q 4.11 5/28/2014
4.6
8-K 4.6 9/30/2020
10.1*
10.2*
10.3*
22.1*
31.1*
     
31.2*
     
32.1**
     
101.INS* Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH* Inline XBRL Taxonomy Extension Schema Document.
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104.1 * Cover Page Interactive Data file (Embedded within Inline XBRL Documents and Included in Exhibit 101.)
  * Filed herewith
  ** Furnished herewith
23
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: June 2, 2021 /s/ Jeffrey W. Shepherd
Jeff W. Shepherd
Executive Vice President, Chief Financial Officer

24

Exhibit 10.1
Advance Auto Parts, Inc.
2021 Time-Based Restricted Stock Unit Award Agreement

This certifies that Advance Auto Parts, Inc. (the “Company”) has granted to <Participant Name> (the “Participant”) an award of Restricted Stock Units (“RSUs”). This award for RSUs (this “Award”) represents the right to receive a like number of shares (“Shares”) of Advance Auto Parts, Inc. Common Stock, $.0001 par value per share (the “Common Stock”), as indicated in the terms outlined below, subject to certain restrictions and on the terms and conditions contained in this Time-Based RSU Award Agreement (“Agreement”) and the Advance Auto Parts, Inc. 2014 Long-Term Incentive Plan (the “Plan”). In the event of any conflict between the terms of the Plan and this Agreement, the terms of the Plan shall govern. Any terms not defined herein shall have the meaning set forth in the Plan.

1.Grant of RSUs: The following RSU Award has hereby been granted to the Participant:

Award Date Number of RSUs Granted
Award Date Number of RSUs Granted

2. Vesting Schedule: Subject to the remaining provisions of this Award, the time-based RSUs shall vest in approximately equal one-third installments on each of the first three anniversaries of the Award Date, commencing on the first anniversary of the Award Date and becoming fully vested on the third anniversary of the Award Date if the Participant remains continuously employed by the Company until each respective vesting date.
Vesting Date / # of shares vested

3. Termination of Service: If, prior to vesting of the time-based RSUs pursuant to this Agreement, the Participant’s employment or other association with the Company and its affiliates ends for any reason, the Participant’s rights to unvested time-based RSUs shall be immediately and automatically forfeited and unvested shares canceled and neither the Company nor any affiliate shall have any further obligations to the Participant under this Agreement. The foregoing notwithstanding, the following exceptions to the forfeiture of unvested RSUs apply:

a.Disability: If termination of employment or other association is on account of Participant’s Disability, then any unvested time-based RSUs will vest immediately as of the date of Participant’s termination of employment due to said Disability. For the purposes of this Agreement, Disability is defined as the Participant having become disabled within the meaning of Section 22 (e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”) or, if applicable, as defined in your Employment Agreement or Loyalty Agreement with the Company in effect as of the Award Date.

b.Death: If termination of employment or other association is on the account of the Participant’s death, then any unvested time-based RSUs will vest immediately as of the date of Participant’s death.

4. Change of Control: Upon a Change of Control, any then remaining unvested time-based RSUs granted pursuant to this Award will vest immediately:

a.on the Change of Control date in the event that the Company’s successor or its affiliate does not assume, convert, or replace the Award; or

















b. upon the termination of the Participant’s employment or other association with the Company or its successor in the event the Award continues or the Company’s successor assumes, converts or replaces the Award and Participant’s employment or other association with the Company or its successor is terminated without Cause, as determined by the Committee or its applicable successor, within 24 months following the Change of Control date.

5. Non-Transferability of RSUs: Until Shares are issued with respect to the RSUs that vest pursuant to this Agreement, the RSUs may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of or encumbered, and no attempt to transfer unvested RSUs, whether voluntary or involuntary, by operation of law or otherwise, shall vest the transferee with any interest or right in or with respect to the Shares. Any attempt to assign, alienate, pledge, attach, sell or otherwise transfer or encumber unvested RSUs or the rights relating thereto shall be wholly ineffective and, if any such attempt is made, the unvested RSUs shall be forfeited by the transferee and all of the transferee’s rights to such RSUs shall immediately terminate without any payment or consideration by the Company. The Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise rights to receive any property disreputable with respect to RSUs upon the Participant’s death.

6. Rights as a Stockholder; Dividend Equivalents: The Participant shall have no rights of a stockholder with respect to Shares of Common Stock underlying the RSUs unless and until the date on which the RSUs vest and are converted to Shares of Common Stock and the restrictions with respect to the RSUs lapse in accordance with the terms of this Agreement. To the extent dividends are declared and paid on the Common Stock of the Company during the period from the Award Date until the RSUs vest and Shares of Common Stock are delivered to the Participant or until such earlier time as the unvested RSUs are forfeited pursuant to this Agreement, the Participant shall be credited with Dividend Equivalents. The Company shall pay currently (and in no case later than the end of the calendar year in which the dividend is paid to the holders of the Common Stock or, if later, the 15th day of the third month following the date the dividend is paid to holders of Common Stock), in cash, an amount equal to the Dividend Equivalent with respect to Participant’s time-based RSUs. Any such Dividend Equivalents shall be paid, if at all, without interest or other earnings. Except as may be provided under Section 8 of the Plan, the Company will make no adjustment for dividends (ordinary or extraordinary and whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the Vesting Date of a time-based RSU.

7. Issuing Shares: Upon any of the time-based RSUs vesting pursuant to this Agreement and payment of the applicable withholding taxes pursuant to Section 11 below, the Company shall cause the Shares of Common Stock to be promptly issued in book-entry form, registered in the Participant’s name, no later than March 15 of the calendar year following the calendar year in which such vesting occurs. For the avoidance of doubt, to the extent Participant does not vest in any RSUs, all interest in such RSUs shall be forfeited and the Participant shall have no right or interest in such forfeited RSUs.

8. Notices: Except as otherwise provided herein, all notices, requests, demands and other communications under this Award shall be in writing, and if by telecopy, shall be deemed to have been validly served, given or delivered when sent, or if by personal delivery or messenger or courier service, shall be deemed to have been validly served, given or delivered upon actual delivery (but in no event may notice be given by deposit in the United States mail), at the following addresses, telephone and facsimile numbers (or such other address(es), telephone and facsimile numbers a party may designate for itself by like notice):

a.If to the Company: Advance Auto Parts, Inc. located at 5008 Airport Road, Roanoke,
Virginia, 24012, Attention: General Counsel or by telephone at (540) 561-1173 or telecopy
at (540) 561-1448; and
b. If to you, the Participant, to your home address on record at Advance Auto Parts or your business address at Advance Auto Parts.













9. Non-Competition: Participant acknowledges and agrees that the Company is engaged in a highly competitive business, and that by virtue of Participant’s position and responsibilities as an employee of the Company and Participant’s access to Confidential Information, engaging in a business that is directly competitive with the Company will cause it great and irreparable harm. Accordingly, Participant agrees and covenants that during Participant’s employment with the Company and for a period of one (1) year after separation of his/her employment with the Company, whether such separation is voluntary or involuntary, Participant shall not, on his/her own behalf or on another’s behalf, (a) accept employment by or provide services for a Restricted Company, as that term is defined in Participant’s applicable Loyalty Agreement or Employment Agreement, in any capacity, role or position with substantially the same or similar duties as Participant performed during Participant’s employment with the Company; (b) provide services, including consulting or contractor services for or on behalf of a Restricted Company, as that term is defined in Participant’s applicable Loyalty Agreement or Employment Agreement, which are the same or substantially similar as the duties Participant performed during Participant’s employment with the Company; or (c) provide services, including consulting or contractor services which would be directly or indirectly competitive with the Company. Participant understands that the business of the Company and Participant’s responsibilities on behalf of the Company have been nationwide and company wide in scope and that the Company has operations in certain international jurisdictions. Accordingly, Participant agrees that this restriction will apply anywhere within the United States, including the United States’ territories and possessions (including, but not limited to, Puerto Rico and the U.S. Virgin Islands) and Canada, including its provinces, territories and possessions. In the event this territory is determined by a court of competent jurisdiction to be overbroad, the territory may be reduced to any combination of the following which the court deems reasonable: the Continental United States; the states of: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; the United States’ territories and possessions including, but not limited to, Puerto Rico and the U.S. Virgin Islands; and Canada and its individual provinces and territories. The restrictive periods set forth in this provision shall not expire and shall be tolled during any period in which Participant is in violation of such restrictions, and therefore such restrictive periods shall be extended for a period equal to the duration of Participant’s violations thereof.
a. For purposes of this Agreement, “Confidential Information” means any proprietary information prepared or maintained in any format, including personnel information or data of the Company, technical data, trade secrets or know-how in which the Company or its affiliates or related entities have an interest, including, but not limited to, business records, contracts, research, product or service plans, products, services, customer lists and customers (including, but not limited to, vendors to the Company or its affiliates and related entities on whom Participant called, with whom Participant dealt or with whom Participant became acquainted during the term of Participant’s employment), pricing data, costs, markets, expansion plans, summaries, marketing and other business strategies, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration or marketing, financial or other business information obtained by Participant or disclosed to Participant by the Company or its affiliates or related entities or any other person or entity during the term of Participant’s employment with the Company or its affiliates, either directly or indirectly, electronically, in writing, orally, by drawings, by observation of services, systems or other aspects of the business of the Company or its affiliates or related entities or otherwise. Confidential Information does not include information that: (A) was available to the public prior to the time of disclosure; or (B) becomes available to the public through no act or omission of Participant.

b.    Nothing in this Agreement shall prohibit or restrict Participant from lawfully (A) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by other












governmental or regulatory agency, entity, or official(s) or self-regulatory organization (collectively, “Governmental Authorities”) regarding a possible violation of any law, rule, or regulation; (B) responding to any inquiry or legal process directed to you individually (and not directed to the Company and/or its subsidiaries or affiliates) from any such Governmental Authorities, including an inquiry about the existence of this Agreement or its underlying facts or circumstances; (C) testifying, participating or otherwise assisting in an action or proceeding by any such Governmental Authorities relating to a possible violation of law; or (D) making any other disclosures that are protected under the whistleblower provisions of any applicable law, rule, or regulation. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made to Participant’s attorney in relation to a lawsuit for retaliation against Participant for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Nor does this Agreement require Participant to obtain prior authorization from the Company before engaging in any conduct described in this paragraph, or to notify the Company that Participant has engaged in any such conduct. Additionally, nothing in this Agreement shall prohibit or restrict Participant from providing legal representation, engaging in the practice of law or any communication or contact with Participant, regardless of who initiates it, regarding any legal representation or the practice of law.


c. In the event that Participant violates any of the terms of this Section 9, Participant understands and agrees that in addition to the Company’s rights to obtain injunctive relief and damages for such violation, Participant shall return to the Company any Shares of Common Stock received by Participant or Participant’s personal representative that vested on or after any such violation and pay to the Company in cash the amount of any proceeds received by Participant or Participant’s personal representative from the disposition or transfer of any such stock, and Participant’s unvested RSUs shall be immediately and irrevocably forfeited.


10. Confidentiality: The Participant agrees not to disclose the terms of this Agreement to anyone other than the members of the Participant’s immediate family, Participant’s legal counsel, Participant’s accountant(s) and/or tax advisor(s) and/or Participant’s financial advisor(s), or as otherwise provided in Section 9 of this Agreement. Should the details of this Agreement be shared with the aforementioned, it shall be on a confidential basis.

11. Income Tax Matters:

a.The Company makes no representation or warranty as to the tax treatment of your receipt or vesting of the time-based RSUs or upon your sale or other disposition of the Shares received upon vesting of your time-based RSUs. You should rely on your own tax advisors for such advice. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are your sole and absolute responsibility, are withheld or collected from you at the time of vesting. The Company will inform you of alternative methods to settle any applicable taxes due prior to the first vesting date of your Award.

b. For the purposes of determining when Shares otherwise issuable on account of your termination of employment or other association with Company will be issued, “termination of employment” or words of similar import, as used in this Agreement, shall mean the date as of which the Company and you reasonably anticipate that no further services will be performed by you, and shall be construed as the date that you first incur a “separation from service” for purposes of Code Section 409A on or following termination of employment or











other association with the Company. Furthermore, if you are a “specified employee” of a public company as determined pursuant to Code Section 409A as of your termination of employment or other association with the Company, any Shares otherwise issuable on account of your termination of employment or other association with the Company which constitute deferred compensation within the meaning of Code Section 409A and which are otherwise payable during the first six months following your termination of employment or other association with the Company shall be issued to you on the earlier of (1) the date of your death and (2) the first business day of the seventh calendar month immediately following the month in which your termination of employment or other association with the Company occurs.


12. Miscellaneous:

a.This Award is made under the provisions of the Plan and shall be interpreted in a manner consistent with it. To the extent that any provision in this Agreement is inconsistent with the Plan, the provisions of the Plan shall control. The interpretation of the Committee (or the Committee’s successor) of any provision of the Plan, this Agreement, or the Award, and determination with respect thereto or hereto by the Committee, shall be binding on all parties. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and operated so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Code Section 409A or shall comply with the requirements of such provision; provided however that in no event shall the Company be liable to the Participant for or with respect to any taxes, penalties or interest which may be imposed upon the Participant pursuant to Code Section 409A. To the extent that any Award granted by the Company is subject to Code Section 409A, such Award shall be subject to the terms and conditions that comply with the requirements of Code Section 409A to avoid adverse tax consequences under Code Section 409A.

b. Nothing contained in this Agreement shall confer, intend to confer or imply any rights to an employment relationship or rights to a continued employment relationship with the Company or any affiliate in your favor or limit the ability of the Company or an affiliate, as the case may be, to terminate, with or without Cause, in its sole and absolute discretion, your employment relationship with the Company or such affiliate, subject to the terms of any written Employment Agreement or Loyalty Agreement to which you are a party.

c. None of the Plan, this Agreement, or the Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any affiliate and You or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to the Award, such right shall be no greater than the right of any unsecured creditor of the Company or any Affiliate.

d. The Company shall not be required to deliver any shares of Common Stock until the requirements of any federal or state securities laws, rules or regulations or other laws or rules (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied.

e. An original record of this Agreement and all the terms hereof, executed by the Company, is held on file by the Company. To the extent there is any conflict between the terms contained in this Agreement and the terms contained in the original held by the Company, the terms of the original held by the Company shall control.

f. If any provision in this Agreement is determined to be invalid, void or unenforceable by the decision of any court of competent jurisdiction, which determination is not appealed or appealable for any reason whatsoever, the provision in question shall not be deemed to affect or impair the validity or enforceability of any other provision of this Agreement and











such invalid or unenforceable provision or portion thereof shall be severed from the remainder of this Agreement.

g. For any Participant who is an Executive Officer of the Company as defined in the Company’s Incentive Compensation Clawback Policy (“Clawback Policy”), this Award shall be subject to the Clawback Policy as such policy shall be adopted, and from time to time amended, by the Board or the Compensation Committee.

h. This Award is intended to be consistent with your Employment Agreement or Loyalty Agreement with the Company, if applicable, in effect as of the Award Date first specified above. To the extent that any provision of this Agreement is inconsistent with the terms of such other agreement between you and the Company in effect as of the Award Date, the provisions of this Agreement shall control with respect to the Award.

i.This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf) or by any other electronic means intended to preserve the original appearance of a document, will have the same effect as physical delivery of a paper document bearing an original signature.

j. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions thereof, and accepts the RSUs subject to all of the terms and conditions of the Plan and this Agreement. The Participant acknowledges that there may be adverse tax consequences upon the vesting and settlement of RSUs or disposition of the underlying Shares and the Participant has been advised to consult a tax advisor prior to such vesting, settlement or disposition.

In Witness Whereof, this Award has been executed by the Company as of the date first above written.


ADVANCE AUTO PARTS, INC.


By: ______________________________________
Natalie Schechtman
Executive Vice President, Human Resources


Accepted and agreed, including specifically but without limitation as to the treatment of this Award in accordance with the terms of the Plan and this Award notwithstanding any terms of an Employment/ Loyalty Agreement between the Company and the undersigned to the contrary:



By: ____________________________ ________________________
Electronic Signature Acceptance Date




Exhibit 10.2
Advance Auto Parts, Inc.

2021 Performance-Based Restricted Stock Unit Award Agreement


This certifies that Advance Auto Parts, Inc. (the “Company”) has granted to <Participant Name> (the “Participant”) an award of Performance-Based Restricted Stock Units (“PSUs”). This award of PSUs (this “Award”) represents the right to receive a like number of shares (“Shares”) of Advance Auto Parts, Inc. Common Stock, $.0001 par value per share (the “Common Stock”), as indicated in the terms outlined below, subject to certain restrictions and on the terms and conditions contained in this Performance-Based Restricted Stock Units Award Agreement (this “Agreement”) and the Advance Auto Parts, Inc. 2014 Long-Term Incentive Plan (the “Plan”). In the event of any conflict between the terms of the Plan and this Agreement, the terms of the Plan shall govern. Any terms not defined herein shall have the meaning set forth in the Plan.


1.    Grant of PSUs: As specified below, on the Award Date the following Award of PSUs (at Target Level) (the “Target Award”) has been granted to the Participant:

Award Date
Number of PSUs Granted
(at Target Level)
Award Date
Number of PSUs Granted

2.    Vesting: Subject to the remaining provisions of this Agreement:

The Participant’s PSUs may vest, in an amount up to the maximum vesting PSUs (defined below) on the Performance Vesting Date (defined below) subject to Participant’s continued employment or other association with the Company through such date and except as otherwise provided in Section 3 of this Agreement. The number of PSUs that may vest will be determined in accordance with the following rules, subject to certification by the Committee of the Company’s Relative Total Shareholder Return (“Relative TSR”) for the three-year period commencing on the Award Date and ending on the day prior to the third anniversary of the Award Date (the “Performance Period”). The last day of the Performance Period is referred to as the “Performance Vesting Date.”

The Company’s Relative TSR for the applicable Performance Period is measured relative to the S&P 500. If the Company achieves target level performance, the payout amount shall be the Number of Shares to Vest (at Target Level) listed in this Section 2. Payout amounts based on performance results between the threshold and maximum levels will be determined using straight line interpolation between specified points of performance. If the Company’s Relative TSR performance is less than the threshold level of Relative TSR performance set forth in Exhibit 1 to this Agreement, no PSUs based on the Company’s Relative TSR performance will vest. If the Company’s TSR results are negative during the applicable Performance Period, PSUs based on Relative TSR will not vest at more than 100% of the target level.

Any PSUs that may vest based on the Company’s Relative TSR performance will be converted to Deferred Share Units (“DSUs”) as of the Performance Vesting Date and will be required to be held for one year following the Performance Vesting Date.

The Participant’s “Maximum Vesting PSUs” is 200% of the number of PSUs indicated above in the box labeled “Number of PSUs Granted (at Target Level).”

3.    Termination of Service: If, prior to the Performance Vesting Date, the Participant’s employment or other association with the Company and its affiliates ends for any reason, the Participant’s rights to unvested PSUs shall be immediately and irrevocably forfeited and the unvested Shares canceled and neither the Company nor any affiliate shall have any further obligations to the Participant under this





Agreement. The foregoing notwithstanding, the following exceptions to the forfeiture of unvested PSUs apply:

a.    Retirement: If termination of employment or other affiliation is on account of Retirement (as defined below), then the Participant’s PSUs will vest on the Performance Vesting Date on a pro-rata basis for the number of full months worked during the applicable Performance Period and based on the actual level of achievement of the Performance criteria outlined in this Agreement. “Retirement” is defined as termination of employment with the Company following attainment of the following minimum age and tenure requirements:


1.    Age: 55 years of age; AND

2.    Tenure: 10 years of service, provided further that in the event the Participant came to be employed by the Company in conjunction with or as a result of a merger with or acquisition by the Company and received any service credit as a result of previous employment, the last three consecutive years of service must occur following the effective date of such merger or acquisition.

If, after termination of the Participant’s employment or other association with the Company on account of Retirement and prior to the third anniversary of the Award Date, you are employed in any capacity by Amazon Auto, AutoZone, Inc., O’Reilly Automotive, Inc. Genuine Parts Company and/or NAPA Auto Parts, or any aftermarket automotive parts distributor owned or operated by Icahn Automotive Group, LLC (including, but not limited to, Pep Boys and Auto Plus), any PSUs that have not vested as of the date of such employment shall be immediately and irrevocably forfeited.

b.    Disability: If termination of employment or other association with the Company is on account of Participant’s Disability, then the Participant’s PSUs will vest on the Performance Vesting Date on a pro-rata basis for the number of full months worked during the applicable Performance Period and based on the actual level of achievement of the performance criteria set forth in this Agreement. For purposes of this Agreement, “Disability” is defined as having become disabled within the meaning of Section 22 (e)(3) of the Internal Revenue Code of 1986, as amended (the “Code) or, if applicable, as defined in your Employment Agreement or Loyalty Agreement with the Company in effect as of the Award Date.

c.    Death: If termination of employment or other association with the Company is on account of the Participant’s death, then PSUs will vest on the Performance Vesting Date on a pro-rata basis for the number of full months worked during the applicable Performance Period and based on the actual level of achievement of the performance criteria set forth in this Agreement.

d.    Termination by the Company other than for Due Cause:

i.    For SVPs: Termination by the Company other than for Due Cause. If your employment or other association with the Company is involuntarily terminated prior to the Performance Vesting Date by the Company other than for Due Cause, as that term is defined in your Loyalty Agreement, your PSUs will vest on the Performance Vesting Date on a pro-rata basis for the number of full months worked during the applicable Performance Period and in accordance with the performance criteria set forth in this Agreement

ii.    For CEO/EVPs: Termination by the Company other than for Due Cause, Resignation from Employment for Good Reason. If your employment or other association with the Company is terminated prior to the Performance Vesting Date by the Company other than for Due Cause, or by you for Good Reason, as those terms are defined in your Employment Agreement, your PSUs will vest on the Performance Vesting Date





on a pro-rata basis for the number of full months worked during the applicable Performance Period and in accordance with the performance criteria set forth in this Agreement.

4.    Change of Control: Upon a Change of Control, the Company will determine the number of PSUs that are earned based on the actual level of achievement of the performance criteria outlined in this Agreement through the Change of Control date and any portion of the PSUs not earned will be forfeited. Following this determination, the earned PSUs will vest based on the Participant’s continued service with the Company through the original Performance Vesting Date in the event the Company’s corporate successor assumes, converts or replaces the Award. Any portion of the Participant’s earned PSUs (as determined pursuant to this Section 4) that have not yet vested will vest immediately:

a.    on the Change of Control date in the event the Company’s successor or its affiliate does not assume, convert, or replace the Award; or

b.    upon the termination of the Participant’s employment or other association with the Company or with the Company’s successor in the event the Award continues or the Company’s successor assumes, converts or replaces the Award, and the Participant’s employment or other association with the Company or its successor is terminated by the Company without Due Cause, as that term is defined in the Participant’s Loyalty Agreement, within 24 months of the Change of Control, or, if applicable, by the Company without Due Cause or by the Participant for Good Reason as those terms are defined in the Participant’s Employment Agreement, within 24 months following the Change of Control date.


5.    Non-Transferability of PSUs and DSUs: In the case of the DSUs described in Section 2 of this Award, until Shares are issued after the mandatory holding period has ended pursuant to this Agreement, the PSUs or DSUs may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of or encumbered, and no attempt to transfer unvested PSUs or DSUs for which the mandatory holding period has not ended, whether voluntary or involuntary, by operation of law or otherwise, shall vest the transferee with any interest or right in or with respect to the Shares. Any attempt to assign, alienate, pledge, attach, sell or otherwise transfer or encumber PSUs or the rights relating thereto shall be wholly ineffective and, if any such attempt is made, the PSUs shall be forfeited by the transferee and all of the transferee’s rights to such PSUs shall immediately terminate without any payment or consideration by the Company. The Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise your rights to receive any property distributable with respect to DSUs upon the Participant’s death.

6.    No Rights as a Stockholder; Dividend Equivalents: The Participant shall have no rights of a stockholder with respect to the Shares of Common Stock underlying the PSUs unless and until the date on which the Shares of Common Stock are issued in accordance with Section 7 of this Agreement. Solely with respect to PSUs that vest, you will be entitled to receive Dividend Equivalents to the extent that dividends are declared and paid on the Common Stock of the Company during the Performance Period. These Dividend Equivalents will be paid in cash as soon as practicable following the determination of the number of PSUs that vest, and in no case later than the end of the calendar year in which this determination is made by the Committee or, if later, the 15th day of the third month following the date of this determination. In addition, with respect to PSUs that are converted to DSUs as set forth in Section 2 of this Agreement, during the holding period you will be entitled to receive Dividend Equivalents to the extent that dividends are declared and paid on the Common Stock of the Company during such period. The Company shall pay currently (and in no case later than the end of the calendar year in which the dividend was paid to the holders of the Common Stock or, if later, the 15th day of the third month following the date the dividend is paid to holders of Common Stock), in cash, an amount equal to the Dividend Equivalents with respect to Participant’s DSUs. Any Dividend Equivalent described in this paragraph shall be paid, if at all, without interest or other earnings. Except as may be provided under Section 8 of the Plan, the Company will make no adjustment for dividends (ordinary or extraordinary and whether in






cash, securities or other property) or distributions of other rights for which the record date is prior to the Performance Vesting Date of a PSU.

7.    Issuing Shares: Upon the expiration of the holding period for DSUs pursuant to Section 2 of this Agreement and payment of the applicable withholding taxes pursuant to Section 11 below, the Company shall cause the Shares of Common Stock to be issued in book-entry form, registered in the Participant’s name. Payment shall be made within thirty days of the expiration of the holding period for DSUs pursuant to Section 2, but not later than March 15, 2025.

8.    Notices: Except as otherwise provided herein, all notices, requests, demands and other communications under this Award shall be in writing, and if by telecopy, shall be deemed to have been validly served, given or delivered when sent, or if by personal delivery or messenger or courier service, shall be deemed to have been validly served, given or delivered upon actual delivery (but in no event may notice be given by deposit in the United States mail), at the following addresses, telephone and facsimile numbers (or such other address(es), telephone and facsimile numbers a party may designate for itself by like notice):

a.    If to the Company: Advance Auto Parts, Inc. located at 5008 Airport Road, Roanoke, Virginia, 24012, Attention: General Counsel or by telephone at (540) 561-1173 or telecopy at (540) 561-1448; and

b.    If to you, then to your home address on record at Advance Auto Parts or your business address at Advance Auto Parts.

9.    Non-Competition: Participant acknowledges and agrees that the Company is engaged in a highly competitive business, and that by virtue of Participant’s position and responsibilities as an employee of the Company and Participant’s access to Confidential Information, engaging in a business that is directly competitive with the Company will cause it great and irreparable harm. Accordingly, Participant agrees and covenants that during Participant’s employment with the Company and for a period of one (1) year after separation of his/her employment with the Company, whether such separation is voluntary or involuntary, Participant shall not, on his/her own behalf or on another’s behalf, (a) accept employment by or provide services for a Restricted Company, as that term is defined in Participant’s applicable Loyalty Agreement or Employment Agreement, in any capacity, role or position with substantially the same or similar duties as Participant performed during Participant’s employment with the Company; (b) provide services, including consulting or contractor services for or on behalf of a Restricted Company, as that term is defined in Participant’s applicable Loyalty Agreement or Employment Agreement, which are the same or substantially similar as the duties Participant performed during Participant’s employment with the Company; or (c) provide services, including consulting or contractor services which would be directly or indirectly competitive with the Company. Participant understands that the business of the Company and Participant’s responsibilities on behalf of the Company have been nationwide and companywide in scope and that the Company has operations in certain international jurisdictions. Accordingly, Participant agrees that this restriction will apply anywhere within the United States, including the United States’ territories and possessions (including, but not limited to, Puerto Rico and the U.S. Virgin Islands) and to Canada, including its provinces, territories and possessions. In the event this territory is determined by a court of competent jurisdiction to be overbroad, the territory may be reduced to any combination of the following which the court deems reasonable: the Continental United States; the states of: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; the United States’ territories and possessions including, but not limited to, Puerto Rico and the U.S. Virgin Islands); and to Canada, including its provinces, territories, and possessions.The restrictive periods set forth in this provision shall not expire and shall be tolled during any period in which Participant is in violation of such






restrictions, and therefore such restrictive periods shall be extended for a period equal to the duration of Participant’s violations thereof.

a.    For purposes of this Agreement, “Confidential Information” means any proprietary information prepared or maintained in any format, including personnel information or data of the Company, technical data, trade secrets or know-how in which the Company or its affiliates or related entities have an interest, including, but not limited to, business records, contracts, research, product or service plans, products, services, customer lists and customers (including, but not limited to, vendors to the Company or its affiliates or related entities on whom Participant called, with whom Participant dealt or with whom Participant became acquainted during the term of Participant’s employment), pricing data, costs, markets, expansion plans, summaries, marketing and other business strategies, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration or marketing, financial or other business information obtained by Participant or disclosed to Participant by the Company or its affiliates or related entities or any other person or entity during the term of Participant’s employment with the Company either directly or indirectly electronically, in writing, orally, by drawings, by observation of services, systems or other aspects of the business of the Company or its affiliates or related entities or otherwise. Confidential Information does not include information that: (A) was available to the public prior to the time of disclosure; or (B) becomes available to the public through no act or omission of Participant.

b.    Nothing in this Agreement shall prohibit or restrict Participant from lawfully (A) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by other governmental or regulatory agency, entity, or official(s) or self-regulatory organization (collectively, “Governmental Authorities”) regarding a possible violation of any law, rule, or regulation; (B) responding to any inquiry or legal process directed to you individually (and not directed to the Company and/or its subsidiaries or affiliates) from any such Governmental Authorities, including an inquiry about the existence of this Agreement or its underlying facts or circumstances; (C) testifying, participating or otherwise assisting in an action or proceeding by any such Governmental Authorities relating to a possible violation of law; or (D) making any other disclosures that are protected under the whistleblower provisions of any applicable law, rule, or regulation. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made to Participant’s attorney in relation to a lawsuit for retaliation against Participant for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Nor does this Agreement require Participant to obtain prior authorization from the Company before engaging in any conduct described in this paragraph, or to notify the Company that Participant has engaged in any such conduct. Additionally, nothing in this Agreement shall prohibit or restrict Participant from providing legal representation, engaging in the practice of law or any communication or contact with Participant, regardless of who initiates it, regarding any legal representation or the practice of law.

c.    In the event that Participant violates any of the terms of this Section 9, Participant understands and agrees that in addition to the Company’s rights to obtain injunctive relief and damages for such violation, Participant shall return to the Company any shares of Common Stock received by Participant or Participant’s personal representative that vested on or after any such violation and pay to the Company in cash the amount of any proceeds received by Participant or Participant’s personal representative from the disposition or transfer of any such stock, and Participant’s unvested PSUs shall be immediately and irrevocably forfeited.










10.    Confidentiality: Due to the confidential information contained in this Agreement, including long-term performance measures, the Participant agrees not to disclose the terms of this Agreement to anyone other than the members of the Participant’s immediate family, Participant’s legal counsel, Participant’s accountant(s) and/or tax advisor(s) and/or Participant’s financial advisor(s), or as otherwise provided in Section 9 of this Agreement. Should the details of this Agreement be shared with the aforementioned, it shall be on a confidential basis.

11.    Income Tax Matters:

a.    The Company makes no representation or warranty as to the tax treatment of your receipt or vesting of the PSUs or upon your sale or other disposition of the Shares received upon vesting of your PSUs. You should rely on your own tax advisors for such advice. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are your sole and absolute responsibility, are withheld or collected from you at the time of vesting. The Company will inform you of alternative methods to settle any applicable taxes due prior to the first vesting date of your Award.

b.    For the purposes of determining when Shares otherwise issuable on account of your termination of employment or other association with Company will be issued, “termination of employment” or words of similar import, as used in this Agreement, shall mean the date as of which the Company and you reasonably anticipate that no further services will be performed by you, and shall be construed as the date that you first incur a “separation from service” for purposes of Code Section 409A on or following termination of employment or other association with the Company. Furthermore, if you are a “specified employee” of a public company as determined pursuant to Code Section 409A as of your termination of employment or other association with the Company, any Shares otherwise issuable on account of your termination of employment or other association with the Company which constitute deferred compensation within the meaning of Code Section 409A and which are otherwise payable upon your separation from service during the first six months following your termination of employment or other association with the Company shall be issued to you on the earlier of (1) the date of your death and (2) the first business day of the seventh calendar month immediately following the month in which your termination of employment or other association with the Company occurs to the extent required to comply with Code Section 409A.

12.    Miscellaneous:

a.    This Award is made under the provisions of the Plan and shall be interpreted in a manner consistent with it. To the extent that any provision in this Agreement is inconsistent with the Plan, the provisions of the Plan shall control. The interpretation of the Committee (or its successor) of any provision of the Plan, this Agreement, or the Award, and any determination with respect thereto or hereto by the Committee (or its successor), shall be binding on all parties. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and operated so that the payment of the benefits set forth herein shall either be exempt from the requirements of Code Section 409A or shall comply with the requirements of such provision; provided, however, that in no event shall the Company be liable to the Participant for or with respect to any taxes, penalties or interest which may be imposed upon the Participant pursuant to Code Section 409A. To the extent that any Award granted by the Company is subject to Code Section 409A, such Award shall be subject to the terms and conditions that comply with the requirements of Code Section 409A to avoid adverse tax consequences under Code Section 409A.

b.    Nothing contained in this Agreement shall confer, intend to confer or imply any rights to an employment relationship or rights to a continued employment relationship with the








Company or any affiliate in your favor or limit the ability of the Company or an affiliate, as the case may be, to terminate, with or without Cause, in its sole and absolute discretion, your employment relationship with the Company or such affiliate, subject to the terms of any written employment agreement to which you are a party.

c.    None of the Plan, this Agreement, or the Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any affiliate and You or any other person. To the extent that any person acquires a right to receive payments from the Company or any affiliate pursuant to the Award, such right shall be no greater than the right of any unsecured creditor of the Company or any affiliate.

d.    The Company shall not be required to deliver any shares of Common Stock until the requirements of any federal or state securities laws, rules or regulations or other laws or rules (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied.

e.    An original record of this Agreement and all the terms hereof, executed by the Company, is held on file by the Company. To the extent there is any conflict between the terms contained in this Agreement and the terms contained in the original held by the Company, the terms of the original held by the Company shall control.

f.    If any provision in this Agreement is determined to be invalid, void or unenforceable by the decision of any court of competent jurisdiction, which determination is not appealed or appealable for any reason whatsoever, the provision in question shall not be deemed to affect or impair the validity or enforceability of any other provision of this Agreement and such invalid or unenforceable provision or portion thereof shall be severed from the remainder of this Agreement.

g.    For any Participant who is an Executive Officer of the Company as defined in the Company’s Incentive Compensation Clawback Policy (“Clawback Policy”), this Award shall be subject to the Clawback Policy as such policy shall be adopted, and from time to time amended, by the Board or the Compensation Committee.

h.    This Agreement is intended to be consistent with your Employment Agreement or Loyalty Agreement with the Company, if applicable, in effect on the Award Date first written above. To the extent that any provision of this Agreement is inconsistent with the terms of such agreement with the Company in effect as of the Award Date, the provisions of this Agreement shall control with respect to this Award.

i.    This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf) or by any other electronic means intended to preserve the original appearance of a document, will have the same effect as physical delivery of a paper document bearing an original signature.

j.    Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions thereof and accepts the PSUs subject to all of the terms and conditions of the Plan and this Agreement. The Participant acknowledges that there may be adverse tax consequences upon the vesting of PSUs, settlement of DSUs, or disposition of the underlying Shares and the Participant has been advised to consult a tax advisor prior to such vesting, settlement or disposition.













In Witness Whereof, this Award has been executed by the Company as of the date first above written.


ADVANCE AUTO PARTS, INC.


By: ______________________________________
Natalie Schechtman
Executive Vice President, Human Resources


Accepted and agreed, including specifically but without limitation as to the treatment of this Award in accordance with the terms of the Plan and this Award notwithstanding any terms of an Employment/ Loyalty Agreement between the Company and the undersigned to the contrary:



By: ____________________________ ________________________
Electronic Signature Acceptance Date

    
Exhibit 10.3

Advance Auto Parts, Inc.

2021 Time-Based Nonstatutory Option Award Agreement


This certifies that Advance Auto Parts, Inc. (the “Company”) has granted to <Participant Name> (the “Participant”) an award of a Nonstatutory Option (an “Option”). This award for an Option (this “Award”) represents the right to purchase a number of shares (“Shares”) of Advance Auto Parts, Inc. Common Stock, $.0001 par value per share (the “Common Stock”), as indicated in the terms outlined below, subject to certain restrictions and on the terms and conditions contained in this agreement (“Agreement”) and the Advance Auto Parts, Inc. 2014 Long-Term Incentive Plan (the “Plan”). In the event of any conflict between the terms of the Plan and this Agreement, the terms of the Plan shall govern. Any terms not defined herein shall have the meaning set forth in the Plan.

1.    Grant of Option: An Option to purchase the following number of Shares has hereby been granted to the Participant:

Award Date
Number of Shares Purchasable
Exercise Price
Award Date
Number of Shares Purchasable
Exercise Price

2.    Vesting Schedule. Subject to the remaining provisions of this Award, the Option shall vest and become exercisable in approximately equal one-third portions on each of the first three anniversaries of the Award Date, commencing on the first anniversary of the Award Date and becoming fully vested on the third anniversary of the Award Date if the Participant remains continuously employed by the Company until each respective vesting date:

Vesting Date / # of shares vested

3.    Termination for Due Cause: Notwithstanding anything else in this Agreement, if the Participant engages in conduct that constitutes Due Cause at any time during the Participant’s employment or other association or thereafter, the Option shall immediately terminate, and the Participant shall immediately and irrevocably:

a.    forfeit the portion of the Option not yet exercised; and

b.    forfeit all Shares delivered, or otherwise subject to delivery, upon exercise of the Option on or after the Participant first engages conduct that constitutes Due Cause as determined in the Committee’s sole discretion, upon refund by the Company of the Exercise Price to the extent paid.

For purposes of this Agreement, “Due Cause” has the meaning ascribed to this term in the Participant’s Loyalty Agreement (in the case of SVPs) or Employment Agreement (in the case of CEO/EVPs).

4.    Change of Control: Upon a Change of Control, any then the unvested portion of the Option will vest and become exercisable immediately:

a.    on the Change of Control date in the event the Company’s successor or its affiliate does not assume, convert, or replace the Award; or

b.    upon the termination of the Participant’s employment or other association with the Company or with its successor in the event the Award continues or the Company’s successor assumes, converts or replaces the Award and Participant’s employment or other association with the Company or its successor is terminated without Due Cause, as determined by the






    
Committee or its applicable successor, within 24 months following the Change of Control date.

5.    Term of Option.

a.    The Option shall have a term of ten (10) years from the Award Date and shall terminate at the expiration of that period, unless it is terminated at an earlier date pursuant to the provisions of this Agreement or the Plan.

b.    The Option shall automatically terminate upon the happening of the first of the following events:

i.    The expiration of the one‑year period after the Participant’s employment or other association with the Company is terminated on account of death or Disability. For the purposes of this Agreement, Disability is defined as the Participant having become disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.

ii.    The expiration of the 90-day period after the Participant’s employment or other association with the Company is terminated for any reason other than for Due Cause, death, or Disability.

iii.    The date on which the Participant’s employment or other association with the Company is terminated for Due Cause.


c.    Notwithstanding the foregoing, in no event may the Option be exercised after the date that is immediately before the tenth (10th) anniversary of the Award Date. Any portion of the Option that is not exercisable at the time the Participant’s employment or other association with the Company is terminated shall immediately terminate.

6.    Exercise Procedures and Restrictions.

a.    Subject to the provisions of Sections 2 through 5 above, the Participant may exercise part or all of the exercisable Option by giving the Company written notice, in the manner provided in this Agreement, of intent to exercise, specifying the number of Shares as to which the Option is to be exercised and the method of payment. Payment of the Exercise Price shall be made in accordance with procedures established by the Committee from time to time based on the type of payment being made but, in any event, prior to issuance of the Shares. The Participant shall pay the Exercise Price (i) in cash or check payable to the order of the Company, (ii) by delivery (either actually or by attestation) to the Company of Shares having a Market Value equal to the Exercise Price, (iii) by surrender of the Option as to all or part of the shares of Shares for which the Option is then exercisable in exchange for Shares having an aggregate Market Value equal to the difference between (1) the aggregate Market Value of the surrendered portion of the Option, and (2) the aggregate exercise price under the Option for the surrendered portion of the Option, or (iv) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board.

b.    Only the Participant (or the Participant’s legal representative during a period of the Participant’s Disability) may exercise the Option during the Participant’s lifetime. After the Participant’s death, the Option shall be exercisable (subject to the limitations specified in the Plan) solely by the legal representatives of the Participant, or by the person who acquires the right to exercise the Option by will or by the laws of descent and distribution, to the extent that the Option is exercisable pursuant to this Agreement.

c.    The obligation of the Company to deliver Shares upon exercise of the Option shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies



    
as may be deemed appropriate by the Committee, including such actions as Company/Committee counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations. The Company may require that the Participant (or other person exercising the Shares after the Participant’s death or Disability) represent that the Participant is purchasing Shares for the Participant’s own account and not with a view to or for sale in connection with any distribution of the Shares, or such other representation as the Committee deems appropriate.

d.    All obligations of the Company under this Agreement shall be subject to the rights of the Company as set forth in the Plan to withhold amounts required to be withheld for any withholding taxes, if applicable. Subject to Committee approval, the Participant may elect to satisfy any withholding tax obligation of the Employer with respect to the Option by having Shares withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities (or such other rate approved by the Committee that does not result in adverse accounting consequences).



7.    Non-Transferability of Option: The Award (including the Option hereunder) shall not be transferable and may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. In the event of any attempt by the Participant to sell, transfer, pledge, assign, or otherwise alienate or hypothecate of the Option or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Option by notice to the Participant, and the Option and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s parents, subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Participant’s consent.

8.    Notices: Except as otherwise provided herein, all notices, requests, demands and other communications under this Award shall be in writing, and if by telecopy, shall be deemed to have been validly served, given or delivered when sent, or if by personal delivery or messenger or courier service, shall be deemed to have been validly served, given or delivered upon actual delivery (but in no event may notice be given by deposit in the United States mail), at the following addresses, telephone and facsimile numbers (or such other address(es), telephone and facsimile numbers a party may designate for itself by like notice):

a.    If to the Company: Advance Auto Parts, Inc. located at 5008 Airport Road, Roanoke, Virginia, 24012, Attention: General Counsel or by telephone at (540) 561-1173 or telecopy at (540) 561-1448; and

b.    If to you, the Participant, to your home address on record at Advance Auto Parts or your business address at Advance Auto Parts.

9.    Non-Competition: Participant acknowledges and agrees that the Company is engaged in a highly competitive business, and that by virtue of Participant’s position and responsibilities as an employee of the Company and Participant’s access to Confidential Information, engaging in a business that is directly competitive with the Company will cause it great and irreparable harm. Accordingly, Participant agrees and covenants that during Participant’s employment with the Company and for a period of one (1) year after separation of his/her employment with the Company, whether such separation is voluntary or involuntary, Participant shall not, on his/her own behalf or on another’s behalf, (a) accept employment by or provide services for a Restricted Company, as that term is defined in Participant’s applicable Loyalty Agreement or Employment Agreement, in any capacity, role or position with substantially the same or similar duties as Participant performed during Participant’s employment with the Company; (b) provide services, including consulting or contractor services for or on behalf of a Restricted Company, as that term is defined in Participant’s applicable Loyalty Agreement or Employment Agreement, which are the same or substantially similar as the duties Participant performed during Participant’s employment with the Company; or (c) provide



    
    
services, including consulting or contractor services which would be directly or indirectly competitive with the Company. Participant understands that the business of the Company and Participant’s responsibilities on behalf of the Company have been nationwide and companywide in scope and that the Company has operations in certain international jurisdictions. Accordingly, Participant agrees that this restriction will apply anywhere within the United States, including the United States’ territories and possessions (including, but not limited to, Puerto Rico and the U.S. Virgin Islands) and Canada, including its provinces, territories and possessions. In the event this territory is determined by a court of competent jurisdiction to be overbroad, the territory may be reduced to any combination of the following which the court deems reasonable: the Continental United States; the states of: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; the United States’ territories and possessions including, but not limited to, Puerto Rico and the U.S. Virgin Islands; and Canada and its individual provinces and territories. The restrictive periods set forth in this provision shall not expire and shall be tolled during any period in which Participant is in violation of such restrictions, and therefore such restrictive periods shall be extended for a period equal to the duration of Participant’s violations thereof.



a.    For purposes of this Agreement, “Confidential Information” means any proprietary information prepared or maintained in any format, including personnel information or data of the Company, technical data, trade secrets or know-how in which the Company or its affiliates or related entities have an interest, including, but not limited to, business records, contracts, research, product or service plans, products, services, customer lists and customers (including, but not limited to, vendors to the Company or its affiliates and related entities on whom Participant called, with whom Participant dealt or with whom Participant became acquainted during the term of Participant’s employment), pricing data, costs, markets, expansion plans, summaries, marketing and other business strategies, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration or marketing, financial or other business information obtained by Participant or disclosed to Participant by the Company or its affiliates or related entities or any other person or entity during the term of Participant’s employment with the Company or its affiliates, either directly or indirectly, electronically, in writing, orally, by drawings, by observation of services, systems or other aspects of the business of the Company or its affiliates or related entities or otherwise. Confidential Information does not include information that: (A) was available to the public prior to the time of disclosure; or (B) becomes available to the public through no act or omission of Participant.


b.    Nothing in this Agreement shall prohibit or restrict Participant from lawfully (A) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by other governmental or regulatory agency, entity, or official(s) or self-regulatory organization (collectively, “Governmental Authorities”) regarding a possible violation of any law, rule, or regulation; (B) responding to any inquiry or legal process directed to you individually (and not directed to the Company and/or its subsidiaries or affiliates) from any such Governmental Authorities, including an inquiry about the existence of this Agreement or its underlying facts or circumstances; (C) testifying, participating or otherwise assisting in an action or proceeding by any such Governmental Authorities relating to a possible violation of law; or (D) making any other disclosures that are protected under the whistleblower provisions of any applicable law, rule, or regulation. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made to Participant’s attorney in relation to a lawsuit for retaliation against     




    

Participant for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Nor does this Agreement require Participant to obtain prior authorization from the Company before engaging in any conduct described in this paragraph, or to notify the Company that Participant has engaged in any such conduct. Additionally, nothing in this Agreement shall prohibit or restrict Participant from providing legal representation, engaging in the practice of law or any communication or contact with Participant, regardless of who initiates it, regarding any legal representation or the practice of law.

c.    In the event that Participant violates any of the terms of this Section 9, Participant understands and agrees that in addition to the Company’s rights to obtain injunctive relief and damages for such violation, Participant shall immediately and irrevocably:

i.    forfeit the portion of the Option not yet exercised; and

ii.    forfeit all Shares delivered, or otherwise subject to delivery, upon exercise of the Option on or after the Participant first engages conduct that constitutes Due Cause as determined in the Committee’s sole discretion, upon refund by the Company of the Exercise Price to the extent paid.


10.    Confidentiality: The Participant agrees not to disclose the terms of this Agreement to anyone other than the members of the Participant’s immediate family, Participant’s legal counsel, Participant’s accountant(s) and/or tax advisor(s) and/or Participant’s financial advisor(s), or as otherwise provided in Section 9 of this Agreement. Should the details of this Agreement be shared with the aforementioned, it shall be on a confidential basis.    

11.    Income Tax Matters: The Company makes no representation or warranty as to the exercise of the Option or upon your receipt or sale or other disposition of the Shares purchased under the Option. You should rely on your own tax advisors for such advice. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are your sole and absolute responsibility, are withheld or collected from you at the time of vesting. The Company will inform you of alternative methods to settle any applicable taxes due prior to the first vesting date of your Award.

12.    Miscellaneous:

a.    This Award is made under the provisions of the Plan and shall be interpreted in a manner consistent with it. To the extent that any provision in this Agreement is inconsistent with the Plan, the provisions of the Plan shall control. The interpretation of the Committee (or the Committee’s successor) of any provision of the Plan, this Agreement, or the Award, and any determination with respect thereto or hereto by the Committee, shall be binding on all parties.

b.    Nothing contained in this Agreement shall confer, intend to confer or imply any rights to an employment relationship or rights to a continued employment relationship with the Company or any affiliate in your favor or limit the ability of the Company or an affiliate, as the case may be, to terminate, with or without Due Cause, in its sole and absolute discretion, your employment relationship with the Company or such affiliate, subject to the terms of any written Employment Agreement or Loyalty Agreement to which you are a party.

c.    None of the Plan, this Agreement, or the Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any affiliate and You or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to the Award, such right shall be no greater than the right of any unsecured creditor of the Company or any Affiliate.                        




    

d.    An original record of this Agreement and all the terms hereof, executed by the Company, is held on file by the Company. To the extent there is any conflict between the terms contained in this Agreement and the terms contained in the original held by the Company, the terms of the original held by the Company shall control.

e.    If any provision in this Agreement is determined to be invalid, void or unenforceable by the decision of any court of competent jurisdiction, which determination is not appealed or appealable for any reason whatsoever, the provision in question shall not be deemed to affect or impair the validity or enforceability of any other provision of this Agreement and such invalid or unenforceable provision or portion thereof shall be severed from the remainder of this Agreement.

f.    For any Participant who is an Executive Officer of the Company as defined in the Company’s Incentive Compensation Clawback Policy (“Clawback Policy”), this Award shall be subject to the Clawback Policy as such policy shall be adopted, and from time to time amended, by the Board or the Compensation Committee.

g.    This Agreement is intended to be consistent with your Employment Agreement or Loyalty Agreement with the Company, if applicable, in effect on the Award Date first written above. To the extent that any provision of this Agreement is inconsistent with the terms of such agreement with the Company in effect as of the Award Date, the provisions of this Agreement shall control with respect to this Award.

h.    This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf) or by any other electronic means intended to preserve the original appearance of a document, will have the same effect as physical delivery of a paper document bearing an original signature.

i.    The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions thereof, and accepts the Option subject to all of the terms and conditions of the Plan and this Agreement. The Participant acknowledges that there may be adverse tax consequences upon the exercise of the Option or disposition of Shares acquired upon exercise of the Option and the Participant has been advised to consult a tax advisor prior to such vesting, settlement or disposition.


In Witness Whereof, this Award has been executed by the Company as of the date first above written.


ADVANCE AUTO PARTS, INC.


By: ______________________________________
Natalie Schechtman
Executive Vice President, Human Resources


Accepted and agreed, including specifically but without limitation as to the treatment of this Award in accordance with the terms of the Plan and this Award notwithstanding any terms of an Employment/ Loyalty Agreement between the Company and the undersigned to the contrary:



By: ____________________________ ________________________
Electronic Signature Acceptance Date


Exhibit 22.1

List of the Issuer and its Guarantor Subsidiaries

As of April 24, 2021, the following subsidiaries of Advance Auto Parts, Inc. (the “Issuer”) guarantee the 4.50% senior unsecured notes due December 1, 2023 (the “2023 Notes”), the 1.75% senior unsecured notes due October 1, 2027 (the “2027 Notes”) and the 3.90% senior unsecured notes due April 15, 2030 (the “2030 Notes”), each issued by the Issuer:

Entity Jurisdiction of
Incorporation or
Organization 		2023 Notes 2027 Notes 2030 Notes
Advance Auto Parts, Inc. Delaware Issuer Issuer Issuer
AAP Financial Services, Inc. Virginia Guarantor Guarantor Guarantor
Advance Auto Business Support, LLC Virginia Guarantor Guarantor Guarantor
Advance Auto Innovations, LLC Virginia Guarantor Guarantor Guarantor
Advance e-Service Solutions, Inc. Virginia Guarantor Guarantor Guarantor
Advance Patriot, Inc. Delaware Guarantor Guarantor Guarantor
Advance Stores Company, Incorporated Virginia Guarantor Guarantor Guarantor
Advance Trucking Corporation Virginia Guarantor Guarantor Guarantor
Autopart International, Inc. Massachusetts Guarantor Guarantor Guarantor
B.W.P. Distributors, Inc. New York Guarantor Guarantor Guarantor
Crossroads Global Trading Corp. Virginia Guarantor Guarantor Guarantor
Discount Auto Parts, LLC Virginia Guarantor Guarantor Guarantor
Driverside, Inc. Delaware Guarantor Guarantor Guarantor
E-Advance, LLC Virginia Guarantor Guarantor Guarantor
General Parts Distribution LLC North Carolina Guarantor Guarantor Guarantor
General Parts International, Inc. North Carolina Guarantor Guarantor Guarantor
General Parts, Inc. North Carolina Guarantor Guarantor Guarantor
Golden State Supply LLC Nevada Guarantor Guarantor Guarantor
GPI Technologies LLC Delaware Guarantor Guarantor Guarantor
Lee Holdings NC, Inc. Delaware Guarantor Guarantor Guarantor
MotoLogic, Inc. Delaware Guarantor Guarantor Guarantor
Straus-Frank Enterprises, LLC Texas Guarantor Guarantor Guarantor
Western Auto of Puerto Rico, Inc. Delaware Guarantor Guarantor Guarantor
Western Auto of St. Thomas, Inc. Delaware Guarantor Guarantor Guarantor
WORLDPAC Puerto Rico, LLC Delaware Guarantor Guarantor Guarantor
WORLDPAC, Inc. Delaware Guarantor Guarantor Guarantor
Worldwide Auto Parts, Inc. California Guarantor Guarantor Guarantor



Exhibit 31.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas R. Greco, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Advance Auto Parts, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: June 2, 2021


/s/ Thomas R. Greco
Thomas R. Greco
President and Chief Executive Officer and Director



Exhibit 31.2
 
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey W. Shepherd, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Advance Auto Parts, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: June 2, 2021


/s/ Jeffrey W. Shepherd
Jeffrey W. Shepherd
Executive Vice President, Chief Financial Officer



Exhibit 32.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas R. Greco, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and 18 U.S.C. Section 1350, that, to my knowledge, the Quarterly Report on Form 10-Q of Advance Auto Parts, Inc. for the quarterly period ended April 24, 2021 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that the information contained in such Report fairly presents in all material respects the financial condition and results of operations of the Company. The foregoing certification is being furnished to the Securities and Exchange Commission as part of the accompanying Report.

 
Date: June 2, 2021 /s/ Thomas R. Greco
Thomas R. Greco
President and Chief Executive Officer and Director


I, Jeffrey W. Shepherd, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and 18 U.S.C. Section 1350, that, to my knowledge, the Quarterly Report on Form 10-Q of Advance Auto Parts, Inc. for the quarterly period ended April 24, 2021 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that the information contained in such Report fairly presents in all material respects the financial condition and results of operations of the Company. The foregoing certification is being furnished to the Securities and Exchange Commission as part of the accompanying Report.

Date: June 2, 2021 /s/ Jeffrey W. Shepherd
Jeffrey W. Shepherd
Executive Vice President, Chief Financial Officer