ADVANCE AUTO PARTS INC

1. Nature of Operations and Basis of Presentation

Description of Business

Advance Auto Parts, Inc. and subsidiaries is a leading automotive aftermarket parts provider in North America, serving both professional installers (“professional”) and “do-it-yourself” (“DIY”) customers. The accompanying unaudited condensed consolidated financial statements include the accounts of Advance Auto Parts, Inc., its wholly owned subsidiaries, Advance Stores Company, Incorporated (“Advance Stores”) and Neuse River Insurance Company, Inc., and their subsidiaries (collectively referred to as “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, Puerto Rico and the U.S. Virgin Islands. In addition, as of October 4, 2025, the Company served 814 independently owned Carquest branded stores across the same geographic locations served by the Company’s stores, in addition to Mexico and various Caribbean islands. The Company’s stores operate primarily under the trade names “Advance Auto Parts” and “Carquest”.

The Company hasone reportable segment. As of December 28, 2024, the Company hadtwo operating segments, which were aggregated as a single reportable segment; however, following the stabilization of the Company’s new organizational structure in the first quarter of fiscal 2025, due to significant restructuring activities, the Company now operates under the single operating segment of “Advance Auto Parts/Carquest”. See Note 11. Segment Reporting and Note 3. Restructuring, of the notes to the condensed consolidated financial statements included herein for additional information on the Company’s segments and restructuring activities.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and unaudited notes to the condensed consolidated financial statements are presented in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), have been condensed or omitted based upon the SEC interim reporting principles.

The accompanying condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. The accounting policies followed in the presentation of these condensed consolidated financial 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 the Company’s 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 for the interim periods are not necessarily indicative of the operating results to be expected for the full year. Consistent with prior years, the Company’s first quarter of the year contained sixteen weeks. The Company’s remaining quarters each consist of twelve weeks, with the exception of the fourth quarter of fiscal 2025 which consists of thirteen weeks.

Change in Presentation

Prior to fiscal 2025, the Company presented its condensed consolidated financial statements and notes to the condensed consolidated financial statements in thousands. Effective in fiscal 2025, such amounts are presented in millions, except par value share amounts and per share data, unless otherwise stated. Certain prior year amounts have been reclassified to conform to the current year presentation, including the separate disclosure of the non-cash expense for expected future credit losses. operating lease right of use assets, other assets, operating lease liabilities and other liabilities, on the condensed consolidated statements of cash flows. This change in presentation does not have a material impact on the condensed consolidated financial statements.

Further, consistent with the presentation in the Company’s 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 reflect this presentation.

Recently Issued Accounting Pronouncements - Not Yet Adopted

Income Tax Disclosure Improvements

In 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 specific categories used in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold, including disaggregation of taxes paid by jurisdiction. The related disclosures are effective for the fiscal year beginning after December 15, 2024. The Company is currently evaluating the impact of adopting ASU 2023-09 on the Company’s consolidated financial statements and related disclosures and believes that the adoption will result in additional disclosures, but will not have any other impact on its consolidated financial statements.

Disaggregation of Income Statement Expenses

In 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 other items) the amount of inventory purchases, employee compensation, selling expenses and depreciation and amortization of intangible assets. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company 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 Assets

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets(“ASU 2025-05”), which provides a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and for interim periods within those annual reporting periods, with early adoption permitted. The amendments in ASU 2025-05 should be applied prospectively. The Company is currently evaluating the impact of adopting ASU 2025-05 and believes 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 Software

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software: Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which makes targeted improvements to the accounting for internal-use software by removing references to “development stages”. The update also clarifies the criteria for capitalization, which begins when both of the following occur: (1) management has 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 perform the function intended. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. The amendment in ASU 2025-06 can be applied prospectively, retrospectively, or via a modified prospective transition method. The Company is currently evaluating the impact of adopting ASU 2025-06 on the consolidated financial statements and related disclosures.

2. Revenues

The following table summarizes disaggregated revenue from contracts with customers by product group from continuing operations:

There were no major customers individually accounting for 10% or more of consolidated net revenues.

3. Restructuring

2024 Restructuring Plan

On November 13, 2024, the Company’s Board of Directors approved a restructuring and asset optimization plan (“2024 Restructuring Plan”) designed to improve the Company’s profitability and growth potential and streamline its operations. This plan contemplated the closure of approximately 500 stores, approximately 200 independent locations andfour distribution centers by mid-2025, as well as headcount reductions. The Company completed the closure of all 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 of operating lease Right-of-Use (“ROU”) assets and property and equipment, 2) personnel expenses related to severance and transition expenses, which were offered to certain employees who would provide services through key dates to ensure completion of closure activities and 3) other location closure-related activity, including nonrecurring services rendered by third-party vendors assisting with the turnaround initiatives and other related expenses, including incremental revisions to receivable collectability due to termination of contracts with independents associated with the 2024 Restructuring Plan.

Other Restructuring Initiatives

In November 2023, the Company announced a strategic and operational plan with anticipated savings of $150 million of which $50 million would be reinvested into frontline team members. In addition to a reduction in workforce, this plan streamlines the Company’s 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 parts closer to the customer. In achieving this plan, the Company is in process of converting certain distribution centers and stores into market hubs. In addition to providing replenishment to near-by stores, market hubs support retail operations. In addition to the distribution network optimization costs, other restructuring expenses 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 condensed consolidated statement of operations, with the exception of inventory related expenses that are recorded as a component of cost of sales on the condensed consolidated statement of operations.

(1)Other location closure related activity for thetwelve 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. Other location closure related activity 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, $7 million for reserves on independent loans and $19 million of other related expenses associated with location closures, including the transfer of assets.

(2)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.

As of October 4, 2025, the cumulative amount incurred to date for active restructuring plans totaled $930 million, consisting of write-down of inventory to net realizable value in the fourth quarter of fiscal 2024, lease termination impacts, other exit-related expenses related to ceased use buildings and certain employee termination benefits. The Company estimates that it will incur additional expenses of approximately $20 million to $30 million under the active restructuring plans. These expenses primarily relate to lease terminations, professional services, and other exit costs, substantially all of which the Company expects to be incurred by the end of fiscal year 2025, with certain expenses, primarily related to closed store and distribution center leases, expected to continue into fiscal year 2026.

4. Inventories, net

The 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 carrying costs at that time. Accordingly, interim LIFO calculations are based on the Company’s estimates of expected inventory levels and costs at the end of the year. The Company’s LIFO debit/(credit) reserve balance was $(48) million and $(11) million as of October 4, 2025 and December 28, 2024, respectively, to state inventories at LIFO. Increases to the Company’s LIFO credit reserve balance are recorded as a noncash charge to cost of sales and decreases are recorded as a non-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 periods presented was as follows:

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 earnings of $3 million, or ($0.05) per diluted share. There wasno impact from LIFO liquidations for the twelve weeks ended ended October 4, 2025 and for the twelve and 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, net

Receivables, net, consisted of the following:

The Company regularly reviews accounts receivable, vendor and other balances and maintains allowances for credit losses estimated whenever events or circumstances indicate the carrying value may not be recoverable and updates its estimate of credit losses each reporting period based on new information that becomes available. The Company considers the following factors when determining if collection is reasonably assured: customer creditworthiness, past transaction history with the customer, current economic and industry trends and changes in customer payment terms. The Company controls credit risk through credit approvals, credit limits and accounts receivable and credit monitoring procedures.

In the third quarter of fiscal 2025, one of the Company’s vendors, a leading auto parts supplier for the automotive aftermarket industry, filed voluntary petitions for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the Southern District of Texas. The vendor has secured short-term financing through a debtor-in-possession (“DIP”) loan, however, Chapter 11 proceedings carry inherent risks with respect to a company’s ability to continue operations and 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 to cost of sales in the third quarter of fiscal 2025, within the condensed consolidated statement of operations, reflecting estimated future credit losses on certain vendor receivables due from the vendor. The estimate was developed utilizing a probability weighted cash-flow model adjusted for risks associated with credit risk deterioration for companies that enter Chapter 11 bankruptcy proceedings.

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

Long-term debt, net of unamortized discount and debt issuance costs, consisted of the following:

Fair Value of Financial Assets and Liabilities

As of October 4, 2025 and December 28, 2024, the fair value of the Company’s 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 Company’s long-term debt was determined using Level 2 inputs based on quoted market prices. The carrying amounts of the Company’s cash and cash equivalents, receivables, net, accounts payable and accrued expenses approximate their fair values due to the relatively short-term nature of these instruments.

Long-term debt

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 exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”). Interest on the Senior Unsecured Notes is payable in cash on February 1 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 Notes are guaranteed by each of the Company’s wholly-owned domestic subsidiaries that also guarantee the Company’s 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 more occasions, 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 of Control Triggering Event (as defined in the Indenture), the Company will be required to offer to repurchase the 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 repurchase date. The Indenture also contains customary provisions 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 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 its outstanding $300 million in aggregate principal amount of 5.90% senior unsecured notes due 2026 and the Company recorded a loss of $3 million on redemption in the third quarter of fiscal 2025 associated with this extinguishment. The remaining proceeds from the issuance are available for general corporate purposes, and, as further discussed under “Credit Facilities” below, certain of our cash and cash equivalents, are designated as qualified cash and are subject to customary “springing” control agreements, as defined in the ABL Facility Agreement.

Future Payments

As of October 4, 2025, the aggregate future annual maturities of long-term debt instruments were as follows:

Credit Facilities

On August 12, 2025, the Company’s $1 billion revolving credit facility (the “2021 Credit Agreement”) was terminated and replaced by the ABL Facility. The Company recorded a $6 million loss on extinguishment of the 2021 Credit Agreement during the third quarter of fiscal 2025. The ABL Facility provides for afive-year senior secured first lien asset-based revolving credit facility of up to $1 billion with an uncommitted accordion feature that provides for additional credit extensions up to $500 million. Our ability to draw upon the ABL Facility is subject to the available borrowing base. Outstanding amounts under the ABL Facility will accrue interest at a floating rate, which, at the Company’s election, can be either (i) SOFR plus an applicable margin or (ii) an alternative base rate plus an applicable margin. The applicable rate varies based on Average Historical Excess Availability (as defined in the ABL Facility Agreement) 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 prospective basis 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 will accrue 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, the Company hadno outstanding borrowings under its ABL Facility and 2021 Credit Agreements, respectively. As of October 4, 2025 the Company had $741 million of borrowing availability and $259 million letters of credit outstanding under the ABL Facility. As of December 28, 2024, the Company had $1 billion of 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 subsidiary guarantors thereunder. Advance Auto Parts, Inc. is the ABL Facility borrower and the guarantors are (i) each of our subsidiaries that guarantee our recently issued Senior Unsecured Notes and (ii) certain of our Canadian subsidiaries. Availability under the ABL Facility is limited to the lesser of (i) the borrowing base, 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 eligible inventory and 100% of qualified cash (up to certain limits for the purpose of determining borrowing capacity), subject, in each case, to customary reserves established by the collateral agent under the ABL Facility from time to time, including reserves related to outstanding obligations to our suppliers that are payable to the paying agents, as a result of such suppliers electing, at their option, to utilize third-party financing, commonly referred to as supply chain financing, and debt maturity reserves, and (ii) the aggregate revolving credit commitments. The ABL Facility contains customary representations and warranties, events of default and financial, affirmative and negative covenants for facilities of this type, including but not limited to a springing financial covenant relating to a fixed charge coverage ratio, defined in the ABL Facility as the ratio of Consolidated Adjusted EBITDA minus Consolidated Capital Expenditures 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 ratio to be maintained, and restrictions on certain indebtedness, liens, investments and acquisitions, asset dispositions, restricted payments, prepayment of certain indebtedness 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 as Qualified Cash Accounts as defined in the ABL Facility. As of October 4, 2025, $2.3 billion was designated as Qualified Cash. These amounts are unrestricted and 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 minimum availability 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 the ABL Facility of at least $400 million. The Qualified Cash Accounts are subject to springing control agreements pursuant to which the cash deposited therein will 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 as of 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 issued separately from the ABL Facility and 2021 Credit Agreement, respectively, none of which were drawn upon. These bilateral letters of credit generally have a term ofone year or less and primarily serve as collateral for the Company’s self-insurance policies.

Debt Guarantees

The Company is a guarantor of loans made by banks to various independently-owned Carquest-branded stores that are or, prior to the 2024 Restructuring Plan, were customers of the Company totaling$76 million and $98 million as of October 4, 2025 and December 28, 2024, respectively. These loans are collateralized by security agreements on merchandise inventory and other assets of the borrowers. The approximate value of the inventory collateralized by these agreements was$157 millionand $181 million as of October 4, 2025 and December 28, 2024, respectively. The Company continuously assesses the likelihood of performance under these guarantees and believes that performance is remote as of October 4, 2025.

7. Leases

Substantially all of the Company’s leases are for facilities, vehicles, and equipment. The initial term for facilities is typically five toten years, with renewal options typically atfive-year intervals, with the exercise of lease renewal options at the Company’s sole discretion. The Company’s vehicle and equipment lease terms are typically three tosix years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Total lease cost is included in cost of sales and total selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and is recorded net of immaterial sublease income. Total lease costs are comprised of the following:

During the twelve and forty weeks ended October 4, 2025, the Company recorded $12 million and $52 million, respectively, primarily related to accelerated amortization on leases the Company expects to exit before the end of the contractual term, and non-cash asset impairment, net of gains on lease modifications and terminations. These amounts are recorded in restructuring and related expenses within the accompanying condensed consolidated statements of operations. See Note 3. Restructuring, of the notes to the condensed consolidated financial statements included herein.

Other information relating to the Company’s lease liabilities was as follows:

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 expenses on the condensed consolidated statement of operations for the forty weeks ended October 5, 2024.

8. Earnings (loss) per Share

The computations of basic and diluted earnings per share were as follows:

(1) 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, 1.4 million and 0.6 million, respectively, ofrestricted 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 have been anti-dilutive.

9. Supplier Finance Programs

Certain of the Company’s suppliers enter into agreements with third-party financial institutions to obtain enhanced receivables options. These arrangements are commonly referred to and known in the industry as supply chain financing programs. Through these agreements, the Company’s suppliers, at their sole discretion, may elect to sell their receivables due from the Company to the third-party financial institution at terms negotiated between the supplier and the third-party financial institution. The Company does not provide any guarantees to any third-party in connection with these financing arrangements. The Company’s 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 accounts payable and represent obligations outstanding under these supplier finance programs for invoices that were confirmed as valid and owed to the third-party financial institutions in the Company’s condensed consolidated balance sheets. As of October 4, 2025, and December 28, 2024, the confirmed obligations outstanding 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 Company’s accounts payable balance on the Company’s condensed consolidated balance sheets, as such amounts represent liabilities of Worldpac transferred with the sale of the business in fiscal 2024. Under the provisions of the 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 Contingencies

On October 9, 2023, and October 27, 2023, two putative class actions on behalf of purchasers of the Company’s securities who purchased or otherwise acquired their securities between November 16, 2022, and May 30, 2023, inclusive (the “Class Period”), were commenced against the Company and certain of the Company’s former officers in the United States District Court for the Eastern District of North Carolina. The plaintiffs allege that the defendants made certain false and materially misleading statements during the alleged Class Period in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. These cases were consolidated on February 9, 2024, and the court-appointed lead plaintiff filed a consolidated and amended complaint on April 22, 2024. The consolidated and amended complaint proposes a Class Period of November 16, 2022 to November 15, 2023, and alleges that defendants made false and misleading statements in connection with (a) the Company’s 2023 guidance and (b) certain accounting issues previously disclosed by the Company. On June 21, 2024, defendants filed a motion to dismiss the consolidated and amended complaint. On January 23, 2025, the motion to 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 4th Circuit 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 Company’s directors and certain former officers alleging derivative liability for the allegations made in the securities class action complaints noted above. On April 9, 2024, the court consolidated these actions and appointed co-lead counsel. On June 10, 2024, the court issued a stay order on the consolidated derivative complaint pending resolution of the motion to dismiss for the underlying securities class action complaint.

11. Segment Reporting

The Company hasone operating segment andone reportable segment, effective during the first quarter of fiscal year 2025, resulting from the stabilization of the Company’s new organizational structure due to the significant restructuring activities announced in fiscal year 2024 as further described in Note 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 the geographical areas of the U.S. and Canada through its Advance Auto Parts and Carquest trade brands. The products sold by the Company, across all geographic areas, have similar economic characteristics, are sourced from the Company’s suppliers in a similar manner, and are available for sale to all of the Company’s customers through the Company’s stores and self-service e-commerce sites. All of the Company’s stores have similar characteristics, including the nature of the products 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 hasone operating segment, referred to as Advance Auto Parts/Carquest. As geographic information is not a key component of how the chief operating decision maker (“CODM”) reviews performance and allocates resources, such entity-wide information is not disclosed on a quarterly basis.

The Company’s CODM is the Chief Executive Officer, who regularly reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance for the Company’s single reportable segment. Discrete information is not regularly provided to and/or reviewed by the Company’s CODM at a lower level than the consolidated level, inclusive of segment asset level detail. The CODM primarily focuses on net income to evaluate its reportable segment. The CODM also uses net income for evaluating pricing strategy and to assess the performance for determining the compensation of certain employees. Significant segment expenses regularly provided to the CODM, which represent the difference between segment revenue and segment net income, consisted of the following:

(1)Selling, general and administrative expenses, excludes restructuring and related expenses and depreciation and amortization.

(2)The twelve weeks ended October 4, 2025 excluded $11 million and $5 million of depreciation and amortization expense included within cost of sales and restructuring, respectively, and $12 million and $2 million, respectively, for the twelve weeks ended October 5, 2024. The forty weeks ended October 4, 2025 excluded $38 million and $21 million of depreciation and amortization expense included within cost of sales and restructuring, respectively, and $44 million and $4 million, respectively, for the forty weeks ended October 5, 2024.

(3)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 consolidated statements of operations.

12. Discontinued Operations

In fiscal 2024, the Company completed the sale of Worldpac for $1.5 billion, with customary purchase price adjustments for working capital and other items 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 tozero no later than 24 months after the closing, to support supply chain financing for the buyer. The transaction closed on November 1, 2024. Net proceeds from the transaction after paying expenses and excluding the impact of taxes were approximately $1.47 billion. The Company’s sale of Worldpac was progress towards changing the landscape of the business with increased focus on the Advance blended-box model. As a result, the Company classified the results of operations and cash flows of Worldpac as discontinued operations in its condensed consolidated statements of operations and condensed consolidated statements of cash flows for prior periods presented. There has been no activity, to-date, related to discontinued operations in fiscal 2025.

The following table presents the major components of discontinued operations in the Company's condensed consolidated statements of operations:

13. Income Taxes

The Company’s 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 loss deductions.

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 and Jobs Act permanent, including 100% bonus depreciation and the business interest expense limitation, among others. The Company has determined the OBBBA has an immaterial impact to the Company’s provision for income taxes and deferred tax balances. ASC 740, “Income Taxes”, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted, which occurred during the Company’s second quarter of fiscal 2025. Therefore, the Company has reflected the effect of the OBBBA within the provision for income taxes for the twelve and forty weeks ended October 4, 2025 and deferred tax balances as of October 4, 2025.