Analog Devices pays $1 billion debt per year, aims for 2x debt ratio

By Devika Patel

Knoxville, Tenn., Aug. 30 – Analog Devices, Inc. plans to pay down its debt at a rate of $1 billion per year in a bid to reach a net debt to EBITDA ratio of 2x by the first quarter of 2019.

The company has been burdened with the debt it took on when it acquired Linear Technology Corp., which has resulted in lower free cash flow.

Analog Devices also recently hired a new chief financial officer, who will join the company in September.

“During the quarter, we paid down $600 million of the debt associated with the Linear [Technology Corp.] acquisition, which helped reduce our net debt to EBITDA ratio to 2.9x,” treasurer and head of investor relations Ali Hussein said on the company’s third quarter earnings conference call conference call on Wednesday.

“We expect to pay down our debt at a rate of approximately $1 billion per year and are planning to achieve a 2x net debt to EBITDA leverage ratio by the first half of fiscal 2019,” Hussein said.

The company still has payments to make on the debt incurred for the acquisition, which has led to lower free cash flow.

“We are carrying a debt load related to the [Linear Technology] acquisition,” Hussein said.

“Related to that debt load, there are two semiannual payments that we need to make.

“One of those payments falls in the third quarter.

“I think you saw a depressed free cash flow number this quarter.

“It really was kind of the perfect storm for free cash flow this quarter,” Hussein said.

At July 29, the company had $908.6 million of cash and cash equivalents and short-term investments.

The company has also appointed a new chief financial officer.

“We recently announced our new CFO Prashanth Mahendra-Rajah who will be joining us at the end of September,” president and chief executive officer Vincent Roche said on the call.

“We are very excited that Prashanth is joining our team,” Roche said in a press release.

“His proven ability to facilitate profitable business growth through smart financial strategy and disciplined financial operations maps well to both [Analog Devices’] culture and business priorities.”

On July 26, 2016, the company announced its planned acquisition of Linear Technology Corp., which settled on March 10, 2017.

The cash and stock transaction valued the combined enterprise at approximately $30 billion.

The acquisition was funded through a combination of cash-on-hand, pre-payable term loans, senior long-term notes and newly-issued common stock.

The maker of circuits for electronic equipment is based in Norwood, Mass.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.