Resideo to de-lever further with ‘solid’ cash flow, aims for 2x ratio

By Devika Patel

Knoxville, Tenn., March 7 – Resideo Technologies Inc. plans to use its “solid” cash flow to de-lever down to 2x.

“We’re committed to a strong balance sheet, and our solid cash flow will help us de-lever,” executive vice president and chief financial officer Joseph Ragan said on the company’s fourth quarter and year ended Dec. 31, 2018 earnings conference call on Thursday.

“We’re continuing to work towards a long-term target of 2x,” Ragan said.

The company is in a “financially strong” position for a healthy balance sheet.

“We've demonstrated a disciplined approach to capital allocation, and we will continue to maintain that discipline going forward,” Ragan said in a press release. “We are in a financially-strong position to prioritize growth capital and maintain a healthy balance sheet.”

The company was created in October 2018 with the spinoff of the Honeywell Homes and ADI Global Distribution businesses from Honeywell.

In connection with the spin-off, the company incurred debt totaling $1,225,000,000 consisting of $825 million of secured debt and $400 million of senior unsecured notes during the fourth quarter of 2018.

The company is ahead of its plans to reduce that debt.

“We generated $87 million of operating cash flow during the quarter, which gives us a year-end balance of $265 million,” president and chief executive officer Mike Nefkens said on the call.

“We ended the year with a total debt balance of $1.2 billion, giving us a net debt position of $936 million.

“This puts us well ahead of our spin plan,” Nefkens said.

The company has a $350 million five-year senior secured first-lien revolving credit facility to be used for working capital and other cash needs from time to time.

Pro forma adjusted EBITDA was $136 million for the quarter and $476 million for the year.

Cash and cash equivalents were $265 million as of Dec. 31, 2018, compared to $56 million as of Dec. 31, 2017.

Resideo is a Morris Plains, N.J.-based provider of critical comfort and security solutions primarily in residential environments.

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