- Returned to Profitability in Second Quarter 2025
- Completed Offering of $1.95 Billion of Senior Notes
- Entered new $1.0 Billion Asset-Backed Revolving Credit Facility to Replace Prior Facility
RALEIGH, N.C.–(BUSINESS WIRE)–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 second quarter ended July 12, 2025.
“The Advance team delivered solid second-quarter results, with both sales and operating margin at the upper end of our expectations. I want to thank the team for their dedication and hard work throughout the quarter,” said Shane O’Kelly, president and chief executive officer. “Our comparable sales performance was fueled by growth in the Pro business, and we are encouraged by the early signs of stabilization in our DIY business. Our strategic plan is designed to establish a strong foundation for consistently delivering exceptional customer service, and I am pleased with the progress being made by the team. Q2 also marked an important milestone with Advance returning to profitability. Over the past year, we have taken decisive actions aimed at creating long-term value for our shareholders, and we remain focused on positioning the Company for sustained, profitable growth.”
Second Quarter 2025 Results (1,2)
Second quarter 2025 net sales totaled $2.0 billion, compared with $2.2 billion in the second quarter of the prior year. Comparable store sales for the second quarter 2025 increased 0.1%.
The Company’s second quarter 2025 gross profit was $0.9 billion, or 43.5% of net sales compared with $1.0 billion, or 43.6% in the second quarter of the prior year. Adjusted gross profit was $0.9 billion, or 43.8% of net sales compared with $1.0 billion, or 43.6% in the second quarter of the prior year. The margin expansion was driven by savings associated with the footprint optimization activity completed in March. These savings were partially offset by the reversal of previously capitalized inventory costs.
The Company’s second quarter 2025 selling, general and administrative (SG&A) expenses were $0.9 billion, or 42.4% of net sales compared with $0.9 billion, or 41.1% in the second quarter of the prior year. Adjusted SG&A expenses were $0.8 billion, or 40.7% of net sales in the second quarter of 2025 compared with $0.9 billion, or 40.8% in the second quarter of 2024. The reduction in SG&A expenses was primarily related to operation of fewer stores compared to last year.
The Company’s second quarter 2025 operating income was $22 million, or 1.1% of net sales, compared with operating income of $54 million, or 2.5% in the second quarter of the prior year. Adjusted operating income was $61 million, or 3.0% of net sales, compared with adjusted operating income of $62 million, or 2.8% in the second quarter of 2024.
The Company’s second quarter 2025 effective tax rate was 28.6%, compared with an effective tax rate of 29.5% in the second quarter of 2024. The Company’s diluted earnings per share for the quarter was $0.25, compared with $0.51 in the second quarter of 2024. The Company’s adjusted diluted earnings per share was $0.69 compared with adjusted diluted earnings per share of $0.62 in the second quarter of 2024.
Net cash used in operating activities was $106 million through the second quarter of 2025 versus $39 million of cash provided by operating activities in the same period of the prior year. Free cash flow through the second quarter of 2025 was an outflow of $201 million compared with an outflow of $48 million in the same period of the prior year.
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____________________ |
|
(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 (โWorldpacโ) as discontinued operations. Refer to the Companyโs Annual Report on Form 10-K for 2024, filed with the Securities and Exchange Commission (โSECโ) on February 26, 2025. |
Capital Allocation
On August 5, 2025, the Company declared a regular cash dividend of $0.25 per share to be paid on October 24, 2025, to all common stockholders of record as of October 10, 2025.
Full Year 2025 Guidance (53 weeks)
The Company has revised adjusted diluted EPS guidance to account for higher net interest expense related to its recent senior notes offering. Other guidance items remain unchanged, as shown in the table below. Full year 2025 guidance assumes current tariffs remain in place for the remainder of 2025.
|
ย |
ย |
As of August 14, 2025 |
||
|
($ in millions, except per share data) |
ย |
Low |
ย |
High |
|
Net sales from continuing operations (1) |
ย |
$8,400 |
ย |
$8,600 |
|
Comparable store sales (52 weeks) (2) |
ย |
0.5% |
ย |
1.5% |
|
Adjusted operating income margin from continuing operations (4) |
ย |
2.00% |
ย |
3.00% |
|
Adjusted diluted EPS from continuing operations (3,4) |
ย |
$1.20 |
ย |
$2.20 |
|
Capital expenditures |
ย |
Approx. $300 |
||
|
Free cash flow (4) |
ย |
$(85) |
ย |
$(25) |
|
ย |
ย |
ย |
ย |
ย |
|
New store growth |
ย |
ย |
||
|
Store openings |
ย |
30 new stores |
||
|
Market hub openings |
ย |
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) |
Reduction in guidance driven by approximately $0.30 of incremental net interest expense related to the recent debt offering. |
|
|
(4) |
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 Company’s 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 second quarter ended July 12, 2025, via a webcast scheduled to begin at 8 a.m. Eastern Time on Thursday, August 14, 2025. The webcast will be accessible via the Investor Relations page of the Company’s website (ir.AdvanceAutoParts.com).
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 Company’s 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 July 12, 2025, Advance operated 4,292 stores primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. The Company also served 842 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.AdvanceAutoParts.com.
Forward-Looking Statements
Certain statements herein are โforward-looking statementsโ within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identifiable by words such as โanticipate,โ โbelieve,โ โcould,โ โestimate,โ โexpect,โ โforecast, โguidance,โ โintend,โ โlikely,โ โmay,โ โplan,โ โposition,โ โpossible,โ โpotential,โ โprobable,โ โproject,โ โshould,โ โstrategy,โ โtarget,โ โwill,โ or similar language. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about the Companyโs strategic initiatives, restructuring and asset optimization plans, financial objectives, including with respect to the Company’s reorganized debt capital structure, operational plans and objectives, statements about the benefits of the Company’s 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 Companyโs 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 Companyโs ability to hire, train and retain qualified employees, the timing and implementation of strategic initiatives, risks associated with the Companyโs restructuring and asset optimization plans, risks relating to incurrence of indebtedness and increased leverage, risks relating to the Company’s 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 Companyโs 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 Companyโs inventory and supply chain and challenges with transforming and growing its business. Please refer to โItem 1A. Risk Factorsโ of the Companyโs most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (โSECโ), as updated by the Companyโs 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 |
July 12, 2025(1) |
ย |
December 28, 2024(1) |
||
|
Current assets: |
ย |
||||
|
Cash and cash equivalents |
$ |
1,657 |
ย |
$ |
1,869 |
|
Receivables, net |
ย |
492 |
ย |
ย |
544 |
|
Inventories, net |
ย |
3,692 |
ย |
ย |
3,612 |
|
Other current assets |
ย |
172 |
ย |
ย |
118 |
|
Total current assets |
ย |
6,013 |
ย |
ย |
6,143 |
|
Property and equipment, net |
ย |
1,263 |
ย |
ย |
1,334 |
|
Operating lease right-of-use assets |
ย |
2,173 |
ย |
ย |
2,243 |
|
Goodwill |
ย |
600 |
ย |
ย |
598 |
|
Other intangible assets, net |
ย |
404 |
ย |
ย |
406 |
|
Other assets |
ย |
86 |
ย |
ย |
74 |
|
Total assets |
$ |
10,539 |
ย |
$ |
10,798 |
|
Liabilities and Stockholdersโ Equity |
ย |
ย |
ย |
||
|
Current liabilities: |
ย |
ย |
ย |
||
|
Accounts payable |
ย |
3,322 |
ย |
ย |
3,408 |
|
Accrued expenses |
ย |
703 |
ย |
ย |
784 |
|
Current portion of long-term debt |
ย |
300 |
ย |
ย |
โ |
|
Other current liabilities |
ย |
406 |
ย |
ย |
473 |
|
Total current liabilities |
ย |
4,731 |
ย |
ย |
4,665 |
|
Long-term debt |
ย |
1,492 |
ย |
ย |
1,789 |
|
Operating lease liabilities |
ย |
1,854 |
ย |
ย |
1,897 |
|
Deferred income taxes |
ย |
172 |
ย |
ย |
193 |
|
Other long-term liabilities |
ย |
87 |
ย |
ย |
84 |
|
Total liabilities |
ย |
8,336 |
ย |
ย |
8,628 |
|
Total stockholders’ equity |
ย |
2,203 |
ย |
ย |
2,170 |
|
Total liabilities and stockholdersโ equity |
$ |
10,539 |
ย |
$ |
10,798 |
|
(1) |
This condensed consolidated balance sheet has been prepared on a basis consistent with the Company’s 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 (โGAAPโ). |
|
ย |
|||||||||||||||
|
Advance Auto Parts, Inc. and Subsidiaries |
|||||||||||||||
|
Condensed Consolidated Statements of Operations |
|||||||||||||||
|
(In millions, except per share data) (unaudited) |
|||||||||||||||
|
ย |
ย |
ย |
ย |
ย |
ย |
ย |
|||||||||
|
ย |
Twelve Weeks Ended |
ย |
Twenty-Eight Weeks Ended |
||||||||||||
|
ย |
July 12, 2025(1) |
ย |
July 13, 2024(1) |
ย |
July 12, 2025(1) |
ย |
July 13, 2024(1) |
||||||||
|
Net sales |
$ |
2,010 |
ย |
ย |
$ |
2,178 |
ย |
ย |
$ |
4,593 |
ย |
ย |
$ |
4,950 |
ย |
|
Cost of sales |
ย |
1,136 |
ย |
ย |
ย |
1,228 |
ย |
ย |
ย |
2,609 |
ย |
ย |
ย |
2,797 |
ย |
|
Gross profit |
ย |
874 |
ย |
ย |
ย |
950 |
ย |
ย |
ย |
1,984 |
ย |
ย |
ย |
2,153 |
ย |
|
Selling, general and administrative expenses, exclusive of restructuring and related expenses |
ย |
823 |
ย |
ย |
ย |
889 |
ย |
ย |
ย |
1,945 |
ย |
ย |
ย |
2,039 |
ย |
|
Restructuring and related expenses |
$ |
29 |
ย |
ย |
ย |
7 |
ย |
ย |
$ |
148 |
ย |
ย |
ย |
8 |
ย |
|
Selling, general and administrative expenses |
ย |
852 |
ย |
ย |
ย |
896 |
ย |
ย |
ย |
2,093 |
ย |
ย |
ย |
2,047 |
ย |
|
Operating (loss) income |
ย |
22 |
ย |
ย |
ย |
54 |
ย |
ย |
ย |
(109 |
) |
ย |
ย |
106 |
ย |
|
Other, net: |
ย |
ย |
ย |
ย |
ย |
ย |
ย |
||||||||
|
Interest expense |
ย |
(19 |
) |
ย |
ย |
(19 |
) |
ย |
ย |
(46 |
) |
ย |
ย |
(43 |
) |
|
Other income, net |
ย |
18 |
ย |
ย |
ย |
9 |
ย |
ย |
ย |
45 |
ย |
ย |
ย |
10 |
ย |
|
Total other, net |
ย |
(1 |
) |
ย |
ย |
(10 |
) |
ย |
ย |
(1 |
) |
ย |
ย |
(33 |
) |
|
(Loss) income before income taxes |
ย |
21 |
ย |
ย |
ย |
44 |
ย |
ย |
ย |
(110 |
) |
ย |
ย |
73 |
ย |
|
Income tax (benefit) expense |
ย |
6 |
ย |
ย |
ย |
13 |
ย |
ย |
ย |
(149 |
) |
ย |
ย |
25 |
ย |
|
Net income from continuing operations |
ย |
15 |
ย |
ย |
ย |
31 |
ย |
ย |
ย |
39 |
ย |
ย |
ย |
48 |
ย |
|
Net income from discontinued operations |
ย |
โ |
ย |
ย |
ย |
14 |
ย |
ย |
ย |
โ |
ย |
ย |
ย |
37 |
ย |
|
Net income |
$ |
15 |
ย |
ย |
$ |
45 |
ย |
ย |
$ |
39 |
ย |
ย |
$ |
85 |
ย |
|
ย |
ย |
ย |
ย |
ย |
ย |
ย |
ย |
||||||||
|
Basic earnings per common share from continuing operations |
$ |
0.25 |
ย |
ย |
$ |
0.51 |
ย |
ย |
$ |
0.65 |
ย |
ย |
$ |
0.81 |
ย |
|
Basic earnings per common share from discontinued operations |
ย |
โ |
ย |
ย |
ย |
0.24 |
ย |
ย |
ย |
โ |
ย |
ย |
ย |
0.62 |
ย |
|
Basic earnings per common share |
$ |
0.25 |
ย |
ย |
$ |
0.75 |
ย |
ย |
$ |
0.65 |
ย |
ย |
$ |
1.43 |
ย |
|
Basic weighted-average common shares outstanding |
ย |
59.9 |
ย |
ย |
ย |
59.6 |
ย |
ย |
ย |
59.9 |
ย |
ย |
ย |
59.6 |
ย |
|
ย |
ย |
ย |
ย |
ย |
ย |
ย |
ย |
||||||||
|
Diluted earnings per common share from continuing operations |
$ |
0.25 |
ย |
ย |
$ |
0.51 |
ย |
ย |
$ |
0.65 |
ย |
ย |
$ |
0.80 |
ย |
|
Diluted earnings per common share from discontinued operations |
ย |
โ |
ย |
ย |
ย |
0.24 |
ย |
ย |
ย |
โ |
ย |
ย |
ย |
0.62 |
ย |
|
Diluted earnings per common share |
$ |
0.25 |
ย |
ย |
$ |
0.75 |
ย |
ย |
$ |
0.65 |
ย |
ย |
$ |
1.42 |
ย |
|
Diluted weighted-average common shares outstanding |
ย |
60.5 |
ย |
ย |
59.9 |
ย |
ย |
ย |
60.3 |
ย |
ย |
ย |
59.9 |
ย |
|
|
(1) |
These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with the Company’s previously prepared statements of operations filed with the SEC, but do not include the footnotes required by GAAP. |
|
ย |
|||||||
|
Advance Auto Parts, Inc. and Subsidiaries |
|||||||
|
Condensed Consolidated Statements of Cash Flows |
|||||||
|
(In millions) (unaudited) |
|||||||
|
ย |
ย |
ย |
ย |
||||
|
ย |
Twenty-Eight Weeks Ended |
||||||
|
ย |
July 12, 2025(1) |
ย |
July 13, 2024(1) |
||||
|
Cash flows from operating activities: |
ย |
ย |
ย |
||||
|
Net income |
$ |
39 |
ย |
ย |
$ |
85 |
ย |
|
Net income from discontinued operations |
ย |
โ |
ย |
ย |
ย |
37 |
ย |
|
Net income from continuing operations |
ย |
39 |
ย |
ย |
ย |
48 |
ย |
|
Adjustments to reconcile net income to net cash used in operating activities: |
ย |
ย |
ย |
||||
|
Depreciation and amortization |
ย |
146 |
ย |
ย |
ย |
151 |
ย |
|
Share-based compensation |
ย |
20 |
ย |
ย |
ย |
25 |
ย |
|
Loss (gain) on sale and impairment of long-lived assets, net |
ย |
11 |
ย |
ย |
ย |
(16 |
) |
|
Provision for deferred income taxes |
ย |
(21 |
) |
ย |
ย |
14 |
ย |
|
Other, net |
ย |
3 |
ย |
ย |
ย |
2 |
ย |
|
Net change in: |
ย |
ย |
ย |
||||
|
Receivables, net |
ย |
54 |
ย |
ย |
ย |
(41 |
) |
|
Inventories, net |
ย |
(73 |
) |
ย |
ย |
(56 |
) |
|
Operating lease right of use assets |
ย |
62 |
ย |
ย |
ย |
(9 |
) |
|
Other assets |
ย |
(65 |
) |
ย |
ย |
(16 |
) |
|
Accounts payable |
ย |
(90 |
) |
ย |
ย |
(117 |
) |
|
Accrued expenses |
ย |
(83 |
) |
ย |
ย |
36 |
ย |
|
Operating lease liabilities |
ย |
(109 |
) |
ย |
ย |
26 |
ย |
|
Other liabilities |
ย |
โ |
ย |
ย |
ย |
(8 |
) |
|
Net cash (used in) provided by operating activities of continuing operations |
ย |
(106 |
) |
ย |
ย |
39 |
ย |
|
Net cash provided by operating activities of discontinued operations |
ย |
โ |
ย |
ย |
ย |
49 |
ย |
|
Net cash (used in) provided by operating activities |
ย |
(106 |
) |
ย |
ย |
88 |
ย |
|
Cash flows from investing activities: |
ย |
ย |
ย |
||||
|
Purchases of property and equipment |
ย |
(95 |
) |
ย |
ย |
(87 |
) |
|
Proceeds from sales of property and equipment |
ย |
20 |
ย |
ย |
ย |
12 |
ย |
|
Net cash used in investing activities of continuing operations |
ย |
(75 |
) |
ย |
ย |
(75 |
) |
|
Net cash used in investing activities of discontinued operations |
ย |
โ |
ย |
ย |
ย |
(5 |
) |
|
Net cash used in investing activities |
ย |
(75 |
) |
ย |
ย |
(80 |
) |
|
Cash flows from financing activities: |
ย |
ย |
ย |
||||
|
Dividends paid |
ย |
(30 |
) |
ย |
ย |
(30 |
) |
|
Purchase of noncontrolling interest |
ย |
โ |
ย |
ย |
ย |
(9 |
) |
|
Proceeds from the issuance of common stock |
ย |
2 |
ย |
ย |
ย |
2 |
ย |
|
Repurchases of common stock |
ย |
(3 |
) |
ย |
ย |
(5 |
) |
|
Other, net |
ย |
(1 |
) |
ย |
ย |
(1 |
) |
|
Net cash used in financing activities |
ย |
(32 |
) |
ย |
ย |
(43 |
) |
|
ย |
ย |
ย |
|||||
|
ย |
ย |
ย |
|||||
|
Twenty-Eight Weeks Ended |
|||||||
|
ย |
July 12, 2025(1) |
ย |
July 13, 2024(1) |
||||
|
Effect of exchange rate changes on cash |
ย |
1 |
ย |
ย |
ย |
11 |
ย |
|
ย |
ย |
||||||
|
Net decrease in cash and cash equivalents |
ย |
(212 |
) |
ย |
ย |
(24 |
) |
|
Cash and cash equivalents, beginning of period |
ย |
1,869 |
ย |
ย |
ย |
503 |
ย |
|
Cash and cash equivalents, end of period |
$ |
1,657 |
ย |
ย |
$ |
479 |
ย |
|
ย |
ย |
ย |
|||||
|
Non-cash transactions of continuing operations: |
ย |
ย |
ย |
||||
|
Accrued purchases of property and equipment |
$ |
15 |
ย |
ย |
$ |
5 |
ย |
|
ย |
ย |
ย |
ย |
||||
|
Summary of cash and cash equivalents: |
ย |
ย |
ย |
||||
|
Cash and cash equivalents of continuing operations, end of period |
$ |
1,657 |
ย |
ย |
$ |
419 |
ย |
|
Cash and cash equivalents of discontinued operations, end of period |
ย |
โ |
ย |
ย |
ย |
60 |
ย |
|
Cash and cash equivalents, end of period |
$ |
1,657 |
ย |
ย |
$ |
479 |
ย |
|
(1) |
This condensed consolidated statement of cash flows has been prepared on a basis consistent with the Company’s 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 Company’s unaudited condensed consolidated financial statements prepared and presented in accordance with GAAP and to understand and evaluate the Company’s core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented as the Company believes that such non-GAAP financial measures provide useful information about 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 Company’s Non-GAAP financial measures reflect results from continuing operations, including Adjusted Net (loss) Income, Adjusted Diluted (loss) Earnings Per Share (โAdjusted Diluted EPSโ), Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Selling, General and Administrative expense (โAdjusted SG&Aโ), 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 Companyโs turnaround plan, inclusive of the Worldpac divestiture and (2) other significant expenses, are useful and indicative of the Company’s base operations because the expenses vary from period to period in terms of size, nature and significance. The income tax impact of these non-GAAP adjustments is also adjusted for using the estimated tax rate in effect for the respective non-GAAP adjustments. These measures assist in comparing the Companyโs 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 Companyโs performance using the same measures management uses in developing internal budgets and forecasts and in evaluating managementโs compensation. Included below is a description of the expenses the Company has determined are not normal, recurring cash operating expenses necessary to operate the Companyโs business and the rationale for why providing these measures is useful to investors as a supplement to the GAAP measures.
Transformation Expenses
Expenses incurred in connection with the Company’s turnaround plan and specific transformative activities related to asset optimization that the Company does not view to be normal cash operating expenses. These expenses primarily include:
- Restructuring and other related expenses: Expenses relating to strategic initiatives, including severance expense, retention bonuses offered to store-level employees to help facilitate the closing of stores, incremental reserves related to the collectibility of receivables resulting from contract terminations with certain independents associated with the 2024 Restructuring Plan and third-party professionals assisting in the development and execution of the strategic initiatives.
- Impairment and write-down of long-lived assets: Expenses relating to the impairment of operating lease ROU assets and property and equipment, incremental depreciation as a result of accelerating long-lived assets over a shorter useful life, depreciation of long-lived assets and ROU asset amortization after store closure, and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases the Company expects to exit before the end of the contractual term, net of gains on lease terminations, in connection with the 2024 Restructuring Plan and Other Restructuring Plan.
- Distribution network optimization: Expenses primarily relating to the conversion of the stores and distribution centers to market hubs, including, realized losses on liquidated inventory, temporary labor, nonrecurring professional service fees and team member severance.
Other Expenses
Expenses incurred by the Company that are not viewed as normal cash operating expenses and vary from period to period in terms of size, nature, and significance. These expenses primarily include:
- Other professional service fees: Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategic business review, including the Companyโs 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 Companyโs previously disclosed material weaknesses in internal control over financial reporting.
- Cybersecurity incident: Expenses related to the response and remediation of a cybersecurity incident.
- Other tax adjustments: Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in order to provide a clearer understanding of the Company’s ongoing Non-GAAP tax rate and after-tax earnings.
Reconciliation of Diluted Earni
Contacts
Investor Relations Contact:
Lavesh Hemnani
T: (919) 227-5466
E: [email protected]
Media Contact:
Nicole Ducouer
T: (984) 389-7207
E: [email protected]



