Resideo Technologies, Inc 10-Q for FY2022 Q2
Resideo Technologies, Inc. (REZI)
About this 10-Q
Resideo Technologies, Inc filed this 10-Q on August 4, 2022, covering the quarter ended July 2, 2022 (FY2022 Q2).
Headline figures
Quarter ended July 2, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.69B
- up 14.2% from $1.48B a year earlier
- Net income
- $94M
- up 62.1% from net income of $58M a year earlier
- Diluted EPS
- $0.63
- up 61.5% from $0.39 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from ______ to _____
Commission File Number
(Exact name of registrant as specified in its charter)
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol: |
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Name of each exchange on which registered: |
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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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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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
The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of July 29, 2022 was
TABLE OF CONTENTS
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Item 1. |
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Unaudited Consolidated Financial Statements |
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3 |
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4 |
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Unaudited Consolidated Balance Sheets as of July 2, 2022 and December 31, 2021 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 6. |
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2
Part I. Financial Information
Item 1. Unaudited Consolidated Financial Statements
RESIDEO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except shares in thousands, and per share data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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July 2, 2022 |
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July 3, 2021 |
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July 2, 2022 |
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July 3, 2021 |
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Net revenue |
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$ |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Research and development expenses |
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Selling, general and administrative expenses |
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Intangible asset amortization |
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Income from operations |
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Other expense, net |
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Interest expense, net |
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Income before taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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Earnings per common share |
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Basic |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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Weighted average number of common shares outstanding |
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Basic |
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Diluted |
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See accompanying notes to the unaudited consolidated financial statements.
3
RESIDEO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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July 2, 2022 |
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July 3, 2021 |
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July 2, 2022 |
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July 3, 2021 |
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Comprehensive income |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive (loss) income, net of tax: |
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Foreign exchange translation (loss) gain |
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Changes in unrealized gain (loss) on derivatives, net of tax |
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- |
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Total other comprehensive (loss) income, net of tax |
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( |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
4
RESIDEO TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares in thousands, and per share data)
(Unaudited)
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July 2, 2022 |
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December 31, 2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable less allowances of $ |
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Inventories, net |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Other intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Current maturities of long-term debt |
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Accrued liabilities |
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Total current liabilities |
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Long-term debt, net of current maturities |
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Obligations payable under Indemnification Agreements |
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Other liabilities |
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Total liabilities |
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AND CONTINGENCIES |
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Stockholders’ Equity: |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss, net |
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Treasury stock, at cost |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
5
RESIDEO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
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Six Months Ended |
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July 2, 2022 |
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July 3, 2021 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
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Depreciation and amortization |
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Share-based compensation expense |
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Other, net |
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Changes in operating assets and liabilities, net of effect of acquisitions: |
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Accounts receivable, net |
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( |
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Inventories, net |
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( |
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( |
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Other current assets |
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Accounts payable |
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Accrued liabilities |
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Other, net |
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- |
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Net cash (used in) provided by operating activities |
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( |
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Cash flows from investing activities: |
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Capital expenditures |
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( |
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Acquisitions, net of cash acquired |
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( |
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Other, net |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Proceeds from issuance of A&R Term B Facility |
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Payments of debt facility issuance and modification costs |
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( |
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Repayments of long-term debt |
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( |
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( |
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Other, net |
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( |
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Net cash provided by financing activities |
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Effect of foreign exchange rate changes on cash and cash equivalents |
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( |
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Net (decrease) increase in cash and cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental Cash Flow Information: |
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Interest paid |
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$ |
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$ |
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Income taxes paid, net |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
6
RESIDEO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions, except shares in thousands)
(Unaudited)
Fiscal Quarters |
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Common |
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Common |
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Additional |
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Retained |
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Accumulated |
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Treasury |
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Treasury |
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Total |
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Balance as of April 2, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net income |
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- |
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- |
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Other comprehensive loss, net of tax |
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- |
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( |
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- |
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Stock issuances, net of shares withheld for taxes |
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( |
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Share-based compensation |
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- |
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- |
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Balance as of July 2, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Balance as of April 3, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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- |
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- |
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Other comprehensive income, net of tax |
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- |
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- |
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Stock issuances, net of shares withheld for taxes |
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Share-based compensation |
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- |
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- |
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Balance as of July 3, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Fiscal Year to Date Periods |
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Common |
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Common |
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Additional |
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Retained |
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Accumulated |
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Treasury |
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Treasury |
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Total |
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Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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- |
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- |
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Other comprehensive loss, net of tax |
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- |
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( |
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- |
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( |
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Stock issuances, net of shares withheld for taxes |
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( |
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( |
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Share-based compensation |
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- |
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- |
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Balance as of July 2, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Balance as of December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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- |
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- |
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Other comprehensive loss, net of tax |
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- |
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( |
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- |
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Stock issuances, net of shares withheld for taxes |
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( |
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Share-based compensation |
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- |
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- |
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Balance as of July 3, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
7
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(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, fire suppression, 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.
We acquired First Alert, Inc. (“First Alert”) on March 31, 2022. Refer to Note 11. Acquisitions for further detail on the First Alert acquisition.
The Company was incorporated in Delaware on April 24, 2018. The Company separated from Honeywell International Inc. (“Honeywell”) on
Basis of Presentation
The accompanying unaudited consolidated financial statements (collectively, the “Financial Statements”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments, which consist of normal recurring adjustments, necessary to fairly present the Company’s financial position, results of operations and cash flows for the periods indicated. Operating results for the period from January 1, 2022 through July 2, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022.
During the three months ended July 2, 2022, the Company changed the presentation of intangible asset amortization. These expenses are now presented as a separate line on the unaudited consolidated statements of operations, whereas they were previously included in cost of goods sold and selling, general and administrative expenses. Prior periods have been reclassified to conform to the current period presentation. The reclassification decreased cost of goods sold by $
Certain reclassifications have been made to prior period amounts in the unaudited consolidated financial statements to conform to the current presentation.
For additional information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2022.
Reporting Periods
The Company’s fiscal quarters are based on a four-four-five week calendar with the periods ending on the Saturday of the last week in the quarter except that December 31st will always be the year end date. Therefore, the financial results of certain fiscal quarters may not be comparable to prior fiscal quarters.
8
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
Restricted Cash
The following table provides a reconciliation of cash, cash and cash equivalents and restricted cash reported within the consolidated balance sheets that total the amounts shown in the consolidated statements of cash flows (in millions):
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July 2, 2022 |
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December 31, 2021 |
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||
Cash and cash equivalents |
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$ |
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$ |
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||
Restricted cash included in (1) |
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Total cash, cash equivalents and restricted cash shown in the consolidated statements of cashflows |
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$ |
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$ |
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||
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Note 2. Summary of Significant Accounting Policies
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 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 have evaluated the potential impact of adopting this guidance, and we do not expect it to have a material impact on our consolidated financial statements. Refer to Note 15. Long-term Debt and Credit Agreement for further details on the Company’s Swap Agreements and A&R Senior Credit Facilities.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Under this guidance, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We adopted ASU 2021-08 effective April 1, 2022, on a prospective basis. The impact of adoption of this standard on our consolidated financial statements, including accounting policies, processes, and systems, was not material.
9
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
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 and Residential Thermal Solutions is now referenced as Energy. As of April 1, 2022, the First Alert business is included in the results of operations as of its March 31, 2022 acquisition date in the Security and Safety grouping.
Revenues by product grouping and region are as follows:
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Three Months Ended |
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Six Months Ended |
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July 2, 2022 |
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July 3, 2021 |
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July 2, 2022 |
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July 3, 2021 |
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Products & Solutions Disaggregated Revenue: |
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Air |
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$ |
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$ |
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$ |
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$ |
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Water |
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Energy |
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Security and Safety |
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Total Products & Solutions |
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$ |
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$ |
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$ |
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$ |
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ADI Global Distribution Disaggregated Revenue: |
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U.S. and Canada |
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EMEA (1) |
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APAC (2) |
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Total ADI Global Distribution |
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Total Net revenue |
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$ |
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$ |
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$ |
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$ |
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(1)
(2)
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
Note 4. Segment Financial Data
The Company monitors its business operations through
These operating segments follow the same accounting policies used for our consolidated financial statements. We evaluate a segment's performance on a U.S. GAAP basis based primarily upon operating income before corporate expenses.
Corporate assets consist primarily of cash, investments, prepaid expenses, current and deferred taxes and property, plant and equipment. These items are not allocated to the operating segments. Corporate unallocated expenses primarily include share-based compensation expenses, unallocated pension expense, restructuring charges, acquisition-related costs, and other expenses related to executive, legal, finance, tax, treasury, human resources, information technology, strategy, communications and corporate travel expenses. Additional unallocated amounts primarily include non-operating items such as interest income, interest expense, and other income (expense).
10
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions, and assesses operating performance.
The following table represents summary financial data attributable to the segments:
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Three Months Ended |
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Six Months Ended |
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July 2, 2022 |
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July 3, 2021 |
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July 2, 2022 |
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July 3, 2021 |
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Net revenue: |
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Products & Solutions |
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ADI Global Distribution |
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Total Net revenue: |
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$ |
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$ |
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$ |
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$ |
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||||
|
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Three Months Ended |
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Six Months Ended |
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July 2, 2022 |
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July 3, 2021 |
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July 2, 2022 |
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July 3, 2021 |
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Income from operations: |
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Products & Solutions |
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$ |
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$ |
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$ |
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$ |
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||||
ADI Global Distribution |
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Corporate |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Total Income from operations: |
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$ |
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$ |
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$ |
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$ |
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||||
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 six months ended July 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
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.
The Company’s operating lease expense for the three and six months ended July 2, 2022 and July 3, 2021 consisted of the following:
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Three Months Ended |
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Six Months Ended |
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July 2, 2022 |
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July 3, 2021 |
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July 2, 2022 |
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July 3, 2021 |
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Cost of goods sold |
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$ |
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$ |
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$ |
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$ |
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Selling, general and administrative |
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$ |
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Total operating lease expense |
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$ |
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$ |
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$ |
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$ |
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Total operating lease expense includes variable lease expense of $
11
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
expense include variable lease expense of $
The Company recognized the following related to its operating leases:
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Financial |
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As of July 2, |
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As of December 31, |
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Operating right-of-use assets |
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$ |
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$ |
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Operating lease liabilities - current |
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$ |
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$ |
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Operating lease liabilities - noncurrent |
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$ |
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$ |
|
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Future minimum lease payments under non-cancelable leases are as follows:
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As of July 2, |
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2022 (excluding the six months ended July 2, 2022) |
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$ |
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2023 |
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2024 |
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2025 |
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2026 |
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Thereafter |
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Total future minimum lease payments |
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Less: imputed interest |
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Present value of future minimum lease payments |
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$ |
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Weighted-average remaining lease term (years) |
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Weighted-average incremental borrowing rate |
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% |
|
Supplemental cash flow information related to the Company’s operating leases was as follows:
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Six Months Ended |
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July 2, 2022 |
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July 3, 2021 |
|
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Cash paid for amounts included in the measurement of lease liabilities: |
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Cash outflows for operating leases |
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$ |
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$ |
|
||
Non-cash activities: |
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|
||
Right of use assets obtained in exchange for new operating lease liabilities |
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$ |
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$ |
|
||
Note 7. Income Taxes
The Company recorded tax expense of $
For interim periods, income tax is equal to the total of (1) year-to-date pretax income multiplied by the Company’s forecasted effective tax rate plus (2) tax expense items specific to the period. In situations where the Company expects to report losses for which the Company does not expect to receive tax benefits, the Company applies separate forecasted effective tax rates to those jurisdictions rather than including them in the consolidated forecasted effective tax rate.
12
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
For the three months ended July 2, 2022, the net tax expense of $
For the six months ended July 2, 2022, the net tax expense of $
Note 8. Earnings Per Common Share
The following table sets forth the computation of basic and diluted earnings per share (in millions, except shares in thousands, and per share data):
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Three Months Ended |
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Six Months Ended |
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|
|
July 2, 2022 |
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July 3, 2021 |
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July 2, 2022 |
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July 3, 2021 |
|
||||
Numerator for Basic and Diluted Earnings Per Common Share |
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Net income |
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$ |
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$ |
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$ |
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$ |
|
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Denominator for Basic and Diluted Earnings Per Common Share |
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Weighted average basic number of shares outstanding |
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Add: dilutive effect of stock equivalents |
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Weighted average diluted number of shares outstanding |
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Earnings per common share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
|
$ |
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$ |
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$ |
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$ |
|
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Diluted earnings per common share is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of the Company’s common stock for the three and six months ended July 2, 2022 and July 3, 2021. For the three and six months ended July 2, 2022, average options and other rights to purchase approximately
13
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
Note 9. Inventories, Net
|
|
July 2, 2022 |
|
|
December 31, 2021 |
|
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Raw materials |
|
$ |
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$ |
|
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Work in process |
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Finished products |
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Total Inventories, Net |
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$ |
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$ |
|
||
Note 10. Property, Plant, and Equipment, Net
|
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July 2, 2022 |
|
|
December 31, 2021 |
|
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Machinery and equipment |
|
$ |
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$ |
|
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Buildings and improvements |
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Construction in progress |
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Other |
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Total Gross Property, Plant, and Equipment |
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Accumulated depreciation |
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( |
) |
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( |
) |
Property, Plant, and Equipment, Net |
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$ |
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$ |
|
||
Depreciation expense for the three and six months ended July 2, 2022 and July 3, 2021 were $
Note 11. Acquisitions
On
The following table summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed as of the date of the acquisition. The Company preliminarily determined the fair value of the tangible and intangible assets and liabilities acquired, and recorded goodwill based on the excess of the fair value of the acquisition consideration over such fair values as follows:
Cash and other current assets |
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$ |
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Accounts receivable, net |
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Inventories, net |
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Property, plant and equipment |
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Goodwill (1) |
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Other intangible assets, net |
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Other assets (non-current) |
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Total assets |
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Accounts payable |
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Accrued liabilities |
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Other liabilities |
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Total liabilities |
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Net asset acquired (2) |
|
$ |
|
(1)
14
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
(2)
First Alert contributed $
The Company expensed approximately $
On February 14, 2022, the Company acquired
Note 12. Goodwill and Other Intangible Assets, Net
The Company's goodwill balance and changes in the carrying amount of goodwill by segment are as follows (in millions):
|
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Products & Solutions |
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ADI Global Distribution |
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Total |
|
|||
Balance as of December 31, 2021 |
|
$ |
|
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$ |
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$ |
|
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Adjusted Goodwill from acquisitions |
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|
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Currency translation |
|
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( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of July 2, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
15
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
|
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Range of Life (Years) |
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Weighted Average Amortization Period (Years) |
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Cost |
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Accumulated |
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Net |
|
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As of July 2, 2022 |
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|
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Other intangible assets, net: |
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|
|
|
|
|
|
|
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|
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|
|||
Patents and technology |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Customer relationships |
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|
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|
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( |
) |
|
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|
||||
Trademarks (1) |
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( |
) |
|
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|
||||
Software |
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|
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( |
) |
|
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|
||||
Total intangible assets |
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|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
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|
|||
As of December 31, 2021 |
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|
|||
Other intangible assets, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Patents and technology |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Customer relationships |
|
|
|
|
|
|
|
( |
) |
|
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|
||||
Trademarks |
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( |
) |
|
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|
||||
Software |
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|
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( |
) |
|
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|
||||
Total intangible assets |
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|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The Company uses the straight-line method of amortization and expects to recognize amortization expense over the next five fiscal years as follows (in millions):
2022 (excluding the six months ended July 2, 2022) |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
Note 13. Accrued Liabilities
|
|
July 2, 2022 |
|
|
December 31, 2021 |
|
||
Obligations payable under Indemnification Agreements |
|
$ |
|
|
$ |
|
||
Taxes payable |
|
|
|
|
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|
||
Compensation, benefit and other employee-related |
|
|
|
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|
||
Customer rebate reserve |
|
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|
||
Current operating lease liability |
|
|
|
|
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|
||
Other |
|
|
|
|
|
|
||
Total Accrued liabilities |
|
$ |
|
|
$ |
|
||
Refer to Note 14. Commitments and Contingencies for further details on Obligations payable under Indemnification Agreements.
Note 14. Commitments and Contingencies
Environmental Matters
The Company is subject to various federal, state, local, and foreign government requirements relating to the protection of the environment and accrues costs related to environmental matters when it is probable that it has incurred a liability related to a contaminated site and the amount can be reasonably estimated. Environmental-related
16
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
expenses for sites owned and operated by Resideo are presented within Cost of goods sold for operating sites. For the three and six months ended July 2, 2022 and July 3, 2021, environmental expenses related to these operating sites were not material. Liabilities for environmental costs were $
Obligations Payable Under Indemnification Agreements
The indemnification and reimbursement agreement (the “Reimbursement Agreement”) and the tax matters agreement (the “Tax Matters Agreement”) (collectively, the “Indemnification Agreements”) are described below.
Reimbursement Agreement
The following table summarizes information concerning the Company’s Reimbursement Agreement liabilities:
|
|
Six Months Ended |
|
|||||
|
|
July 2, 2022 |
|
|
July 3, 2021 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Accruals for indemnification liabilities deemed probable and reasonably estimable |
|
|
|
|
|
|
||
Indemnification payment |
|
|
( |
) |
|
|
( |
) |
Ending balance (1) |
|
$ |
|
|
$ |
|
||
For the three and six months ended July 2, 2022, net expenses related to the Reimbursement Agreement were $
Reimbursement Agreement liabilities are included in the following balance sheet accounts:
|
|
July 2, 2022 |
|
|
December 31, 2021 |
|
||
Accrued liabilities |
|
$ |
|
|
$ |
|
||
Obligations payable under Indemnification Agreements |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
17
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
The Company does not currently possess sufficient information to reasonably estimate the amounts of indemnification liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with such indemnification liability payments can be determined although they could be material to the Company’s unaudited consolidated results of operations and operating cash flows in the periods recognized or paid.
Tax Matters Agreement
In connection with the Spin-Off, the Company entered into the Tax Matters Agreement with Honeywell pursuant to which it is responsible and will indemnify Honeywell for certain taxes, including certain income taxes, sales taxes, VAT and payroll taxes, relating to the business for all periods, including periods prior to the consummation of the Spin-Off. In addition, the Tax Matters Agreement addresses the allocation of liability for taxes that are incurred as a result of restructuring activities undertaken to effectuate the Spin-Off. As of July 2, 2022 and December 31, 2021, the Company has recorded a liability in respect to the Tax Matters Agreement of $
Trademark Agreement
In connection with the Spin-Off, the Company and Honeywell entered into a
Other Matters
The Company is subject to lawsuits, investigations, and disputes arising out of the conduct of its business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee matters, intellectual property, and environmental, health, and safety matters. The Company recognizes a liability for any contingency that is probable of occurrence and reasonably estimable. The Company continually assesses the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. No such matters are material to the Company’s unaudited financial statements.
The Company, the Company’s former CEO Michael Nefkens, the Company’s former CFO Joseph Ragan, and the Company’s former CIO Niccolo de Masi were named defendants in a class action securities suit that was filed in the U.S. District Court for the District of Minnesota styled In re Resideo Technologies, Inc. Securities Litigation (the “Securities Litigation”). The amended complaint asserted claims under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, broadly alleging, among other things, that the defendants (or some of them) made false and misleading statements regarding, among other things, Resideo’s business, performance, the efficiency of its supply chain, operational and administrative issues resulting from the spin-off from Honeywell, certain business initiatives, and financial guidance in 2019. Following a court-approved settlement resolving the Securities Litigation, on March 25, 2022, the court entered a final judgement, which was amended to provide a dismissal of the Securities Litigation with prejudice on April 14, 2022.
Certain current or former directors and officers of the Company were defendants in a consolidated derivative action in the District Court for the District of Delaware under the caption In re Resideo Technologies, Inc. Derivative Litigation (the “Federal Derivative Action”). On September 23, 2021, the Federal Derivative Action was transferred to the District of Minnesota, where Securities Litigation was pending. On September 1, 2021, an additional shareholder derivative complaint was filed by Riviera Beach, part of the leadership group in the Federal Derivative Action, and
18
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
City of Hialeah Employees Retirement System against certain current or former directors and officers of the Company in the District of Minnesota, alleging substantially that the same facts and making substantially the same claims against the same defendants as in the Federal Derivative Action, and additionally referencing board materials obtained through a demand made pursuant to Section 220 of the Delaware Code Title 8 (the “Riviera Beach Action”). On December 1, 2021, the Federal Derivative Action and the Riviera Beach Action were consolidated into a single action under the caption: In re Resideo Technologies, Inc. Derivative Litigation (the “Consolidated Federal Derivative Action”) and was stayed pending entry of final judgement in the Securities Litigation. On April 19, 2022, after entry of the final judgement in the Securities Litigation, the court entered the parties’ stipulation suspending all deadlines in the case for sixty days to facilitate settlement discussions. On July 8, 2022, the parties participated in a status conference with the Court, following which, on July 19, 2022, the Court entered a sealed order extending the stay and addressing certain matters in respect of the ongoing settlement discussions.
On June 25, 2021, the Bud & Sue Frashier Family Trust U/A DTD 05/05/98, filed a shareholder derivative complaint against certain current or former directors and officers of the Company in the Court of Chancery of the State of Delaware, captioned Bud & Sue Frashier Trust U/A DTD 05/05/98 v. Fradin (“Delaware Chancery Derivative Action”). The Delaware Chancery Derivative Action alleges substantially the same facts and makes substantially the same claims as the Federal Derivative Action, and additionally references board materials obtained through a demand made pursuant to Section 220 of the Delaware Code Title 8. The Delaware Chancery Derivative Action remains stayed by order of the Court.
While the Company is engaged in discussions concerning potential settlement of the Federal Derivative Action and the Delaware Chancery Derivative Action, there can be no guarantees that a settlement will be reached or approved. In the event that no settlement is reached, the Company intends to defend these actions vigorously, but there can be no assurance that the defense will be successful.
See Note 17. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements in the Company’s 2021 Annual Report on Form 10-K for further discussion of these matters.
Warranties and Guarantees
In the normal course of business, the Company issues product warranties and product performance guarantees. It accrues for the estimated cost of product warranties and product performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities.
The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees:
|
|
Six Months Ended |
|
|||||
|
|
July 2, 2022 |
|
|
July 3, 2021 |
|
||
Beginning of period |
|
$ |
|
|
$ |
|
||
Accruals for warranties/guarantees issued during the year |
|
|
|
|
|
|
||
Additions from acquisitions |
|
|
|
|
|
- |
|
|
Settlements and adjustments |
|
|
( |
) |
|
|
( |
) |
End of period |
|
$ |
|
|
$ |
|
||
19
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
Note 15. Long-term Debt and Credit Agreement
The Company’s long-term debt as of July 2, 2022 and December 31, 2021 consisted of the following:
|
|
July 2, 2022 |
|
|
December 31, 2021 |
|
||
|
$ |
|
|
$ |
|
|||
Seven-year variable rate A&R Term B Facility |
|
|
|
|
|
|
||
Unamortized deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Total outstanding indebtedness |
|
|
|
|
|
|
||
Less: Amounts expected to be paid within one year |
|
|
|
|
|
|
||
Total long-term debt due after one year |
|
$ |
|
|
$ |
|
||
As of July 2, 2022 and July 3, 2021, the interest rate for the Amendment and Restatement Agreement (“A&R”) Term B Facility (defined below) was
The Company assessed the amounts recorded under the Amendment and Restatement Agreement Term B Facility, the Senior Notes due 2029, and the A&R Revolving Credit Facility. The Company determined that the A&R Revolving Credit Facility approximated fair value. As of July 2, 2022, the A&R Term B Facility and the Senior Notes due 2029 had approximate fair values of $
Senior Notes due 2029
On August 26, 2021, the Company issued $
Credit Agreement
The A&R Credit Agreement provides for a (i)
On March 28, 2022, the A&R Credit Agreement was further amended to include an additional aggregate principal amount of $
Refer to Note 18. Long-Term Debt and Credit Agreement in the Company’s 2021 Annual Report on Form 10-K for further discussion regarding the Company’s long-term debt and credit agreement.
20
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 2022
(In millions, unless otherwise noted)
(Unaudited)
Note 16. Derivative Instruments
The Company uses interest rate swap agreements to manage exposure to interest rate risks. The Company does not use interest rate swap agreements for speculative or trading purposes. The gain or loss on the interest rate swaps that qualify as derivatives is recorded in Accumulated other comprehensive loss and is subsequently recognized as Interest expense in the Consolidated Statements of Operations when the hedged exposure affects earnings. If the related debt or the interest rate swap is terminated prior to maturity, the fair value of the interest rate swap recorded in Accumulated other comprehensive loss may be recognized in the Consolidated Statements of Operations based on an assessment of the agreements at the time of termination.
On March 31, 2021, the Company entered into
Note 17. Pension
The Company sponsors multiple funded and unfunded U.S. and non-U.S. defined benefit pension plans. Pension benefits for many of its U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit plans. It also sponsors defined benefit pension plans which cover non-U.S. employees who are not U.S. citizens, in certain jurisdictions, principally Germany, Austria, Belgium, France, India, Switzerland, and the Netherlands. The pension obligations as of July 2, 2022 and December 31, 2021 were $
The service cost component of the net periodic benefit cost for the three and six months ended July 2, 2022 and July 3, 2021 was $
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand the results of operations and financial condition of Resideo Technologies, Inc. and its consolidated subsidiaries (“Resideo” or “the Company”, “we”, “us” or “our”) for the three and six months ended July 2, 2022 and should be read in conjunction with the unaudited Consolidated Financial Statements and the notes thereto contained elsewhere in this Form 10-Q. The financial information as of July 2, 2022 should be read in conjunction with the consolidated and combined financial statements for the year ended December 31, 2021 contained in our 2021 Annual Report on Form 10-K (the “2021 Annual Report on Form 10-K”).
FORWARD LOOKING STATEMENTS
This Quarterly Report on 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:
22
23
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.
Overview and Business Trends
We are a leading global manufacturer and distributor of technology-driven products and solutions that help homeowners and businesses stay connected and in control of their comfort, security, and energy use. We are a leader in the home heating, ventilation and air conditioning controls markets, smoke and carbon monoxide detection home safety and fire suppression products, and security markets. We have a global footprint serving commercial and residential end-markets. We manage our business operations through two operating segments, Products & Solutions and ADI Global Distribution. Our Products & Solutions segment offerings include temperature and humidity control, energy products and solutions, water and air solutions, smoke and carbon monoxide detection home safety products, security panels, sensors, peripherals, wire and cable, communications devices, video cameras, awareness solutions, cloud infrastructure, installation and maintenance tools, and related software. Our ADI Global Distribution business is 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 Products & Solutions segment, consistent with our industry, has a higher gross and operating profit margin profile in comparison to the ADI Global Distribution segment.
In March 2022, we completed the acquisition of First Alert, Inc. ("First Alert"), a leading provider of home safety products. This acquisition was integrated into the Products & Solutions portfolio and expands our footprint in the home with complementary smoke and carbon monoxide detection home safety and fire suppression products.
Our financial performance is influenced by macroeconomic factors such as repair and remodeling activity, residential and non-residential construction, employment rates, interest rates, and the overall macroeconomic environment. We are experiencing global shortages in key materials and components in certain instances impacting our ability to supply certain products. Additionally, the current inflationary environment has resulted in higher raw materials, freight, and other costs, and unfavorable foreign currency impacts from a stronger U.S. dollar.
Second Quarter Highlights
Net revenue increased $209 million, or 14%, over the second quarter prior year primarily from $128 million in revenue from the First Alert and Arrow acquisitions and higher selling prices for our products in response to the current inflationary environment. Partially offsetting these increases were foreign currency fluctuations of approximately 300 bps or $40 million.
Gross profit as a percent of net revenues was 28% for the three months ended July 2, 2022, an approximately 200 bps increase over the same period last year. The drivers of the increase include favorable price and positive sales mix, including from recent acquisitions, of 400 bps. Partially offsetting the increases were higher costs as a result of the current inflationary environment of 200 bps.
Research and development expenses for the three months ended July 2, 2022 was $28 million, an increase of $6 million from $22 million for the three months ended July 3, 2021. The increase was driven by acquisitions and new product investments.
24
Selling, general and administrative expenses for the three months ended July 2, 2022 were $244 million, an increase of $8 million or 3% from $236 million for the three months ended July 3, 2021. The increase was primarily driven by increased costs associated with the First Alert acquisition of $16 million, labor inflation of $6 million, and investment of $4 million offset by lower legal and foreign currency impacts. As a percentage of net sales, selling, general and administrative expense improved 200 bps despite increases incurred as a result of acquisitions, labor inflation, and foreign currency fluctuations.
Net income for the three months ended July 2, 2022 was $94 million compared to net income of $58 million for the three months ended July 3, 2021, a 62% increase and $0.25 improvement in earnings per share. The improvement is a result of the discussion above.
Unrestricted cash on hand was approximately $251 million and liquidity was approximately $751 million as of July 2, 2022. Also, there were no borrowings under the $500 million revolving credit facility.
COVID-19 and Recent Macroeconomic Environment
Our visibility toward future performance is more limited than is typical due to the uncertainty surrounding the duration and ultimate impact of COVID-19 and its variants, and the overall prevailing macroeconomic environment, including due to COVID-19. For example, recent business conditions have been impacted by shortages in key materials and components which have impacted our ability to supply certain products. We have also experienced various inflationary impacts, such as increased labor rates, materials price inflation, and increased freight costs. In response to these challenges, we have, among other measures, aggressively managed supplier relationships to mitigate some of these shortages, developed contingency plans for future supply, aligned our production schedules with demand in a proactive manner; and pursued further improvements in the productivity and effectiveness of our manufacturing, selling, and administrative activities.
Results of Operations
We report our segment information in the same way management internally organizes the business in assessing performance and making decisions regarding allocation of resources in accordance with ASC 280, Segment Reporting. We have determined that we have two reportable segments, organized and managed principally by the different services provided. While the segments often operate using shared infrastructure, each reportable segment is managed to address specific customer needs in these diverse market sectors. We report all other business activities in Corporate and unallocated costs. Corporate assets consist primarily of cash, investments, prepaid expenses, current and deferred taxes and property, plant and equipment. These items are not allocated to the operating segments. Corporate unallocated expenses primarily include share-based compensation expenses, restructuring charges, acquisition costs, gain on legal settlements, and other expenses related to executive, legal, finance, tax, treasury, human resources, information technology and strategy, and corporate travel expenses. Additional unallocated amounts primarily include non-operating items such as interest income, interest expense, and other income (expense).
Consolidated Statements of Operations
25
(In millions, except shares in thousands and per share data)
(Unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
||||
Net revenue |
|
$ |
1,686 |
|
|
$ |
1,477 |
|
|
$ |
3,192 |
|
|
$ |
2,896 |
|
Cost of goods sold |
|
|
1,219 |
|
|
|
1,091 |
|
|
|
2,287 |
|
|
|
2,135 |
|
Gross profit |
|
|
467 |
|
|
|
386 |
|
|
|
905 |
|
|
|
761 |
|
Research and development expenses |
|
|
28 |
|
|
|
22 |
|
|
|
52 |
|
|
|
43 |
|
Selling, general and administrative expenses |
|
|
244 |
|
|
|
236 |
|
|
|
479 |
|
|
|
451 |
|
Intangible asset amortization |
|
|
9 |
|
|
|
7 |
|
|
|
16 |
|
|
|
16 |
|
Income from operations |
|
|
186 |
|
|
|
121 |
|
|
|
358 |
|
|
|
251 |
|
Other expense, net |
|
|
41 |
|
|
|
28 |
|
|
|
81 |
|
|
|
72 |
|
Interest expense |
|
|
14 |
|
|
|
12 |
|
|
|
25 |
|
|
|
25 |
|
Income before taxes |
|
|
131 |
|
|
|
81 |
|
|
|
252 |
|
|
|
154 |
|
Provision for income taxes |
|
|
37 |
|
|
|
23 |
|
|
|
71 |
|
|
|
47 |
|
Net income |
|
$ |
94 |
|
|
$ |
58 |
|
|
$ |
181 |
|
|
$ |
107 |
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.65 |
|
|
$ |
0.40 |
|
|
$ |
1.25 |
|
|
$ |
0.74 |
|
Diluted |
|
$ |
0.63 |
|
|
$ |
0.39 |
|
|
$ |
1.22 |
|
|
$ |
0.72 |
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
145,457 |
|
|
|
143,939 |
|
|
|
145,286 |
|
|
|
143,657 |
|
Diluted |
|
|
148,829 |
|
|
|
148,328 |
|
|
|
148,836 |
|
|
|
148,050 |
|
Net Revenue
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
||||
Net revenue |
|
$ |
1,686 |
|
|
$ |
1,477 |
|
|
$ |
3,192 |
|
|
$ |
2,896 |
|
% change compared with prior period |
|
|
14 |
% |
|
|
|
|
|
10 |
% |
|
|
|
||
Three months ended
Net revenue increased $209 million, or 14%, over the second quarter prior year primarily $128 million in revenue from the First Alert and Arrow acquisitions and higher selling prices of $113 million. Partially offsetting these increases were foreign currency fluctuations of approximately 300 bps or $40 million.
Six months ended
Net revenue for the six months ended July 2, 2022 was $3,192 million, an increase of $296 million, or 10%, from $2,896 million for the six months ended July 3, 2021. The increase in net revenue was driven by price increases and acquisitions revenue, partially offset by foreign exchange fluctuations.
Gross Profit as a Percent of Net Sales
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Cost of goods sold |
|
$ |
1,219 |
|
|
$ |
1,091 |
|
|
$ |
2,287 |
|
|
$ |
2,135 |
|
% change compared with prior period |
|
|
12 |
% |
|
|
|
|
|
7 |
% |
|
|
|
||
Gross profit percentage |
|
|
28 |
% |
|
|
26 |
% |
|
|
28 |
% |
|
|
26 |
% |
26
Three months ended
Gross profit as a percentage of net sales was 28% for the three months ended July 2, 2022, compared to a 200 bps increase over the same period last year. The drivers of the increase include favorable price and positive sales mix, including from recent acquisitions, of 400 bps. Partially offsetting the increases were unfavorable impacts from higher costs as a result of the current inflationary environment of 200 bps.
Six months ended
Gross profit as a percentage of net sales was 28% for the six months ended July 2, 2022, compared to 26% for the six months ended July 3, 2021. The primary items driving the increase in gross profit percentage were a 300 bps impact from price increases and favorable sales mix. This impact was partially offset by a 100 bps unfavorable impact from increased material costs.
Research and Development Expenses
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Research and development expenses |
|
$ |
28 |
|
|
$ |
22 |
|
|
$ |
52 |
|
|
$ |
43 |
|
% of revenue |
|
|
2 |
% |
|
|
1 |
% |
|
|
2 |
% |
|
|
1 |
% |
Three months ended
Research and development expenses for the three months ended July 2, 2022 was $28 million, an increase of $6 million from $22 million for the three months ended July 3, 2021. The increase was driven by acquisitions and new product investments.
Six months ended
Research and development expenses for the six months ended July 2, 2022 was $52 million, an increase of $9 million from $43 million for the six months ended July 3, 2021. The increase was driven by planned investment to support new product launches and the inclusion of acquisitions.
Selling, General and Administrative Expenses
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Selling, general and administrative |
|
$ |
244 |
|
|
$ |
236 |
|
|
$ |
479 |
|
|
$ |
451 |
|
% of revenue |
|
|
14 |
% |
|
|
16 |
% |
|
|
15 |
% |
|
|
16 |
% |
Three months ended
Selling, general and administrative expenses for the three months ended July 2, 2022 was $244 million, an increase of $8 million, or 3%, from $236 million for the three months ended July 3, 2021. The increase was primarily driven by increased costs associated with the First Alert acquisition of $16 million, labor inflation of $6 million, and investment of $4 million offset by lower legal expenses as a result of the 2021 securities class action litigation settlement net of insurance recoveries of $16 million, and foreign currency impacts. As a percentage of net sales, selling, general and administrative expenses improved 200 bps despite increases incurred as a result of acquisitions, labor inflation, and foreign currency fluctuations.
Six months ended
27
Selling, general and administrative expenses for the six months ended July 2, 2022 was $479 million, an increase of $28 million from $451 million for the six months ended July 3, 2021. The increase was driven by expenses related to acquisitions, transaction costs associated with the First Alert acquisition, increased investment, and labor inflation and other items totaling $56 million. These increases were partially offset by lower legal expenses as a result of the 2021 securities class action litigation settlement net of insurance recoveries of $16 million, foreign currency translation and other cost reductions totaling $28 million.
Other Expense, Net
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Other expense, net |
|
$ |
41 |
|
|
$ |
28 |
|
|
$ |
81 |
|
|
$ |
72 |
|
Three months ended
Other expense, net for the three months ended July 2, 2022 was $41 million, an increase of $13 million from $28 million for the three months ended July 3, 2021. Other expense, net for the three months ended July 2, 2022 included $45 million in expenses related to the Honeywell Reimbursement Agreement partially offset by $4 million of other non-operating income. Other expense, net for the three months ended July 3, 2021, included $36 million in expenses related to the Honeywell Reimbursement Agreement, partially offset by $8 million of other non-operating income.
Six months ended
Other expense, net for the six months ended July 2, 2022 was $81 million, an increase of $9 million from $72 million for the six months ended July 3, 2021. Other expense, net for the six months ended July 2, 2022 included $86 million in expenses related to the Honeywell Reimbursement Agreement partially offset by $5 million of other non-operating income. Other expense, net for the six months ended July 3, 2021 included $72 million in expenses related to the Honeywell Reimbursement Agreement.
Tax Expense
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Provision for income taxes |
|
$ |
37 |
|
|
$ |
23 |
|
|
$ |
71 |
|
|
$ |
47 |
|
Effective tax rate |
|
|
28 |
% |
|
|
29 |
% |
|
|
28 |
% |
|
|
31 |
% |
Three months ended
For the three months ended July 2, 2022, the net tax expense of $37 million consists primarily of year-to-date pretax income multiplied by our forecasted effective tax rate. In addition to items specific to the period, our income tax rate is impacted by the mix of earnings across the jurisdictions in which we operate, non-deductible expenses, and U.S. taxation of foreign earnings.
Six months ended
For the six months ended July 2, 2022, the net tax expense of $71 million consists primarily of year-to-date pretax income multiplied by our forecasted effective tax rate. In addition to items specific to the period, our income tax rate is impacted by the mix of earnings across the jurisdictions in which we operate, non-deductible expenses, and U.S. taxation of foreign earnings.
28
Segment Results of Operations
Products & Solutions Segment
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
|
|
|
July 2, |
|
|
July 3, |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Total revenue |
|
$ |
852 |
|
|
$ |
695 |
|
|
|
|
|
$ |
1,566 |
|
|
$ |
1,395 |
|
|
|
|
||
Operating profit |
|
$ |
154 |
|
|
$ |
129 |
|
|
|
19 |
% |
|
$ |
307 |
|
|
$ |
259 |
|
|
|
19 |
% |
Operating profit percentage |
|
|
20 |
% |
|
|
22 |
% |
|
|
|
|
|
22 |
% |
|
|
22 |
% |
|
|
|
||
On March 31, 2022, we completed the acquisition of First Alert, a leading provider of home safety products. This acquisition was integrated into the Products & Solutions portfolio and expands our footprint in the home with complementary smoke and carbon monoxide detection home safety products and fire suppression products.
Three months ended
Products & Solutions revenue increased 28%, mainly due to First Alert acquisition revenue and price increases, partially offset by foreign exchange fluctuations. Operating profit increased from $129 million to $154 million, or 19% primarily from positive price, net of inflationary cost increases of $7 million, higher demand of $11 million, and the contribution from the First Alert acquisition of $7 million.
Six months ended
Products & Solutions revenue increased 15%, mainly due to price increases and First Alert acquisition revenue, partially offset by foreign exchange fluctuations. Operating profit increased from $259 million to $307 million, or 19%. Operating profit was positively impacted by price increases, contributions from the First Alert acquisition, and other cost reductions totaling $166 million. These impacts were partially offset by increased material costs, unfavorable changes in sales mix, higher charges related to obsolete and surplus inventory, increased freight costs, increased investment totaling $118 million.
ADI Global Distribution Segment
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
|
|
|
July 2, |
|
|
July 3, |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
External revenue |
|
$ |
922 |
|
|
$ |
879 |
|
|
|
5 |
% |
|
$ |
1,809 |
|
|
$ |
1,692 |
|
|
|
7 |
% |
Operating profit |
|
$ |
86 |
|
|
$ |
66 |
|
|
|
30 |
% |
|
$ |
166 |
|
|
$ |
125 |
|
|
|
33 |
% |
Operating profit percentage |
|
|
9 |
% |
|
|
8 |
% |
|
|
|
|
|
9 |
% |
|
|
7 |
% |
|
|
|
||
Three months ended
ADI Global Distribution revenue increased 5% highlighted by strong growth in the U.S. and Canada driven by price increases, and the impact of acquisitions, partially offset by foreign exchange fluctuations. Operating profit increased from $66 million to $86 million, or 30%. Operating profit was favorably impacted primarily by changes in sales mix, price increases, impact of acquisitions, and other expense productivity totaling $31 million. These positive impacts were partially offset by commercial investments, increased freight costs, as well as labor inflation totaling $11 million.
Six months ended
ADI Global Distribution revenue increased 7% driven by price increases and the impact of acquisitions, partially offset by foreign exchange fluctuations. Operating profit increased from $125 million to $166 million, or 33%. Operating profit was favorably impacted by changes in sales mix, price increases, impact of acquisitions, and other expense productivity totaling $60 million. These positive impacts were partially offset by commercial investments, increased freight costs, as well as labor inflation totaling $19 million.
29
Corporate
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
|
|
|
July 2, |
|
|
July 3, |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Corporate costs |
|
$ |
54 |
|
|
$ |
74 |
|
|
|
(27 |
)% |
|
$ |
115 |
|
|
$ |
133 |
|
|
|
(14 |
)% |
Three months ended
Corporate costs for the three months ended July 2, 2022 were $54 million, a decrease from $74 million for the three months ended July 3, 2021, or 27%. The decrease was due primarily to the 2021 securities class action litigation settlement net of insurance recoveries of $16 million, and other cost reductions totaling $20 million.
Six months ended
Corporate costs for the six months ended July 2, 2022 were $115 million, a decrease from $133 million for the six months ended July 3, 2021, or 14%. The decrease was due primarily to the 2021 securities class action litigation settlement net of insurance recoveries of $16 million, lower consulting spend of $7 million, and other cost reductions. These positive impacts were partially offset by transaction costs associated with the First Alert acquisition of $10 million.
Capital Resources and Liquidity
Our liquidity is primarily dependent on our ability to continue to generate positive cash flows from operations, supplemented by external sources of capital as needed. Additional liquidity may also be provided through access to the financial capital markets and a committed global credit facility. The following is a summary of our liquidity position:
Our future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent of research and development projects, potential acquisitions of companies or technologies, and the expansion of our sales and marketing activities. While we may elect to seek additional funding at any time, we believe our existing cash, cash equivalents, and availability under our credit facilities are sufficient to meet our capital requirements through at least the next 12 months and the longer term. We may enter into acquisitions or strategic arrangements in the future which also could require us to seek additional equity or debt financing.
Reimbursement Agreement
In connection with the Spin-Off, we entered into the Reimbursement Agreement, pursuant to which we have an obligation to make cash payments to Honeywell in amounts equal to 90% of payments for certain Honeywell environmental-liability payments, which include amounts billed, less 90% of Honeywell’s net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales. The amount payable by us in respect of such liabilities arising in any given year is subject to a cap of $140 million.
The amount paid during the six months ended July 2, 2022 was $70 million. See Note 14. Commitments and Contingencies of Notes to Consolidated Financial Statements of this Form 10-Q and Note 17. Commitments and
30
Contingencies of Notes to Consolidated and Combined Financial Statements in our 2021 Annual Report on Form 10-K for further discussion.
Cash Flow Summary for the six months ended July 2, 2022 and July 3, 2021
Our cash flows from operating, investing and financing activities for the six months ended July 2, 2022 and July 3, 2021, as reflected in the unaudited Consolidated Statements of Cash Flows, are summarized as follows:
|
|
Six Months Ended |
|
|||||
|
|
July 2, |
|
|
July 3, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Cash provided by (used for): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(24 |
) |
|
$ |
99 |
|
Investing activities |
|
|
(670 |
) |
|
|
(42 |
) |
Financing activities |
|
|
183 |
|
|
|
7 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(13 |
) |
|
|
(2 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
$ |
(524 |
) |
|
$ |
62 |
|
Cash used for operating activities for the six months ended July 2, 2022 increased by $123 million, primarily due to an increase in net income of $74 million, and an increase in current liabilities of $23 million. These increases were offset by increases in account receivable and inventory totaling $231 million. The increase in accounts receivable and inventory were necessary to support the increased sales activity.
Cash used for investing activities increased by $628 million, primarily due to $623 million of additional cash paid for acquisitions in the six months ended July 2, 2022.
Net cash provided by financing activities increased by $176 million. The increase was primarily due to $196 million of net proceeds from the March 2022 Amended A&R Credit Agreement, as compared to $6 million of net proceeds resulting from the 2021 execution of the A&R Credit Agreement, debt issuance and modification costs, and repayments of long-term debt and, cash used for other financing activities totaling $1 million.
Capital Expenditures
We believe our capital spending has been sufficient to support the requirements of the business. We expect to continue investing to expand and modernize our existing facilities and to create capacity for new product development.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, net revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
31
Critical Accounting Policies
The preparation of our unaudited Financial Statements in accordance with U.S. GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. We consider the accounting policies discussed in our 2021 Annual Report on Form 10-K to be critical to the understanding of our unaudited Financial Statements included in this Form 10-Q. There have been no material changes in our critical accounting policies as compared to what was disclosed in the 2021 Annual Report on Form 10-K. We adopted ASU 2021-08 effective April 1, 2022, on a prospective basis. The impact of adoption of this standard on our consolidated financial statements, including accounting policies, processes, and systems, was not material. Actual results could differ from our estimates and assumptions, and any such differences could be material to our unaudited Financial Statements.
Other Matters
Litigation, Environmental Matters and Reimbursement Agreement
See Note 14. Commitments and Contingencies of Notes to Consolidated Financial Statements of this Form 10-Q for a discussion of environmental and other litigation matters.
Recent Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements of this Form 10-Q for a discussion of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments.
Interest Rate Risk
As of July 2, 2022, $1,137 million of our total debt, excluding unamortized deferred financing costs, carried variable interest rates. In March 2021, eight interest rate swap agreements were entered into with various financial institutions for a combined notional amount of $560 million (the “Swap Agreements”). The Swap Agreements effectively converted a portion of the Company’s variable interest rate obligations based on three-month LIBOR with a minimum rate of 0.50% per annum to a base fixed weighted average rate of 0.9289% over a term of two to four years. For more information on the Swap Agreements, see Note 16. Derivative Instruments of Notes to Consolidated Financial Statements of this Form 10-Q. The fair market values of our fixed-rate financial instruments and Swap Agreements are sensitive to changes in interest rates. As of July 2, 2022, an increase or decrease in the interest rate by 100 basis points would have an approximate $6 million impact on our annual interest expense.
Foreign Currency Exchange Rate Risk
We are exposed to market risks from changes in currency exchange rates. While we primarily transact with customers in the U.S. Dollar, we also transact in foreign currencies, primarily including the Canadian Dollar, Euro, Mexican Peso, Indian Rupee, British Pound, and Czech Koruna. These exposures may impact total assets, liabilities, future earnings and/or operating cash flows. Our exposure to market risk for changes in foreign currency exchange rates arises from transactions arising from international trade, foreign currency denominated monetary assets and liabilities, and international financing activities between subsidiaries. We rely primarily on natural offsets to address our exposures and may supplement this approach from time to time by entering into forward and option hedging contracts. As of July 2, 2022 and December 31, 2021, we have no outstanding foreign currency hedging arrangements.
32
Commodity Price Risk
While we are exposed to commodity price risk, we attempt to pass through significant changes in component and raw material costs to our customers based on the contractual terms of our arrangements. In limited situations, we may not be fully compensated for such changes in costs.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures designed to give reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.
Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud have been or will be detected.
Our Chief Executive Officer and Chief Financial Officer, with the assistance of other members of our management, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended July 2, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
33
PART II
Item 1. Legal Proceedings
See Note 14. Commitments and Contingencies — Other Matters of Notes to Consolidated Financial Statements of this Form 10-Q for a discussion on legal proceedings.
Item 1A. Risk Factors
We face a variety of risks that are inherent in our business and our industry, including operational, legal, and regulatory risks. Such risks could cause our actual results to differ materially from our forward-looking statements, expectations, and historical trends. There have been no material changes to the risk factors described in our 2021 Annual Report on Form 10-K.
34
Item 6. Exhibits
The Exhibits listed below on the Exhibit Index are filed or incorporated by reference as part of this Form 10-Q.
EXHIBIT INDEX
Exhibit Number |
|
Exhibit Description |
4.2 |
|
|
|
|
|
10.1 |
|
Resideo Technologies, Inc. Bonus Plan, amended as of April 28, 2022 (filed herewith) |
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document (filed herewith) |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema (filed herewith) |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith) |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith) |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase (filed herewith) |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith) |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
|
† |
Schedules omitted pursuant to item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon its request. |
35
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
Resideo Technologies, Inc. |
|
|
|
|
Date: August 4, 2022 |
By: |
/s/ Anthony L. Trunzo |
|
|
Anthony L. Trunzo Executive Vice President and Chief Financial Officer (on behalf of the Registrant and as the Registrant’s Principal Financial Officer) |
|
|
|
Date: August 4, 2022 |
By: |
/s/ Tina Beskid |
|
|
Tina Beskid |
|
|
Vice President and Chief Accounting Officer (Principal Accounting Officer) |
36
Exhibit 4.2
Execution Version
SECOND SUPPLEMENTAL INDENTURE
Second Supplemental Indenture (this “Supplemental Indenture”), dated as of May 19, 2022, among Arrow Wire & Cable, Inc., a California corporation (the “Guaranteeing Subsidiary”), Resideo Funding Inc. (the “Issuer”), and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee (the “Trustee”). The Guaranteeing Subsidiary is a subsidiary of Resideo Technologies, Inc., one of the Guarantors (as defined in the Indenture referred to below) and the parent company of the Issuer.
W I T N E S S E T H
WHEREAS, each of the Issuer and the Guarantors (as defined in the Indenture referred to below) has heretofore executed and delivered to the Trustee an indenture, dated as of August 26, 2021 (as supplemented by the First Supplemental Indenture thereto, dated as of April 1, 2022, the “Indenture”), providing for the issuance of an unlimited aggregate principal amount of 4.000% Senior Notes due 2029 (the “Notes”);
WHEREAS, the Indenture provides that under certain circumstances a Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which such Guaranteeing Subsidiary shall unconditionally Guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:
.
[signature pages follow]
- 2 -
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.
Guaranteeing Subsidiary:
ARROW WIRE & CABLE, INC.
By: /s/ John Heskett Name: John Heskett
Title: Chief Executive Officer, Chief Financial Officer and Treasurer
Issuer:
RESIDEO FUNDING INC.
By: /s/ John Heskett Name: John Heskett
Title: President and Treasurer
[Signature Page to Second Supplemental Indenture]
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Michael K. Herberger Name: Michael K. Herberger
Title: Vice President
[Signature Page to Second Supplemental Indenture]
Exhibit 10.1
RESIDEO TECHNOLOGIES, INC.
BONUS PLAN
AMENDED AS OF APRIL 28, 2022
1. Purpose
The purpose of this amended Resideo Technologies, Inc. Bonus Plan (the “Plan”) is to attract and retain highly qualified employees, to obtain from each the best possible performance, and to underscore the importance to such employees of achieving particular business objectives.
2. Definitions
For the purposes of the Plan, the following terms shall have the following meanings:
2.1 “Affiliate” means (i) any subsidiary of the Company of which at least 50 percent of the aggregate outstanding voting common stock or capital stock is owned directly or indirectly by the Company, (ii) any other parent of a subsidiary described in clause (i), or (iii) any other entity in which the Company has a substantial ownership interest and which has been designated as an Affiliate by the Committee in its sole discretion.
2.2 “Bonus Awards” means incentive compensation awards, the payment of which may be earned based on the achievement of one or more performance-based metrics, which may relate to one or any combination of Company, subsidiary, operating unit, division or individual performance, in each case established by the Committee for each Performance Period.
2.3 “Board of Directors” means the Board of Directors of Resideo.
2.4 “Cause” has the meaning assigned to such term in any written individual agreement between the Company or an Affiliate and such Employee in which such term is defined as of immediately prior to the Change in Control (but assuming that a Change in Control has occurred for purposes of such agreement); provided, that if no such agreement exists, or if such term is not defined in such agreement, “Cause” means any of the following: (i) clear evidence of a significant violation of the company’s Code of Business Conduct; (ii) a fraud committed against the Company; (iii) the misappropriation, embezzlement or reckless or willful destruction of the Company’s property; (iv) the willful failure to perform, or gross negligence in the performance of, duties; (v) the conviction (treating a nolo contendere plea as a conviction) of a felony (whether or not any right to appeal has been or may be exercised); (vi) knowing falsification of any records or documents of the Company; (vii) a significant breach of any statutory or common law duty of loyalty to the Company; (viii) intentional and improper conduct that is significantly prejudicial to the business of the Company; (ix) the failure to cooperate fully in a Company investigation or the failure to be fully truthful when providing evidence or testimony in such investigation; or (x) the violation of Company rules and policies that, based on a single occurrence, might not meet the significance thresholds of (i), (vii) or (viii) above, but that shall, for purposes of such significance thresholds, be deemed to constitute a violation thereof in the event any such violation occurs more than once. Cause shall be determined by the Committee in its sole and absolute discretion.
2.5 “Change in Control” means (i) any one person, or more than one person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)) acquires ownership of stock of Resideo
1
that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of Resideo; or (ii) any one person, or more than one person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Resideo possessing 30 percent or more of the total voting power of the stock of Resideo; or (iii) a majority of members of the Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of the appointment or election; or (iv) any one person, or more than one person acting as a group (as defined in Treasury Regulation § 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions. For purposes of subsection (iv), “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. The foregoing subsections (i) through (iv) shall be interpreted in a manner that is consistent with the Treasury Regulations promulgated pursuant to Section 409A of the Code so that all, and only, such transactions or events that could qualify as a “change in control event” within the meaning of Treasury Regulation §1.409A-3(i)(5)(i) will be deemed to be a Change in Control for purposes of this Plan.
2.6 “Change in Control Date” means the date on which a Change in Control occurs.
2.7 “Chief Executive Officer” means the Chief Executive Officer of Resideo.
2.8 “Code” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations, and administrative guidance issued thereunder.
2.9 “Committee” means the Compensation and Human Capital Management Committee of the Board of Directors, or such other committee as the Board of Directors shall appoint from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan. The Committee shall at all times be comprised solely of two or more outside directors and shall be “independent” pursuant to the listing requirements of the NYSE (or other such exchange on which the Company’s shares may be listed for trading) as may be applicable from time to time.
2.10 “Common Stock” means the common stock of Resideo.
2.11 “Company” means Resideo and its Affiliates, as well as their respective successors.
2.12 “Disability” with respect to an Employee shall have the meaning assigned to such term under the long-term disability plan maintained by the Company or an Affiliate in which such Employee is covered at the time the determination is made, and if there is no such plan, means the permanent inability as a result of accident or sickness to perform any and every duty pertaining to such Employee’s occupation or employment for which the Employee is suited by reason of the Employee’s training, education and experience, unless otherwise provided in a written agreement between the Employee and the Company.
2.13 “Employee” means any individual who performs services as an employee of the Company or any Affiliate of the Company.
2
2.14 “Executive Officer” means an Employee of the Company who is subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended.
2.15 “Good Reason” has the meaning assigned to such term in any written individual agreement between the Company or an Affiliate and the Employee in which such term is defined and in the absence of any such written agreement, has the meaning assigned to such term in any severance plan of the Company or an Affiliate, in each case, that is applicable to such Employee, in each case, as of immediately prior to the Change in Control (but assuming that a Change in Control has occurred for purposes of such agreement or plan); provided, that if no such agreement exists, or if such term is not defined in such agreement, “Good Reason” means, without the Employee’s consent, (a) a material reduction in the Employee’s base salary and, as to an Employee who is an Executive Officer, annual target bonus in effect immediately prior to the Change in Control (other than a reduction that is generally applicable to all salaried and non-union hourly employees of the Company); (b) the permanent elimination of the Employee’s position, not including a transfer pursuant to the sale of a facility or line of business, provided the Employee is offered substantially comparable employment with the successor employer; (c) in the case of an Executive Officer, a material adverse change to the Employee’s position, function, responsibilities or reporting level, or in the standard of performance required of the Executive Officer, as determined immediately prior to a Change in Control; (d) a material change in the geographic location at which the Employee must perform his or her services from the location the Employee was required to perform such services immediately prior to a Change in Control; or (e) an action by the Company that under applicable law constitutes constructive discharge. Notwithstanding the foregoing, Good Reason shall not be deemed to have occurred unless the Employee provides written notice to the Company identifying the event or omission constituting the reason for a Good Reason termination within ninety (90) days following the first occurrence of such event or omission. Within thirty (30) days after such notice has been provided to the Company, the Company shall have the opportunity, but shall have no obligation, to cure the events or conditions that give rise to a Good Reason termination. If the Company fails to cure the events or conditions giving rise to an Employee’s Good Reason termination by the end of the thirty (30) day cure period, the Employee’s employment shall be terminated effective as of the expiration of such thirty (30) day cure period unless the Employee has withdrawn such Good Reason termination notice.
2.16 “Resideo” means Resideo Technologies, Inc., a Delaware corporation.
2.17 “Performance Period” means the Resideo fiscal year or such other period as may be designated by the Committee with respect to which Bonus Awards may be payable under the Plan.
2.18 “Section 409A” means Section 409A of the Code.
2.19 “Stub Period” means the portion of a Performance Period that ends on the Change in Control Date.
3. Effective Date
The original Resideo Technologies, Inc. Bonus Plan was effective as of February 11, 2019, and applied to Bonus Awards for Performance Periods that began on or after January 1, 2019. This amended Plan is effective as of April 28, 2022, and applies to Bonus Awards for Performance Periods that begin on or after January 1, 2022.
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4. Administration; Delegation
4.1 Plan Administration. The Plan shall be administered by the Committee, which shall have full power and authority (i) to select Employees to receive Bonus Awards under the Plan and determine the amount and terms and conditions of such awards; (ii) to prescribe, amend and rescind rules and procedures relating to the Plan; (iii) subject to the provisions of the Plan, to delegate to one or more officers of the Company some or all of its authority under the Plan; (iv) to employ such legal counsel, independent auditors and consultants as it deems desirable for the administration of the Plan and to rely upon any opinion or computation received therefrom; (v) to make all determinations, and to formulate such rules and procedures, as may be necessary or advisable in the opinion of the Committee for the administration of the Plan; and (vi) construe and interpret the Plan.
4.2 Delegation to Chief Executive Officer. Until otherwise provided by the Committee, the Committee delegates to the Chief Executive Officer the authority to grant Bonus Awards to Employees other than Executive Officers, to determine the amounts and performance goal(s) for such awards, and to administer and interpret such awards, subject to the terms of the Plan and such conditions to and limitations on such authority that the Committee may establish. The Chief Executive Officer may further delegate such authority as he or she determines.
5. Participation in the Plan
5.1 Selection of Plan Participants. Only those Employees selected to participate in the Plan for any Performance Period shall receive a Bonus Award. The Committee shall select the Executive Officers as it deems appropriate to participate in the Plan for any Performance Period. Unless specifically determined by the Committee, an Employee who commences employment with the Company or in a position that would customarily involve participation in the Plan after November 1 will generally not be entitled to a Bonus Award for any Performance Period coinciding with the Company’s fiscal year in which such employment commences. Unless specifically determined by the Committee, the Bonus Award for any Employee who is selected to participate in the Plan for only a portion of the Performance Period shall be prorated for the portion of the Performance Period during which the Employee is a participant.
5.2 Notice of Award. Each Employee selected to participate in the Plan shall receive a notice of Bonus Award setting forth the amount of the Bonus Award, the applicable Performance Period and the performance goal(s) for such award, as well as any other terms applicable to the award determined by the Committee.
6. Determination of Amounts of Bonus Awards
6.1 Bonus Award Amounts. The amounts of individual Bonus Awards to (i) Executive Officers shall be determined by the Committee acting in its discretion, and (ii) other Employees shall be determined by the Chief Executive Officer or his or her delegate in his or her discretion, subject to any revocation or restriction on such delegated authority. Such determinations shall be made after consideration of such matters as the Committee or the Chief Executive Officer, as applicable, shall deem relevant.
Unless otherwise provided in a notice of Bonus Award, the target amount of a Bonus Award shall be set as a percentage of the Employee’s annual base salary. If an Employee’s percentage target changes during a Performance Period, the Bonus Award shall be calculated by prorating the target percentage based on the number of days at each target percentage. Unless otherwise provided in a
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notice of Bonus Award, a Bonus Award shall be based on the Employee’s annual base salary in effect on September 1 of the applicable Performance Period (or, for an Employee who receives a Bonus Award after September 1, on such date of grant); provided, that for purposes of calculating a payout in accordance with Section 8.3 for an Employee who dies or terminates due to Disability prior to September 1, the annual base salary shall be the Employee’s annual base salary in effect on the date of such death or termination. Base salary shall exclude commissions, overtime pay, shift differentials, bonuses and any other remuneration, except to the extent such items are included in the base salary calculations under current practice or applicable law. If an Employee transfers business units during the Performance Period, the performance of both business units may be considered when determining the Bonus Award.
6.2 Determination of Performance Goals. The performance goal(s) for the Performance Period shall be set by the Committee (or, the Chief Executive Officer, as the case may be) at a time when achievement of the performance goal(s) is substantially uncertain. The Committee (or the Chief Executive Officer, as the case may be) shall have discretion to modify the performance goals if it determines that as a result of changed circumstances, such modification is required to reflect the intent of such performance goals.
7. Form of Bonus Awards
Bonus Awards under the Plan shall be paid in cash or, at the sole option of the Committee, may be settled in shares of Common Stock or other equity awards issued from the Company’s then-effective stock incentive plan, on such terms as determined by the Committee.
8. Payment of Bonus Awards
8.1 Certification of Achievement of Performance Goals. No Bonus Awards shall be paid to Employees prior to certification by the Committee (or the Chief Executive Officer, as the case may be) of the degree to which the performance goals for the applicable Performance Period have been attained. The Committee (or the Chief Executive Officer, as the case may be) is authorized at any time during or after a Performance Period, in its sole and absolute discretion, to adjust or eliminate the amount of a Bonus Award otherwise payable to any Employee for any reason.
8.2 Timing and Eligibility for Payment. The amount determined by the Committee (or the Chief Executive Officer, as the case may be) to be payable in connection with each Bonus Award shall be paid in full in cash in one lump sum as soon as practicable following the end of the Performance Period in which the Bonus Award was earned, but no later than the 15th day of the third month following the end of the Company’s fiscal year in which the Performance Period ended for employees subject to the tax laws of the United States (and, for all other employees, no later than the last day of such third month), provided that, except as otherwise provided in Section 8.3, the recipient Employee is still actively employed by the Company on the date Bonus Awards are paid.
8.3 Certain Terminations of Employment. Notwithstanding the foregoing, and except as otherwise set forth in a notice of Bonus Award, (i) in the event of the death or termination of employment due to Disability of an Employee, the Employee shall be entitled to receive a payout of the Employee’s Bonus Award assuming performance at the target level, as soon as administratively possible after such Employee’s death or termination of employment due to Disability, as applicable; and (ii) in the event of the involuntary termination of the Employee’s employment in connection with a reduction-in-force other than for Cause after the end of the Performance Period but prior to the date the Bonus Awards for such period are paid, the Employee shall be eligible to receive a payout of
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the Bonus Award determined as set forth in Section 8.2 above, subject to the Employee signing a release of claims in favor of the Company in the form determined by the Company.
8.4 Deferrals. Employees may defer the payout of Bonus Awards in accordance with and subject to the terms and conditions of the Company’s Deferred Incentive Compensation Plan (the “DIC Plan”) to the extent they are eligible to participate in the DIC Plan.
9. Recoupment of Bonus Awards
The Committee shall have the authority to condition the grant or payment of a Bonus Award upon the execution of an agreement that contains intellectual property, confidentiality, nonsolicitation and noncompetition covenants (“Protective Agreement”) in favor of the Company in a form determined by the Committee from time to time. If any Bonus Award recipient violates the terms of the Protective Agreement, the Board of Directors shall have the right to terminate the Bonus Award, or if such award has already been paid, to recoup, and the recipient shall have the obligation to repay, all or part of any Bonus Award that is subject to a Protective Agreement.
The Committee shall also have the authority to recoup, and each recipient shall have the obligation to repay, all or part of any Bonus Award paid under this Plan that may be required to be subject to recoupment under federal or state laws, any Company policy or the listing requirements of the NYSE (or other such exchange on which the Company’s shares may be listed for trading) as may be applicable from time to time.
10. Corporate Transactions
10.1 Plan Termination Triggers. Notwithstanding anything to the contrary in the Plan, in the event of a Change in Control, this Plan shall terminate as of the Change in Control Date.
10.2 Bonus Awards for Stub Period. If a Change in Control occurs, Employees shall be entitled to a determination of whether payment of Bonus Awards outstanding as of the Change in Control Date has been earned for the Stub Period. The amount of such Bonus Award payments shall be determined in accordance with the provisions of Section 6 and 8.2 and in a manner consistent with past practice by treating the Stub Period as the Performance Period and with the applicable metrics and Bonus Awards adjusted (including pro-rating the target amount of any such award), to the extent necessary, to reflect the length of the Stub Period. The payment amounts of the Bonus Awards shall be determined prior to the Change in Control Date and shall be based on the good faith estimates of the Company’s financial performance for the Stub Period, as determined by the Committee (as constituted immediately prior to the Change in Control).
10.3 Payment of Bonus Awards. Any Bonus Award for the Stub Period shall be paid in full in one lump sum no later than the 15th day of the third month following the end of the Company’s fiscal year in which the Stub Period ended, provided that the recipient Employee is still actively employed by the Company on the date Bonus Awards are paid. Notwithstanding the foregoing, if an Employee is employed by the Company on the Change in Control Date but not on the date Bonus Awards are paid because (i) he or she has been involuntarily terminated other than for Cause, or (ii) he or she has voluntarily resigned for Good Reason, such Employee shall be treated for this Section 10 as being employed by the Company on the date Bonus Awards are paid.
10.4 Deferred Bonus Awards. Notwithstanding anything herein to the contrary, to the extent a Bonus Award has been deferred pursuant to Section 8.4, such Bonus Award shall be subject to the terms and conditions of the DIC Plan including, without limitation, with respect to change in control events.
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11. Determinations and Liability of the Committee and the Chief Executive Officer
11.1 Determinations of Committee and Chief Executive Officer Final and Binding. All determinations by the Committee in carrying out and administering the Plan and in construing and interpreting the Plan shall be made in the Committee’s sole discretion and shall be final, binding and conclusive for all purposes and upon all persons interested herein. The Committee or the Chief Executive Officer’s decisions regarding the amount of each Bonus Award, as applicable, shall be final, binding and conclusive for all purposes and need not be consistent among Employees.
11.2 Liability of Committee and Chief Executive Officer. Neither the Committee (or its delegates) nor the Chief Executive Officer shall be liable for any action or determination made in good faith with respect to the Plan or any Bonus Award, and the members of the Committee (and its delegates) and the Chief Executive Officer shall be entitled to indemnification and reimbursement in the manner provided in the Company’s Certificate of Incorporation or its By-laws, as applicable, in each case as amended and in effect from time to time. In the performance of its responsibilities with respect to the Plan, the Committee and the Chief Executive Officer shall be entitled to rely upon information and advice furnished by the Company’s officers and employees, the Company’s accountants, the Company’s legal counsel or any other person the Committee and the Chief Executive Officer deem necessary, and neither the Committee nor the Chief Executive Officer shall be liable for any action taken or not taken in good faith reliance upon any such advice.
11.3 Section 409A Limitation. Notwithstanding anything contained herein to the contrary, any discretionary authority that the Board of Directors, the Committee or the Chief Executive Officer may have pursuant to the Plan shall not be applicable to a Bonus Award that is subject to Section 409A to the extent such discretionary authority will contravene Section 409A.
12. Amendment and Termination of the Plan
Subject to applicable laws, rules and regulations, the Board of Directors or the Committee shall have the right at any time to amend, suspend, discontinue or terminate the Plan; provided, however, that no such action shall be effective without approval by the shareowners of the Company to the extent necessary to comply with applicable laws, including applicable rules of a stock exchange on which the Company’s shares are traded. Moreover, (i) no amendment of the Plan shall operate to annul or diminish, without the consent of the Employee, a Bonus Award already made hereunder, and (ii) no amendment shall adversely affect an Employee’s entitlement to a Bonus Award for the Stub Period after a Change in Control.
13. Personal Data
In connection with managing and administering the Plan, the Company processes certain personal information about participants including, but not limited to, name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, shares or directorships held in the Company, and details of all Bonus Awards paid or pending payment. Some of this information is collected by the participant’s local employer and is transferred to the Company, as needed, for the purposes of implementation, administration, and management of the Plan. This information may also be shared with third parties providing services to the Company in connection with the Plan, and the Company takes all necessary steps, in accordance with applicable data protection laws, to ensure that such personal information is adequately protected. Resideo is headquartered in the United States, and some of its subsidiaries and affiliates are located outside of the United States. The Company will have in place standard contractual clauses approved by the European Commission to allow for transfer of personal data outside the European Union or European Economic Area. Likewise, the Company will take all necessary measures, in accordance with applicable data protection laws, to protect personal information relating to participants
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located in countries with data privacy laws that is transferred to other countries. Applicable data privacy laws may provide participants the right to review and, if factually inaccurate, correct any personal information relating to them. To review their own personal information, participants should contact their local human resources department.
14. Discretionary Nature of the Plan
14.1 No Labor Relationship. Incentive Compensation Awards under the Plan are not derived from any pre-existing labor relationship between the participant and the Company, but rather from a mercantile relationship.
14.2 Location of Administration. The Company may administer the Plan from outside of the participant's country of residence.
14.3 Benefits and Rights are Discretionary. Benefits and rights provided under the Plan are wholly discretionary and, although provided by the Company, do not constitute regular or periodic payments.
14.4 Benefits and Rights Not Included for Other Purposes. Except as otherwise provided by the terms of a written agreement, plan, policy or other arrangement that applies to a participant, benefits and rights provided under the Plan are not to be considered part of a participant's salary or compensation from the participant's local employer for purposes of calculating any severance, resignation, redundancy or other end of service payments, vacation, bonuses, long-term service awards, indemnification, pension or retirement benefits, or any other payments, benefits or rights of any kind, except to the extent specifically provided under a Company-sponsored benefit plan.
14.5 Plan Participation is Voluntary and Discretionary. Participation in the Plan and the payment of Incentive Compensation Awards hereunder is entirely voluntary and at the complete discretion of the Company. Participation in the Plan, the payment of an Incentive Compensation Award, or the payment of any future Incentive Compensation Award shall not be deemed to create any employment relationship or any obligation to pay Incentive Compensation Awards in the future, whether or not such reservation is explicitly stated at the time of payment.
14.6 Not Part of Employment Terms. The Plan shall not be deemed to constitute part of a participant’s terms and conditions of employment. The Company shall not incur any liability of any kind as a result of any change or amendment of the Plan at any time.
14.7 Participation Does Not Constitute Relationship. Participation in the Plan shall not be deemed to constitute an employment or labor relationship with the Company.
15. Miscellaneous
15.1 Section 409A. The Plan is intended to comply with the requirements of Section 409A and the regulations promulgated thereunder, and the provisions hereof shall be interpreted in a manner that satisfies such requirements, to the extent permitted by law. All Incentive Compensation Awards granted hereunder are intended to be excluded from coverage under Section 409A pursuant to Treasury Regulation § 1.409A-1(b)(4)’s “short-term deferral” rule unless, and only to the extent that, a deferral election is made pursuant to Section 8.4. If any provision of the Plan would otherwise frustrate or conflict with this intent or could cause any Incentive Compensation Award to be subject to taxes, interest or penalties under Section 409A, the Board of Directors may amend the Plan to the extent necessary to (i) comply with Section 409A, (ii) avoid the imposition of taxes,
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interest and penalties under Section 409A, and/or (iii) maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A; provided however, that such amendment shall not result in additional cost to the Company and provided further that nothing herein shall require the Company to provide any Employee with any gross-up for any tax, interest or penalty incurred by the Employee under Section 409A.
15.2 Other Compensation Plans. Nothing contained in the Plan shall prohibit the Company from granting special performance or recognition awards under such conditions, and in such form and manner as it sees fit, to Employees (including Executive Officers) for meritorious service of any nature. In addition, nothing contained in the Plan shall preclude or limit the ability of the Company to establish other incentive compensation plans providing for the payment of incentive compensation to Employees (including Executive Officers). Notwithstanding the foregoing provisions of this Section 15.2, no Employee shall participate in more than one incentive compensation plan for the same Performance Period unless such participation is communicated to the Employee by the Company in writing.
15.3 Plan Expenses. All expenses and costs in connection with the operation of the Plan shall be borne by the Company and no part thereof shall be charged against the Incentive Compensation Awards or to the Employees.
15.4 Withholding. All Incentive Compensation Awards under the Plan are subject to withholding, where applicable, for federal, state and local taxes.
15.5 No Limitation on Corporate Actions. Nothing contained in the Plan shall be construed to prevent the Company from taking or not taking any corporate action, whether or not such action could have an adverse effect on any Incentive Compensation Awards made under the Plan. No Participant, beneficiary or other person shall have any claim against the Company as a result of any such action.
15.6 Unfunded Plan. The Plan is intended to constitute an unfunded plan for incentive compensation. Prior to the payment of any Incentive Compensation Award, nothing contained herein shall give any Participant any rights that are greater than those of a general creditor of the Company.
15.7 Severability. If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan.
15.8 Governing Law. The Plan and all actions taken thereunder shall be governed by and construed in accordance with and governed by the laws of the State of Delaware.
15.9 No Rights to Incentive Compensation Awards or Employment. This Plan is not a contract between the Company and an Employee. No Employee shall have any claim or right to receive Incentive Compensation Awards under the Plan. Nothing in the Plan shall confer upon any employee of the Company any right to continued employment with the Company or interfere in any way with the right of the Company to terminate the employment of any of its employees, in accordance with the laws of the applicable jurisdiction, at any time, with or without cause, including, without limitation, any individual who is then an Executive Officer under the Plan.
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Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Jay Geldmacher, certify that:
Date: August 4, 2022 |
By: |
/s/Jay Geldmacher |
|
|
Jay Geldmacher |
|
|
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Anthony L. Trunzo, certify that:
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 4, 2022 |
By: |
/s/Anthony L. Trunzo |
|
|
Anthony L. Trunzo |
|
|
Executive Vice President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Resideo Technologies, Inc. (the Company) on Form 10-Q for the period ended July 2, 2022 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Jay Geldmacher, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 4, 2022 |
By: |
/s/ Jay Geldmacher |
|
|
Jay Geldmacher |
|
|
President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Resideo Technologies, Inc. (the Company) on Form 10-Q for the period ended July 2, 2022 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Anthony L. Trunzo, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 4, 2022 |
By: |
/s/ Anthony L. Trunzo |
|
|
Anthony L. Trunzo |
|
|
Executive Vice President and Chief Financial Officer |