Advance Auto Parts Inc.

What's Changed

New risk factor: Restructuring operations may cause disruptions, unexpected costs, and challenges in achieving goals, with $300-500M in cash charges expected.

Breakdown

ITEM 1A.RISK FACTORS

Restructuring our operations is a significant undertaking and introduces risk to the continuity and results of our operations.

In November 2024, we announced a plan to restructure our operations to improve profitability and growth potential and streamline our operations. This plan is supplemental to other ongoing initiatives to simplify our business and improve profitable growth and entails, among other items, certain store and independent location closures as well as headcount reductions and organizational design changes to align our workforce to the expected needs of our business. We are also pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational efficiencies. These measures are subject to known and unknown risks and uncertainties, including whether we have targeted the appropriate areas for our cost-saving efforts and at the appropriate scale, our ability to successfully execute the restructuring plan and achieve the cost-savings anticipated while minimally disrupting our operations and whether, if required in the future, we will be able to appropriately target any additional areas for our cost-saving efforts.

We expect to incur restructuring charges and undertake other exit-related activities as a result of such initiatives. For example, execution of our plan is expected to result in the termination of certain leases, leading to exits of certain properties over time and the incurrence of expenses, including but not limited to impairment charges and contingent obligations, which could be material. The terms, scope and timing of any additional changes to our lease obligations, as well as any other effects on our landlord relationships or reputation with other real estate owners, are uncertain. As a result of the restructuring plan, we expect to incur approximately $300 - 500 million of cash charges, primarily as a result of closure sites and the reduction in force. Our expectations for charges to be incurred and cash to be expended in connection with the restructuring activities are based on a number of assumptions, and we may experience unanticipated consequences, such as higher than anticipated lease termination and facility closure costs, asset impairment or other unforeseen expenses related to the restructuring.

Implementing any restructuring plan, including the one we have outlined, presents potential risks that may impair our ability to achieve or sustain anticipated cost reductions or operational improvements. These risks include the

potential for management distraction from ongoing business activities, requirement of capital investment that could otherwise be used for the operation and growth of our existing business, inadequate support of important business functions due to staffing changes and other cost reduction efforts, delays or inability to achieve targeted efficiencies as a result of economic, competitive or other factors, failure to maintain adequate controls and procedures while executing our restructuring plans, disruptions to important business relationships, and damage to our reputation and brand. Additionally, as a result of restructuring initiatives, we may experience a loss of continuity and accumulated knowledge or increased employee attrition and difficulty attracting and retaining highly skilled employees, which may, among other things, slow the progress of our turnaround initiatives or impair our ability to maintain and enhance our internal controls and procedures.

The implementation of our restructuring efforts, including the potential reduction of our facilities and workforce, may not improve our operational and cost structure or result in greater efficiency of our organization; and we may not be able to support sustainable profitable growth following our restructuring actions. Failure to achieve or sustain the expected cost reductions and other benefits related to these restructuring initiatives could have a material adverse effect on our results of operations, financial condition and cash flows.

Please refer to Item 1A. Risk Factors found in the 2023 Form 10-K filed for the year ended December 30, 2023 for risks that, if they were to occur, could materially adversely affect the Companys business, financial condition, results of operations, cash flows and future prospects, which could in turn materially affect the price of the Companys common stock.