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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 April 2, 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 April 29, 2022 was 145,400,448 shares.

 


 

TABLE OF CONTENTS

 

 

Item

 

Page

 

 

 

 

Part I.

 

Item 1. Financial Statements

5

 

 

 

 

 

1.

Financial Statements

5

 

 

 

 

 

 

Consolidated Interim Statements of Operations (unaudited) – Three Months Ended April 2, 2022 and April 3, 2021

5

 

 

 

 

 

 

Consolidated Interim Statements of Comprehensive Income (unaudited) – Three Months Ended April 2, 2022 and April 3, 2021

6

 

 

 

 

 

 

Consolidated Interim Balance Sheets (unaudited) – April 2, 2022 and December 31, 2021

7

 

 

 

 

 

 

Consolidated Interim Statements of Cash Flows (unaudited) – Three Months Ended April 2, 2022 and April 3, 2021

8

 

 

 

 

 

 

Consolidated Interim Statements of Equity (unaudited) – Three Months Ended April 2, 2022 and April 3, 2021

9

 

 

 

 

 

 

Notes to Consolidated Interim Financial Statements (unaudited)

10

 

 

 

 

 

2.

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

21

 

 

 

 

 

3.

Quantitative and Qualitative Disclosures About Market Risk

29

 

 

 

 

 

4.

Controls and Procedures

30

 

 

 

 

Part II.

1.

Legal Proceedings

31

 

 

 

 

 

1A.

Risk Factors

31

 

 

 

 

 

6.

Exhibits

32

 

 

 

 

 

 

Signatures

33

 

 

 

2


 

Cautionary Statement Concerning Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about our industries and our business and financial results. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Although we believe that the forward-looking statements contained in this Form 10-Q are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in such forward-looking statements, including but not limited to:

 

competition from other companies in our markets and segments, as well as in new markets and emerging markets;
our ability to successfully develop new technologies and products and develop and protect the intellectual property related to the same and to defend against IP threats of others;
inability to obtain necessary product components, production equipment or replacement parts;
the impact of pandemics, epidemics, natural disasters and other public health emergencies, such as COVID-19;
failure to achieve and maintain a high level of product and service quality;
inability to compete in the market for potential acquisitions;
inability to consummate acquisitions on satisfactory terms or to integrate such acquisitions effectively;
our ability to retain or expand relationships with significant customers;
dependence upon information technology infrastructure having adequate cyber-security functionality;
economic, political, regulatory, foreign exchange and other risks of international operations, including the impact of tariffs;
changes in prevailing global and regional economic conditions;
our failure to execute on key business transformation programs and activities;
the failure to increase productivity through sustainable operational improvements;
fluctuation in financial results due to the seasonal nature of portions of our business;
our ability to recruit and retain qualified personnel;
labor disputes, work stoppages, other disruptions, or the need to relocate any of our facilities;
changes in legislation or government regulations or policies;
the significant failure or inability to comply with the specifications and manufacturing requirements of our original equipment manufacturers (“OEMs”) customers;
the operational constraints and financial distress of third parties;
our ability to borrow funds and access capital markets;
the amount of our obligations and nature of our contractual restrictions pursuant to, and disputes that have or may hereafter arise under, the Reimbursement Agreement and the other agreements we entered into with Honeywell in connection with the Spin-Off;
our reliance on Honeywell for the Honeywell Home trademark;
potential material environmental liabilities;
our inability to maintain intellectual property agreements necessary to our business;
potential material costs as a result of warranty claims, including product recalls, and product liability actions that may be brought against us;
potential material litigation matters;
unforeseen U.S. federal income tax and foreign tax liabilities; and
certain factors discussed elsewhere in this Form 10-Q.

 

3


 

These and other factors are more fully discussed in our filings with the U.S. Securities and Exchange Commission, including the “Risk Factors” section in our 2021 Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report on Form 10-K”) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in this Form 10-Q. There have been no material changes to the risk factors described in our 2021 Annual Report on Form 10-K. These risks could cause actual results to differ materially from those implied by forward-looking statements in this Form 10-Q. Even if our results of operations, financial condition and liquidity and the development of the industries in which we operate are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

 

Any forward-looking statements made by us in this Form 10-Q speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.

 

PART I

 

The financial statements and related footnotes as of April 2, 2022 should be read in conjunction with the financial statements for the year ended December 31, 2021 contained in our 2021 Annual Report on Form 10-K.

4


 

Item 1. Financial Statements

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

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

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 2,
2022

 

 

April 3,
2021

 

Net revenue

 

$

1,506

 

 

$

1,419

 

Cost of goods sold

 

 

1,072

 

 

 

1,051

 

Gross profit

 

 

434

 

 

 

368

 

Research and development expenses

 

 

24

 

 

 

21

 

Selling, general and administrative expenses

 

 

238

 

 

 

217

 

Operating profit

 

 

172

 

 

 

130

 

Other expense, net

 

 

40

 

 

 

44

 

Interest expense

 

 

11

 

 

 

13

 

Income before taxes

 

 

121

 

 

 

73

 

Tax expense

 

 

34

 

 

 

24

 

Net income

 

$

87

 

 

$

49

 

Weighted Average Number of Common Shares Outstanding (in thousands)

 

 

 

 

 

 

Basic

 

 

145,118

 

 

 

143,382

 

Diluted

 

 

148,760

 

 

 

147,656

 

Earnings Per Share

 

 

 

 

 

 

Basic

 

$

0.60

 

 

$

0.34

 

Diluted

 

$

0.58

 

 

$

0.33

 

 

The unaudited Notes to Consolidated Interim Financial Statements are an integral part of these statements.

 

5


 

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 2,
2022

 

 

April 3,
2021

 

Net income

 

$

87

 

 

$

49

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

Foreign exchange translation adjustment

 

 

(9

)

 

 

(26

)

Changes in unrealized gain on derivatives

 

 

23

 

 

 

2

 

   Total other comprehensive income (loss), net of tax

 

 

14

 

 

 

(24

)

Comprehensive income

 

$

101

 

 

$

25

 

 

The unaudited Notes to Consolidated Interim Financial Statements are an integral part of these statements.

 

6


 

 

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED INTERIM BALANCE SHEETS

(In millions, except number of shares which are reflected in thousands and par value)

(Unaudited)

 

 

 

April 2, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

244

 

 

$

779

 

Accounts receivable – net

 

 

1,008

 

 

 

876

 

Inventories – net

 

 

922

 

 

 

740

 

Other current assets

 

 

165

 

 

 

146

 

Total current assets

 

 

2,339

 

 

 

2,541

 

Property, plant and equipment – net

 

 

350

 

 

 

287

 

Goodwill

 

 

3,125

 

 

 

2,661

 

Other assets

 

 

431

 

 

 

364

 

Total assets

 

$

6,245

 

 

$

5,853

 

LIABILITIES

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

958

 

 

$

883

 

Current maturities of debt

 

 

12

 

 

 

10

 

Accrued liabilities

 

 

576

 

 

 

601

 

Total current liabilities

 

 

1,546

 

 

 

1,494

 

Long-term debt

 

 

1,412

 

 

 

1,220

 

Obligations payable under Indemnification Agreements

 

 

592

 

 

 

585

 

Other liabilities

 

 

334

 

 

 

302

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Common stock, $0.001 par value, 700,000 shares authorized,
147,068 and 145,372 shares issued and outstanding as of April 2, 2022, 146,248 and 144,808 shares issued and outstanding as of December 31, 2021, respectively

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

2,135

 

 

 

2,121

 

Treasury stock, at cost

 

 

(27

)

 

 

(21

)

Retained earnings

 

 

404

 

 

 

317

 

Accumulated other comprehensive loss

 

 

(151

)

 

 

(165

)

Total equity

 

 

2,361

 

 

 

2,252

 

Total liabilities and equity

 

$

6,245

 

 

$

5,853

 

 

The unaudited Notes to Consolidated Interim Financial Statements are an integral part of these statements.

 

7


 

 

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 2, 2022

 

 

April 3, 2021

 

Cash flows (used for) provided by operating activities:

 

 

 

 

 

 

Net income

 

$

87

 

 

$

49

 

Adjustments to reconcile net income to net cash (used for) provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

20

 

 

 

23

 

Stock compensation expense

 

 

11

 

 

 

9

 

Other

 

 

2

 

 

 

25

 

Changes in assets and liabilities, net of acquired companies:

 

 

 

 

 

 

Accounts receivable

 

 

(61

)

 

 

(17

)

Inventories – net

 

 

(66

)

 

 

(10

)

Other current assets

 

 

(12

)

 

 

16

 

Accounts payable

 

 

17

 

 

 

(15

)

Accrued liabilities

 

 

(66

)

 

 

(66

)

Obligations payable under Indemnification Agreements

 

 

7

 

 

 

(7

)

Other

 

 

2

 

 

 

(2

)

Net cash (used for) provided by operating activities

 

 

(59

)

 

 

5

 

Cash flows used for investing activities:

 

 

 

 

 

 

Expenditures for property, plant, equipment and other intangibles

 

 

(19

)

 

 

(19

)

Cash paid for acquisitions, net of cash acquired

 

 

(633

)

 

 

(5

)

Other

 

 

(13

)

 

 

-

 

Net cash used for investing activities

 

 

(665

)

 

 

(24

)

Cash flows provided by financing activities:

 

 

 

 

 

 

Proceeds from long-term debt

 

 

200

 

 

 

950

 

Payment of debt facility issuance and modification costs

 

 

(4

)

 

 

(21

)

Repayment of long-term debt

 

 

(3

)

 

 

(921

)

Other

 

 

(4

)

 

 

5

 

Net cash provided by financing activities

 

 

189

 

 

 

13

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

-

 

 

 

(3

)

Net decrease in cash and cash equivalents

 

 

(535

)

 

 

(9

)

Cash and cash equivalents at beginning of period

 

 

779

 

 

 

517

 

Cash and cash equivalents at end of period

 

$

244

 

 

$

508

 

 

The unaudited Notes to Consolidated Interim Financial Statements are an integral part of these statements.

8


 

 

RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED INTERIM STATEMENTS OF EQUITY

(In millions, shares in thousands)

(Unaudited)

 

Three Months Ended April 2, 2022

 

Common
Shares

 

 

Treasury
Shares

 

 

Common
Stock

 

 

Treasury
Stock

 

 

Additional
Paid-
In Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total
Equity

 

Balance at January 1, 2022

 

 

144,808

 

 

 

1,440

 

 

$

-

 

 

$

(21

)

 

$

2,121

 

 

$

317

 

 

$

(165

)

 

$

2,252

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

87

 

 

 

-

 

 

 

87

 

Other comprehensive income, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14

 

 

 

14

 

Stock issuances, net of shares withheld for taxes

 

 

564

 

 

 

256

 

 

 

-

 

 

 

(6

)

 

 

3

 

 

 

-

 

 

 

-

 

 

 

(3

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11

 

 

 

-

 

 

 

-

 

 

 

11

 

Balance at April 2, 2022

 

 

145,372

 

 

 

1,696

 

 

$

-

 

 

$

(27

)

 

$

2,135

 

 

$

404

 

 

$

(151

)

 

$

2,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended April 3, 2021

 

Common
Shares

 

 

Treasury
Shares

 

 

Common
Stock

 

 

Treasury
Stock

 

 

Additional
Paid-
In Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total
Equity

 

Balance at January 1, 2021

 

 

143,059

 

 

 

900

 

 

$

-

 

 

$

(6

)

 

$

2,070

 

 

$

75

 

 

$

(146

)

 

$

1,993

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

49

 

 

 

-

 

 

 

49

 

Other comprehensive loss, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(24

)

 

 

(24

)

Stock issuances, net of shares withheld for taxes

 

 

760

 

 

 

169

 

 

 

-

 

 

 

(4

)

 

 

9

 

 

 

-

 

 

 

-

 

 

 

5

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

-

 

 

 

-

 

 

 

9

 

Balance at April 3, 2021

 

 

143,819

 

 

 

1,069

 

 

$

-

 

 

$

(10

)

 

$

2,088

 

 

$

124

 

 

$

(170

)

 

$

2,032

 

 

The unaudited Notes to Consolidated Interim Financial Statements are an integral part of these statements.

9


RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(In millions, unless otherwise noted)

(Unaudited)

 

Note 1. Organization, Operations, and Basis of Presentation

Business Description

Resideo Technologies, Inc. (“Resideo” or “the Company”), is a leading manufacturer and developer of technology-driven products that provide critical comfort, energy, smoke and carbon monoxide detection home safety products, and security solutions to homes globally. The Company is also the leading wholesale distributor of low-voltage security products including access control, fire detection, intrusion, and video products, and participates significantly in the broader related markets of audio, communications, data communications, networking, power, ProAV, smart home, and wire and cable. The Company has a global footprint serving commercial and residential end markets.

The Company was incorporated in Delaware on April 24, 2018. The Company separated from Honeywell International Inc. (“Honeywell”) on October 29, 2018, becoming an independent publicly traded company as a result of a pro rata distribution of the Company’s common stock to shareholders of Honeywell (the “Spin-Off”).

Basis of Presentation

The Company’s financial statements are presented on a consolidated basis (collectively, the “Interim Financial Statements”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions have been eliminated for all periods presented. The Interim Financial Statements are unaudited; however, in the opinion of management, they contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to state fairly the financial position, results of operations, and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods.

 

The Company reports financial information on a fiscal quarter basis using a “modified” 4-4-5 calendar (modified in that the fiscal year always begins on January 1 and ends on December 31). The effects of this practice are generally not significant to reported results for any quarter. In the event that differences in closing dates are material to year-over-year comparisons of quarterly or year-to-date results, the Company will provide appropriate disclosures.

 

Reclassification

 

Certain reclassifications have been made to the prior period financial statements to conform to the classification adopted in the current period.

 

The prior period unaudited consolidated interim statement of operations was reclassified to present research and development expenses as a separate line item within the statement. Research and development expenses were formerly included within Selling, general and administrative expenses.

 

Note 2. Summary of Significant Accounting Policies

The Company’s accounting policies are set forth in Note 2. Summary of Significant Accounting Policies of the Company’s Notes to Consolidated and Combined Financial Statements included in the 2021 Annual Report on Form 10-K.

Recent Accounting Pronouncements—The Company considers the applicability and impact of all recent accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial position or results of operations.

 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which is optional guidance related to reference rate reform that provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance along with its subsequent

10


RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(In millions, unless otherwise noted)

(Unaudited)

clarifications, is effective from March 12, 2020 through December 31, 2022 and is applicable for the Company’s A&R Senior Credit Facilities and Swap Agreements, which use LIBOR as a reference rate. The A&R Senior Credit Facilities include a transition clause to a new reference rate in the event LIBOR is discontinued and Swap Agreements will be amended to match the new reference rate. We are currently evaluating the potential impact of adopting this guidance, but do not expect it to have a material impact on our consolidated financial statements. Refer to Note 13. Long-term Debt and Credit Agreement for further details on the Company’s Swap Agreements and A&R Senior Credit Facilities.

 

Note 3. Revenue Recognition

Disaggregated Revenue

The Company has two operating segments, Products & Solutions and ADI Global Distribution. Disaggregated revenue information for Products & Solutions is presented by product grouping while ADI Global Distribution is presented by region. Beginning January 1, 2022, the Products & Solutions segment further disaggregated the Comfort product grouping into Air and Water. Residential Thermal Solutions is now referenced as Energy.

Revenues by product grouping and region are as follows:

 

 

 

Three Months Ended

 

 

 

April 2,
2022

 

 

April 3,
2021

 

Air

 

$

214

 

 

$

191

 

Water

 

 

91

 

 

 

88

 

Energy

 

 

159

 

 

 

150

 

Security

 

 

155

 

 

 

177

 

Products & Solutions

 

 

619

 

 

 

606

 

 

 

 

 

 

 

 

U.S. and Canada

 

 

752

 

 

 

667

 

EMEA (1)

 

 

126

 

 

 

134

 

APAC (2)

 

 

9

 

 

 

12

 

ADI Global Distribution

 

 

887

 

 

 

813

 

Net revenue

 

$

1,506

 

 

$

1,419

 

 

(1) EMEA represents Europe, the Middle East and Africa.

(2) APAC represents Asia and Pacific countries.

 

The Company recognizes the majority of its revenue from performance obligations outlined in contracts with its customers that are satisfied at a point in time. Less than 3% of the Company’s revenue is satisfied over time. As of April 2, 2022 and April 3, 2021, contract assets and liabilities were not material.

 

 

Note 4. Segment Financial Data

The Company monitors its business operations through two operating segments, Products & Solutions and ADI Global Distribution and reports Corporate separately from the two operating segments.

Products & Solutions—The Products & Solutions business is a leading global provider of products, software solutions and technologies that help homeowners stay connected and in control of their comfort, security, and energy use.

ADI Global Distribution—The ADI Global Distribution business is the leading distributor of low-voltage security products including access control, fire detection, intrusion, and video products and participates significantly

11


RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(In millions, unless otherwise noted)

(Unaudited)

in the broader related markets of audio, communications, data communications, networking, power, ProAV, smart home, and wire and cable.

Corporate—Corporate includes executive, legal, finance, information technology, human resources, strategy, and communications activities not allocated directly to either business units.

 

Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions, and assesses operating performance.

 

 

 

Three Months Ended

 

 

 

April 2,
2022

 

 

April 3,
2021

 

Revenue

 

 

 

 

 

 

Total Products & Solutions revenue

 

$

714

 

 

$

700

 

Less: Intersegment revenue

 

 

95

 

 

 

94

 

External Products & Solutions revenue

 

 

619

 

 

 

606

 

External ADI Global Distribution revenue

 

 

887

 

 

 

813

 

Total revenue

 

$

1,506

 

 

$

1,419

 

 

 

 

 

Three Months Ended

 

 

 

April 2,
2022

 

 

April 3,
2021

 

Operating profit

 

 

 

 

 

 

Products & Solutions

 

$

153

 

 

$

130

 

ADI Global Distribution

 

 

80

 

 

 

59

 

Corporate

 

 

(61

)

 

 

(59

)

Total

 

$

172

 

 

$

130

 

 

The Company’s Chief Operating Decision Maker does not use segment assets information to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed.

 

Note 5. Stock-Based Compensation Plans

Restricted Stock Units (“RSUs”) and Performance Stock Unit (“PSUs”)

 

During the three months ended April 2, 2022, as part of the Company’s annual long-term compensation under the 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates and the 2018 Stock Incentive Plan for Non-Employee Directors of Resideo Technologies, Inc. as may be amended from time to time (together, the “Stock Incentive Plan”), it granted 672,453 market-based PSUs and 808,919 service-based RSUs to eligible employees. The weighted average grant date fair value per share for market-based PSUs and service-based RSUs was $36.11 and $24.87, respectively.

 

Note 6. Leases

The Company is party to operating leases for the majority of its manufacturing sites, offices, engineering and lab sites, stocking locations, warehouses, automobiles, and certain equipment. Certain of the Company’s real estate leases include variable rental payments which adjust periodically based on inflation. Generally, the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

12


RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(In millions, unless otherwise noted)

(Unaudited)

The Company’s operating lease costs for the three months ended April 2, 2022 and April 3, 2021 consisted of the following:

 

 

 

Three Months Ended

 

 

 

April 2,
2022

 

 

April 3,
2021

 

Cost of goods sold

 

$

3

 

 

$

4

 

Selling, general and administrative

 

 

12

 

 

 

12

 

Total operating lease costs

 

$

15

 

 

$

16

 

 

Total operating lease costs include variable lease costs of $4 million for the three months ended April 2, 2022 and April 3, 2021. Total operating lease costs also include offsetting sublease income which is immaterial for the three months ended April 2, 2022 and April 3, 2021.

 

The Company recognized the following related to its operating leases:

 

 

 

Financial
Statement
Line Item

 

At April 2,
2022

 

 

At December 31,
2021

 

Operating right-of-use assets

 

Other assets

 

$

164

 

 

$

141

 

Operating lease liabilities - current

 

Accrued liabilities

 

$

36

 

 

$

32

 

Operating lease liabilities - noncurrent

 

Other liabilities

 

$

140

 

 

$

120

 

 

Maturities of the Company’s operating lease liabilities were as follows:

 

 

 

At April 2,
2022

 

2022

 

$

33

 

2023

 

 

40

 

2024

 

 

31

 

2025

 

 

25

 

2026

 

 

21

 

Thereafter

 

 

55

 

Total lease payments

 

 

205

 

Less: imputed interest

 

 

29

 

Present value of operating lease liabilities

 

$

176

 

Weighted-average remaining lease term (years)

 

 

6.10

 

Weighted-average incremental borrowing rate

 

 

5.08

%

 

Supplemental cash flow information related to the Company’s operating leases was as follows: