Advance Auto Parts (AAP) Plans Job Cuts; Sees Charges Up to $51M

Effective June 18, 2014, the board of directors of Advance Auto Parts (NYSE: AAP) approved plans to relocate operations from its Minneapolis, Minnesota and Campbell, California offices to other existing offices of the Company, including in Newark, California, Roanoke, Virginia and Raleigh, North Carolina, and to close its Minneapolis and Campbell offices. The Company also expects to relocate various functions between its existing offices in Roanoke and Raleigh. In addition, the Company expects to consolidate approximately 100 Carquest and Advance Auto Parts stores.

In connection with these relocations, office closings and store consolidations, the Company plans to relocate some employees and terminate the employment of others. The board of directors of the Company approved this action in order to take advantage of synergies following the acquisition of General Parts International, Inc. (GPI) and to capitalize on the strength of existing locations and organizational experience. The Company anticipates that the relocations and office closings will be substantially completed by the end of 2015. The Company anticipates that the above referenced store consolidations will be substantially completed by the end of 2014.

In connection with this plan, the Company estimates that it will incur restructuring costs in the range of $39 million to $51 million over the next two years. This estimate includes approximately $30 million to $40 million of employee severance/outplacement and relocation costs and $9 million to $11 million of contract termination and other costs. The allocation between relocation benefits and severance/outplacement benefits will depend in part on employee decisions to relocate. Substantially all of these costs are expected to be cash expenditures.

These restructuring costs fall within our previously disclosed estimates of both our total one-time expenses to achieve synergies of $190 million over three years and also contemplated in our 2014 estimated one-time expenses related to the GPI acquisition of between $55 million to $65 million.

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