DOWNLOAD
DOWNLOAD

CORPORATE PROFILE

_____________

Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both professional installer and do-it-yourself customers. As of December 28, 2019, Advance operated 4,877 stores and 160 Worldpac branches in the United States, Canada, Puerto Rico and the U.S. Virgin Islands. The Company also serves 1,253 independently owned Carquest branded stores across these locations in addition to Mexico, the Bahamas, Turks and Caicos and British Virgin 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.

0

STORES & BRANCHES*

$0

TOTAL NET SALES

* As of December 28, 2019 and includes 1,253 Independently Owned Carquest Stores.

* As of December 28, 2019 and includes 1,253 Independently Owned Carquest Stores.

LETTER TO SHAREHOLDERS

_____________

Looking back to review 2019, this was an important year marked by steady improvement in our financial performance with continued progress against our long-term objectives. In 2019 we delivered our second consecutive year of sales growth and margin expansion. At the same time, we made significant investments in our business that will help enable long-term growth and add value to our customers and Team Members.

DEAR FELLOW ADVANCE AUTO PARTS SHAREHOLDERS,

These letters normally recap the prior year and discuss opportunities for the future. However, given the unprecedented situation surrounding COVID-19, we felt it was important to provide an update on our response to the evolving pandemic in addition to a recap of our performance in 2019 and summary of the bright future that we believe is ahead for Advance Auto Parts.

First and foremost, we sincerely hope that you are healthy and staying safe. At Advance, nothing is more important than the health and safety of our Team Members and customers. This is not a new priority for us at Advance, however this global pandemic has brought new meaning to the statement. In keeping with other important elements of attracting the very best parts people in the business, we rapidly introduced enhanced benefits for our Team Members as a result of COVID-19. Advance provides an essential service to our communities by supplying critical parts and hardware to keep both emergency vehicles as well as everyday vehicles on the road. Now more than ever, we need transportation to access essential healthcare and food while enabling people who work in those sectors to get to and from work.

We believe it is a privilege to provide these essential parts and services in our communities and are working hard to not just keep our customers on the road, but to also prioritize their health and safety. For the approximately 60% of our business that serves professional customers, we have increased sanitization of our delivery vehicles and are reducing personal contact during the delivery experience. For the approximately 40% of our business that serves DIY omnichannel customers, we have increased sanitization of our stores and trained our employees on enhanced health and safety practices and accelerated new delivery options. This includes the introduction of “Advance Same Day” Curbside Pickup, for a contactless buy online pickup at store experience, as well as the roll out of “Advance Same Day” Home Delivery. We were the first major auto parts company to introduce Same Day Delivery to Home and are proud of our Team Members for enabling us to reach our customers in a manner that demonstrates we care, while also delivering with speed.

We are very proud of the role we play in keeping our customers on the road during this critical time . For this, we owe a great deal of thanks to our Team Members and Independent Partners. They are the real heroes helping us do our part to keep America running. Looking back to review 2019, this was an important year marked by steady improvement in our financial performance with continued progress against our long-term objectives. In 2019 we delivered our second consecutive year of sales growth and margin expansion. At the same time, we made significant investments in our business that will help enable long-term growth and add value to our customers and Team Members. We also delivered operational improvements which will increase productivity and efficiency over the long term.

Before reviewing our specific accomplishments, I want to once again thank all our Team Members, including our network of Carquest Independent partners, for their relentless focus on our customers. They consistently go above and beyond to bring our core competitive advantages to life. This includes ensuring we get “The Right Part in the Right Place at the Right Time,” enabling a continuously improving online and in store experience, providing trusted advice from thousands of ASE Certified Parts Professionals and of course, selling more of our industry leading assortment of quality parts.

PASSION FOR CUSTOMERS. . . PASSION FOR YES!

At Advance, having a “Passion for Customers and a Passion for Yes!” means putting customers first in every decision we make. It means delivering with care and speed, because getting the right parts quickly is critically important to enable both professional and do-it-yourself customers to complete their jobs.

In 2019, we put customers first by ramping up our investments in eCommerce and information technology to improve our customer value proposition. We enhanced our website, which led to increased traffic and improved conversion rates. We also expanded our Walmart.com partnership by increasing our assortment of parts and accessories.

In our professional business, we updated our MyAdvance and AdvancePro Enterprise Catalog to better support our customers. In addition, we invested in dynamic assortment and leveraged machine learning for a greater understanding of customer demand and to improve the quality of our product assortment in our stores.

We also made significant improvements to our SpeedPerks loyalty program, making sign-up even easier and offering a faster way to earn benefits once enrolled. We believe this program is best in class and demonstrates our commitment to listening to our customers and providing benefits they want.

Toward the end of the year, we completed the exciting acquisition of DieHard®, a truly iconic brand our customers know, love and trust. With the highest brand awareness and regard of any automotive battery brand in North America, DieHard® will help differentiate Advance and be a significant driver of traffic, sales and growth for both our corporate stores and Independent Carquest partners moving forward.

INVESTING IN OUR TEAM MEMBERS

We know that when we take care of our Team Members, they in turn will take care of our Customers which ultimately translates to shareholder value. As a result, our goal is to attract the very best people in the industry across the board in every function throughout the entire company. In 2019, we continued to make progress on this critically important objective as we invested in the areas of Team Member health, safety and productivity. We also continued to invest in our frontline team through our innovative “Fuel the Frontline” program, which awards Advance stock grants to our top performing frontline leaders. Since the program began in 2016, we have awarded more than 18,000 grants, which has helped drive retention of top people and reduced overall turnover. Finally, we further strengthened the Advance culture with progress on organizational health, inclusion and diversity. You can learn more about our Team Member-focused initiatives in our Corporate Sustainability and Social Report, which can be found on our website.

DRIVING MARGIN EXPANSION AND FREE CASH FLOW

In the last year, we improved our sales and profit per store by optimizing our footprint and improving our execution. By opening new WorldPac branches and welcoming new Carquest Independent locations, we established a presence in markets where we were previously unrepresented. In addition, operational improvements in our Advance and Carquest locations improved the customer experience, improving NPS scores while differentiating Advance from our competitors.

Across our supply chain we are making sweeping changes. We invested in our distribution center Team Members and began the implementation of new cost saving initiatives like cross banner replenishment. In addition, the integration of multiple supply chains at Advance is underway as we launched the consolidation of the Advance and Carquest supply chains while we also began to integrate Worldpac and Autopart International. In addition, the initial steps we have taken to consolidate our warehouse management systems have not only increased productivity, they have resulted in greater Team Member engagement, which is helping to reduce turnover.

Considering the importance of building and transforming our capabilities in application development, eCommerce and information technology, we opened our Global Capability Center (GCC) in Hyderabad, India. The GCC serves as a support center for our North American based teams, providing 24x7 capabilities and giving us access to important technology talent on a global stage. This will enable us to move faster and more efficiently on our primary growth and margin expansion initiatives.

In 2019 we invested over $270 million in capital expenditures in our business, the most since 2012. Over 60% of this was in information technology, eCommerce and supply chain. While we invested heavily in the business, we also remained focused on our other financial priorities. In 2019 we improved our accounts payable to inventory ratio by nearly 450 points driving our ability to deliver close to $600 million in Free Cash Flow which allowed us to return over $504 million to our shareholders through a combination of share buybacks and dividends. In the past two years, we have delivered over $1.2 billion in Free Cash Flow. We have a strong balance sheet, produce substantial cash flow and have an investment grade credit rating.

LOOKING AHEAD

2019 was a transformative year for Advance and one that we believe positions us well for future success. While we expect there may be implications from COVID-19, we believe it is premature to fully understand the impact it may have on the automotive aftermarket and our business. With that said, as we study the early impact of COVID-19, we see some short-term headwinds for our industry caused by quarantining and a reduction in miles driven. That said, we also believe it is possible that when people begin returning to work, many may be more comfortable using their personal vehicle to commute rather than use public transportation. We also expect that many of us may want or require our cars to last longer and do more. While COVID-19 continues to challenge individuals and businesses worldwide, we are relentlessly focused on our Team Members and customers throughout this unprecedented situation and are confident that we will come out of this global crisis stronger together.

Going forward, we’ve elevated and narrowed our focus to the largest and most impactful initiatives for driving long-term shareholder value. 2020 is a year where we have some terrific initiatives planned. This includes rolling out additional tools and technology for professional customers, continuing the roll out of dynamic assortment, launching a new DIY advertising campaign, and executing our multi-year partnership with Team Penske and Ryan Blaney. It also is a year when we are launching DieHard® batteries to our customers across North America. Finally, we will continue to execute against our long-term margin expansion and cash flow improvement plans. I know I speak for all at Advance when I say, the best is yet to come. Stay healthy, stay safe and thank you for your continued support and trust.

Respectfully,

Tom Greco

President and Chief Executive Officer

READ MORE

"At Advance, focusing on our customers means putting customers first in every decision we make. It means delivering with care and speed, because getting the right parts quickly is critically important to enable both professional and do-it-yourself customers to complete their jobs."

- Tom Greco,
President, Chief Executive Officer

"It is incumbent on all of us to drive customer and shareholder value. And we did this by remaining disciplined in executing against our strategic plans while controlling costs."

- Jeffery W. Shepherd,
Executive Vice President, Chief Financial Officer

2019 FINANCIAL SUMMARY

_____________
DOWNLOAD 10-K

EXECUTIVE OFFICERS

_____________

BOARD OF DIRECTORS*

_____________
From Left to Right:     John Bergstrom     Sharon McCollam     John Ferraro     Eugene Lee, Jr.     Thomas Greco     Brad Buss     Jeffrey Smith     Douglas Pertz     Nigel Travis     Adriana Karaboutis     Jeffrey Jones II
* As of February 11, 2020

BUILDING A WINNING CULTURE

_____________

We know that when we take care of our Team Members, they in turn will take care of our Customers which ultimately translates to shareholder value. As a result, our goal is to attract the very best people in the industry across the board in every function throughout the entire company. In 2019, we continued to make progress on this critically important objective as we invested in the areas of Team Member health, safety and productivity.

At Advance, we understand the awesome responsibility we have to take action and care for our people, planet and community. We are proud of all that we accomplished in 2019, and we are committed to building on our achievements in the months and years ahead. We invite you to follow us on social media and our website to learn more.

READ MORE

Our People are our Best Part

_____________

In 2019 we invested in our people through programs such as Fuel the Frontline and Be an Owner, which awards stock grants to high performing Team Members. In addition, we empowered our Team Members to Speak Up unique programs such as Innovation Garage.

Supply Chain Enhancements

_____________

We made important enhancements to our Supply Chain optimization efforts in 2019, including beginning to implement Cross Banner Replenishment, which will enable the optimizing of our supply chain and create a more freight logical distribution network. In addition, we began the implementation of our new warehouse management system, which will increase productivity and efficiency.

Safety Culture

_____________

The safety of our Team Members is a top priority and in 2019, we implemented new safety programs and significantly reduced the number of incidents, helping to ensure our Team Members return home safely.

DieHard® Acquisition

_____________

In December 2019, we acquired the iconic DieHard brand. The addition of DieHard to our industry leading assortment of national brands, OE parts and owned brands will enable us to differentiate Advance and drive significant long-term shareholder value.

Speed Perks

_____________

In response to customer feedback, we redesigned our Speed Perks Loyalty Program to allow for faster rewards for our Customers. We believe this is one of the best programs in the business and will continue to drive customer loyalty and retention.

Social Responsibility

_____________

We continued our focus on three important areas: People, Planet and Community. This includes making Advance a better place to work, doing our part to reduce our environmental impact and give back to our communities.

Driving our Pro Business

_____________

In 2019, we introduced our MyAdvance.com and rolled-out an enhanced AdvancePro Enterprise Catalog, improving our ability to say yes to our professional customers more. Additionally, we continued to roll out Dynamic Assortment, using machine learning to better understand customer demand and improve availability.

Supporting our Communities

_____________

In 2019, we continued our support of the American Heart Association, becoming the number one participating company in the country and raising over $1 million. In addition, we continued our support of Building Homes for Heroes and JDRF.

Investing in Information Technology

_____________

We continue to make enhancements to our information technology initiatives, including improving our B2C website, implementing new human resource tools, and began the implementation our new finance ERP system.

"@AdvanceAuto Shout out to Tina at your Dover, PA location. I needed a differential pinion seal and even though that location didn't have one in stock she went above and beyond to help me locate one. Thanks Tina!!"
– Allen, PA
"Shout out to Glenn at @AdvanceAuto. Not only did this man take time to help me find a part that wasn’t on the shelf, he helped me fix my issue in store too. #glennistheman."
– Alan, MD
"Once again my friends at my neighborhood @AdvanceAuto in West Akron came to my rescue. Thanks for the battery help and for always being quick, reliable and helpful when I come through the door."
- Eric, OH
"@AdvanceAuto Thank you to Wil in Blacksburg, VA for going above and beyond to help this mama stranded in her minivan with two kids. He not only got us back on the road, but took time to try to teach my kids what was wrong."
– Katie, VA

Thomas R.
Greco

President and Chief Executive Officer

Tom Greco joined Advance Auto Parts in April 2016 and has held his current role as President, Chief Executive Officer (CEO) and a member of our Board of Directors since August 2016. Previously, Tom served as CEO and a member of our Board of Directors from April 2016 to August 2016.

Prior to joining Advance, from September 2014 until April 2016, Tom served as CEO, Frito-Lay North America, a unit of PepsiCo, Inc. (“PepsiCo”), a leading global food and beverage company. In this role, Tom was responsible for overseeing PepsiCo’s snack and convenient foods business in the U.S. and Canada. He previously served as Executive Vice President, PepsiCo and President, Frito-Lay North America from September 2011 to September 2014 and as Executive Vice President and Chief Commercial Officer for Pepsi Beverages Company from 2009 to September 2011. Tom joined PepsiCo in Canada in 1986 and served in a variety of leadership positions, including Region Vice President, Midwest; President, Frito-Lay Canada; Senior Vice President, Sales, Frito-Lay North America; President, Global Sales, PepsiCo; and Executive Vice President, Sales, North America Beverages. Before joining PepsiCo, he worked at The Proctor & Gamble Company. Tom is a dedicated supporter of many charitable organizations, including the American Heart Association Heart Walk in Dallas and Raleigh, JDRF, Building Homes for Heroes and United Way.

Tom earned his bachelor’s degree from Laurentian University in Sudbury, Ontario and a master’s degree from the Richard Ivey School of Business in London, Ontario.

Michael T.
Broderick

Executive Vice President, Merchandising and Store Operations Support

Mike Broderick joined Advance Auto Parts in December 2016 and has held his role as Executive Vice President, Merchandising and Store Operations Support since February 2018. Previously, Mike served as Senior Vice President, Merchandising from March 2017 to February 2018, with Operations Support added to his responsibilities in June 2017. Mike also served as Senior Vice President, Professional Sales from December 2016 to March 2017.

Prior to joining Advance, Mike worked for Canadian Tire Corporate as Senior Vice President, Automotive from 2014 to 2016. Before Canadian Tire, he served as Chief Executive Officer of the Vehicle Component Solutions Segment at Federal Mogul Corporation from 2012 to 2013. Previously, Mike served as President, GPI/Carquest from 2009 to 2012 and Senior Vice President, Sales, for the company from 2008 to 2009. Mike began his career with AutoZone where he held multiple field and operations roles, including Vice President for the company’s Northeast Division from 1999 to 2008.

Mike earned his bachelor’s degree from Assumption College.

Robert B.
Cushing

Executive Vice President, Professional

Bob Cushing joined Advance Auto Parts in January 2014 via the acquisition of General Parts International, Inc., which included the wholly-owned subsidiary, WORLDPAC, Inc. ("WORLDPAC"). Bob has held his current position as Executive Vice President, Professional since August 2016 and is responsible for the operations of our professional sales team in addition to WORLDPAC.

Bob joined WORLDPAC via the acquisition of Metrix Parts Warehouse in 1999 and was named WORLDPAC’s President and Chief Executive Officer (CEO) in January 2008. Prior to serving as President and CEO, he served as Executive Vice President, Sales and Operations for the U.S. and Canada from 1999 to 2007. Before WORLDPAC, Bob held executive-level sales, marketing and operations positions with Metrix Parts Warehouse, Inc., Interco Parts Corporation and Robert Bosch Corporation.

Bob earned his bachelor’s degree and Finance MBA from Adelphi University.

Tammy M.
Finley

Executive Vice President, General Council and Corporate Secretary

Tammy Moss Finley joined Advance Auto Parts in 1998 and has held her position as Executive Vice President, General Counsel and Corporate Secretary since May 2016.

Previously, Tammy served as Executive Vice President, Human Resources, General Counsel and Corporate Secretary from January 2015 to May 2016 and Senior Vice President, Human Resources from March 2013 to January 2015. She was Vice President, Employment Counsel and Government Affairs from March 2010 to March 2013 and Vice President, Employment Counsel from September 2007 to March 2010. From January 2003 to September 2007, Tammy served as Vice President, Staffing and Team Member Relations. Her first role with Advance was Assistant Vice President, Human Resources, which she held from March 1998 to January 2003. Prior to joining Advance, Tammy worked as a labor and employment attorney with The Center for Employment Law, PC, and as a Staff Attorney with the Virginia Supreme Court.

Tammy earned her bachelor’s degree from Virginia Tech and a juris doctorate degree from the College of William and Mary Marshall-Wythe School of Law.

Natalie S.
Schechtman

Executive Vice President, Human Resources

Natalie Rothman Schechtman joined Advance Auto Parts in May 2016 and has held her position as Executive Vice President, Human Resources since February 2018. Previously, Natalie served as Senior Vice President, Human Resources.

Prior to joining Advance, Natalie served in human resources leadership roles at PepsiCo for almost 10 years, including Senior Director, Human Resources for Global Foodservice, a division of PepsiCo. In that role, she was responsible for the division’s talent strategy, recruitment, training and development, organizational health and employee relations. She also held human resources leadership roles in PepsiCo’s Retail Beverages, Pepsi-Cola North America and within PepsiCo's Corporate division. From 2003 to 2006, she worked as an employment attorney with the law firm Brown Raysman in New York, handling corporate labor and employment legal issues for a variety of clients, including several large international corporations. Prior to Brown Raysman, she served in recruiting and talent management roles with The Estee Lauder Companies, FreeRide.com, LLC and Gundersen Partners, LLC.

Natalie earned her bachelor’s degree from Ithaca College, a master’s degree from American University and a juris doctorate degree from Brooklyn Law School.

Jeffrey W.
Shepherd

Executive Vice President, Chief Financial Officer

Jeff Shepherd joined Advance Auto Parts in March 2017 and has held his position as Executive Vice President, Chief Financial Officer since April 2018. Previously, Jeff served as Senior Vice President, Controller and Chief Accounting Officer.

Prior to joining Advance, Jeff worked for General Motors Company from September 2010 to February 2017 in various accounting and finance roles. These roles included Controller – General Motors Europe from July 2015 to February 2017, Director – Consolidation and SEC Reporting from June 2013 to July 2015, and Director – Analysis and Reporting from September 2010 to June 2013. Prior to joining General Motors, Jeff worked for Ernst & Young, a public accounting firm, from October 1994 to September 2010.

Jeff earned his bachelor’s degree in accounting from Central Michigan University and is a certified public accountant.

Reuben E.
Sloan

Executive Vice President,
Supply Chain

Reuben E. Sloan joined Advance Auto Parts in October 2018 as Executive Vice President, Supply Chain. In this role, Reuben is responsible for the company’s Supply Chain and Procurement functions.

Prior to joining Advance, Reuben served as Senior Vice President, Supply Chain, at Walgreen Co. where he was responsible for inventory management and replenishment, imports, transportation, distribution center operations and logistics. Prior to joining Walgreens in 2012, Reuben served as Executive Vice President, Supply Chain and General Manager of Services for OfficeMax, Inc. Previously, Reuben served in a number of senior supply chain and operational leadership roles at Whirlpool Corporation, General Motors Company and Federal-Mogul Holdings Corporation, among others. Reuben also served as a member of Advance’s Board of Directors from March 2016 to October 2018.

Reuben earned his bachelor’s degree in Engineering from the University of Michigan.

Andrew
Page

Senior Vice President,
Controller and Chief Accounting Officer

Andrew Page joined Advance Auto Parts in May 2019 as Senior Vice President, Controller and Chief Accounting Officer. In this role, Andrew is responsible for enterprise-wide accounting operations, tax, external financial reporting and all related compliance.

Prior to joining Advance, Andrew served as Senior Vice President and Chief Accounting Officer for Under Armour, Inc. Andrew worked for Under Armour, Inc. from 2011 to 2019, where he initially served as the company’s Assistant Controller. Previously, Page served in Assistant Controller roles for FTI Consulting, Inc., AES Corporation, Inc., and General Electric. Earlier in his career, Andrew served in Controller positions for Discovery Communications, Inc., and Proxicom and was an Audit Manager for PricewaterhouseCoopers.

Andrew earned his bachelor’s degree in Accounting from Eastern Kentucky University, an MBA from Georgetown University and is a Certified Public Accountant.

Advance Auto Parts logo
Copyright© 2020 Advance Auto Parts.