Advance Auto leverage falls to 2.1x after $300 million debt buyback

By Devika Patel

Knoxville, Tenn., May 22 – Advance Auto Parts, Inc. bought back $300 million of debt in the last quarter, thereby lowering the company’s leverage ratio to 2.1x, the lowest it has been in over five years.

“We did buy back debt in the first quarter, so that was another $300 million of debt that we repaid early, would have come due next year,” executive vice president and chief financial officer Jeff Shepherd said on the company’s first quarter ended April 20 earnings conference call on Wednesday.

“In the quarter, we completed the early redemption of our $300 million bonds due in May of 2020.

“In line with our financial priorities, we are pleased that our leverage ratio of 2.1x is now at the lowest point since the GPI acquisition,” he said.

The company acquired General Parts International, Inc., or GPI, in January 2014 for $2.04 billion, using a combination of senior notes, bank debt and cash on hand.

Management believes Advance is in a strong position financially and can weather economic trends without it impacting the company’s financial stability.

“Our team’s unrelenting focus has enabled a solid balance sheet that provides us financial flexibility and security,” Shepherd said.

“I’m confident our ability to generate meaningful cash flow, combined with the strength of our balance sheet, will differentiate Advance and create financial stability regardless of economic trends that may impact the industry,” he said.

Free cash flow was $143 million for the first quarter, a 20% increase compared to the prior year quarter.

Cash and cash equivalents were $537.33 million as of April 20, 2019, compared to $896,527,000 as of Dec. 29, 2018.

Long-term debt was $746,767,000 as of April 20, 2019, compared to $1,045,720,000 as of Dec. 29, 2018.

On Jan. 29, Advance Auto reported that it would redeem all $300 million of its outstanding 5.75% notes due 2020 on Feb. 28 at a redemption price of about $1,035.00 per $1,000 of notes plus accrued interest to the redemption date.

Advance Auto is a Roanoke, Va.-based specialty retailer of automotive aftermarket parts, accessories, batteries and maintenance items.

© 2015 Prospect News.
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