Advance Auto Parts Reports Third Quarter 2025 Results 3.0%comparable store sales growth and 4.4justed operating income margin Reaffirms midpoint of full year comparable sales growth and adjusted operating margin guidance Ended the quarter with a strong liquidity position;Over$3 billion of cash on the balance sheet RALEIGH,N.C.,October 30,2025-Advance Auto Parts,Inc.(NYSE:AAP),a leading automotive aftermarket parts provider in North America that serves both professional installer and do-it-yourself customers,announced its financial results for the third quarter ended October 4,2025.We delivered our strongest quarterly performance in over two years,thanks to the teams determination,commitment to our turnaround objectives,and their dedication to serving our customers,said Shane OKelly,president and chief executive officer.Our comparable sales performance was led by growth in the Pro channel.The DIY channel also delivered positive comparable sales growth in the quarter.We continue to make progress on our strategic priorities,and based on our updated guidance we are on track to deliver approximately 200-basis points of annual margin expansion in the first year of our turnaround.Our initiatives are geared toward delivering sustained,profitable growth and we remain committed to advancing our strategic priorities to create shareholder value over the long-term.Third Quarter 2025 Results(1,2)Third quarter 2025 net sales totaled$2.0 billion,compared with$2.1 billion in the third quarter of the prior year.Comparable store sales for the third quarter 2025 increased 3.0%.The Companys third quarter 2025 gross profit was$0.9 billion,or 43.3%of net sales compared with$0.9 billion,or 42.3%in the third quarter of the prior year.Adjusted gross profit was$0.9 billion,or 44.8%of net sales compared with$0.9 billion,or 42.3%in the third quarter of the prior year.The margin expansion was driven by savings associated with the footprint optimization activity completed in March and reduction in product costs driven by strategic sourcing initiatives.The Companys third quarter 2025 selling,general and administrative(SG&A)expenses were$0.9 billion,or 42.2%of net sales compared with$0.9 billion,or 42.3%in the third quarter of the prior year.Adjusted SG&A expenses were$0.8 billion,or 40.4%of net sales in the third quarter of 2025 compared with$0.9 billion,or 41.5%in the third quarter of 2024.The reduction in SG&A expenses was primarily related to operation of fewer stores compared to last year.(1)All comparisons are based on continuing operations for the same time period in the prior year.The Company calculates comparable store sales based on the change in store sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations.The Company includes sales from relocated stores in comparable store sales from the original date of opening.Comparable store sales is intended only as supplemental information and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the United States of America(GAAP).(2)Comparative financial information related to results from continuing operations has been recast to reflect the presentation of our former Worldpac,Inc.business(“Worldpac”)as discontinued operations.Refer to the Companys Annual Report on Form 10-K for 2024,filed with the Securities and Exchange Commission(“SEC”)on February 26,2025.The Companys third quarter 2025 operating income was$22 million,or 1.1%of net sales,compared with break-even operating income,or 0.0%in the third quarter of the prior year.Adjusted operating income was$90 million,or 4.4%of net sales,compared with adjusted operating income of$16 million,or 0.7%in the third quarter of 2024.The Companys diluted earnings(loss)per share for the quarter was$(0.02),compared with$(0.42)in the third quarter of 2024.The Companys adjusted diluted earnings(loss)per share was$0.92 compared with adjusted diluted earnings per share of$(0.05)in the third quarter of 2024.Net cash used in operating activities was$118 million through the third quarter of 2025 versus$81 million of cash provided by operating activities in the same period of the prior year.Free cash flow through the third quarter of 2025 was an outflow of$277 million compared with an outflow of$49 million in the same period of the prior year.Free cash flow through the third quarter of 2025 includes approximately$130 million of cash charges related to restructuring and other related expenses.Capital Allocation On October 27,2025,the Company declared a regular cash dividend of$0.25 per share to be paid on January 23,2026,to all common stockholders of record as of January 9,2026.Full Year 2025 Guidance(53 weeks)The Company has updated full year guidance to reflect operating assumptions for the fourth quarter of 2025 along with reaffirming the midpoint of its prior full year comparable store sales and adjusted operating income margin expectations.Full year 2025 guidance assumes current tariffs remain in place for the remainder of 2025.As of October 30,2025 Prior Guidance($in millions,except per share data)Low High Low High Net sales from continuing operations(1)$8,550$8,600$8,400$8,600 Comparable store sales(52 weeks)(2)0.7%1.3%0.5%1.5justed operating income margin from continuing operations(3)2.4%2.6%2.0%3.0justed diluted EPS from continuing operations(3)$1.75$1.85$1.20$2.20 Capital expenditures Approx.$250 Approx.$300 Free cash flow(3)($90)-($80)($85)-($25)New store growth Store openings 30 new stores 30 new stores Market hub openings 14 new market hubs 10 new market hubs(1)Includes approximately$100 to$120 million of net sales in the 53rd week.(2)The Company calculates comparable store sales based on the change in store sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations.The Company includes sales from relocated stores in comparable store sales from the original date of opening.(3)Adjusted operating income margin from continuing operations,Adjusted diluted EPS from continuing operations and Free cash flow are non-GAAP measures.For a better understanding of the Companys non-GAAP adjustments,refer to the reconciliation of non-GAAP financial measures in the accompanying financial tables.The Company is not able to provide a reconciliation of these forward-looking non-GAAP measures because it is unable to predict with reasonable accuracy the value of certain adjustments and as a result,the comparable GAAP measures are unavailable without unreasonable efforts.Investor Conference Call The Company will detail its results for the third quarter ended October 4,2025,via a webcast scheduled to begin at 8 a.m.Eastern Time on Thursday,October 30,2025.The webcast will be accessible via the Investor Relations page of the Companys website(ir.AdvanceAutoP).To join by phone,please pre-register online for dial-in and passcode information.Upon registering,participants will receive a confirmation with call details and a registrant ID.While registration is open through the live call,the Company suggests registering a day in advance or at minimum 10 minutes before the start of the call.A replay of the conference call will be available on the Companys Investor Relations website for one year.About Advance Auto Parts Advance Auto Parts,Inc.is a leading automotive aftermarket parts provider that serves both professional installers and do-it-yourself customers.As of October 4,2025,Advance operated 4,297 stores primarily within the United States,with additional locations in Canada,Puerto Rico and the U.S.Virgin Islands.The Company also served 814 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands.Additional information about Advance,including employment opportunities,customer services and online shopping for parts,accessories and other offerings can be found at www.AdvanceAutoP.Investor Relations Contact:Media Contact:Lavesh Hemnani Nicole Ducouer T:(919)227-5466 T:(984)389-7207 E:invrelationsadvance- E:AAPcommunicationsadvance- 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,“guidance,”“intend,”“likely,”“may,”“plan,”“position,”“possible,”“potential,”“probable,”“project,”“should,”“strategy,”“target,”“will,”or similar language.All statements other than statements of historical fact are forward-looking statements,including,but not limited to,statements about the Companys strategic initiatives,restructuring and asset optimization plans,financial objectives,including with respect to the Companys reorganized debt capital structure,operational plans and objectives,statements about the benefits of the Companys Worldpac sale and use of proceeds therefrom,statements regarding expectations for economic conditions,future business and financial performance,including with respect to tariffs,as well as statements regarding underlying assumptions related thereto.Forward-looking statements reflect the Companys views based on historical results,current information and assumptions related to future developments.Except as may be required by law,the Company undertakes 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,the Companys ability to hire,train and retain qualified employees,the timing and implementation of strategic initiatives,risks associated with the Companys restructuring and asset optimization plans,risks relating to incurrence of indebtedness and increased leverage,risks relating to the Companys credit ratings or perceived creditworthiness,deterioration of general macroeconomic conditions,geopolitical factors including increased tariffs and trade restrictions,the highly competitive nature of the industry,demand for the Companys products and services,risks relating to the impairment of assets,including intangible assets such as goodwill,access to financing on favorable terms,complexities in the Companys inventory and supply chain and challenges with transforming and growing its business.Please refer to“Item 1A.Risk Factors”of the Companys most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission(“SEC”),as updated by the Companys subsequent filings with the SEC,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.Advance Auto Parts,Inc.and Subsidiaries Condensed Consolidated Balance Sheets(In millions)(unaudited)Assets October 4,2025(1)December 28,2024(1)Current assets:Cash and cash equivalents$3,174$1,869 Receivables,net 483 544 Inventories,net 3,694 3,612 Other current assets 167 118 Total current assets 7,518 6,143 Property and equipment,net 1,269 1,334 Operating lease right-of-use assets 2,184 2,243 Goodwill 599 598 Other intangible assets,net 401 406 Other assets 88 74 Total assets$12,059$10,798 Liabilities and Stockholders Equity Current liabilities:Accounts payable 3,177 3,408 Accrued expenses 761 784 Other current liabilities 411 473 Total current liabilities 4,349 4,665 Long-term debt 3,411 1,789 Operating lease liabilities 1,850 1,897 Deferred income taxes 166 193 Other long-term liabilities 88 84 Total liabilities 9,864 8,628 Total stockholders equity 2,195 2,170 Total liabilities and stockholders equity$12,059$10,798 (1)This condensed consolidated balance sheet has been prepared on a basis consistent with the Companys previously prepared balance sheets filed with the Securities and Exchange Commission(SEC),but does not include the footnotes required by accounting principles generally accepted in the United States of America(“GAAP”).Advance Auto Parts,Inc.and Subsidiaries Condensed Consolidated Statements of Operations(In millions,except per share data)(unaudited)Twelve Weeks Ended Forty Weeks Ended October 4,2025(1)October 5,2024(1)October 4,2025(1)October 5,2024(1)Net sales$2,036$2,148$6,628$7,098 Cost of sales 1,155 1,240 3,764 4,037 Gross profit 881 908 2,864 3,061 Selling,general and administrative expenses,exclusive of restructuring and related expenses 826 895 2,771 2,933 Restructuring and related expenses 33 13 180 21 Selling,general and administrative expenses 859 908 2,951 2,954 Operating(loss)income 22 (87)107 Other,net:Interest expense (40)(19)(86)(62)Other income,net 16 2 61 12 Total other,net (24)(17)(25)(50)(Loss)income before income taxes (2)(17)(112)57 Income tax(benefit)expense (1)8 (150)34 Net income(loss)from continuing operations (1)(25)38 23 Net income from discontinued operations 19 56 Net income(loss)$(1)$(6)$38$79 Basic earnings(loss)per common share from continuing operations$(0.02)$(0.42)$0.63$0.38 Basic earnings per common share from discontinued operations 0.32 0.95 Basic earnings(loss)per common share$(0.02)$(0.10)$0.63$1.33 Basic weighted-average common shares outstanding 60.0 59.7 59.9 59.6 Diluted earnings(loss)per common share from continuing operations$(0.02)$(0.42)$0.63$0.38 Diluted earnings per common share from discontinued operations 0.32 0.94 Diluted earnings(loss)per common share$(0.02)$(0.10)$0.63$1.32 Diluted weighted-average common shares outstanding 60.0 59.9 60.5 59.9 (1)These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with the Companys previously prepared statements of operations filed with the SEC,but do not include the footnotes required by GAAP.Advance Auto Parts,Inc.and Subsidiaries Condensed Consolidated Statements of Cash Flows(In millions)(unaudited)Forty Weeks Ended October 4,2025(1)October 5,2024(1)Cash flows from operating activities:Net income$38$79 Net income from discontinued operations 56 Net income from continuing operations 38 23 Adjustments to reconcile net income to net cash used in operating activities:Depreciation and amortization 214 217 Share-based compensation 29 34 Loss(gain)on sale and impairment of long-lived assets,net 23 (14)Expected future credit losses,net 50 23 Provision for deferred income taxes (27)24 Other,net 14 3 Net change in:Receivables,net 46 (84)Inventories,net (75)(152)Operating lease right of use assets 41 (43)Other assets (57)(3)Accounts payable (270)(25)Accrued expenses (37)31 Operating lease liabilities (108)47 Other liabilities 1 Net cash(used in)provided by operating activities of continuing operations (118)81 Net cash provided by operating activities of discontinued operations 77 Net cash(used in)provided by operating activities (118)158 Cash flows from investing activities:Purchases of property and equipment (159)(130)Proceeds from sales of property and equipment 22 14 Net cash used in investing activities of continuing operations (137)(116)Net cash used in investing activities of discontinued operations (8)Net cash used in investing activities (137)(124)Cash flows from financing activities:Proceeds from issuance of long-term debt 1,950 Repayment of long-term debt (300)Debt issuance costs (42)Dividends paid (45)(45)Forty Weeks Ended October 4,2025(1)October 5,2024(1)Proceeds from the issuance of common stock 3 3 Repurchases of common stock (4)(6)Other,net (3)(10)Net cash provided by(used in)financing activities 1,559 (58)Effect of exchange rate changes on cash 1 12 Net increase(decrease)in cash and cash equivalents 1,305 (12)Cash and cash equivalents,beginning of period 1,869 503 Cash and cash equivalents,end of period$3,174$491 Non-cash transactions of continuing operations:Accrued purchases of property and equipment$23$9 Transfers of property and equipment from(to)assets related to discontinued operations to(from)continuing operations 7 Accrued debt issuance costs 4 Summary of cash and cash equivalents:Cash and cash equivalents of continuing operations,end of period$3,174$464 Cash and cash equivalents of discontinued operations,end of period 27 Cash and cash equivalents,end of period$3,174$491 (1)This condensed consolidated statement of cash flows has been prepared on a basis consistent with the Companys previously prepared statements of operations filed with the SEC,but does not include the footnotes required by GAAP.Reconciliation of Non-GAAP Financial Measures The Company uses certain non-GAAP financial measures described below to supplement the Companys unaudited condensed consolidated financial statements prepared and presented in accordance with GAAP and to understand and evaluate the Companys core operating performance.These non-GAAP financial measures,which may be different than similarly titled measures used by other companies,are presented as the Company believes that such non-GAAP financial measures provide useful information about our financial performance,enhance the overall understanding of our past performance and future prospects,and allow for greater transparency with respect to important metrics used by management for financial and operational decision-making.The Company is presenting these non-GAAP metrics to provide investors insight to the information used by our management to evaluate our business and financial performance.The Company believes that these measures provide investors increased comparability of our core financial performance over multiple periods with other companies in our industry.The Companys Non-GAAP financial measures reflect results from continuing operations,including Adjusted Net(loss)Income,Adjusted Diluted(loss)Earnings Per Share(“Adjusted Diluted EPS”),Adjusted Gross Profit,Adjusted Gross Profit Margin,Adjusted Selling,General and Administrative expense(“Adjusted SG&A”),Adjusted SG&A Margin,Adjusted Operating(loss)Income,Adjusted Operating(loss)Income Margin,Free Cash Flow and Adjusted Net Debt to Adjusted EBITDAR,and should not be used as a substitute for GAAP financial measures,or considered in isolation,for the purpose of analyzing operating performance,financial position or cash flows.The Company has presented these non-GAAP financial measures as the Company believes that the presentation of the financial results that exclude(1)transformation expenses under the Companys turnaround plan,inclusive of the Worldpac divestiture and(2)other significant expenses,are useful and indicative of the Companys base operations because the expenses vary from period to period in terms of size,nature and significance.The income tax impact of these non-GAAP adjustments is also adjusted for using the estimated tax rate in effect for the respective non-GAAP adjustments.These measures assist in comparing the Companys current operating results with past periods and with the operational performance of other companies in the industry.The disclosure of these measures allows investors to evaluate the Companys performance using the same measures management uses in developing internal budgets and forecasts and in evaluating managements compensation.Included below is a description of the expenses the Company has determined are not normal,recurring cash operating expenses necessary to operate the Companys business and the rationale for why providing these measures is useful to investors as a supplement to the GAAP measures.Transformation Expenses Expenses incurred in connection with the Companys turnaround plan and specific transformative activities related to asset optimization that the Company does not view to be normal cash operating expenses.These expenses primarily include:Restructuring and other related expenses:Expenses relating to strategic initiatives,including severance expense,retention bonuses offered to store-level employees to help facilitate the closing of stores,incremental reserves related to the collectibility of receivables resulting from contract terminations with certain independents associated with the 2024 Restructuring Plan and third-party professionals assisting in the development and execution of the strategic initiatives.Impairment and write-down of long-lived assets:Expenses relating to the impairment of operating lease ROU assets and property and equipment,incremental depreciation as a result of accelerating long-lived assets over a shorter useful life,depreciation of long-lived assets and ROU asset amortization after store closure,and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases the Company expects to exit before the end of the contractual term,net of gains on lease terminations,in connection with the 2024 Restructuring Plan and Other Restructuring Plan.Distribution network optimization:Expenses primarily relating to the conversion of the stores and distribution centers to market hubs,including,realized losses on liquidated inventory,temporary labor,nonrecurring professional service fees and team member severance.Other Expenses Expenses incurred by the Company that are not viewed as normal cash operating expenses and vary from period to period in terms of size,nature,and significance.These expenses primarily include:Other professional service fees:Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategic business review,including the Companys transformation initiatives.Worldpac post transaction-related expenses:Expenses primarily relating to non-recurring separation activities provided by third-party professionals subsequent to the sale of Worldpac.Executive turnover:Expenses associated with executive level reorganization,including expenses for executive severance,the hiring search for leadership positions and certain compensation benefits.Material weakness remediation:Incremental expenses associated with the remediation of the Companys previously disclosed material weaknesses in internal control over financial reporting.Cybersecurity incident:Expenses related to the response and remediation of a cybersecurity incident.Other:Includes a non-cash charge related to expected future credit losses on vendor receivables due from a vendor that filed voluntary petitions for Chapter 11 bankruptcy protection.Other tax adjustments:Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in order to provide a clearer understanding of the Companys ongoing Non-GAAP tax rate and after-tax earnings.Reconciliation of Diluted Earnings(loss)Per Share(GAAP)and Adjusted Diluted(Loss)Earnings Per Share(Non-GAAP)Twelve Weeks Ended Forty Weeks Ended(in millions,except per share data)Classification October 4,2025 October 5,2024 October 4,2025 October 5,2024 Net income(loss)from continuing operations(GAAP)$(1)$(25)$38$23 Cost of sales adjustments:Transformation expenses:Distribution network optimization Restructuring 4 9 Expected future credit loss related to vendor receivables(1)Non-restructuring 28 28 Selling,general and administrative adjustments:Transformation expenses:Restructuring and other related expenses(2)Restructuring 7 4 78 5 Impairment and write-down of long-lived assets(3)Restructuring 18 76 Distribution network optimization Restructuring 6 9 15 14 Other expenses:Other professional service fees Non-restructuring(6)3 12 Worldpac post transaction-related expenses Restructuring 2 7 Executive turnover Restructuring 4 2 Material weakness remediation Non-restructuring 1 1 4 Cybersecurity incident Non-restructuring 2 3 Other income adjustments:TSA services (1)(8)Losses on extinguishment of debts 9 9 Provision for income taxes on adjustments(4)(19)(4)(58)(7)Other tax(benefit)expense adjustments(5)10 (126)10 Adjusted net income(loss)(Non-GAAP)$56$(3)$85$54 Diluted earnings(loss)per share from continuing operations(GAAP)$(0.02)$(0.42)$0.63$0.38 Adjustments,net of tax 0.94 0.37 0.77 0.52 Adjusted diluted earnings(loss)per share(Non-GAAP)(7)$0.92$(0.05)$1.40$0.90 (1)Reflects a charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28,2025.(2)Restructuring and other related expenses for the twelve weeks ended October 4,2025 includes$2 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan and$5 million of other related expenses associated with location closures,including the transfer of assets.Restructuring and other related expenses for the forty weeks ended October 4,2025 includes$37 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan,$15 million of severance and other labor related costs,$7 million for reserves on independent loans and$19 million of other related expenses associated with location closures,including the transfer of assets.(3)The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of$7 million and impairment charges for ROU assets and property and equipment of$11 million net of gains on sales,for the twelve weeks ended October 4,2025.The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of$55 million and impairment charges for ROU assets and property and equipment of$21 million,net of gains on sale,for the forty weeks ended October 4,2025.(4)The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments.(5)Income tax(benefit)expenses included a discrete non-recurring tax benefit associated with capital loss deductions effectuated in the first quarter of fiscal 2025.The benefit has been excluded from Non-GAAP results in order to provide a clearer understanding of ongoing Non-GAAP tax rate and after-tax earnings.(6)Other professional service fees in fiscal 2024 were classified as restructuring and related expenses based on the underlying activity to which they related.(7)Refer to the reconciliation of diluted weighted-average common shares outstanding(GAAP)to adjusted diluted weighted-average common shares outstanding(Non-GAAP)which is the denominator utilized to calculate adjusted diluted earnings(loss)per share(Non-GAAP).Adjusted diluted weighted-average common shares outstanding(Non-GAAP)includes the dilutive impact of share-based awards as such shares are considered dilutive in consideration of the Companys Non-GAAP earnings for the period.Reconciliation of Adjusted Diluted Weighted-Average Common Shares Outstanding Twelve Weeks Ended Forty Weeks Ended(shares in millions)October 4,2025 October 5,2024 October 4,2025 October 5,2024 Diluted Weighted-Average Common Shares Outstanding(GAAP)60.0 59.9 60.5 59.9 Dilutive impact of share-based awards 0.9 Adjusted Diluted Weighted-Average Common Shares Outstanding(Non-GAAP)60.9 59.9 60.5 59.9 Reconciliation of Adjusted Gross Profit Twelve Weeks Ended Forty Weeks Ended(in millions)October 4,2025 October 5,2024 October 4,2025 October 5,2024 Gross Profit(GAAP)$881$908$2,864$3,061 Gross Profit adjustments 32 37 Adjusted Gross Profit(Non-GAAP)$913$908$2,901$3,061 Gross Profit Margin(GAAP)(1)43.3B.3C.2C.1justed Gross Profit Margin(Non-GAAP)(1)44.8B.3C.8C.1%(1)These GAAP and Non-GAAP measures are calculated as a percentage of Net sales.Reconciliation of Adjusted Selling,General and Administrative Expenses Twelve Weeks Ended Forty Weeks Ended(in millions)October 4,2025 October 5,2024 October 4,2025 October 5,2024 Selling,general and administrative(SG&A)expenses(GAAP)$859$908$2,951$2,954 SG&A adjustments (36)(16)(193)(28)Adjusted SG&A(Non-GAAP)$823$892$2,758$2,926 SG&A Margin(GAAP)(1)42.2B.3D.5A.6justed SG&A Margin(Non-GAAP)(1)40.4A.5A.6A.2%(1)These GAAP and Non-GAAP measures are calculated as a percentage of Net sales.Reconciliation of Adjusted Operating Income Twelve Weeks Ended Forty Weeks Ended(in millions)October 4,2025 October 5,2024 October 4,2025 October 5,2024 Operating(Loss)Income(GAAP)$22$(87)$107 Gross Profit adjustments 32 37 SG&A adjustments 36 16 193 28 Adjusted Operating Income(Non-GAAP)$90$16$143$135 Operating(Loss)Income Margin(GAAP)(1)1.1%(1.3)%1.5justed Operating Income Margin(Non-GAAP)(1)4.4%0.7%2.2%1.9%(1)These GAAP and Non-GAAP measures are calculated as a percentage of Net sales.Reconciliation of Free Cash Flow Forty Weeks Ended(in millions)October 4,2025 October 5,2024 Cash flows(used in)provided by operating activities of continuing operations(1)$(118)$81 Purchases of property and equipment (159)(130)Free cash flow$(277)$(49)(1)Includes approximately$130 million of cash charges related to restructuring and other related expenses.Reconciliation of Adjusted Net Debt to Adjusted EBITDAR(1)Four Quarters Ended(In millions,except adjusted debt to adjusted EBITDAR ratio)October 4,2025 Total Debt(GAAP)$3,411 Add:Operating lease liabilities 2,252 Less:Cash&cash equivalents (3,174)Adjusted Net Debt(Non-GAAP)$2,489 Net loss from continuing operations(GAAP)$(571)Depreciation and amortization 289 Interest expense 105 Other income,net (74)Income tax benefit (366)Rent expense 597 Share-based compensation 40 Transformation and other charges(2)928 Adjusted EBITDAR(Non-GAAP)$948 Debt to Net Loss from continuing operations(GAAP)(6.0)Adjusted Net Debt to Adjusted EBITDAR(Non-GAAP)2.6 (1)Management believes its Adjusted Net Debt to Adjusted EBITDAR ratio(“net leverage ratio”)is a key financial metric for debt securities,as reviewed by rating agencies,and believes its debt levels are best analyzed using this measure.The Companys goal is to maintain an investment grade rating.The Companys credit rating could impact the Companys ability to obtain additional funding.A negative change in the Companys investment rating,could negatively impact future performance and limit growth opportunities.The net leverage ratio calculated by the Company is a Non-GAAP measure and should not be considered a substitute for debt to net income,as determined in accordance with GAAP.The Company adjusts the calculation to remove rent expense,deduct available cash&cash equivalents and to add back the Companys existing operating lease liabilities related to their right-of-use assets to provide a more meaningful comparison with the Companys peers and to account for differences in debt structures and leasing arrangements.The Companys calculation of its net leverage ratio may not be calculated in the same manner as other companies,and thus may not be comparable to similarly titled measures used by other companies.(2)The adjustments to the four quarters ended October 4,2025,include expenses associated with our transformation and restructuring and related activities,in addition to other items,including a charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28,2025,the Companys material weakness remediation efforts,professional fees and executive turnover.Store Information During the forty weeks ended October 4,2025,26 stores were opened and 517 were closed,resulting in a total of 4,297 stores as of October 4,2025,compared with a total of 4,788 stores as of December 28,2024.The below table summarizes the changes in the number of company-operated stores during the twelve and forty weeks ended October 4,2025:Twelve Weeks Ended AAP CARQUEST Total July 12,2025 4,055 237 4,292 New 8 8 Closed (3)(3)Converted 1 (1)Relocated October 4,2025 4,061 236 4,297 Forty Weeks Ended AAP CARQUEST Total December 28,2024 4,507 281 4,788 New 22 4 26 Closed (470)(47)(517)Converted 1 (1)Relocated 1 (1)October 4,2025 4,061 236 4,297
2025-10-31
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COMCAST REPORTS 3rd QUARTER 2025 RESULTSPHILADELPHIA-October30,2025 Comcast Corporation(NASDAQ:CMCSA)today reported results for the quarter ended September30,2025.“Were making steady progress as we reposition the company for long-term,sustained growth,said Brian L.Roberts,Chairman and Chief Executive Officer of Comcast Corporation.In Connectivity,were taking deliberate steps to strengthen our broadband foundation and accelerate wireless as a meaningful growth engine,adding a record 414,000 wireless lines this quarter clear evidence of the value of our converged offerings.In addition,Business Services delivered another solid performance,with mid-single digit revenue and Adjusted EBITDA growth.In Content&Experiences,were building momentum across NBC and Peacock as we head into one of the most exciting stretches of live sports in our history,including robust NBA coverage which just began last week.The early success of Epic Universe contributed to 19%revenue growth at our Theme Parks,reflecting the strength of our newest attractions and the enduring appeal of the Universal brand.We generated$4.9 billion of free cash flow this quarter and$14.9 billion year-to-date despite significant investment were making in repositioning our company,a testament to both the durability and resilience of our underlying business.($in millions,except per share data)3rd QuarterConsolidated Results20252024ChangeRevenue$31,198$32,070 (2.7%)Net Income Attributable to Comcast$3,332$3,629 (8.2%)Adjusted Net Income1$4,125$4,337 (4.9%)Adjusted EBITDA2$9,669$9,735 (0.7%)Earnings per Share3$0.90$0.94 (3.4%)Adjusted Earnings per Share1$1.12$1.12%Net Cash Provided by Operating Activities$8,693$7,021 23.8%Free Cash Flow4$4,945$3,406 45.2%For additional detail on segment revenue and expenses,customer metrics,capital expenditures,and free cash flow,please refer to the trending schedule on Comcasts Investor Relations website at .3rd Quarter 2025 Highlights:Generated Consolidated Adjusted EBITDA of$9.7 Billion,Adjusted EPS of$1.12,and Free Cash Flow of$4.9 BillionReturned$2.8 Billion to Shareholders Through a Combination of$1.2 Billion in Dividend Payments and$1.5 Billion in Share Repurchases,Reducing Shares Outstanding by 5%Compared to the Prior Year PeriodAt Connectivity&Platforms,Connectivity Revenue Increased 4.2%to$11.5 Billion,Primarily Reflecting Growth in Domestic Wireless,International Connectivity and Business Services ConnectivityContinued to Invest in Our New Go-to-Market Strategy and Tactics,Including National Internet Plans with Everyday Pricing and Everything Included;a 5-Year Internet Price Guarantee;a Free Xfinity Unlimited Mobile Line Included for 1-Year;and a Premium Unlimited Wireless Plan That Delivers Gigabit Speeds,Upgraded Features,and Significant SavingsDomestic Wireless Customer Line Net Additions Were 414,000,the Best Quarterly Result on Record;Surpassed 14%Penetration of Our Domestic Residential Broadband Customers with a Total of 8.9 Million LinesBusiness Services Connectivity Revenue Increased 6.2%to$2.6 Billion,EBITDA Increased 4.5%to$1.5 Billion and EBITDA Margin Was 56.4%Media EBITDA Increased 28.0%to$832 Million,Driven by Peacock.Peacock EBITDA Losses of$217 Million Improved by$219 Million Compared to the Prior Year PeriodJurassic World Rebirth Premiered in July and Grossed Nearly$900 Million in Worldwide Box Office Year-to-Date,Pushing the Jurassic Franchises Cumulative Total to$7 Billion PRESS RELEASE1Theme Parks EBITDA Increased 13.1%to$958 Million;Fueled by the Opening of Epic Universe in Orlando in May3rd Quarter Consolidated Financial ResultsRevenue decreased 2.7%reflecting an unfavorable comparison to the prior year period,which included incremental revenue from the Paris Olympics.Net Income Attributable to Comcast decreased 8.2%.Adjusted Net Income decreased 4.9%.Adjusted EBITDA was consistent with the prior year period.Earnings per Share(EPS)decreased to 3.4%to$0.90.Adjusted EPS of$1.12 was consistent with the prior year period.Capital Expenditures increased 5.4%to$3.1 billion.Connectivity&Platforms capital expenditures increased 19.5%to$2.3 billion,primarily reflecting higher spending on scalable infrastructure and customer premise equipment.Content&Experiences capital expenditures decreased 19.9%to$714 million,reflecting the opening of Epic Universe in May 2025.Net Cash Provided by Operating Activities was$8.7 billion.Free Cash Flow was$4.9 billion.Dividends and Share Repurchases.Comcast paid dividends totaling$1.2 billion and repurchased 46.0 million of its shares for$1.5 billion,resulting in a total return of capital to shareholders of$2.8 billion.Connectivity&Platforms($in millions)Constant Currency Change53rd Quarter20252024ChangeConnectivity&Platforms RevenueResidential Connectivity&Platforms$17,601$17,866(1.5%)(2.4%)Business Services Connectivity2,5762,425 6.2%6.2%Total Connectivity&Platforms Revenue$20,176$20,291(0.6%)(1.4%)Connectivity&Platforms Adjusted EBITDAResidential Connectivity&Platforms$6,554$6,904(5.1%)(5.4%)Business Services Connectivity1,4541,391 4.5%4.5%Total Connectivity&Platforms Adjusted EBITDA$8,008$8,295(3.5%)(3.7%)Connectivity&Platforms Adjusted EBITDA MarginResidential Connectivity&Platforms 37.28.6%(140)bps(120)bpsBusiness Services Connectivity 56.4W.4%(100)bps(90)bpsTotal Connectivity&Platforms Adjusted EBITDA Margin 39.7.9%(120)bps(100)bpsChange percentages represent year/year growth rates.The changes in Adjusted EBITDA margins are presented as year/year basis point changes in the rounded Adjusted EBITDA margins.Revenue for Connectivity&Platforms was consistent with the prior year but decreased when excluding the impact of foreign currency.Adjusted EBITDA decreased due to declines in Residential Connectivity&Platforms Adjusted EBITDA,partially offset by growth in Business Services Adjusted EBITDA.Residential Connectivity&Platforms revenue and Adjusted EBITDA reflect the investment in our new go-to-market strategy.Adjusted EBITDA margin was 39.7%.2(in thousands)Net Additions/(Losses)3rd Quarter3Q253Q2420252024Customer RelationshipsDomestic Residential Connectivity&Platforms Customer Relationships30,64231,324 (103)(103)International Residential Connectivity&Platforms Customer Relationships17,60317,716 (95)78 Business Services Connectivity Customer Relationships2,7022,627 (11)(4)Total Connectivity&Platforms Customer Relationships50,94751,667 (210)(29)Domestic BroadbandResidential Customers28,89729,504 (91)(79)Business Customers2,5382,477 (13)(8)Total Domestic Broadband Customers31,43631,981 (104)(87)Total Domestic Wireless Lines8,9417,519 414 319 Total Domestic Video Customers11,51512,834 (257)(365)Total Customer Relationships for Connectivity&Platforms decreased by 210,000 to 50.9 million,primarily reflecting decreases in Residential Connectivity&Platforms customer relationships.Total domestic broadband customer net losses were 104,000,total domestic wireless line net additions were 414,000 and total domestic video customer net losses were 257,000.Residential Connectivity&Platforms($in millions)Constant Currency Change53rd Quarter20252024ChangeRevenueDomestic Broadband$6,433$6,400 0.5%0.5%Domestic Wireless1,2461,093 14.0.0%International Connectivity1,2751,150 10.8%6.7%Total Residential Connectivity8,9548,644 3.6%3.1%Video6,5916,938(5.0%)(6.3%)Advertising864987(12.5%)(13.6%)Other 1,1921,298(8.2%)(9.1%)Total Revenue$17,601$17,866(1.5%)(2.4%)Operating ExpensesProgramming$3,952$4,102(3.7%)(4.9%)Non-Programming7,0956,860 3.4%2.1%Total Operating Expenses$11,047$10,962 0.8%(0.5%)Adjusted EBITDA$6,554$6,904(5.1%)(5.4%)Adjusted EBITDA Margin 37.28.6%(140)bps(120)bpsChange percentages represent year/year growth rates.The changes in Adjusted EBITDA margins are presented as year/year basis point changes in the rounded Adjusted EBITDA margins.Beginning in the first quarter of 2025,commission revenue from the sale of certain direct to consumer(“DTC”)streaming services and revenue related to certain equipment are presented in video revenue.Previously,these amounts were presented in domestic broadband and international connectivity.Prior periods have been reclassified to reflect the current year presentation.Revenue for Residential Connectivity&Platforms decreased compared to the prior year period,primarily reflecting decreases in video,advertising and other revenue,partially offset by increases in domestic wireless and international connectivity revenue.Domestic broadband revenue was consistent due to higher average rates,offset by a decline in the number of domestic broadband customers.Domestic wireless revenue increased due to an increase in the number of customer lines and device sales.International connectivity revenue increased due to increases in broadband revenue from higher average rates and in wireless revenue,reflecting higher sales of wireless services,which includes the positive impact of foreign currency.Video revenue decreased due to a decline in the number of video customers,partially offset by an overall increase in average rates and the positive impact of foreign currency.3Advertising revenue decreased primarily due to lower domestic political and nonpolitical advertising.Other revenue decreased primarily due to lower residential wireline voice revenue,driven by a decline in the number of customers.Adjusted EBITDA for Residential Connectivity&Platforms decreased due to lower revenue and consistent operating expenses.Programming expenses decreased primarily due to a decline in the number of domestic video customers,partially offset by rate increases under our domestic programming contracts,an increase in programming expenses for our international sports networks and the impact of foreign currency.Non-programming expenses increased primarily due to an increase in direct product costs mainly due to higher mobile device sales,the impact of foreign currency and higher marketing and promotion costs driven by our new broadband and mobile offers introduced in April 2025,partially offset by lower fees paid to third-party channels relating to advertising sales.Adjusted EBITDA margin was 37.2%.Business Services Connectivity($in millions)Constant Currency Change53rd Quarter20252024ChangeRevenue$2,576$2,425 6.2%6.2%Operating Expenses1,1221,034 8.5%8.4justed EBITDA$1,454$1,391 4.5%4.5justed EBITDA Margin 56.4W.4%(100)bps(90)bpsChange percentages represent year/year growth rates.The changes in Adjusted EBITDA margins are presented as year/year basis point changes in the rounded Adjusted EBITDA margins.Revenue for Business Services Connectivity increased primarily due to an increase in revenue from enterprise solutions offerings,including the results from a recent acquisition.Adjusted EBITDA for Business Services Connectivity increased due to higher revenue,partially offset by higher operating expenses.The increase in operating expenses was primarily due to increases in direct product costs,which include the results from a recent acquisition.Adjusted EBITDA margin was 56.4%.4Content&Experiences($in millions)3rd Quarter20252024ChangeContent&Experiences RevenueMedia$6,589$8,231(19.9%)Excluding Olympics7 6,589 6,325 4.2%Studios 3,000 2,826 6.1%Theme Parks 2,717 2,289 18.7%Headquarters&Other 15 11 40.9%Eliminations(580)(758)23.4%Total Content&Experiences Revenue$11,742$12,599 (6.8%)Content&Experiences Adjusted EBITDAMedia$832$650 28.0%Studios 365 468 (21.9%)Theme Parks 958 847 13.1%Headquarters&Other(271)(200)(35.5%)Eliminations 69 38 81.8%Total Content&Experiences Adjusted EBITDA$1,953$1,802 8.4%Revenue for Content&Experiences decreased due to an unfavorable comparison to the prior year period,which included$1.9 billion of incremental revenue from the Paris Olympics included in the Media segment.Adjusted EBITDA for Content&Experiences increased primarily due to growth in Media and Theme Parks,partially offset by a decline in Studios.Media($in millions)3rd Quarter20252024ChangeRevenueDomestic Advertising$1,964$3,347(41.3%)Excluding Olympics7 1,964 1,915 2.6%Domestic Distribution 2,841 3,272 (13.1%)Excluding Olympics7 2,841 2,798 1.5%International Networks 1,252 1,070 17.0%Other 532 542 (1.8%)Total Revenue$6,589$8,231 (19.9%)Excluding Olympics7 6,589 6,325 4.2%Operating Expenses 5,758 7,581 (24.1%)Adjusted EBITDA$832$650 28.0%Revenue for Media decreased primarily due to lower domestic advertising and domestic distribution revenue,reflecting the comparison to the Paris Olympics in the prior year period.Excluding$1.9 billion of incremental revenue from this event,Media revenue increased 4.2%.Domestic advertising revenue decreased primarily reflecting the Paris Olympics in the prior year period.Excluding the incremental revenue from this event,domestic advertising revenue increased 2.6%,primarily due to an increase in revenue at Peacock.Domestic distribution revenue decreased primarily reflecting the Paris Olympics in the prior year period.Excluding the incremental revenue from this event,domestic distribution revenue increased 1.5%,primarily due to higher revenue at Peacock,partially offset by lower revenue at our linear television networks.International networks revenue increased primarily due to an increase in revenue associated with the distribution of sports networks and the positive impact of foreign currency.5Adjusted EBITDA for Media increased due to lower operating expenses,which more than offset lower revenue.The decrease in operating expenses was primarily due to lower sports programming costs associated with the Paris Olympics in the prior year period and a decrease in other sports programming costs for our domestic television networks,mainly reflecting lower sports volumes compared to the prior year period,partially offset by an increase in sports costs for our international networks.Media results include$1.4 billion of revenue and an Adjusted EBITDA6 loss of$217 million related to Peacock,compared to$1.5 billion of revenue and an Adjusted EBITDA6 loss of$436 million in the prior year period,which included amounts attributable to the Paris Olympics.Studios($in millions)3rd Quarter20252024ChangeRevenueContent Licensing$2,035$1,865 9.1%Theatrical 639 611 4.6%Other 326 350 (6.9%)Total Revenue$3,000$2,826 6.1%Operating Expenses 2,635 2,359 11.7justed EBITDA$365$468 (21.9%)Revenue for Studios increased primarily due to higher content licensing revenue.Content licensing revenue increased primarily due to the timing of when content was made available by our television studios,partially offset by the timing of when content was made available by our film studios.Theatrical revenue increased primarily due to higher revenue from an increased number of releases in the current quarter,including the successful release of Jurassic World Rebirth.Adjusted EBITDA for Studios decreased due to higher operating expenses,which more than offset higher revenue.The increase in operating expenses was primarily driven by higher programming and production expenses,mainly due to higher costs associated with content licensing sales,and higher marketing and promotion expenses due to increased spending on recent and upcoming theatrical film releases.Theme Parks($in millions)3rd Quarter20252024ChangeRevenue$2,717$2,289 18.7%Operating Expenses 1,759 1,442 22.0justed EBITDA$958$847 13.1%Revenue for Theme Parks increased primarily due to higher revenue at domestic theme parks,driven by the successful opening of Epic Universe in May 2025.Adjusted EBITDA for Theme Parks increased,reflecting higher revenue,which more than offset higher operating expenses.The increase in operating expenses was primarily due to operating costs associated with Epic Universe.Headquarters&OtherContent&Experiences Headquarters&Other includes overhead,personnel costs and costs associated with corporate initiatives.Headquarters&Other Adjusted EBITDA loss in the third quarter was$271 million,compared to a loss of$200 million in the prior year period.EliminationsAmounts represent eliminations of transactions between our Content&Experiences segments,the most significant being content licensing between the Studios and Media segments,which are affected by the timing of recognition of content licenses.Revenue eliminations were$580 million,compared to$758 6million in the prior year period,and Adjusted EBITDA eliminations were a benefit of$69 million,compared to a benefit of$38 million in the prior year period.Corporate,Other and Eliminations($in millions)3rd Quarter20252024ChangeCorporate&OtherRevenue$736$675 9.0%Operating Expenses 1,009 978 3.2justed EBITDA($273)($302)9.8%EliminationsRevenue($1,456)($1,495)(2.6%)Operating Expenses(1,437)(1,436)justed EBITDA($19)($59)(67.3%)Corporate&OtherCorporate&Other primarily includes overhead and personnel costs;our Sky-branded video services and television networks in Germany;Comcast Spectacor,which owns the Philadelphia Flyers and the Xfinity Mobile Arena in Philadelphia,Pennsylvania;and Xumo.Corporate&Other Adjusted EBITDA increased primarily due to decreased marketing associated with the Paris Olympics in the prior year period.EliminationsAmounts represent eliminations of transactions between Connectivity&Platforms,Content&Experiences and other businesses,the most significant being distribution of television network programming between the Media and Residential Connectivity&Platforms segments.Revenue eliminations were$1.5 billion,consistent with the prior year period,and Adjusted EBITDA eliminations were a loss of$19 million compared to a loss of$59 million in the prior year period.Prior year amounts reflect an increase in eliminations associated with the Paris Olympics.7Notes:1 We define Adjusted Net Income and Adjusted EPS as net income attributable to Comcast Corporation and diluted earnings per common share attributable to Comcast Corporation shareholders,respectively,adjusted to exclude the effects of the amortization of acquisition-related intangible assets,investments that investors may want to evaluate separately(such as based on fair value)and the impact of certain events,gains,losses or other charges that affect period-over-period comparisons.See Table 5 for reconciliations of non-GAAP financial measures.2 We define Adjusted EBITDA as net income attributable to Comcast Corporation before net income(loss)attributable to noncontrolling interests,income tax expense,investment and other income(loss),net,interest expense,depreciation and amortization expense,and other operating gains and losses(such as impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets),if any.From time to time,we may exclude from Adjusted EBITDA the impact of certain events,gains,losses or other charges(such as significant legal settlements)that affect the period-to-period comparability of our operating performance.See Table 4 for reconciliation of non-GAAP financial measure.3 All earnings per share amounts are presented on a diluted basis.4 We define Free Cash Flow as net cash provided by operating activities(as stated in our Consolidated Statement of Cash Flows)reduced by capital expenditures and cash paid for intangible assets.From time to time,we may exclude from Free Cash Flow the impact of certain cash receipts or payments(such as significant legal settlements)that affect period-to-period comparability.Cash payments related to certain capital or intangible assets,such as the construction of Universal Beijing Resort,are presented separately in our Consolidated Statement of Cash Flows and are therefore excluded from capital expenditures and cash paid for intangible assets for Free Cash Flow.See Table 4 for reconciliation of non-GAAP financial measure.5 Constant currency growth rates are calculated by comparing the results for each comparable prior year period adjusted to reflect the average exchange rates from each current year period presented rather than the actual exchange rates that were in effect during the respective periods.See Table 6 for reconciliations of non-GAAP financial measures.6 Adjusted EBITDA is the measure of profit or loss for our segments.From time to time,we may present Adjusted EBITDA for components of our reportable segments,such as Peacock.We believe these measures are useful to evaluate our financial results and provide a basis of comparison to others,although our definition of Adjusted EBITDA may not be directly comparable to similar measures used by other companies.Adjusted EBITDA for components are presented on a consistent basis with the respective segments and disaggregated in accordance with GAAP.7 From time to time,we may present adjusted information(e.g.,Adjusted Revenues)to exclude the impact of certain events,gains,losses or other charges affecting period-to-period comparability of our operating performance.See Table 7 for reconciliations of non-GAAP financial measures.Numerical information is presented on a rounded basis using actual amounts,unless otherwise noted.The change in Peacock paid subscribers is calculated using rounded paid subscriber amounts.Minor differences in totals and percentage calculations may exist due to rounding.8Conference Call and Other InformationComcast Corporation will host a conference call with the financial community today,October30,2025,at 8:30 a.m.Eastern Time(ET).The conference call and related materials will be broadcast live and posted on our Investor Relations website at .A replay of the call will be available today,October30,2025,starting at 11:30 a.m.ET on the Investor Relations website.From time to time,we post information that may be of interest to investors on our website at and on our corporate website,.To automatically receive Comcast financial news by email,please visit and subscribe to email alerts.#Investor Contacts:Press Contacts:Marci Ryvicker(215)286-4781Jennifer Khoury(215)286-7408Jane Kearns(215)286-4794John Demming(215)286-8011#Caution Concerning Forward-Looking StatementsThis press release includes statements that may constitute forward-looking statements.In evaluating these statements,readers should consider various factors,including the risks and uncertainties we describe in the“Risk Factors”sections of our most recent Annual Report on Form 10-K,our most recent Quarterly Report on Form 10-Q and other reports filed with the Securities and Exchange Commission(SEC).Factors that could cause our actual results to differ materially from these forward-looking statements include changes in and/or risks associated with:the competitive environment;consumer behavior;the advertising market;consumer acceptance of our content;programming costs;key distribution and/or licensing agreements;use and protection of our intellectual property;our reliance on third-party hardware,software and operational support;keeping pace with technological developments;cyber attacks,security breaches or technology disruptions;weak economic conditions;acquisitions and strategic initiatives;operating businesses internationally;natural disasters,severe weather-related and other uncontrollable events;loss of key personnel;labor disputes;laws and regulations;adverse decisions in litigation or governmental investigations;and other risks described from time to time in reports and other documents we file with the SEC.Readers are cautioned not to place undue reliance on forward-looking statements,which speak only as of the date they are made,and involve risks and uncertainties that could cause actual events or our actual results to differ materially from those expressed in any such forward-looking statements.We undertake no obligation to update or revise publicly any forward-looking statements,whether because of new information,future events or otherwise.The amount and timing of any dividends and share repurchases are subject to business,economic and other relevant factors.#Non-GAAP Financial MeasuresIn this discussion,we sometimes refer to financial measures that are not presented according to generally accepted accounting principles in the U.S.(GAAP).Certain of these measures are considered“non-GAAP financial measures”under the SEC regulations;those rules require the supplemental explanations and reconciliations that are in Comcasts Form 8-K(Quarterly Earnings Release)furnished to the SEC.#About Comcast CorporationComcast Corporation(Nasdaq:CMCSA)is a global media and technology company.From the connectivity and platforms we provide,to the content and experiences we create,our businesses reach hundreds of millions of customers,viewers,and guests worldwide.We deliver world-class broadband,wireless,and video through Xfinity,Comcast Business,and Sky;produce,distribute,and stream leading entertainment,sports,and news through brands including NBC,Telemundo,Universal,Peacock,and Sky;and bring incredible theme parks and attractions to life through Universal Destinations&Experiences.Visit for more 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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-Q_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended October 4,2025 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _.Commission file number 001-16797_ADVANCE AUTO PARTS,INC.(Exact name of registrant as specified in its charter)_Delaware54-2049910(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)4200 Six Forks Road,Raleigh,North Carolina 27609(Address of principal executive offices)(Zip Code)(540)362-4911(Registrants telephone number,including area code)Securities Registered Pursuant to Section 12(b)of the Act:Title of each classTrading symbolName of each exchange on which registeredCommon Stock,$0.0001 par valueAAPNew York Stock ExchangeNot 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 preceding12 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 growthcompany.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 filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf 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 financialaccounting 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 October 27,2025,the number of shares of the registrants common stock outstanding was 60,022,245 shares.Table of ContentsTABLE OF CONTENTS PageNOTE REGARDING FORWARD LOOKING STATEMENTS1PART I.FINANCIAL INFORMATION Item 1.Condensed Consolidated Financial Statements of Advance Auto Parts,Inc.and Subsidiaries(unaudited)2 Condensed Consolidated Balance Sheets2 Condensed Consolidated Statements of Operations3Condensed Consolidated Statements of Comprehensive Income4Condensed Consolidated Statements of Changes in Stockholders Equity5 Condensed Consolidated Statements of Cash Flows7 Notes to the Condensed Consolidated Financial Statements 9 Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations22 Item 3.Quantitative and Qualitative Disclosures About Market Risk34 Item 4.Controls and Procedures 34PART II.OTHER INFORMATION Item 1.Legal Proceedings34Item 1A.Risk Factors34 Item 2.Unregistered Sales of Equity Securities and Use of Proceeds 35Item 5.Other Information36 Item 6.Exhibits 37SIGNATURE38Table of ContentsFORWARD-LOOKING STATEMENTSCertain 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,“guidance,”“intend,”“likely,”“may,”“plan,”“position,”“possible,”“potential,”“probable,”“project,”“should,”“strategy,”“target,”“will,”or similar language.All statements other thanstatements of historical fact are forward-looking statements,including,but not limited to,statements about the Companys strategic initiatives,restructuringand asset optimization plans,financial objectives,including with respect to the Companys reorganized debt capital structure,operational plans and objectives,statements about the benefits of the Companys Worldpac sale and use of proceeds therefrom,statements regarding expectations for economic conditions,future business and financial performance,including with respect to tariffs,as well as statements regarding underlying assumptions related thereto.Forward-looking statements reflect the Companys views based on historical results,current information and assumptions related to future developments.Except as maybe required by law,the Company undertakes no obligation to update any forward-looking statements made herein.Forward-looking statements are subject to anumber of risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.Theyinclude,among others,the Companys ability to hire,train and retain qualified employees,the timing and implementation of strategic initiatives,risksassociated with the Companys restructuring and asset optimization plans,risks relating to incurrence of indebtedness and increased leverage,risks relating tothe Companys credit ratings or perceived creditworthiness,deterioration of general macroeconomic conditions,geopolitical factors including increased tariffsand trade restrictions,the highly competitive nature of the industry,demand for the Companys products and services,risks relating to the impairment of assets,including intangible assets such as goodwill,access to financing on favorable terms,complexities in the Companys inventory and supply chain and challengeswith transforming and growing its business.Please refer to“Item 1A.Risk Factors”of the Companys most recent Annual Report on Form 10-K filed with theSecurities and Exchange Commission(“SEC”),as updated by the Companys subsequent filings with the SEC,for a description of these and other risks anduncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.1Table of ContentsPART I.FINANCIAL INFORMATIONITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Balance Sheets(in millions,except par value amounts)(Unaudited)AssetsOctober 4,2025December 28,2024Current assets:Cash and cash equivalents$3,174$1,869 Receivables,net483 544 Inventories,net3,694 3,612 Other current assets167 118 Total current assets7,518 6,143 Property and equipment,net1,269 1,334 Operating lease right-of-use assets2,184 2,243 Goodwill599 598 Other intangible assets,net401 406 Other assets88 74 Total assets$12,059$10,798 Liabilities and Stockholders Equity Current liabilities:Accounts payable3,177 3,408 Accrued expenses761 784 Other current liabilities411 473 Total current liabilities4,349 4,665 Long-term debt3,411 1,789 Operating lease liabilities1,850 1,897 Deferred income taxes166 193 Other long-term liabilities88 84 Total liabilities9,864 8,628 Commitments and contingencies(Note 10)Stockholders equity:Preferred stock,nonvoting,$0.0001 par value,10 million shares authorized;no shares issued or outstanding Common stock,voting,and additional paid-in capital,$0.0001 par value,200 million shares authorized;78 million shares issued and 60 million outstanding at October 4,2025 and 78 million shares issued and 60 million outstanding at December 28,20241,026 994 Treasury stock,at cost(2,944)(2,940)Accumulated other comprehensive loss(42)(47)Retained earnings4,155 4,163 Total stockholders equity2,195 2,170 Total liabilities and stockholders equity$12,059$10,798 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.2Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Statements of Operations(in millions,except per share data)(Unaudited)Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Net sales$2,036$2,148$6,628$7,098 Cost of sales1,155 1,240 3,764 4,037 Gross profit881 908 2,864 3,061 Selling,general and administrative expenses,exclusive ofrestructuring and related expenses826 895 2,771 2,933 Restructuring and related expenses33 13 180 21 Selling,general and administrative expenses859 908 2,951 2,954 Operating(loss)income22 (87)107 Other,net:Interest expense(40)(19)(86)(62)Other income,net16 2 61 12 Total other,net(24)(17)(25)(50)(Loss)income before income taxes(2)(17)(112)57 Income tax(benefit)expense(1)8(150)34 Net income(loss)from continuing operations(1)(25)38 23 Net income from discontinued operations 19 56 Net income(loss)$(1)$(6)$38$79 Basic earnings(loss)per common share from continuing operations$(0.02)$(0.42)$0.63$0.38 Basic earnings per common share from discontinued operations 0.32 0.95 Basic earnings(loss)per common share$(0.02)$(0.10)$0.63$1.33 Basic weighted-average common shares outstanding60.0 59.7 59.9 59.6 Diluted earnings(loss)per common share from continuingoperations$(0.02)$(0.42)$0.63$0.38 Diluted earnings per common share from discontinued operations 0.32 0.94 Diluted earnings(loss)per common share$(0.02)$(0.10)$0.63$1.32 Diluted weighted-average common shares outstanding60.0 59.9 60.5 59.9 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.3Table of ContentsCondensed Consolidated Statements of Comprehensive Income(in millions)(Unaudited)Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Net income(loss)$(1)$(6)$38$79 Other comprehensive income(loss):Currency translation adjustments(1)1 5 9 Total other comprehensive income(loss)(1)1 5 9 Comprehensive income(loss)$(2)$(5)$43$88 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.4Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Statements of Changes in Stockholders Equity(in millions,except per share data)(Unaudited)Twelve Weeks Ended October 4,2025Common Stock andAdditional Paid-In-CapitalTreasuryStock,at CostAccumulated OtherComprehensiveLossRetainedEarningsTotalStockholdersEquitySharesAmountBalance at July 12,202560$1,016$(2,943)$(41)$4,171$2,203 Net loss (1)(1)Total other comprehensive loss (1)(1)Share-based compensation 9 9 Common stock issued under employee benefit plans1 1 Repurchases of common stock (1)(1)Dividends declared($0.25 per common share)(15)(15)Balance at October 4,202560$1,026$(2,944)$(42)$4,155$2,195 Twelve Weeks Ended October 5,2024Common Stock andAdditional Paid-In-CapitalTreasuryStock,at CostAccumulated OtherComprehensiveLossRetainedEarningsTotalStockholdersEquitySharesAmountBalance at July 13,202460$976$(2,938)$(44)$4,613$2,607 Net loss (6)(6)Total other comprehensive income 1 1 Share-based compensation 11 11 Common stock issued under employee benefit plans 1 1 Repurchases of common stock (1)(1)Dividends declared($0.25 per common share)(15)(15)Balance at October 5,202460$988$(2,939)$(43)$4,592$2,598 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.5Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Statements of Changes in Stockholders Equity(in millions,except per share data)(Unaudited)Forty Weeks Ended October 4,2025Common Stock andAdditional Paid-InCapitalTreasuryStock,at CostAccumulated OtherComprehensiveLossRetainedEarningsTotalStockholdersEquitySharesAmountBalance at December 28,202460$994$(2,940)$(47)$4,163$2,170 Net income 38 38 Total other comprehensive income 5 5 Share-based compensation 29 29 Common stock issued under employee benefit plans 3 3 Repurchases of common stock (4)(4)Dividends declared($0.75 per common share)(46)(46)Balance at October 4,202560$1,026$(2,944)$(42)$4,155$2,195 Forty Weeks Ended October 5,2024Common Stock andAdditional Paid-InCapitalTreasuryStock,at CostAccumulated OtherComprehensiveLossRetainedEarningsTotalStockholdersEquitySharesAmountBalance at December 30,202360$946$(2,933)$(52)$4,559$2,520 Net income 79 79 Total other comprehensive income 9 9 Share-based compensation 39 39 Common stock issued under employee benefit plans 3 3 Repurchases of common stock (6)(6)Dividends declared($0.75 per common share)(46)(46)Balance at October 5,202460$988$(2,939)$(43)$4,592$2,598 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.6Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Statements of Cash Flows(in millions)(Unaudited)Forty Weeks EndedOctober 4,2025October 5,2024Cash flows from operating activities:Net income$38$79 Net income from discontinued operations 56 Net income from continuing operations38 23 Adjustments to reconcile net income to net cash used in operating activities:Depreciation and amortization214 217 Share-based compensation29 34 Loss(gain)on sale and impairment of long-lived assets,net23(14)Expected future credit losses,net50 23 Provision for deferred income taxes(27)24 Other,net14 3 Net change in:Receivables,net46(84)Inventories,net(75)(152)Operating lease right of use assets41(43)Other assets(57)(3)Accounts payable(270)(25)Accrued expenses(37)31 Operating lease liabilities(108)47 Other liabilities1 Net cash(used in)provided by operating activities of continuing operations(118)81 Net cash provided by operating activities of discontinued operations 77 Net cash(used in)provided by operating activities(118)158 Cash flows from investing activities:Purchases of property and equipment(159)(130)Proceeds from sales of property and equipment22 14 Net cash used in investing activities of continuing operations(137)(116)Net cash used in investing activities of discontinued operations(8)Net cash used in investing activities(137)(124)Cash flows from financing activities:Proceeds from issuance of long-term debt1,950 Repayment of long-term debt(300)Debt issuance costs(42)Dividends paid(45)(45)Proceeds from the issuance of common stock3 3 Repurchases of common stock(4)(6)Other,net(3)(10)Net cash provided by(used in)financing activities1,559(58)Effect of exchange rate changes on cash1 12 7Table of Contents Forty Weeks EndedOctober 4,2025October 5,2024Net increase(decrease)in cash and cash equivalents1,305(12)Cash and cash equivalents,beginning of period1,869 503 Cash and cash equivalents,end of period$3,174$491 Non-cash transactions of continuing operations:Accrued purchases of property and equipment$23$9 Transfers of property and equipment from(to)assets related to discontinued operations to(from)continuingoperations 7 Accrued debt issuance costs4 Summary of cash and cash equivalents:Cash and cash equivalents of continuing operations,end of period3,174 464 Cash and cash equivalents of discontinued operations,end of period 27 Cash and cash equivalents,end of period$3,174$491 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.8Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)1.Nature of Operations and Basis of PresentationDescription of BusinessAdvance 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 unaudited condensed consolidated financial statements include the accounts ofAdvance 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“the Company”).As of October 4,2025,the Company operated a total of 4,297 stores primarily within the United States,with additional locations in Canada,PuertoRico and the U.S.Virgin Islands.In addition,as of October 4,2025,the Company served 814 independently owned Carquest branded stores across the samegeographic locations served by the Companys stores,in addition to Mexico and various Caribbean islands.The Companys stores operate primarily under thetrade names“Advance Auto Parts”and“Carquest”.The Company has one reportable segment.As of December 28,2024,the Company had two operating segments,which were aggregated as a singlereportable segment;however,following the stabilization of the Companys new organizational structure in the first quarter of fiscal 2025,due to significantrestructuring activities,the Company now operates under the single operating segment of“Advance Auto Parts/Carquest”.See Note 11.Segment Reporting andNote 3.Restructuring,of the notes to the condensed consolidated financial statements included herein for additional information on the Companys segmentsand restructuring activities.Basis of PresentationThe accompanying unaudited condensed consolidated financial statements and unaudited notes to the condensed consolidated financial statements arepresented in accordance with the rules and regulations of the United States Securities and Exchange Commission(“SEC”).Certain information and footnotedisclosures 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 SEC interim reporting principles.The accompanying condensed consolidated financial statements,in the opinion of management,reflect all normal recurring adjustments that arenecessary to present fairly the results for the interim periods presented.The accounting policies followed in the presentation of these condensed consolidatedfinancial statements are consistent with those followed on an annual basis.These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in theCompanys Annual Report on Form 10-K for fiscal year 2024(“2024 Form 10-K”)as filed with the SEC on February 26,2025.The results of operations forthe interim periods are not necessarily indicative of the operating results to be expected for the full year.Consistent with prior years,the Companys firstquarter of the year contained sixteen weeks.The Companys remaining quarters each consist of twelve weeks,with the exception of the fourth quarter of fiscal2025 which consists of thirteen weeks.Change in PresentationPrior to fiscal 2025,the Company presented its condensed consolidated financial statements and notes to the condensed consolidated financialstatements in thousands.Effective in fiscal 2025,such amounts are presented in millions,except par value share amounts and per share data,unless otherwisestated.Certain prior year amounts have been reclassified to conform to the current year presentation,including the separate disclosure of the non-cash expensefor expected future credit losses.operating lease right of use assets,other assets,operating lease liabilities and other liabilities,on the condensed consolidatedstatements of cash flows.This change in presentation does not have a material impact on the condensed consolidated financial statements.9Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)Further,consistent with the presentation in the Companys 2024 Form 10-K,the Company has presented the sale of the Worldpac,Inc.business(“Worldpac”)as discontinued operations in its condensed consolidated financial statements.Comparative interim period amounts have been updated to reflectthis presentation.Recently Issued Accounting Pronouncements-Not Yet AdoptedIncome Tax Disclosure ImprovementsIn December 2023,the Financial Accounting Standards Board(“FASB”)issued Accounting Standards Update(“ASU”)2023-09,Income Taxes(“ASU 2023-09”),which requires a company to enhance its income tax disclosures.In each annual reporting period,the company should disclose the specificcategories used in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold,including disaggregation of taxespaid by jurisdiction.The related disclosures are effective for the fiscal year beginning after December 15,2024.The Company is currently evaluating theimpact of adopting ASU 2023-09 on the Companys consolidated financial statements and related disclosures and believes that the adoption will result inadditional disclosures,but will not have any other impact on its consolidated financial statements.Disaggregation of Income Statement ExpensesIn November 2024,the FASB issued ASU 2024-03,Income Statement-Reporting Comprehensive Income-Expense Disaggregation(“ASU 2024-03”),which requires public entities to disclose more detailed information about certain costs and expenses presented in the income statement,including(among otheritems)the amount of inventory purchases,employee compensation,selling expenses and depreciation and amortization of intangible assets.ASU 2024-03 iseffective for fiscal years beginning after December 15,2026,and for interim periods beginning after December 15,2027,with early adoption permitted.TheCompany is currently evaluating the impact of adopting ASU 2024-03 on the consolidated financial statements and related disclosures.Measurement of Credit Losses for Accounts Receivable and Contract AssetsIn July 2025,the FASB issued ASU 2025-05,Financial Instruments-Credit Losses(Topic 326):Measurement of Credit Losses for AccountsReceivable and Contract Assets(“ASU 2025-05”),which provides a practical expedient permitting an entity to assume that conditions at the balance sheet dateremain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets.ASU 2025-05 iseffective for annual reporting periods beginning after December 15,2025,and for interim periods within those annual reporting periods,with early adoptionpermitted.The amendments in ASU 2025-05 should be applied prospectively.The Company is currently evaluating the impact of adopting ASU 2025-05 andbelieves that the adoption will not have a material impact on the consolidated financial statements and related disclosures.Targeted Improvements to the Accounting for Internal-Use SoftwareIn September 2025,the FASB issued ASU 2025-06,Intangibles-Goodwill and Other-Internal-Use Software:Targeted Improvements to theAccounting for Internal-Use Software(“ASU 2025-06”),which makes targeted improvements to the accounting for internal-use software by removingreferences to“development stages”.The update also clarifies the criteria for capitalization,which begins when both of the following occur:(1)managementhas authorized and committed to funding the software project and(2)it is probable that the project will be completed and the software will be used to performthe function intended.ASU 2025-06 is effective for annual reporting periods beginning after December 15,2027,and for interim periods within those annualreporting periods,with early adoption permitted.The amendment in ASU 2025-06 can be applied prospectively,retrospectively,or via a modified prospectivetransition method.The Company is currently evaluating the impact of adopting ASU 2025-06 on the consolidated financial statements and related disclosures.10Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)2.RevenuesThe following table summarizes disaggregated revenue from contracts with customers by product group from continuing operations:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Percentage of Net Sales:Parts and Batteries65dcccessories and Chemicals20 21 22 22 Engine Maintenance14 14 14 14 Other1 1 1 1 Total100000%There were no major customers individually accounting for 10%or more of consolidated net revenues.3.Restructuring2024 Restructuring PlanOn November 13,2024,the Companys Board of Directors approved a restructuring and asset optimization plan(“2024 Restructuring Plan”)designedto improve the Companys profitability and growth potential and streamline its operations.This plan contemplated the closure of approximately 500 stores,approximately 200 independent locations and four distribution centers by mid-2025,as well as headcount reductions.The Company completed the closure ofall of these locations during the first quarter of 2025.Expenses associated with the 2024 Restructuring Plan included:1)noncash asset impairment and accelerated amortization and depreciation ofoperating lease Right-of-Use(“ROU”)assets and property and equipment,2)personnel expenses related to severance and transition expenses,which wereoffered to certain employees who would provide services through key dates to ensure completion of closure activities and 3)other location closure-relatedactivity,including nonrecurring services rendered by third-party vendors assisting with the turnaround initiatives and other related expenses,includingincremental revisions to receivable collectability due to termination of contracts with independents associated with the 2024 Restructuring Plan.Other Restructuring InitiativesIn November 2023,the Company announced a strategic and operational plan with anticipated savings of$150 million of which$50 million would bereinvested into frontline team members.In addition to a reduction in workforce,this plan streamlines the Companys supply chain by configuring a multi-echelon supply chain by leveraging current assets and operating fewer,more productive distribution centers that focus on replenishment and move more partscloser to the customer.In achieving this plan,the Company is in process of converting certain distribution centers and stores into market hubs.In addition toproviding replenishment to near-by stores,market hubs support retail operations.In addition to the distribution network optimization costs,other restructuringexpenses included certain other items as further detailed in the table below.The Company has recorded all restructuring and related expenses as a component of selling,general and administrative expenses in the condensedconsolidated statement of operations,with the exception of inventory related expenses that are recorded as a component of cost of sales on the condensedconsolidated statement of operations.11Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)Twelve Weeks EndedForty Weeks Ended2024 Restructuring Plan Expenses:October 4,2025October 5,2024October 4,2025October 5,2024Selling,general and administrative expenses:Impairment and write-down of long-lived assets$15$67$Severance and other personnel expenses 15 Other location closure related expenses7 63 2024 Restructuring Plan Expenses$22$145$Other Restructuring Plan Expenses:Cost of sales:Distribution network optimization$4$9$Selling,general and administrative expenses:Distribution network optimization6 9 15 14 Impairment and write-down of long-lived assets3 9 Worldpac post transaction-related expenses2 7 Other restructuring expenses 4 4 7 Other Restructuring Plan Expenses$15$13$44$21 Other location closure related activity for the twelve weeks ended October 4,2025 includes$2 million of nonrecurring services rendered by third-party vendors assisting with the 2024Restructuring Plan and$5 million of other related expenses associated with location closures,including the transfer of assets.Other location closure related activity for the forty weeks endedOctober 4,2025 includes$37 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan,$7 million for reserves on independent loans and$19million of other related expenses associated with location closures,including the transfer of assets.Other restructuring expenses primarily consists of severance and other personnel expenses.The following table shows the change in the restructuring liability in the period,which excludes operating lease liabilities and associated expenses.The restructuring liabilities are classified within accounts payable,accrued liabilities and other current liabilities in the condensed consolidated balance sheets.Professional servicefeesSeverance and otherpersonnel expensesBalance at December 28,2024$23$14 Restructuring expenses during the period45 30 Cash payments(66)(40)Balance at October 4,2025$2$4 As of October 4,2025,the cumulative amount incurred to date for active restructuring plans totaled$930 million,consisting of write-down ofinventory to net realizable value in the fourth quarter of fiscal 2024,lease termination impacts,other exit-related expenses related to ceased use buildings andcertain employee termination benefits.The Company estimates that it will incur additional expenses of approximately$20 million to$30 million under theactive restructuring plans.These expenses primarily relate to lease terminations,professional services,and other exit costs,substantially all of which theCompany expects to be incurred by the end of fiscal year 2025,with certain expenses,primarily related to closed store and distribution center leases,expectedto continue into fiscal year 2026.(1)(2)(1)(2)12Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)4.Inventories,netThe Company used the last in,first out(“LIFO”)method of accounting for approximately 92%of inventories as of October 4,2025 and December 28,2024,respectively.An actual valuation of inventory under the LIFO method is performed at the end of each fiscal year based on inventory levels and carryingcosts at that time.Accordingly,interim LIFO calculations are based on the Companys estimates of expected inventory levels and costs at the end of the year.The Companys LIFO debit/(credit)reserve balance was$(48)million and$(11)million as of October 4,2025 and December 28,2024,respectively,to stateinventories at LIFO.Increases to the Companys LIFO credit reserve balance are recorded as a noncash charge to cost of sales and decreases are recorded as anon-cash benefit to cost of sales.The non-cash(benefit)expense recorded to cost of sales related to the change in the LIFO credit reserve for the periodspresented was as follows:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024LIFO credit reserve(benefit)expense$33$(35)$37$(69)The effect of LIFO liquidations for the forty weeks ended October 4,2025 was a decrease to cost of sales of$4 million and an increase to net earningsof$3 million,or($0.05)per diluted share.There was no impact from LIFO liquidations for the twelve weeks ended ended October 4,2025 and for the twelveand forty weeks ended October 5,2024.Purchasing and warehousing costs included in inventories as of October 4,2025 and December 28,2024 were$400 million and$368 million,respectively.5.Receivables,netReceivables,net,consisted of the following:October 4,2025December 28,2024Trade$428$417 Vendor133 157 Other11 28 Total receivables572 602 Less:allowance for credit losses(89)(58)Receivables,net$483$544 The Company regularly reviews accounts receivable,vendor and other balances and maintains allowances for credit losses estimated whenever eventsor circumstances indicate the carrying value may not be recoverable and updates its estimate of credit losses each reporting period based on new informationthat becomes available.The Company considers the following factors when determining if collection is reasonably assured:customer creditworthiness,pasttransaction history with the customer,current economic and industry trends and changes in customer payment terms.The Company controls credit risk throughcredit approvals,credit limits and accounts receivable and credit monitoring procedures.13Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)In the third quarter of fiscal 2025,one of the Companys vendors,a leading auto parts supplier for the automotive aftermarket industry,filed voluntarypetitions for Chapter 11 bankruptcy protection with the U.S.Bankruptcy Court for the Southern District of Texas.The vendor has secured short-term financingthrough a debtor-in-possession(“DIP”)loan,however,Chapter 11 proceedings carry inherent risks with respect to a companys ability to continue operationsand maintain adequate liquidity to satisfy current and future obligations.As a result of these events,the Company recorded a non-cash charge of$28 million tocost of sales in the third quarter of fiscal 2025,within the condensed consolidated statement of operations,reflecting estimated future credit losses on certainvendor receivables due from the vendor.The estimate was developed utilizing a probability weighted cash-flow model adjusted for risks associated with creditrisk deterioration for companies that enter Chapter 11 bankruptcy proceedings.6.Long-term Debt and Fair Value of Financial InstrumentsLong-term debt,net of unamortized discount and debt issuance costs,consisted of the following:October 4,2025December 28,20245.90%Senior Unsecured Notes due March 9,2026$300 1.75%Senior Unsecured Notes due October 1,2027350 350 5.95%Senior Unsecured Notes due March 9,2028300 300 3.90%Senior Unsecured Notes due April 15,2030500 500 7.00%Senior Unsecured Notes due August 1,2030975 3.50%Senior Unsecured Notes due March 15,2032350 350 7.375%Senior Unsecured Notes due August 1,2033975 Total principal of long-term debt and current maturities of long-term debt3,450 1,800 Less:Unamortized discounts and debt issuance costs(39)(11)Total debt,net3,411 1,789 Less:Current portion of long-term debt Long-term debt,excluding the current portion$3,411$1,789 Fair Value of Financial Assets and LiabilitiesAs of October 4,2025 and December 28,2024,the fair value of the Companys long-term debt,which includes the current portion of long-term debt,was approximately$3.4 billion and$1.6 billion,respectively.The fair value of the Companys long-term debt was determined using Level 2 inputs based onquoted market prices.The carrying amounts of the Companys cash and cash equivalents,receivables,net,accounts payable and accrued expenses approximatetheir fair values due to the relatively short-term nature of these instruments.Long-term debtOn August 4,2025,the Company issued(i)$975 million in aggregate principal amount of 7.000%Senior Notes due 2030(the“2030 Notes”)and(ii)$975 million in aggregate principal amount of 7.375%Senior Notes due 2033(collectively,the“Senior Unsecured Notes”)in a private transaction exemptfrom the registration requirements of the Securities Act of 1933,as amended(the“Act”).Interest on the Senior Unsecured Notes is payable in cash on February1 and August 1 of each year,commencing on February 1,2026.The 2030 Notes will mature on August 1,2030,and the 2033 Notes will mature on August 1,2033.Net proceeds from the issuance of the Senior Unsecured Noted were$1.9 billion,net of direct transaction and closing costs.The Senior Unsecured Notesare guaranteed by each of the Companys wholly-owned domestic subsidiaries that also guarantee the Companys new asset-based loan revolving credit facility(the“ABL Facility”)as further discussed below.In accordance with the terms of the Indenture governing the Senior Unsecured Notes,the Company may,at its option and on any one or moreoccasions,redeem some or all of the Senior Unsecured Notes at the redemption prices described in the14Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)Indenture.In addition,in the event of a Change of Control Triggering Event(as defined in the Indenture),the Company will be required to offer to repurchasethe Senior Unsecured Notes at a price equal to 101%of the principal amount thereof,plus accrued and unpaid interest,if any,to,but excluding,the repurchasedate.The Indenture also contains customary provisions for events of default and certain covenants limiting the ability of the Company and its subsidiaries toincur debt secured by liens and to enter into certain sale and lease-back transactions.Following the closing of the issuance of the Senior Unsecured Notes,the Company utilized a portion of the net proceeds to redeem in full itsoutstanding$300 million in aggregate principal amount of 5.90%senior unsecured notes due 2026 and the Company recorded a loss of$3 million onredemption in the third quarter of fiscal 2025 associated with this extinguishment.The remaining proceeds from the issuance are available for general corporatepurposes,and,as further discussed under“Credit Facilities”below,certain of our cash and cash equivalents,are designated as qualified cash and are subject tocustomary“springing”control agreements,as defined in the ABL Facility Agreement.Future PaymentsAs of October 4,2025,the aggregate future annual maturities of long-term debt instruments were as follows:YearAmount2026$2027350 2028300 2029 20301,475 Thereafter1,325$3,450 Credit FacilitiesOn August 12,2025,the Companys$1 billion revolving credit facility(the“2021 Credit Agreement”)was terminated and replaced by the ABLFacility.The Company recorded a$6 million loss on extinguishment of the 2021 Credit Agreement during the third quarter of fiscal 2025.The ABL Facilityprovides for a five-year senior secured first lien asset-based revolving credit facility of up to$1 billion with an uncommitted accordion feature that provides foradditional credit extensions up to$500 million.Our ability to draw upon the ABL Facility is subject to the available borrowing base.Outstanding amountsunder the ABL Facility will accrue interest at a floating rate,which,at the Companys election,can be either(i)SOFR plus an applicable margin or(ii)analternative base rate plus an applicable margin.The applicable rate varies based on Average Historical Excess Availability(as defined in the ABL FacilityAgreement)from(i)with respect to base rate loans,0.25%to 0.75%and(b)with respect to SOFR loans,1.25%to 1.75%and resets quarterly on a prospectivebasis and is,in part,derived based-upon the utilization of the facility.Interest is payable on a quarterly basis.Unused commitments under the ABL Facility willaccrue an unused commitment fee of either 0.30%or 0.25%per annum,depending on average utilization.As of October 4,2025 and December 28,2024,theCompany had no outstanding borrowings under its ABL Facility and 2021 Credit Agreements,respectively.As of October 4,2025 the Company had$741million of borrowing availability and$259 million letters of credit outstanding under the ABL Facility.As of December 28,2024,the Company had$1 billionof borrowing availability and no letters of credit outstanding under the 2021 Credit Agreement.The ABL Facility has first lien on substantially all of the accounts receivable,inventory,cash and related assets of the Company and its subsidiaryguarantors thereunder.Advance Auto Parts,Inc.is the ABL Facility borrower and the guarantors are(i)each of our subsidiaries that guarantee our recentlyissued Senior Unsecured Notes and(ii)certain of our Canadian subsidiaries.Availability under the ABL Facility is limited to the lesser of(i)the borrowingbase,equal to the sum of 90%of eligible credit card receivables,85%of eligible trade accounts receivable,85%of the net orderly liquidation value of eligibleinventory and 100%of qualified cash(up to certain limits for the purpose of determining borrowing capacity),subject,in each case,to customary reservesestablished by the collateral agent under the ABL Facility from time to time,including reserves related to outstanding obligations to our suppliers that arepayable to the paying agents,as a result of such suppliers electing,at their option,to utilize third-party financing,commonly referred to as supply chainfinancing,and debt maturity reserves,and(ii)the aggregate revolving credit commitments.The ABL Facility contains customary representations andwarranties,events of15Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)default and financial,affirmative and negative covenants for facilities of this type,including but not limited to a springing financial covenant relating to a fixedcharge coverage ratio,defined in the ABL Facility as the ratio of Consolidated Adjusted EBITDA minus Consolidated Capital Expenditures minus Taxes toFixed Charges,each as defined in the ABL Facility,on a four quarter trailing basis,which requires a minimum 1:1 coverage ratio to be maintained,andrestrictions on certain indebtedness,liens,investments and acquisitions,asset dispositions,restricted payments,prepayment of certain indebtedness andtransactions with affiliates,subject to various thresholds and caps.In accordance with the ABL Facility,the Company is required to hold cash and cash equivalents in designated accounts with lenders,referred to asQualified Cash Accounts as defined in the ABL Facility.As of October 4,2025,$2.3 billion was designated as Qualified Cash.These amounts are unrestrictedand the Company is able to direct,and have sole control over,the manner of disposition of funds in such accounts,subject to:1)maintaining a minimumavailability under the ABL facility of at least the greater of(i)12.5%of the Line Cap and(ii)$125 million;and 2)maintaining excess availability under theABL Facility of at least$400 million.The Qualified Cash Accounts are subject to springing control agreements pursuant to which the cash deposited thereinwill become restricted in the event of default or a breach of such covenants.The Company was in compliance with its covenants related to the ABL Facility asof October 4,2025.As of October 4,2025 and December 28,2024,the Company had$89 million and$91 million,respectively,of bilateral letters of credit issuedseparately from the ABL Facility and 2021 Credit Agreement,respectively,none of which were drawn upon.These bilateral letters of credit generally have aterm of one year or less and primarily serve as collateral for the Companys self-insurance policies.Debt GuaranteesThe Company is a guarantor of loans made by banks to various independently-owned Carquest-branded stores that are or,prior to the 2024Restructuring Plan,were customers of the Company totaling$76 million and$98 million as of October 4,2025 and December 28,2024,respectively.Theseloans are collateralized by security agreements on merchandise inventory and other assets of the borrowers.The approximate value of the inventorycollateralized by these agreements was$157 million and$181 million as of October 4,2025 and December 28,2024,respectively.The Company continuouslyassesses the likelihood of performance under these guarantees and believes that performance is remote as of October 4,2025.16Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)7.LeasesSubstantially all of the Companys leases are for facilities,vehicles,and equipment.The initial term for facilities is typically five to ten years,withrenewal options typically at five-year intervals,with the exercise of lease renewal options at the Companys sole discretion.The Companys vehicle andequipment lease terms are typically three to six years.The Companys lease agreements do not contain any material residual value guarantees or materialrestrictive covenants.Total lease cost is included in cost of sales and total selling,general and administrative expenses in the accompanying condensed consolidatedstatements of operations and is recorded net of immaterial sublease income.Total lease costs are comprised of the following:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Operating lease cost$107$121$391$396 Variable lease cost34 34 123 120 Total lease cost$141$155$514$516 During the twelve and forty weeks ended October 4,2025,the Company recorded$12 million and$52 million,respectively,primarily related toaccelerated amortization on leases the Company expects to exit before the end of the contractual term,and non-cash asset impairment,net of gains on leasemodifications and terminations.These amounts are recorded in restructuring and related expenses within the accompanying condensed consolidated statementsof operations.See Note 3.Restructuring,of the notes to the condensed consolidated financial statements included herein.Other information relating to the Companys lease liabilities was as follows:Forty Weeks EndedOctober 4,2025October 5,2024Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows from operating leases$458$401 Right-of-use assets obtained in exchange for lease obligations:Operating leases$284$387 During the first quarter of 2024,the Company entered into a sale-leaseback transaction where the Company sold a building and land and entered into athree-year lease of the property upon the sale.This transaction resulted in a gain of$22 million and is included in selling,general and administrative expenseson the condensed consolidated statement of operations for the forty weeks ended October 5,2024.17Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)8.Earnings(loss)per ShareThe computations of basic and diluted earnings per share were as follows:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024NumeratorIncome(loss)from continuing operations$(1)$(25)$38$23 Income from discontinued operations 19 56 Net income(loss)applicable to common shares$(1)$(6)$38$79 DenominatorBasic weighted-average common shares60.0 59.7 59.9 59.6 Dilutive impact of share-based awards 0.2 0.6 0.3 Diluted weighted-average common shares60.0 59.9 60.5 59.9 Basic earnings(loss)per common share from continuingoperations$(0.02)$(0.42)$0.63$0.38 Basic earnings per common share from discontinuedoperations 0.32 0.95 Basic earnings(loss)per common share$(0.02)$(0.10)$0.63$1.33 Diluted earnings(loss)per common share from continuingoperations$(0.02)$(0.42)$0.63$0.38 Diluted earnings per common share from discontinuedoperations 0.32 0.94 Diluted earnings(loss)per common share$(0.02)$(0.10)$0.63$1.32 For the twelve weeks ended October 4,2025,the number of shares utilized in the computation of diluted weighted earnings per share from continuing operations is equal to the basic weighted-average common shares as the effect of incremental dilutive shares would be anti-dilutive as a result of incurring a net loss.For the twelve weeks ended October 4,2025 and October 5,2024,1.4million and 0.6 million,respectively,of restricted stock units(“RSUs”)were excluded from the diluted weighted-average common share count calculation as their inclusion would have been anti-dilutive.For the forty weeks ended October 4,2025 and October 5,2024,0.8 million and 0.5 million,respectively,of RSUs were excluded from the diluted calculation as their inclusion would havebeen anti-dilutive.(1)(1)18Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)9.Supplier Finance ProgramsCertain of the Companys suppliers enter into agreements with third-party financial institutions to obtain enhanced receivables options.Thesearrangements are commonly referred to and known in the industry as supply chain financing programs.Through these agreements,the Companys suppliers,attheir sole discretion,may elect to sell their receivables due from the Company to the third-party financial institution at terms negotiated between the supplierand the third-party financial institution.The Company does not provide any guarantees to any third-party in connection with these financing arrangements.TheCompanys obligations to suppliers,including amounts due and scheduled payment terms,are not impacted,and no assets are pledged under the agreements.All outstanding amounts due to third-party financial institutions related to suppliers participating in such financing arrangements are recorded within accountspayable and represent obligations outstanding under these supplier finance programs for invoices that were confirmed as valid and owed to the third-partyfinancial institutions in the Companys condensed consolidated balance sheets.As of October 4,2025,and December 28,2024,the confirmed obligationsoutstanding under these supplier finance programs to third-party financial institutions were$2.7 billion and$3.2 billion,respectively.As of October 4,2025,and December 28,2024,$16 million and$0.4 billion,respectively,is excluded from the Companys accounts payable balance on the Companys condensedconsolidated balance sheets,as such amounts represent liabilities of Worldpac transferred with the sale of the business in fiscal 2024.Under the provisions ofthe sale,the Company will provide certain letters of credit to the buyer to support supply chain financing for the buyer.See Note 12.Discontinued Operations,of the notes to the condensed consolidated financial statements included herein.10.Commitments and ContingenciesOn October 9,2023,and October 27,2023,two putative class actions on behalf of purchasers of the Companys securities who purchased or otherwiseacquired their securities between November 16,2022,and May 30,2023,inclusive(the“Class Period”),were commenced against the Company and certain ofthe Companys former officers in the United States District Court for the Eastern District of North Carolina.The plaintiffs allege that the defendants madecertain false and materially misleading statements during the alleged Class Period in violation of Section 10(b)of the Securities Exchange Act of 1934 andRule 10b-5 promulgated thereunder.These cases were consolidated on February 9,2024,and the court-appointed lead plaintiff filed a consolidated andamended complaint on April 22,2024.The consolidated and amended complaint proposes a Class Period of November 16,2022 to November 15,2023,andalleges that defendants made false and misleading statements in connection with(a)the Companys 2023 guidance and(b)certain accounting issues previouslydisclosed by the Company.On June 21,2024,defendants filed a motion to dismiss the consolidated and amended complaint.On January 23,2025,the motionto dismiss was granted by the United States District Court for the Eastern District of North Carolina.On February 21,2025,plaintiffs filed an appeal to the 4thCircuit Court of Appeals.The Company strongly disputes the allegations and intends to defend the case vigorously.On January 17,2024,February 20,2024,and February 26,2024,derivative shareholder complaints were commenced against the Companys directorsand certain former officers alleging derivative liability for the allegations made in the securities class action complaints noted above.On April 9,2024,thecourt consolidated these actions and appointed co-lead counsel.On June 10,2024,the court issued a stay order on the consolidated derivative complaintpending resolution of the motion to dismiss for the underlying securities class action complaint.19Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)11.Segment ReportingThe Company has one operating segment and one reportable segment,effective during the first quarter of fiscal year 2025,resulting from thestabilization of the Companys new organizational structure due to the significant restructuring activities announced in fiscal year 2024 as further described inNote 3.Restructuring,of the notes to the condensed consolidated financial statements included herein.Following this restructuring,the Company no longer hastwo operating segments,which were previously aggregated into a single reportable segment.The Company conducts its operations principally in thegeographical areas of the U.S.and Canada through its Advance Auto Parts and Carquest trade brands.The products sold by the Company,across all geographicareas,have similar economic characteristics,are sourced from the Companys suppliers in a similar manner,and are available for sale to all of the Companyscustomers through the Companys stores and self-service e-commerce sites.All of the Companys stores have similar characteristics,including the nature of theproducts and services,the type and class of customers,and the methods used to distribute products and provide service to its customers.Due to these reasons,the Company has one operating segment,referred to as Advance Auto Parts/Carquest.As geographic information is not a key component of how the chiefoperating decision maker(“CODM”)reviews performance and allocates resources,such entity-wide information is not disclosed on a quarterly basis.The Companys CODM is the Chief Executive Officer,who regularly reviews financial information presented on a consolidated basis for purposes ofallocating resources and evaluating financial performance for the Companys single reportable segment.Discrete information is not regularly provided toand/or reviewed by the Companys CODM at a lower level than the consolidated level,inclusive of segment asset level detail.The CODM primarily focuses onnet income to evaluate its reportable segment.The CODM also uses net income for evaluating pricing strategy and to assess the performance for determiningthe compensation of certain employees.Significant segment expenses regularly provided to the CODM,which represent the difference between segmentrevenue and segment net income,consisted of the following:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Net sales$2,036$2,148$6,628$7,098 Less:Cost of sales$1,155$1,240$3,764$4,037 Selling,general and administrative expenses 774 843 2,616 2,764 Restructuring and related expenses33 13 180 21 Depreciation and amortization expense 52 52 155 169 Interest expense40 19 86 62 Other segment items(16)(2)(61)(12)Income tax(benefit)expense(1)8(150)34 Net income from continuing operations$(1)$(25)$38$23 Selling,general and administrative expenses,excludes restructuring and related expenses and depreciation and amortization.The twelve weeks ended October 4,2025 excluded$11 million and$5 million of depreciation and amortization expense included within cost of sales andrestructuring,respectively,and$12 million and$2 million,respectively,for the twelve weeks ended October 5,2024.The forty weeks ended October 4,2025excluded$38 million and$21 million of depreciation and amortization expense included within cost of sales and restructuring,respectively,and$44 millionand$4 million,respectively,for the forty weeks ended October 5,2024.Other segment items relates to interest income,loss on extinguishment of debt,and income recognized from the transition services(“TSA Services”)agreement with Worldpac that commenced in the fourth quarter of fiscal 2024,included in total other,net,in the accompanying condensed consolidatedstatements of operations.(1)(2)(3)(1)(2)(3)20Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)12.Discontinued OperationsIn fiscal 2024,the Company completed the sale of Worldpac for$1.5 billion,with customary purchase price adjustments for working capital and otheritems as well as the provision of letters of credit in an aggregate amount of up to$200 million for up to 12 months following the closing of the transaction,which letter of credit exposure will reduce to zero no later than 24 months after the closing,to support supply chain financing for the buyer.The transactionclosed on November 1,2024.Net proceeds from the transaction after paying expenses and excluding the impact of taxes were approximately$1.47 billion.TheCompanys sale of Worldpac was progress towards changing the landscape of the business with increased focus on the Advance blended-box model.As aresult,the Company classified the results of operations and cash flows of Worldpac as discontinued operations in its condensed consolidated statements ofoperations and condensed consolidated statements of cash flows for prior periods presented.There has been no activity,to-date,related to discontinuedoperations in fiscal 2025.The following table presents the major components of discontinued operations in the Companys condensed consolidated statements of operations:Twelve Weeks EndedForty Weeks EndedOctober 5,2024October 5,2024Major classes of line items constituting income of discontinued operations before provision for incometaxes:Net Sales$497$1,636 Cost of sales,including purchasing and warehousing costs330 1,079 Gross profit167 557 Selling,general and administrative expenses138 476 Operating income29 81 Other,net:Other income(expense),net(3)Total other,net(3)Income from discontinued operations related to major classes before provision for income taxes29 78 Income tax expense10 22 Net income from discontinued operations$19$56 13.Income TaxesThe Companys effective tax rate benefit for the forty weeks ended October 4,2025 was higher than the estimated annual effective tax rate benefit,primarily due to a net discrete tax benefit of$126 million realized in the first quarter of fiscal 2025 related to certain tax benefits associated with capital lossdeductions.On July 4,2025,President Trump signed into law the One Big Beautiful Bill Act(“OBBBA”).The OBBBA makes key elements of the Tax Cuts andJobs Act permanent,including 100%bonus depreciation and the business interest expense limitation,among others.The Company has determined the OBBBAhas an immaterial impact to the Companys provision for income taxes and deferred tax balances.ASC 740,“Income Taxes”,requires the effects of changes intax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted,which occurred during the Companys secondquarter of fiscal 2025.Therefore,the Company has reflected the effect of the OBBBA within the provision for income taxes for the twelve and forty weeksended October 4,2025 and deferred tax balances as of October 4,2025.21Table of ContentsITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of financial condition and results of operations should be read in conjunction with the audited consolidatedfinancial statements and notes included in the Companys Annual Report on Form 10-K for the year ended December 28,2024(filed with the SEC onFebruary 26,2025)which the Company refers to as the“2024 Form 10-K”),and the Companys unaudited condensed consolidated financial statements andthe notes to those statements that appear elsewhere in this report.The results of operations for the interim periods are not necessarily indicative of theoperating results to be expected for the full year.Consistent with the previous fiscal year,the Companys first quarter of the year contained sixteen weeks.TheCompanys remaining quarters each consist of twelve weeks,with the exception of the fourth quarter of fiscal 2025 which consists of thirteen weeks.Third Quarter Fiscal 2025 Management OverviewThe Companys financial results from continuing operations for the third quarter of 2025 includes:Net sales during the third quarter of fiscal 2025 were$2.0 billion,a decrease of 5.2%compared with the third quarter of fiscal 2024.Comparablestore sales increased by 3.0%.Gross profit margin for the third quarter of 2025 was 43.3%of net sales,an increase of 100 basis points compared with the third quarter of fiscal2024.Gross profit margin for the third quarter of 2025 was unfavorably impacted by a non-cash charge of$28 million reflecting expected futurecredit losses on vendor receivables due from a vendor that filed for Chapter 11 bankruptcy protection in the third quarter of 2025.Selling,general and administrative expenses,exclusive of restructuring and related expenses for the third quarter of fiscal 2025 were 40.6%of netsales,a decrease of(110)basis points compared with the third quarter of fiscal 2024.The Company generated a diluted loss per share of$0.02 during the third quarter of fiscal 2025,compared with a diluted loss per share of$0.42for the comparable period of 2024.Business and Risks UpdateThe Company continues to make progress on the various elements of its business plan,which is focused on improving the customer experience,margin expansion,and driving consistent execution for both professional and DIY customers.In the first quarter of fiscal 2025,the Company completed allstore location closures under the 2024 Restructuring Plan designed to improve the Companys profitability and growth potential,and streamline its operations.For further information related to restructuring and related activities,see Note 3.Restructuring of the Notes to Condensed Consolidated Financial Statementsincluded in Part I,Item 1.In the third quarter of fiscal 2025,one of the Companys vendors,a leading auto parts supplier for the automotive aftermarket industry,filed voluntarypetitions for Chapter 11 bankruptcy protection with the U.S.Bankruptcy Court for the Southern District of Texas.The vendor has secured short-term financingthrough a debtor-in-possession(“DIP”)loan,however,Chapter 11 proceedings carry inherent risks with respect to a companys ability to continue operationsand maintain adequate liquidity to satisfy current and future obligations.As a result of these events,the Company recorded a non-cash charge of$28 million tocost of sales in the third quarter of fiscal 2025,within the condensed consolidated statement of operations,reflecting estimated future credit losses on certainvendor receivables due from the vendor.The estimate was developed utilizing a probability weighted cash-flow model adjusted for risks associated with creditrisk deterioration for companies that enter Chapter 11 bankruptcy proceedings.The Company currently continues to source products from the vendor,but is nota material supplier of the Company.In August 2025,the Company completed various financing-related transactions,including the issuance of$1.95 billion in Senior Unsecured Noteswith net proceeds of$1.6 billion,after giving effect to the redemption of the Companys 5.90%Senior Notes due March 9,2026 with the proceeds and directtransaction and closing costs.The Company also terminated its existing 2021 Credit Agreement which has been replaced by a new asset-based loan revolvingcredit facility(the“ABL Facility”).For further information related to these financing-related transactions,see Note 6.Long-term Debt and Fair Value ofFinancial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I,Item 1 and Part I,Item 2,“Liquidity and CapitalResources”of this Quarterly Report.22Table of ContentsDuring fiscal 2025,new global trade tariffs were announced on imports to the U.S.,including additional tariffs on various countries from which theCompany directly or indirectly imports and/or sources merchandise,including Canada,China and Mexico,among others.Since the initial announcement in thefirst quarter of fiscal 2025,various modifications and delays to the U.S.tariffs have been announced and further changes are expected to be made in the future,which may include additional sector-based tariffs or other measures.In response to the tariffs,certain of our suppliers have increased prices.However,theimpact of such increases to-date has not been material to the Companys business,financial condition and results of operations.The ultimate impact of tariffson the Companys business remains uncertain.See Part II,Item 1A,“Risk Factors”of this Quarterly Report.Industry UpdateOperating within the automotive aftermarket industry,the Company is influenced by a number of general macroeconomic factors,many of which aresimilar to those affecting the overall retail industry.In addition to the“Business and Risk Update”section included within this Managements Discussion andAnalysis of Financial Condition and Results of Operations,these factors include,but are not limited to:Significant changes in U.S trade policies,including the recently enacted and/or proposed new global trade tariffsInflationary pressures,including logistics and laborGlobal supply chain disruptionsCost of fuelChanges in the number of miles drivenUnemployment ratesInterest ratesConsumer confidence and purchasing powerCompetitionChanges in new car salesEconomic and geopolitical uncertaintyForeign currency exchange volatilityWhile these factors tend to fluctuate,the Company remains confident in the long-term growth prospects for the automotive parts industry.StoresThe key factors used in selecting sites and market locations in which the Company operates include population,demographics,traffic count,vehicleprofile,number and strength of competitors stores and the cost of real estate.During the forty weeks ended October 4,2025,26 stores were opened and 517were closed,resulting in a total of 4,297 stores as of the end of the third fiscal quarter compared with a total of 4,788 stores as of December 28,2024.Thesignificant reduction in stores during fiscal 2025 relates to actions taken under the Companys restructuring and related activities.See Note 3.Restructuring,ofthe Notes to Condensed Consolidated Financial Statements included in Part I,Item 1.23Table of ContentsResults of OperationsTwelve Weeks EndedChangeBasis Points($in millions)October 4,2025October 5,2024Net sales$2,036 100.0%$2,148 100.0%$(112)Cost of sales1,155 56.7 1,240 57.7 85(100)Gross profit881 43.3 908 42.3(27)100 Selling,general and administrative expenses,exclusive ofrestructuring and related expenses826 40.6 895 41.7 69(110)Restructuring and related expenses33 1.6 13 0.6(20)102 Selling,general and administrative expenses859 42.2 908 42.3 49(8)Operating income22 1.1 22 108 Interest expense(40)(2.0)(19)(0.9)(21)(108)Other income,net16 0.8 2 0.1 14 69 Income tax(benefit)expense(1)8 0.4 9(42)Net loss$(1)%$(25)(1.2)%$24 111 Forty Weeks EndedChangeBasis Points($in millions)October 4,2025October 5,2024Net sales$6,628 100.0%$7,098 100.0%$(470)Cost of sales3,764 56.8 4,037 56.9 273(9)Gross profit2,864 43.2 3,061 43.1(197)9 Selling,general and administrative expenses,exclusive ofrestructuring and related expenses2,771 41.8 2,933 41.3 162 49 Restructuring and related expenses180 2.7 21 0.3(159)242 Selling,general and administrative expenses2,951 44.5 2,954 41.6 3 291 Operating(loss)income(87)(1.3)1071.5(194)(282)Interest expense(86)(1.3)(62)(0.9)(24)(42)Other income,net61 0.9 12 0.2 49 75 Income tax(benefit)expense(150)(2.3)34 0.5 184(274)Net income$38 0.6%$23 0.3%$15 25(1)Represents favorable(unfavorable)year over year changeNote:Sums may not equal totals due to rounding.Net SalesFor the twelve weeks ended October 4,2025,net sales decreased 5.2%and comparable store sales increased 3.0%compared with the twelve weeksended October 5,2024.For the forty weeks ended October 4,2025,net sales declined 6.6%and comparable store sales increased 0.7%compared with thesame period in 2024.The decline in net sales for both the twelve and forty weeks ended October 4,2025 as compared to the prior periods,was due to lowersales as a result of store closures executed under the 2024 Restructuring Plan.The Company calculates comparable store sales based on the change in store or branch sales starting once a location has been open for approximatelyone year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations.The Companyincludes sales from relocated stores in comparable store sales from the original date of opening.Comparable store sales is intended only as supplementalinformation and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the United States of America(“GAAP”).(1)(1)24Table of ContentsGross ProfitFor the twelve weeks ended October 4,2025,gross profit was$881 million,or 43.3%of net sales,compared with$908 million,or 42.3%of net sales,for the twelve weeks ended October 5,2024.For the forty weeks ended October 4,2025 and October 5,2024,gross profit was$2,864 million,or 43.2%of netsales,and$3,061 million,or 43.1%of net sales,respectively.The increase in gross profit as a percentage of net sales compared to both the twelve week andforty week prior comparative periods was due to more favorable product margins,driven by strategic sourcing initiatives and pricing and lower supply chainand other related costs,offset by the$28 million non-cash charge for expected future credit losses related to vendor receivables due from a vendor that filedpetitions for Chapter 11 bankruptcy protection on September 28,2025.Gross profit as a percentage of net sales for the forty weeks ended October 4,2025 wasalso adversely impacted by lower-margin liquidation sales associated with the 2024 Restructuring Plan.Total gross profit dollars decreased as a result of lowernet sales stemming from store closures executed under the 2024 Restructuring Plan.Selling,General and Administrative Expenses,Exclusive of Restructuring and Related ExpensesFor the twelve weeks ended October 4,2025,selling,general and administrative(SG&A)expenses,exclusive of restructuring and related expenses,were$826 million,or 40.6%of net sales,compared with$895 million,or 41.7%of net sales,for the twelve weeks ended October 5,2024.For the forty weeksended October 4,2025,SG&A expenses,exclusive of restructuring and related expenses,were$2,771 million,or 41.8%of net sales,compared with$2,933million,or 41.3%of net sales,for the forty weeks ended October 5,2024.Overall SG&A expenses decreased in both the twelve week and forty weeks endedOctober 4,2025,as compared to prior comparative periods,as a result of store closures executed under the 2024 Restructuring Plan reducing overhead andoperating costs.SG&A expenses as a percentage of net sales for the forty weeks ended October 5,2024,benefited from a net gain on asset sales,see Note 7.Leases,of the Notes to the Condensed Consolidated Financial Statements included in Part I,Item1.25Table of ContentsRestructuring and Related ExpensesFor the twelve weeks ended October 4,2025,restructuring and related expenses were$33 million,or 1.6%of net sales,compared to$13 million,or0.6%of net sales,in the prior year comparable period.For the forty weeks ended October 4,2025,restructuring and related expenses were$180 million,or2.7%of net sales,compared to$21 million,or 0.3%of net sales,in the prior year comparable period.The increase in expenses as compared to the same periodin fiscal 2024,relates to the Companys 2024 Restructuring Plan which was announced during the fourth quarter of fiscal 2024.The Company estimates that itwill incur additional expenses of approximately$20 million to$30 million through the remainder of fiscal 2025 related to the active restructuring plans.Theexpenses for both the twelve and forty weeks ended October 4,2025,relate to lease terminations,professional services,severance and termination costs andother exit costs.We expect that the Companys 2024 Restructuring Plan will be substantially completed by the end of fiscal 2025 with certain expenses,primarily related to closed store and distribution center leases,expected to continue into fiscal year 2026.See Note 3.Restructuring,of the Notes to theCondensed Consolidated Financial Statements included in Part I,Item 1.Interest ExpenseFor the twelve weeks and the forty weeks ended October 4,2025,interest expense increased as compared to the same periods in fiscal 2024,due to anincrease in the principal amount of interest bearing long-term debt in the third quarter of fiscal 2025.For further information see Note 6.Long-term Debt andFair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I,Item 1 and Part I,Item 2,“Liquidity andCapital Resources”of this Quarterly Report.Other Income,NetFor the twelve weeks and the forty weeks ended October 4,2025,other income,net increased as compared to the same periods in fiscal 2024,due tohigher interest income earned from higher cash and cash equivalent balances held,driven by the proceeds received from the sale of the Worldpac business inthe fourth quarter of fiscal 2024 and the issuance of$1.95 billion in Senior Unsecured Notes with net proceeds of$1.6 billion,after the redemption of theCompanys 5.90%Senior Notes due March 2026 with the proceeds and direct transaction and closing costs in the third quarter of fiscal 2025.Other income,net also includes income recognized from the transition services(“TSA Services”)agreement with Worldpac that commenced in the fourth quarter of fiscal2024.Income Tax(Benefit)ExpenseFor the twelve weeks ended October 4,2025 the Companys provision for income taxes was negligible.The Companys provision for income taxes forthe twelve weeks ended October 5,2024 was an expense of$8 million,largely attributable to a$10 million tax expense related to a book to tax difference inthe stock basis of Worldpac Canada as a result of the sale of Worldpac.The Companys provision for income taxes for the forty weeks ended October 4,2025,was a benefit of$150 million compared with an expense of$34 million for the same period in 2024.The decrease in tax expense for the forty weeks endedOctober 4,2025 was a result of a net discrete tax benefit in the first quarter of fiscal 2025 of$126 million related to certain tax benefits associated with capitalloss deductions and lower income before taxes.On July 4,2025,President Trump signed into law the One Big Beautiful Bill Act(“OBBBA”).The Company has determined the OBBBA has animmaterial impact to the Companys provision for income taxes and deferred tax balances.Non-GAAP Financial MeasuresThe Company uses certain non-GAAP financial measures described below to supplement the Companys unaudited condensed consolidated financialstatements prepared and presented in accordance with GAAP and to understand and evaluate the Companys core operating performance.These non-GAAPfinancial measures,which may be different than similarly titled measures used by other companies,are presented as the Company believes that such non-GAAP financial measures provide useful information about the Companys financial performance,enhance the overall understanding of the Companys pastperformance and future prospects,and allow for greater transparency with respect to important metrics used by the Companys management for financial andoperational decision-making.The Company is presenting these non-GAAP metrics to provide investors insight to the information used by the Companysmanagement to evaluate its business and financial performance.The Company believes that these measures provide investors increased comparability of theCompanys core financial performance over multiple periods and with other companies in the same industry.The Company may make reference to certainfinancial measures not derived in accordance with GAAP within Item 2.Managements Discussion and Analysis of Financial Condition26Table of Contentsand Results of Operations of this Quarterly Report.The Companys Non-GAAP financial measures reflect results from continuing operations,includingAdjusted Net Income(loss),Adjusted Diluted Earnings(loss)Per Share(“Adjusted Diluted EPS”),Adjusted Gross Profit,Adjusted Gross Profit Margin,Adjusted Sales,General and Administrative expense(“Adjusted SG&A”),Adjusted SG&A Margin,Adjusted Operating Income(loss)and Adjusted OperatingIncome(loss)Margin,and should not be used as a substitute for GAAP financial measures,or considered in isolation,for the purpose of analyzing theCompanys operating performance,financial position or cash flows.The Company has presented these non-GAAP financial measures as the company believes that the presentation of the financial results that exclude(1)transformation expenses under the Companys turnaround plan,inclusive of the Worldpac divestiture and(2)other significant expenses,are useful andindicative of the Companys base operations because the expenses vary from period to period in terms of size,nature and significance.The income tax impactof these non-GAAP adjustments is also adjusted for using the estimated tax rate in effect for the respective non-GAAP adjustments.These measures assist incomparing the Companys current operating results with past periods and with the operational performance of other companies in the industry.The disclosureof these measures allows investors to evaluate the Companys performance using the same measures management uses in developing internal budgets andforecasts and in evaluating managements compensation.Included below is a description of the expenses the Company has determined are not normal,recurring cash operating expenses necessary to operate the Companys business and the rationale for why providing these measures is useful to investors as asupplement to the GAAP measures.Transformation ExpensesExpenses incurred in connection with the Companys turnaround plan and specific transformative activities related to asset optimization that theCompany does not view to be normal cash operating expenses.These expenses primarily include:Restructuring and other related expenses:Expenses relating to strategic initiatives,including severance expense,retention bonuses offered tostore-level employees to help facilitate the closing of stores,incremental reserves related to the collectibility of receivables resulting from contractterminations with certain independents associated with the 2024 Restructuring Plan and third-party professionals assisting in the development andexecution of the strategic initiatives.Impairment and write-down of long-lived assets:Expenses relating to the impairment of operating lease ROU assets and property and equipment,incremental depreciation as a result of accelerating long-lived assets over a shorter useful life,depreciation of long-lived assets and ROU assetamortization after store closure,and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases theCompany expects to exit before the end of the contractual term,net of gains on lease terminations,in connection with the 2024 Restructuring Planand Other Restructuring Plan.Distribution network optimization:Expenses primarily relating to the conversion of the stores and distribution centers to market hubs,includingrealized losses on liquidated inventory,temporary labor,nonrecurring professional service fees and team member severance.Other ExpensesExpenses incurred by the Company that are not viewed as normal cash operating expenses and vary from period to period in terms of size,nature,andsignificance.These expenses primarily include:Other professional service fees:Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategicbusiness review,including the Companys transformation initiatives.Worldpac post transaction-related expenses:Expenses primarily relating to non-recurring separation activities provided by third-partyprofessionals subsequent to the sale of Worldpac.Executive turnover:Expenses associated with executive level reorganization,including expenses for executive severance,the hiring search forleadership positions and certain compensation benefits.Material weakness remediation:Incremental expenses associated with the remediation of the Companys previously disclosed materialweaknesses in internal control over financial reporting.Cybersecurity incident:Expenses related to the response and remediation of a cybersecurity incident.Other:Includes a non-cash charge related to expected future credit losses on vendor receivables due from a vendor that filed voluntary petitionsfor Chapter 11 bankruptcy protection.27Table of ContentsOther tax adjustments:Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in order to provide a clearerunderstanding of the Companys ongoing Non-GAAP tax rate and after-tax earnings.The following table includes a reconciliation of this information to the most comparable GAAP measures(in millions):Twelve Weeks EndedForty Weeks EndedClassificationOctober 4,2025October 5,2024October 4,2025October 5,2024Net income(loss)from continuing operations(GAAP)$(1)$(25)$38$23 Cost of sales adjustments:Transformation expenses:Distribution network optimizationRestructuring4 9 Expected future credit loss related tovendor receivablesNon-restructuring28 28 Selling,general and administrativeadjustments:Transformation expenses:Restructuring and other related expensesRestructuring7 4 78 5 Impairment and write-down of long-livedassets Restructuring18 76 Distribution network optimizationRestructuring6 9 15 14 Other expenses:Other professional service feesNon-restructuring 3 12 Worldpac post transaction-relatedexpensesRestructuring2 7 Executive turnoverRestructuring 4 2 Material weakness remediationNon-restructuring 1 1 4 Cybersecurity incidentNon-restructuring 2 3 Other income adjustments:TSA services(1)(8)Losses on extinguishment of debt9 9 Provision for income taxes on adjustments(19)(4)(58)(7)Other tax(benefit)expense adjustments 10(126)10 Adjusted net income(loss)(Non-GAAP)$56$(3)$85$54 Diluted earnings(loss)per share fromcontinuing operations(GAAP)$(0.02)$(0.42)$0.63$0.38 Adjustments,net of tax0.94 0.37 0.77 0.52 Adjusted diluted earnings(loss)per share(Non-GAAP)$0.92$(0.05)$1.40$0.90(1)Reflects a charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28,2025.(1)(2)(3)(6)(4)(5)(7)28Table of Contents(2)Restructuring and other related expenses for the twelve weeks ended October 4,2025 includes$2 million of nonrecurring services rendered by third-party vendors assisting with the 2024Restructuring Plan and$5 million of other related expenses associated with location closures,including the transfer of assets.Restructuring and other related expenses for the forty weeks endedOctober 4,2025 includes$37 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan,$15 million of severance and other labor related costs,$7million for reserves on independent loans and$19 million of other related expenses associated with location closures,including the transfer of assets.(3)The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of$7 million and impairment charges for ROU assets and property andequipment of$11 million,net of gains on sales,for the twelve weeks ended October 4,2025.The Company recorded incremental accelerated depreciation and amortization for property andequipment and ROU assets of$55 million and impairment charges for ROU assets and property and equipment of$21 million,net of gains on sale,for the forty weeks ended October 4,2025.(4)The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments.(5)Income tax(benefit)expenses included a discrete non-recurring tax benefit associated with capital loss deductions effectuated in the first quarter of fiscal 2025.The benefit has been excluded fromNon-GAAP results in order to provide a clearer understanding of ongoing Non-GAAP tax rate and after-tax earnings.(6)Other professional service fees in fiscal 2024 were classified as restructuring and related expenses based on the underlying activity to which they related.(7)Refer to the reconciliation of diluted weighted-average common shares outstanding(GAAP)to adjusted diluted weighted-average common shares outstanding(Non-GAAP)which is thedenominator utilized to calculate adjusted diluted earnings(loss)per share(Non-GAAP).Adjusted diluted weighted-average common shares outstanding(Non-GAAP)includes the dilutive impact ofshare-based awards as such shares are considered dilutive in consideration of the Companys Non-GAAP earnings for the period.29Table of ContentsReconciliation of Adjusted Diluted Weighted-Average Common Shares OutstandingTwelve Weeks EndedForty Weeks Ended(shares in millions)October 4,2025October 5,2024October 4,2025October 5,2024Diluted Weighted-Average Common Shares Outstanding(GAAP)60.0 59.9 60.5 59.9 Dilutive impact of share-based awards0.9 Adjusted Diluted Weighted-Average Common SharesOutstanding(Non-GAAP)60.9 59.9 60.5 59.9 For the twelve weeks ended October 4,2025,0.5 million shares of restricted stock units(“RSUs”)were excluded from the diluted weighted-average common share count calculation as theirinclusion would have been anti-dilutive.Liquidity and Capital ResourcesOverviewThe Companys principal sources of liquidity are cash and cash equivalents and borrowing availability under a revolving credit facility.TheCompanys primary cash requirements necessary to maintain the Companys current operations include payroll and benefits,inventory purchases,contractualobligations,capital expenditures,payment of income taxes,funding of initiatives and other operational priorities,such as restructuring and asset optimizationplans.In addition,cash is required to pay the Companys dividend and to pay interest and principle on the Companys long-term debt when due.The followingtables present selected financial information related to the Companys liquidity(in millions):October 4,2025December 28,2024ChangeCash and cash equivalents$3,174$1,869$1,305 The increase in cash and cash equivalents was primarily due to the issuance of$1.95 billion in Senior Unsecured Notes with net proceeds of$1.6billion,after giving effect to the redemption of the Companys 5.90%Senior Notes due 2026 with the proceeds and direct transaction and closing costs in thethird quarter of fiscal 2025,offset by net cash used in operating activities of$118 million,primarily as a result of changes in net working capital,inclusive ofcash payments made in the period related to the Companys 2024 Restructuring Plan,$137 million used for purchases of property and equipment,net ofproceeds from sales,and the payment of$45 million in dividends.In addition to cash and cash equivalents presented above,as of October 4,2025,the Company also maintained access to$741 million in undrawncapacity through the Companys$1.0 billion asset-based revolving credit facility(the“ABL Facility”).As of October 4,2025 approximately$2.3 billion wasdesignated as Qualified Cash as defined in the ABL Facility.The Company believes that its cash and cash equivalents and sources of liquidity will satisfy its working and other capital requirements for at least thenext 12 months and thereafter for the foreseeable future.(1)(1)30Table of ContentsAnalysis of Cash FlowsIn the fourth quarter of fiscal 2024,the Company completed the sale of Worldpac.As a result,the Company classified the results of operations andcash flows of Worldpac as discontinued operations in its condensed consolidated statements of operations and condensed consolidated statements of cash flowsfor prior periods presented.The Companys cash flows from operating,investing and financing activities were as follows(in millions):Forty Weeks Ended(in millions)October 4,2025October 5,2024Net cash(used in)provided by operating activities of continuing operations$(118)$81 Net cash provided by operating activities of discontinued operations 77 Net cash used in investing activities of continuing operations(137)(116)Net cash used in investing activities of discontinued operations(8)Net cash provided by(used in)financing activities1,559(58)Effect of exchange rate changes on cash1 12 Net increase(decrease)in cash and cash equivalents$1,305$(12)Operating ActivitiesFor the forty weeks ended October 4,2025,cash used in operating activities changed unfavorably by$199 million compared with the same period ofprior year.The decrease as compared to the comparative period was due to changes in net working capital,inclusive of cash payments made in the periodrelated to the Companys 2024 Restructuring Plan.Investing ActivitiesFor the forty weeks ended October 4,2025,cash flows used in investing activities increased by$21 million compared with the forty weeks endedOctober 5,2024,with higher spend on property and equipment in the current period,partially offset by higher proceeds from the sale of property andequipment.Financing ActivitiesFor the forty weeks ended October 4,2025,cash flows provided by financing activities was$1,559 million,an increase of$1,617 million as comparedwith the forty weeks ended October 5,2024.The increase in cash generated from financing activities was due to the issuance of$1.95 billion in SeniorUnsecured Notes with net proceeds of$1.6 billion,after giving effect to the redemption of the Companys 5.90%Senior Notes due 2026 with the proceeds anddirect transaction and closing costs.The Companys Board of Directors has declared a cash dividend every quarter since 2006.Any payments of dividends in the future will be at thediscretion of the Companys Board of Directors and will depend upon the Companys results of operations,cash flows,capital requirements and other factorsdeemed relevant by the Board of Directors.Similar to the 2021 Credit Agreement,the Companys new ABL Facility,as detailed further below,has certainrestrictions that may limit the Companys ability to increase the amount of the Companys cash dividends above its current levels.31Table of ContentsRestructuring ActivitiesOn November 13,2024,the Companys Board of Directors approved the 2024 Restructuring Plan,which was designed to improve the Companysprofitability and growth potential and streamline its operations.In fiscal 2023,the Company also announced a strategic and operational plan to streamline theCompanys supply chain by configuring a multi-echelon supply chain by leveraging current asset and operating fewer,more productive distribution centers thatfocus on replenishment and move more parts closer to the customer.The Company estimates that it will incur additional expenses of approximately$20 millionto$30 million through the remainder of fiscal 2025,of which approximately$10 million to$20 million is expected to be cash expenses,primarily composed oflease terminations and other exit expenses and professional services,by the end of fiscal year 2025 with certain expenses,primarily related to closed store anddistribution center leases,expected to continue into fiscal year 2026.For further information,see Note 3.Restructuring,of the Notes to CondensedConsolidated Financial Statements included in Part I,Item 1.Long-Term DebtAs of October 4,2025 and December 28,2024,the Company had outstanding long-term debt totaling$3.4 billion and$1.8 billion,respectively.On August 4,2025,the Company issued(i)$975 million in aggregate principal amount of 7.000%Senior Notes due 2030(the“2030 Notes”)and(ii)$975 million in aggregate principal amount of 7.375%Senior Notes due 2033(collectively,the“Senior Unsecured Notes”)in a private transaction exemptfrom the registration requirements of the Securities Act of 1933,as amended(the“Act”).Interest on the Senior Unsecured Notes is payable in cash on February1 and August 1 of each year,commencing on February 1,2026.The 2030 Notes will mature on August 1,2030,and the 2033 Notes will mature on August 1,2033.Net proceeds from the issuance of the Senior Unsecured Noted were approximately$1.9 billion,net of direct transaction and closing costs.The SeniorUnsecured Notes are guaranteed by each of the Companys wholly-owned domestic subsidiaries that also guarantee the ABL Facility.In accordance with the terms of the Indenture governing the Senior Unsecured Notes,the Company may,at its option and on any one or moreoccasions,redeem some or all of the Senior Unsecured Notes at the redemption prices described in the Indenture.In addition,in the event of a Change ofControl Triggering Event(as defined in the Indenture),the Company will be required to offer to repurchase the Senior Unsecured Notes at a price equal to101%of the principal amount thereof,plus accrued and unpaid interest,if any,to,but excluding,the repurchase date.The Indenture also contains customaryprovisions for events of default and certain covenants limiting the ability of the Company and its subsidiaries to incur debt secured by liens and to enter intocertain sale and lease-back transactions.Following the closing of the issuance of the Senior Unsecured Notes,the Company utilized a portion of the net proceeds to redeem in full itsoutstanding$300 million in aggregate principal amount of 5.90%Senior Notes due 2026 and recorded a loss of$3 million on redemption in the third quarter offiscal 2025 associated with this extinguishment.The remaining proceeds from the issuance are available for general corporate purposes,and,as of October 4,2025,approximately$2.3 billion of cash and cash equivalents,was designated as qualified cash and are subject to customary“springing”control agreements,as described in the ABL Facility Agreement.For further details,see Note 6.Long-term Debt and Fair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statementsincluded in Part I,Item 1.Credit FacilitiesOn August 12,2025,the Companys$1 billion revolving credit facility(the“2021 Credit Agreement”)was terminated and replaced by the ABLFacility.The Company recorded a$6 million loss on extinguishment of the 2021 Credit Agreement during the third quarter of fiscal 2025.The ABL Facilityprovides for a five-year senior secured first lien asset-based revolving credit facility of up to$1 billion with an uncommitted accordion feature that provides foradditional credit extensions up to$500 million.Our ability to draw upon the ABL Facility is subject to the available borrowing base.Outstanding amountsunder the ABL Facility will accrue interest at a floating rate,which,at the Companys election,can be either(i)SOFR plus an applicable margin or(ii)analternative base rate plus an applicable margin.The applicable rate varies based on Average Historical Excess Availability(as defined in the ABL FacilityAgreement)from(i)with respect to base rate loans,0.25%to 0.75%and(b)with respect to SOFR loans,1.25%to 1.75%and resets quarterly on a prospectivebasis and is,in part,derived based-upon the utilization of the facility.Interest is payable on a quarterly basis.Unused commitments under the ABL Facility willaccrue an unused commitment fee of either 0.30%or 0.25%per annum,depending on average utilization.32Table of ContentsThe ABL Facility has first lien on substantially all of the accounts receivable,inventory,cash and related assets of the Company and its subsidiaryguarantors thereunder.Advance Auto Parts,Inc.is the ABL Facility borrower and the guarantors are(i)each of our subsidiaries that guarantee our recentlyissued Senior Unsecured Notes and(ii)certain of our Canadian subsidiaries.Availability under the ABL Facility is limited to the lesser of(i)the borrowingbase,equal to the sum of 90%of eligible credit card receivables,85%of eligible trade accounts receivable,85%of the net orderly liquidation value of eligibleinventory and 100%of qualified cash(up to certain limits for the purpose of determining borrowing capacity),subject,in each case,to customary reservesestablished by the collateral agent under the ABL Facility from time to time,including reserves related to outstanding obligations to our suppliers that arepayable to the paying agents,as a result of such suppliers electing,at their option,to utilize third-party financing,commonly referred to as supply chainfinancing,and debt maturity reserves,and(ii)the aggregate revolving credit commitments.The ABL Facility contains customary representations andwarranties,events of default and financial,affirmative and negative covenants for facilities of this type,including but not limited to a springing financialcovenant relating to a fixed charge coverage ratio,defined in the ABL Facility as the ratio of Consolidated Adjusted EBITDA minus Consolidated CapitalExpenditures minus Taxes to Fixed Charges,each as defined in the ABL Facility,on a four quarter trailing basis,which requires a minimum 1:1 coverage ratioto be maintained,and restrictions on certain indebtedness,liens,investments and acquisitions,asset dispositions,restricted payments,prepayment of certainindebtedness and transactions with affiliates,subject to various thresholds and caps.In accordance with the ABL Facility,the Company is required to hold cash and cash equivalents in designated accounts with lenders,referred to asQualified Cash Accounts as defined in ABL Facility.These amounts are unrestricted and the Company is able to direct,and have sole control over,the mannerof disposition of funds in such accounts,subject to:1)maintaining a minimum availability under the ABL facility of at least the greater of(i)12.5%of the LineCap and(ii)$125 million;and 2)maintaining excess availability under the ABL Facility of at least$400 million.The Qualified Cash Accounts are subject tospringing control agreements pursuant to which the cash deposited therein will become restricted in the event of default or a breach of such covenants.As of October 4,2025,the Company had no outstanding borrowings,$741 million of borrowing availability 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