Company Quick10K Filing
Quick10K
Advance Auto Parts
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$138.07 72 $9,905
10-Q 2019-07-13 Quarter: 2019-07-13
10-Q 2019-04-20 Quarter: 2019-04-20
10-K 2018-12-29 Annual: 2018-12-29
10-Q 2018-10-06 Quarter: 2018-10-06
10-Q 2018-07-14 Quarter: 2018-07-14
10-Q 2018-04-21 Quarter: 2018-04-21
10-K 2017-12-30 Annual: 2017-12-30
10-Q 2017-10-07 Quarter: 2017-10-07
10-Q 2017-07-15 Quarter: 2017-07-15
10-Q 2017-04-22 Quarter: 2017-04-22
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-10-08 Quarter: 2016-10-08
10-Q 2016-07-16 Quarter: 2016-07-16
10-Q 2016-04-23 Quarter: 2016-04-23
10-K 2016-01-02 Annual: 2016-01-02
10-Q 2015-10-10 Quarter: 2015-10-10
10-Q 2015-07-18 Quarter: 2015-07-18
10-Q 2015-04-25 Quarter: 2015-04-25
10-K 2015-01-03 Annual: 2015-01-03
10-Q 2014-10-04 Quarter: 2014-10-04
10-Q 2014-07-12 Quarter: 2014-07-12
10-Q 2014-04-19 Quarter: 2014-04-19
10-K 2013-12-28 Annual: 2013-12-28
8-K 2019-08-13 Earnings, Exhibits
8-K 2019-05-22 Earnings, Exhibits
8-K 2019-05-14 Officers, Shareholder Vote
8-K 2019-05-08 Officers, Exhibits
8-K 2019-02-19 Earnings, Exhibits
8-K 2019-02-11 Officers, Regulation FD, Exhibits
8-K 2019-01-29 Off-BS Arrangement
8-K 2019-01-10 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-11-06 Earnings, Officers, Exhibits
8-K 2018-08-14 Earnings, Exhibits
8-K 2018-08-07 Officers, Regulation FD, Exhibits
8-K 2018-03-29 Officers, Regulation FD, Exhibits
8-K 2018-01-31 Enter Agreement, Off-BS Arrangement, Exhibits
JD JD.com 86,107
APU Amerigas Partners 2,903
FLWS 1 800 Flowers Com 971
ODP Office Depot 699
BKS Barnes & Noble 475
ZAGG Zagg 184
BNED Barnes & Noble Education 171
PRTS US Auto Parts Network 45
KIRK Kirkland's 19
TKAT Takung Art 7
AAP 2019-07-13
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 aapexhibit3117132019.htm
EX-31.2 aapexhibit3127132019.htm
EX-32.1 aapexhibit3217132019.htm

Advance Auto Parts Earnings 2019-07-13

AAP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
________________________________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 13, 2019

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.

Commission file number 001-16797
________________________

aaplogocolornotaga391.jpg
ADVANCE AUTO PARTS, INC.
(Exact name of registrant as specified in its charter)
________________________

Delaware
54-2049910
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

2635 East Millbrook Road, Raleigh, North Carolina 27604
(Address of principal executive offices) (Zip Code)
 
(540) 362-4911
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol
 
Name of each exchange on which registered
Common Stock, $0.0001 par value
 
AAP
 
New York Stock Exchange
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report).

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No

As of August 9, 2019, the number of shares of the registrant’s common stock outstanding was 71,386,990 shares.
 

 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

PART I.  FINANCIAL INFORMATION
 
ITEM 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share data) (Unaudited)
 
July 13, 2019
 
December 29, 2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
747,719

 
$
896,527

Receivables, net
713,061

 
624,972

Inventories
4,374,933

 
4,362,547

Other current assets
126,758

 
198,408

Total current assets
5,962,471

 
6,082,454

Property and equipment, net of accumulated depreciation of $1,985,197 and $1,918,502
1,381,388

 
1,368,985

Operating lease right-of-use assets
2,360,019

 

Goodwill
992,432

 
990,237

Intangible assets, net
521,969

 
550,593

Other assets
49,667

 
48,379

 
$
11,267,946

 
$
9,040,648

Liabilities and Stockholders’ Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
3,317,972

 
$
3,172,790

Accrued expenses
587,119

 
623,141

Other current liabilities
467,314

 
90,019

Total current liabilities
4,372,405

 
3,885,950

Long-term debt
746,951

 
1,045,720

Noncurrent operating lease liabilities
2,032,350

 

Deferred income taxes
313,903

 
318,353

Other long-term liabilities
131,035

 
239,812

Commitments and contingencies


 


Stockholders’ equity:
 

 
 

Preferred stock, nonvoting, $0.0001 par value

 

Common stock, voting, $0.0001 par value
8

 
8

Additional paid-in capital
715,747

 
694,797

Treasury stock, at cost
(572,592
)
 
(425,954
)
Accumulated other comprehensive loss
(33,481
)
 
(44,193
)
Retained earnings
3,561,620

 
3,326,155

Total stockholders’ equity
3,671,302

 
3,550,813

 
$
11,267,946

 
$
9,040,648




The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

1

Table of Contents

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data) (Unaudited)
 
Twelve Weeks Ended
 
Twenty-Eight Weeks Ended
 
July 13, 2019
 
July 14, 2018
 
July 13, 2019
 
July 14, 2018
Net Sales
$
2,332,246

 
$
2,326,652

 
$
5,284,283

 
$
5,200,500

Cost of sales, including purchasing and warehousing costs
1,322,808

 
1,315,093

 
2,970,233

 
2,916,658

Gross profit
1,009,438

 
1,011,559

 
2,314,050

 
2,283,842

Selling, general and administrative expenses
838,666

 
844,018

 
1,935,338

 
1,918,061

Operating income
170,772

 
167,541

 
378,712

 
365,781

Other, net:
 
 
 
 
 
 
 
Interest expense
(8,675
)
 
(12,855
)
 
(23,619
)
 
(30,537
)
Other income, net
4,113

 
2,785

 
1,874

 
3,243

Total other, net
(4,562
)
 
(10,070
)
 
(21,745
)
 
(27,294
)
Income before provision for income taxes
166,210

 
157,471

 
356,967

 
338,487

Provision for income taxes
41,390

 
39,635

 
89,647

 
83,925

Net income
$
124,820

 
$
117,836

 
$
267,320

 
$
254,562

 
 
 
 
 
 
 
 
Basic earnings per common share
$
1.74

 
$
1.59

 
$
3.73

 
$
3.44

Weighted average common shares outstanding
71,738

 
74,054

 
71,767

 
74,011

Diluted earnings per common share
$
1.73

 
$
1.59

 
$
3.71

 
$
3.43

Weighted average common shares outstanding
72,008

 
74,244

 
72,063

 
74,222



Condensed Consolidated Statements of Comprehensive Income
(In thousands) (Unaudited)
 
Twelve Weeks Ended
 
Twenty-Eight Weeks Ended
 
July 13, 2019
 
July 14, 2018
 
July 13, 2019
 
July 14, 2018
Net income
$
124,820

 
$
117,836

 
$
267,320

 
$
254,562

Other comprehensive income (loss):
 
 
 
 
 
 
 
Changes in net unrecognized other postretirement benefit (costs) income, net of tax of $25, $24, $8 and $56
(69
)
 
(67
)
 
26

 
(158
)
Currency translation adjustments
6,626

 
(7,035
)
 
10,686

 
(10,802
)
Total other comprehensive income (loss)
6,557

 
(7,102
)
 
10,712

 
(10,960
)
Comprehensive income
$
131,377

 
$
110,734

 
$
278,032

 
$
243,602




The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

2

Table of Contents

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except per share data) (Unaudited)
 
 
 
Twelve Weeks Ended July 13, 2019
 
Common Stock
 
Additional
Paid-in Capital
 
Treasury Stock, at Cost
 
Accumulated Other
Comprehensive Loss
 
Retained Earnings
 
Total
Stockholders’ Equity
 
Shares
 
Amount
 
 
 
 
 
Balance, April 20, 2019
71,737

 
$
8

 
$
706,360

 
$
(560,245
)
 
$
(40,038
)
 
$
3,441,138

 
$
3,547,223

Net income

 

 

 

 

 
124,820

 
124,820

Total other comprehensive income

 

 

 

 
6,557

 

 
6,557

Issuance of shares upon the exercise of stock appreciation rights
1

 

 

 

 

 

 

Tax withholdings related to the exercise of stock appreciation rights

 

 
(24
)
 

 

 

 
(24
)
Restricted stock units and deferred stock units vested
34

 
 
 

 

 

 

 

Share-based compensation

 

 
8,441

 

 

 

 
8,441

Stock issued under employee stock purchase plan
6

 

 
970

 

 

 

 
970

Repurchases of common stock
(81
)
 

 

 
(12,347
)
 

 

 
(12,347
)
Cash dividends declared ($0.06 per common share)

 

 

 

 

 
(4,338
)
 
(4,338
)
Balance, July 13, 2019
71,697

 
$
8

 
$
715,747

 
$
(572,592
)
 
$
(33,481
)
 
$
3,561,620

 
$
3,671,302

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve Weeks Ended July 14, 2018
 
Common Stock
 
Additional
Paid-in Capital
 
Treasury Stock, at Cost
 
Accumulated Other
Comprehensive Loss
 
Retained Earnings
 
Total
Stockholders’ Equity
 
Shares
 
Amount
 
 
 
 
 
Balance, April 21, 2018
74,030

 
$
8

 
$
672,913

 
$
(149,824
)
 
$
(28,812
)
 
$
3,052,336

 
$
3,546,621

Net income

 

 

 

 

 
117,836

 
117,836

Total other comprehensive loss

 

 

 

 
(7,102
)
 

 
(7,102
)
Issuance of shares upon the exercise of stock appreciation rights
3

 

 

 

 

 

 

Tax withholdings related to the exercise of stock appreciation rights

 

 
(211
)
 

 

 

 
(211
)
Restricted stock units and deferred stock units vested
44

 

 

 

 

 

 

Share-based compensation

 
 
 
4,771

 

 

 

 
4,771

Stock issued under employee stock purchase plan
7

 

 
943

 

 

 

 
943

Repurchases of common stock
(3
)
 

 

 
(433
)
 

 

 
(433
)
Cash dividends declared ($0.06 per common share)

 

 

 

 

 
(4,476
)
 
(4,476
)
Balance, July 14, 2018
74,081

 
$
8

 
$
678,416

 
$
(150,257
)
 
$
(35,914
)
 
$
3,165,696

 
$
3,657,949



3

Table of Contents

 
Twenty-Eight Weeks Ended July 13, 2019
 
Common Stock
 
Additional
Paid-in Capital
 
Treasury Stock, at Cost
 
Accumulated Other
Comprehensive Loss
 
Retained Earnings
 
Total
Stockholders’ Equity
 
Shares
 
Amount
 
 
 
 
Balance, December 29, 2018
72,460

 
$
8

 
$
694,797

 
$
(425,954
)
 
$
(44,193
)
 
$
3,326,155

 
$
3,550,813

Net income

 

 

 

 

 
267,320

 
267,320

Cumulative effect of accounting change from adoption of ASU 2016-02, net of tax

 

 

 

 

 
(23,165
)
 
(23,165
)
Total other comprehensive income

 

 

 

 
10,712

 

 
10,712

Issuance of shares upon the exercise of stock appreciation rights
2

 

 

 

 

 

 

Tax withholdings related to the exercise of stock appreciation rights

 

 
(123
)
 

 

 

 
(123
)
Restricted stock units and deferred stock units vested
145

 

 

 

 

 

 

Share-based compensation

 

 
19,425

 

 

 

 
19,425

Stock issued under employee stock purchase plan
11

 

 
1,648

 

 

 

 
1,648

Repurchases of common stock
(921
)
 

 

 
(146,638
)
 

 

 
(146,638
)
Cash dividends declared ($0.12 per common share)

 

 

 

 

 
(8,690
)
 
(8,690
)
Balance, July 13, 2019
71,697

 
$
8

 
$
715,747

 
$
(572,592
)
 
$
(33,481
)
 
$
3,561,620

 
$
3,671,302

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twenty-Eight Weeks Ended July 14, 2018
 
Common Stock
 
Additional
Paid-in Capital
 
Treasury Stock, at Cost
 
Accumulated Other
Comprehensive Loss
 
Retained Earnings
 
Total
Stockholders’ Equity
 
Shares
 
Amount
 
 
 
 
Balance, December 30, 2017
73,936

 
$
8

 
$
664,646

 
$
(144,600
)
 
$
(24,954
)
 
$
2,920,096

 
$
3,415,196

Net income

 

 

 

 

 
254,562

 
254,562

Total other comprehensive loss

 

 

 

 
(10,960
)
 

 
(10,960
)
Issuance of shares upon the exercise of stock appreciation rights
5

 

 

 

 

 

 

Tax withholdings related to the exercise of stock appreciation rights

 

 
(304
)
 

 

 

 
(304
)
Restricted stock units and deferred stock units vested
163

 

 

 

 

 

 

Share-based compensation

 
 
 
12,413

 

 

 

 
12,413

Stock issued under employee stock purchase plan
25

 

 
1,697

 

 

 

 
1,697

Repurchases of common stock
(48
)
 

 

 
(5,657
)
 

 

 
(5,657
)
Cash dividends declared ($0.12 per common share)

 

 

 

 

 
(8,962
)
 
(8,962
)
Other

 

 
(36
)
 

 

 

 
(36
)
Balance, July 14, 2018
74,081

 
$
8

 
$
678,416

 
$
(150,257
)
 
$
(35,914
)
 
$
3,165,696

 
$
3,657,949




The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.


4

Table of Contents

Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
 
Twenty-Eight Weeks Ended
 
July 13, 2019
 
July 14, 2018
Cash flows from operating activities:
 
 
 
Net income
$
267,320

 
$
254,562

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
123,257

 
128,244

Share-based compensation
19,425

 
12,413

Loss and impairment of long-lived assets
2,297

 
4,757

Provision for deferred income taxes
2,930

 
11,195

Other
11,719

 
1,180

Net change in:
 
 
 
Receivables, net
(85,941
)
 
(59,995
)
Inventories
(5,685
)
 
2,140

Accounts payable
142,002

 
19,083

Accrued expenses
(21,272
)
 
112,214

Other assets and liabilities, net
36,109

 
(41,825
)
Net cash provided by operating activities
492,161

 
443,968

Cash flows from investing activities:
 

 
 

Purchases of property and equipment
(111,425
)
 
(61,815
)
Proceeds from sales of property and equipment
8,566

 
578

Net cash used in investing activities
(102,859
)
 
(61,237
)
Cash flows from financing activities:
 

 
 

Decrease in bank overdrafts
(70,265
)
 
(8,362
)
Redemption of senior unsecured notes
(310,047
)
 

Dividends paid
(13,028
)
 
(13,398
)
Proceeds from the issuance of common stock
1,648

 
1,697

Tax withholdings related to the exercise of stock appreciation rights
(123
)
 
(304
)
Repurchases of common stock
(146,638
)
 
(5,657
)
Other, net
(113
)
 
784

Net cash used in financing activities
(538,566
)
 
(25,240
)
Effect of exchange rate changes on cash
456

 
(2,179
)
Net (decrease) increase in cash and cash equivalents
(148,808
)
 
355,312

Cash and cash equivalents, beginning of period
896,527

 
546,937

Cash and cash equivalents, end of period
$
747,719

 
$
902,249

 
 
 
 
Non-cash transactions:
 
 
 
Accrued purchases of property and equipment
$
30,068

 
$
9,075




The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

5

Table of Contents
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



1.
Nature of Operations and Basis of Presentation:

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 consolidated financial statements have been prepared by us and include the accounts of Advance Auto Parts, Inc., its wholly owned subsidiary, Advance Stores Company, Incorporated (“Advance Stores”), and its subsidiaries (collectively referred to as “Advance,” “we,” “us” or “our”).

As of July 13, 2019, we operated a total of 4,912 stores and 150 Worldpac branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of July 13, 2019, we served 1,250 independently owned Carquest branded stores across the same geographic locations served by our stores in addition to Mexico, the Bahamas, Turks and Caicos and the British Virgin Islands.

The accounting policies followed in the presentation of interim financial results are consistent with those followed on an annual basis. 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 Securities and Exchange Commission (“SEC”) interim reporting guidance. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for 2018 as filed with the SEC on February 19, 2019.

During the sixteen weeks ended April 20, 2019, we made an out-of-period correction, which increased Cost of sales by $13.0 million, related to received not invoiced inventory.

The results of operations for the interim periods are not necessarily indicative of the operating results to be expected for the full year. Our first quarter of the year contains sixteen weeks. Our remaining three quarters consist of twelve weeks.

2.
Significant Accounting Policies:

Revenues

The following table summarizes disaggregated revenue from contracts with customers by product group:
 
Twelve Weeks Ended
 
Twenty-Eight Weeks Ended
 
July 13, 2019
 
July 14, 2018
 
July 13, 2019
 
July 14, 2018
Percentage of Net sales, by product group:
 
 
 
 
 
 
 
Parts and batteries
67
%
 
66
%
 
66
%
 
65
%
Accessories and chemicals
21

 
20

 
21

 
20

Engine maintenance
11

 
13

 
12

 
14

Other
1

 
1

 
1

 
1

Total
100
%
 
100
%
 
100
%
 
100
%


We had no material contract assets, contract liabilities or costs to obtain and fulfill contracts recorded on the condensed consolidated balance sheets as of July 13, 2019 and December 29, 2018.

Recently Issued Accounting Pronouncements

We adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”), as of December 30, 2018, using the alternative transition method provided in ASU 2018-11, Leases (Topic 842): Targeted Improvements. Using the alternative transition method, we applied the transition requirements at the effective date of ASU 2016-02 with the impact of initially applying ASU 2016-02 recognized as a cumulative-effect adjustment to retained earnings in the first quarter of 2019. Consequently, the comparative periods presented continue to be in accordance with ASC 840, Leases (Topic 840) (“ASC 840”), including the disclosure requirements of ASC 840.


6

Table of Contents
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


We elected the package of practical expedients permitted under the transition guidance within the new standard. In addition, as a practical expedient relating to our facility and vehicle leases, we elected not to separate lease components from nonlease components.

The adoption of ASU 2016-02 resulted in the recording of lease assets and lease liabilities of $2.4 billion as of December 30, 2018. At the date of adoption, there was a difference between the operating lease right-of-use assets and lease liabilities recorded that included an adjustment to retained earnings, net of a $7.9 million deferred tax impact, which primarily resulted from the impairment of operating lease right-of-use assets. For the twenty-eight weeks ended July 13, 2019, the adoption of the new standard did not have a material impact on our condensed consolidated statements of operations and condensed consolidated statements of cash flows as substantially all of our leases remained operating in nature.

3.
Inventories

Inventories are stated at the lower of cost or market. We used the last in, first out (“LIFO”) method of accounting for approximately 89% of inventories as of July 13, 2019 and December 29, 2018. Under the LIFO method, our Cost of sales reflects the costs of the most recently purchased inventories, while the inventory carrying balance represents the costs for inventories purchased in the twenty-eight weeks ended July 13, 2019 and prior years. We recorded an increase to Cost of sales of $16.5 million for the twelve weeks ended July 13, 2019, a reduction to Cost of sales of $12.3 million for the twelve weeks ended July 14, 2018, an increase to Cost of sales of $42.9 million for the twenty-eight weeks ended July 13, 2019 and a reduction to Cost of sales of $32.3 million for the twenty-eight weeks ended July 14, 2018 to state inventories at LIFO.

An actual valuation of inventory under the LIFO method is performed by us at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on our estimates of expected inventory levels and costs at the end of the year.

Inventory balances were as follows:
(in thousands)
July 13, 2019
 
December 29, 2018
Inventories at first in, first out (“FIFO”)
$
4,174,944

 
$
4,119,617

Adjustments to state inventories at LIFO
199,989

 
242,930

Inventories at LIFO
$
4,374,933

 
$
4,362,547



4.
Exit Activities

As of December 29, 2018, and in accordance with ASC 420, Exit or Disposal Cost Obligations, the closed facility lease obligation, which comprised of sublease assets and lease liabilities for closed facilities, was $42.3 million recorded in connection with the initiatives and liabilities associated with facility closures that occurred as part of our normal market evaluation process as described in our 2018 Form 10-K. As a result of our transition to ASU 2016-02, our lease liabilities for closed facilities are included within the lease liability recorded in Other current liabilities and Noncurrent operating lease liabilities, and the operating lease right-of-use assets recorded upon transition was recorded net of the previously recorded closed facility lease obligation.

5.
Intangible Assets

Our definite-lived intangible assets include customer relationships and non-compete agreements. Amortization expense was $7.3 million and $8.5 million for the twelve weeks ended July 13, 2019 and July 14, 2018 and $17.0 million and $21.9 million for the twenty-eight weeks ended July 13, 2019 and July 14, 2018.


7

Table of Contents
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


6.
Receivables, net

Receivables consist of the following:
(in thousands)
July 13, 2019
 
December 29, 2018
Trade
$
497,338

 
$
397,909

Vendor
222,377

 
228,024

Other
10,060

 
17,081

Total receivables
729,775

 
643,014

Less: allowance for doubtful accounts
(16,714
)
 
(18,042
)
Receivables, net
$
713,061

 
$
624,972



7.
Long-term Debt and Fair Value of Financial Instruments

Long-term debt consists of the following:
(in thousands)
July 13, 2019
 
December 29, 2018
Total long-term debt
$
746,951

 
$
1,045,930

Less: current portion of long-term debt

 
(210
)
Long-term debt, excluding current portion
$
746,951

 
$
1,045,720

 
 
 
 
Fair value of long-term debt
$
793,000

 
$
1,074,000



Fair Value of Financial Assets and Liabilities

The fair value of our senior unsecured notes was determined using Level 2 inputs based on quoted market prices. We believe the carrying value of our other long-term debt approximates fair value. The carrying amounts of our cash and cash equivalents, receivables, accounts payable and accrued expenses approximate their fair values due to the relatively short-term nature of these instruments.

Bank Debt

As of July 13, 2019 and December 29, 2018 we had no outstanding borrowings under the unsecured revolving credit facility (the “2017 Credit Agreement”) and borrowing availability was $1.0 billion and $998.0 million. As of July 13, 2019 and December 29, 2018, we had no letters of credit and $2.0 million of letters of credit outstanding under the 2017 Credit Agreement.

As of July 13, 2019 and December 29, 2018, we had letters of credit relating to our bilateral letter of credit facility outstanding of $99.9 million and $100.5 million, which generally have a term of one year or less and primarily serve as collateral for our self-insurance policies. We were in compliance with all financial covenants required by our debt arrangements as of July 13, 2019.

Senior Unsecured Notes

On February 28, 2019, we redeemed all $300.0 million aggregate principal amount of our outstanding 5.75% senior unsecured notes that were issued in April 2010 at 99.587% of the principal amount (the “2020 Notes”). During the sixteen weeks ended April 20, 2019, we incurred charges relating to a make-whole provision and debt issuance costs of $10.1 million and $0.7 million resulting from the early redemption of our 2020 Notes.


8

Table of Contents
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


Debt Guarantees

We are a guarantor of loans made by banks to various independently owned Carquest-branded stores that are our customers totaling $26.0 million and $24.3 million as of July 13, 2019 and December 29, 2018. 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 is $49.0 million and $53.9 million as of July 13, 2019 and December 29, 2018. We believe that the likelihood of performance under these guarantees is remote.

8.
Leases

Substantially all of our leases are for facilities and vehicles. The initial term for facilities are typically 5 years to 10 years, with renewal options at 5 year intervals, with the exercise of lease renewal options at our sole discretion. Our vehicle and equipment leases are typically 3 years to 5 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating lease liabilities consist of the following:
(in thousands)
July 13, 2019
Total operating lease liabilities
$
2,481,431

Less: Current portion of operating lease liabilities
(449,081
)
Noncurrent operating lease liabilities
$
2,032,350



The current portion of operating lease liabilities is included in Other current liabilities in the accompanying condensed consolidated balance sheet.

Total lease cost is included in Cost of sales and selling, general and administrative expenses (“SG&A”) in the accompanying condensed consolidated statements of operations and is recorded net of immaterial sublease income. Total lease cost is comprised of the following:
 
Twelve Weeks Ended
 
Twenty-Eight Weeks Ended
(in thousands)
July 13, 2019
 
July 13, 2019
Operating lease cost
$
124,765

 
$
284,811

Variable lease cost
32,856

 
82,546

Total lease cost
$
157,621

 
$
367,357



The future maturity of lease liabilities are as follows:
(in thousands)
July 13, 2019
Remainder of 2019
$
230,520

2020
560,102

2021
458,167

2022
362,804

2023
317,640

Thereafter
968,831

Total lease payments
$
2,898,064

Less: Imputed interest
(416,633
)
Total operating lease liabilities
$
2,481,431




9

Table of Contents
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


Operating lease payments include $149.5 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $26.1 million of legally binding minimum lease payments for leases signed, but not yet commenced.

The weighted-average remaining lease term and weighted-average discount rate for our operating leases are 7.2 years and 4.1% as of July 13, 2019. We calculated the weighted-average discount rates using incremental borrowing rates, which equal the rates of interest that we would pay to borrow funds on a fully collateralized basis over a similar term.

Other information relating to our lease liabilities is as follows:
 
Twenty-Eight Weeks Ended
(in thousands)
July 13, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
278,323

Right-of-use assets obtained in exchange for lease obligations:


Operating leases
$
201,856



As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments due under non-cancelable operating leases were as follows:
 
December 29, 2018
(in thousands)
 
2019
$
520,541

2020
481,812

2021
416,895

2022
349,470

2023
270,116

Thereafter
837,441

 
$
2,876,275



9.
Warranty Liabilities

The following table presents changes in our warranty reserves:
 
Twenty-Eight Weeks Ended
 
Fifty-Two Weeks Ended
(in thousands)
July 13, 2019
 
December 29, 2018
Warranty reserve, beginning of period
$
45,280

 
$
49,024

Additions to warranty reserves
23,248

 
43,200

Reserves utilized
(23,211
)
 
(46,944
)
Warranty reserve, end of period
$
45,317

 
$
45,280


  
10.
Share Repurchase Program

Our share repurchase program permits the repurchase of our common stock on the open market and in privately negotiated transactions from time to time. On August 8, 2018, our Board of Directors authorized a $600.0 million share repurchase program.


10

Table of Contents
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


During the twelve weeks ended July 13, 2019 and July 14, 2018, we purchased 0.1 million and no shares of our common stock under the share repurchase program. The shares repurchased during the twelve weeks ended July 13, 2019 were at an aggregate cost of $10.9 million, or an average price of $151.58 per share. During the twenty-eight weeks ended July 13, 2019 and July 14, 2018, we repurchased 0.9 million shares and no shares of our common stock under our share repurchase program. The shares repurchased during the twenty-eight weeks ended July 13, 2019 were at an aggregate cost of $138.1 million, or an average price of $158.98 per share. We had $189.1 million remaining under our share repurchase program as of July 13, 2019.

On August 7, 2019, our Board of Directors authorized a $400.0 million share repurchase program, which replaced the remaining portion of our $600.0 million share repurchase program authorized in August 2018.

11.
Earnings per Share

The computation of basic and diluted earnings per share are as follows:  
 
Twelve Weeks Ended
 
Twenty-Eight Weeks Ended
(in thousands, except per share data)
July 13, 2019
 
July 14, 2018
 
July 13, 2019
 
July 14, 2018
Numerator
 
 
 
 
 
 
 
Net income applicable to common shares
$
124,820


$
117,836

 
$
267,320

 
$
254,562

Denominator
 
 
 
 
 

 
 
Basic weighted average common shares
71,738

 
74,054

 
71,767

 
74,011

Dilutive impact of share-based awards
270

 
190

 
296

 
211

Diluted weighted average common shares
72,008

 
74,244

 
72,063

 
74,222

 
 
 
 
 
 

 
 
Basic earnings per common share
$
1.74

 
$
1.59

 
$
3.73

 
$
3.44

Diluted earnings per common share
$
1.73

 
$
1.59

 
$
3.71

 
$
3.43



12.
Share-Based Compensation

During the twenty-eight weeks ended July 13, 2019, we granted 225 thousand time-based restricted stock units (“RSUs”), 55 thousand performance-based RSUs and 28 thousand market-based RSUs. The general terms of the time-based, performance-based and market-based RSUs are similar to awards previously granted by us.

The weighted average fair values of the time-based, performance-based and market-based RSUs granted during the twenty-eight weeks ended July 13, 2019 were $159.34, $159.80 and $165.70 per share. For time-based and performance-based RSUs, the fair value of each award was determined based on the market price of our stock on the date of grant adjusted for expected dividends during the vesting period, as applicable. The fair value of each market-based RSU was determined using a Monte Carlo simulation model.

Total income tax benefit related to share-based compensation expense for the twelve and twenty-eight weeks ended July 13, 2019 was $2.3 million and $5.0 million. Total income tax benefit related to share-based compensation expense for the twelve and twenty-eight weeks ended July 14, 2018 was $1.2 million and $3.0 million. As of July 13, 2019, there was $76.5 million of unrecognized compensation expense related to all share-based awards that is expected to be recognized over a weighted average period of 1.7 years.

13.
Condensed Consolidating Financial Statements

Certain 100% wholly owned domestic subsidiaries of Advance, including our Material Subsidiaries (as defined in the 2017 Credit Agreement) serve as guarantors (“Guarantor Subsidiaries”) of our senior unsecured notes. The subsidiary guarantees related to our senior unsecured notes are full and unconditional and joint and several, and there are no restrictions on the ability of Advance to obtain funds from its Guarantor Subsidiaries. Certain of our wholly owned subsidiaries, including all of its foreign subsidiaries, do not serve as guarantors of our senior unsecured notes (“Non-Guarantor Subsidiaries”).


11

Table of Contents
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


Set forth below are condensed consolidating financial statements presenting the financial position, results of operations, and cash flows of (i) Advance, (ii) the Guarantor Subsidiaries, (iii) the Non-Guarantor Subsidiaries, and (iv) the eliminations necessary to arrive at consolidated information for Advance. Investments in subsidiaries of Advance are presented under the equity method. The statement of operations eliminations relate primarily to the sale of inventory from a Non-Guarantor Subsidiary to a Guarantor Subsidiary. The balance sheet eliminations relate primarily to the elimination of intercompany receivables and payables and subsidiary investment accounts.

Condensed Consolidating Balance Sheet
As of July 13, 2019
(in thousands)
Advance Auto Parts, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
690,002

 
$
57,717

 
$

 
$
747,719

Receivables, net

 
663,858

 
49,203

 

 
713,061

Inventories

 
4,189,502

 
185,431

 

 
4,374,933

Other current assets
1,403

 
119,472

 
5,883

 

 
126,758

Total current assets
1,403

 
5,662,834

 
298,234

 

 
5,962,471

Property and equipment, net of accumulated depreciation
66

 
1,372,713

 
8,609

 

 
1,381,388

Operating lease right-of-use assets

 
2,317,564

 
42,455

 

 
2,360,019

Goodwill

 
943,364

 
49,068

 

 
992,432

Intangible assets, net

 
481,450

 
40,519

 

 
521,969

Other assets, net
1,694

 
49,060

 
610

 
(1,697
)
 
49,667

Investment in subsidiaries
4,214,313

 
519,888

 

 
(4,734,201
)
 

Intercompany note receivable
749,283

 

 

 
(749,283
)
 

Due from intercompany, net

 
237,570

 
307,650

 
(545,220
)
 

 
$
4,966,759

 
$
11,584,443

 
$
747,145

 
$
(6,030,401
)
 
$
11,267,946

Liabilities and Stockholders' Equity