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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _____

Commission File Number 001-38635

Resideo Technologies, Inc.

 

(Exact name of registrant as specified in its charter)

 

Delaware

 

82-5318796

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

16100 N 71st Street, Suite 550

Scottsdale, Arizona

 

85254

(Address of principal executive offices)

 

(Zip Code)

(480) 573-5340

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:

 

Trading Symbol:

 

Name of each exchange on which registered:

Common Stock, par value $0.001 per share

 

REZI

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of October 28, 2022 was 145,843,859 shares.

 


 

TABLE OF CONTENTS

 

 

 

Part I. Financial Information

Page

 

 

 

 

Item 1.

 

Unaudited Consolidated Financial Statements

 

 

 

 

 

 

 

Unaudited Consolidated Balance Sheets as of October 1, 2022 and December 31, 2021

3

 

 

 

 

 

 

Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended October 1, 2022 and October 2, 2021

4

 

 

 

 

 

 

Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 1, 2022 and October 2, 2021

5

 

 

 

 

 

 

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended October 1, 2022 and October 2, 2021

6

 

 

 

 

 

 

Unaudited Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended October 1, 2022 and October 2, 2021

7

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

8

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

34

 

 

 

 

Item 4.

 

Controls and Procedures

35

 

 

 

 

 

 

Part II. Other Information

 

 

 

 

 

Item 1.

 

Legal Proceedings

36

 

 

 

 

Item 1A.

 

Risk Factors

36

 

 

 

 

Item 6.

 

Exhibits

37

 

 

 

 

 

 

Signatures

38

 

 

 

2


 

Part I. Financial Information

Item 1. Unaudited Consolidated Financial Statements

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except shares in thousands, and per share data)

(Unaudited)

 

 

 

October 1, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

252

 

 

$

775

 

Accounts receivable, net

 

 

1,043

 

 

 

876

 

Inventories, net

 

 

957

 

 

 

740

 

Other current assets

 

 

198

 

 

 

150

 

Total current assets

 

 

2,450

 

 

 

2,541

 

Property, plant and equipment, net

 

 

351

 

 

 

287

 

Goodwill

 

 

2,678

 

 

 

2,661

 

Other intangible assets, net

 

 

460

 

 

 

120

 

Other assets

 

 

323

 

 

 

244

 

Total assets

 

$

6,262

 

 

$

5,853

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

936

 

 

$

883

 

Current maturities of long-term debt

 

 

12

 

 

 

10

 

Accrued liabilities

 

 

594

 

 

 

601

 

Total current liabilities

 

 

1,542

 

 

 

1,494

 

Long-term debt, net of current maturities

 

 

1,407

 

 

 

1,220

 

Obligations payable under Indemnification Agreements

 

 

575

 

 

 

585

 

Other liabilities

 

 

338

 

 

 

302

 

Total liabilities

 

 

3,862

 

 

 

3,601

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common shares, $0.001 par value, 700,000 shares authorized,
147,703 and 145,838 shares issued and outstanding as of October 1, 2022, 146,248 and 144,808 shares issued and outstanding as of December 31, 2021, respectively

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

2,162

 

 

 

2,121

 

Retained earnings

 

 

561

 

 

 

317

 

Accumulated other comprehensive loss, net

 

 

(292

)

 

 

(165

)

Treasury shares

 

 

(31

)

 

 

(21

)

Total stockholders’ equity

 

 

2,400

 

 

 

2,252

 

Total liabilities and stockholders’ equity

 

$

6,262

 

 

$

5,853

 

 

Refer to accompanying Notes to Unaudited Consolidated Financial Statements.

3


 

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except shares in thousands, and per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 1, 2022

 

 

October 2, 2021

 

 

October 1, 2022

 

 

October 2, 2021

 

Net revenue

 

$

1,618

 

 

$

1,496

 

 

$

4,810

 

 

$

4,392

 

Cost of goods sold

 

 

1,188

 

 

 

1,075

 

 

 

3,475

 

 

 

3,210

 

Gross profit

 

 

430

 

 

 

421

 

 

 

1,335

 

 

 

1,182

 

Research and development expenses

 

 

29

 

 

 

20

 

 

 

81

 

 

 

63

 

Selling, general and administrative expenses

 

 

236

 

 

 

227

 

 

 

716

 

 

 

678

 

Intangible asset amortization

 

 

10

 

 

 

7

 

 

 

25

 

 

 

23

 

Income from operations

 

 

155

 

 

 

167

 

 

 

513

 

 

 

418

 

Other expense, net

 

 

44

 

 

 

58

 

 

 

125

 

 

 

130

 

Interest expense, net

 

 

15

 

 

 

12

 

 

 

40

 

 

 

37

 

Income before taxes

 

 

96

 

 

 

97

 

 

 

348

 

 

 

251

 

Provision for income taxes

 

 

33

 

 

 

29

 

 

 

104

 

 

 

76

 

Net income

 

$

63

 

 

$

68

 

 

$

244

 

 

$

175

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.43

 

 

$

0.47

 

 

$

1.68

 

 

$

1.22

 

Diluted

 

$

0.42

 

 

$

0.46

 

 

$

1.64

 

 

$

1.18

 

Weighted average number of shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

145,755

 

 

 

144,284

 

 

 

145,442

 

 

 

143,865

 

Diluted

 

 

149,158

 

 

 

148,559

 

 

 

148,972

 

 

 

148,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Refer to accompanying Notes to Unaudited Consolidated Financial Statements.

 

4


 

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In millions)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 1, 2022

 

 

October 2, 2021

 

 

October 1, 2022

 

 

October 2, 2021

 

Comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

63

 

 

$

68

 

 

$

244

 

 

$

175

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation (loss)

 

 

(86

)

 

 

(24

)

 

 

(165

)

 

 

(41

)

Changes in unrealized gain on derivatives

 

 

14

 

 

 

-

 

 

 

38

 

 

 

-

 

   Total other comprehensive (loss)

 

 

(72

)

 

 

(24

)

 

 

(127

)

 

 

(41

)

Comprehensive (loss) income

 

$

(9

)

 

$

44

 

 

$

117

 

 

$

134

 

 

Refer to accompanying Notes to Unaudited Consolidated Financial Statements.

 

5


 

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

October 1, 2022

 

 

October 2, 2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

244

 

 

$

175

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

69

 

 

 

67

 

Loss on extinguishment of debt

 

 

-

 

 

 

41

 

Share-based compensation expense

 

 

36

 

 

 

29

 

Other, net

 

 

8

 

 

 

4

 

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

 

 

 

Accounts receivable, net

 

 

(142

)

 

 

(78

)

Inventories, net

 

 

(129

)

 

 

(40

)

Other current assets

 

 

(38

)

 

 

(6

)

Accounts payable

 

 

5

 

 

 

(19

)

Accrued liabilities

 

 

(25

)

 

 

26

 

Other, net

 

 

(15

)

 

 

4

 

Net cash provided by operating activities

 

 

13

 

 

 

203

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(34

)

 

 

(48

)

Acquisitions, net of cash acquired

 

 

(660

)

 

 

(11

)

Other, net

 

 

(13

)

 

 

3

 

Net cash used in investing activities

 

 

(707

)

 

 

(56

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of A&R Term B Facility

 

 

200

 

 

 

1,250

 

Payments of debt facility issuance and modification costs

 

 

(4

)

 

 

(39

)

Repayments of long-term debt

 

 

(9

)

 

 

(1,185

)

Other, net

 

 

(5

)

 

 

2

 

Net cash provided by financing activities

 

 

182

 

 

 

28

 

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

 

 

(12

)

 

 

(6

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(524

)

 

 

169

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

779

 

 

 

517

 

Cash, cash equivalents and restricted cash at end of period

 

$

255

 

 

$

686

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

Interest paid

 

$

38

 

 

$

33

 

Income taxes paid, net

 

$

129

 

 

$

84

 

 

Refer to accompanying Notes to Unaudited Consolidated Financial Statements.

6


 

 

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In millions, except shares in thousands)

(Unaudited)

 

Fiscal Quarters

 

Common
Shares

 

 

Common
Shares ($)

 

 

Additional
Paid-
In Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Treasury
Shares

 

 

Treasury
Shares ($)

 

 

Total
Stockholders’ Equity

 

Balance as of July 2, 2022

 

 

145,684

 

 

$

-

 

 

$

2,147

 

 

$

498

 

 

$

(220

)

 

 

1,844

 

 

$

(31

)

 

$

2,394

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

63

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

63

 

Other comprehensive loss, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(72

)

 

 

-

 

 

 

-

 

 

 

(72

)

Share issuances, net of shares withheld for taxes

 

 

154

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

21

 

 

 

-

 

 

 

2

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13

 

Balance as of October 1, 2022

 

 

145,838

 

 

$

-

 

 

$

2,162

 

 

$

561

 

 

$

(292

)

 

 

1,865

 

 

$

(31

)

 

$

2,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of July 3, 2021

 

 

144,171

 

 

$

-

 

 

$

2,098

 

 

$

182

 

 

$

(163

)

 

 

1,188

 

 

$

(14

)

 

$

2,103

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

68

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

68

 

Other comprehensive (loss), net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(24

)

 

 

-

 

 

 

-

 

 

 

(24

)

Share issuances, net of shares withheld for taxes

 

 

212

 

 

 

-

 

 

 

3

 

 

 

-

 

 

 

-

 

 

 

45

 

 

 

(2

)

 

 

1

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

10

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10

 

Balance as of October 2, 2021

 

 

144,383

 

 

$

-

 

 

$

2,111

 

 

$

250

 

 

$

(187

)

 

 

1,233

 

 

$

(16

)

 

$

2,158

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year to Date Periods

 

Common
Shares

 

 

Common
Shares ($)

 

 

Additional
Paid-
In Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Treasury
Shares

 

 

Treasury
Shares ($)