Advance Auto aims to cut leverage ratio to 2x, stay investment-grade

By Devika Patel

Knoxville, Tenn., Aug. 15 – Advance Auto Parts, Inc. plans to keep its investment-grade credit rating and has been in discussions with two of the three ratings agencies.

The company is also committed to driving its leverage ratio back down to 2 times.

The company expects to maintain an investment-grade credit rating, executive vice president and chief financial officer Thomas Okray said on the company’s second quarter earnings conference call on Tuesday.

“We have had discussions with both Moody’s and S&P,” he said.

Part of maintaining an investment-grade rating means keeping the company’s leverage ratio low.

“We’re committed to get back to the 2.5x leverage ratio,” Okray said.

“In the current environment, [we will be] under pressure for the short-term but we’re comfortable and committed to get back to that [leverage ratio] and we anticipate that the ratings agencies will see that favorably,” he said.

The company also had strong free cash flow in the quarter.

“Our free cash flow more than doubled through Q2 versus the prior year,” Okray said.

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

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