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

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

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

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

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

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

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

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of October ~~29, 2021~~28, 2022 was ~~144,386,057~~145,843,859 shares.

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

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 2020 Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report on Form 10-K”) and “Management’s Discussion and Analysis ofPart I. 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 2020 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.

The financial statements and related footnotes as of October 2, 2021 should be read in conjunction with the financial statements for the year ended December 31, 2020 contained in our 2020 Annual Report on Form 10-K.

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

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

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

~~Note~~Note 1. ~~Organization, Operations,~~Business Description and Basis of Presentation

Business Description

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

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

We acquired First Alert, Inc., a provider of home safety products (“First Alert”) on March 31, 2022. The acquisition is expected to expand and leverage our footprint in the home with complementary smoke and carbon monoxide detection home safety products and fire suppression products. Refer to Note 13. Acquisitions for additional information.

Basis of Presentation

The ~~Company’s financial statements are presented on a consolidated basis~~accompanying Unaudited Consolidated Financial Statements (collectively, the ~~“Interim Financial~~“Financial Statements”) ~~and~~ have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)~~. All intercompany transactions have been eliminated~~ for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all ~~periods presented. The Interim Financial Statements are unaudited; however, in~~of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, ~~they~~the Financial Statements included herein contain all ~~the~~ adjustments, ~~(consisting~~which consist of ~~those of a~~ normal recurring ~~nature) considered~~adjustments, necessary to ~~state~~ fairly ~~the~~present our financial position, results of operations and cash flows for the periods ~~presented in conformity with U.S. GAAP applicable to interim periods.~~

~~The Company reports financial information on a fiscal quarter basis using a “modified” 4-4-5 calendar (modified in~~indicated. Operating results for the period from January 1, 2022 through October 1, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ~~always begins on January 1 and ends on~~ending December 31) that requires its businesses to close their first, second, and third quarter books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on business processes. The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year. In the event that differences in closing dates are material to year-over-year comparisons of quarterly or year-to-date results, the Company will provide appropriate disclosures.31, 2022.

During the year, we changed the presentation of intangible asset amortization on the unaudited Consolidated Statements of Operations, whereas they were previously included in cost of goods sold and selling, general and administrative expenses. The reclassification decreased cost of goods sold by $5 million and $17 million, and decreased selling, general and administrative expenses by $2 million and $6 million for the three and nine months ended October 2, 2021, respectively.

~~Reclassification~~

~~The prior year segment information was recast. See Note 4. Segment Financial Data for additional information.~~ Certain other reclassifications have been made to ~~the~~ prior period ~~financial statements~~amounts in the Financial Statements to conform to the ~~classification adopted~~current presentation.

For additional information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the United States Securities and Exchange Commission (the “SEC”) on February 15, 2022.

Reporting Periods

Our fiscal quarters are based on a four-four-five week calendar with the periods ending on the Saturday of the last week in the ~~current period.~~quarter except that December 31

~~The~~will always be the year end date. Therefore, the financial results of certain fiscal quarters may not be directly comparable to prior year unaudited Consolidated Interim Statements of Operations were reclassified to present research and development expenses as a separate line item within the statements. Research and development expenses were formerly included within Selling, general and administrative expenses.fiscal quarters.

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 1, 2022

(In millions, unless otherwise noted)

(Unaudited)

Restricted Cash

The following table provides a reconciliation of 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:


	October 1, 2022		December 31, 2021
Cash and cash equivalents	$	252	$	775
Restricted cash included in Other current assets (1)		3		4
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows	$	255	$	779

(1) Primarily collateral to support certain bank guarantees.

Note 2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are ~~set forth~~detailed in Note 2. Summary of Significant Accounting Policies of the ~~Company’s Notes to Consolidated and Combined Financial Statements included in the 2020~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2021.

Recent Accounting Pronouncements

~~—The Company considers~~We consider 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.~~our Financial Statements.

~~RESIDEO TECHNOLOGIES, INC.~~In September 2022, the FASB issued ASU No. 2022-04, Liabilities-Supplier Finance Programs (Topic 405): Disclosure of Supplier Finance Program Obligations, which provides guidance for a buyer in a supplier finance program to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude. The standard is effective for interim annual periods beginning after December 15, 2023, with early adoption permitted. We are currently evaluating the potential impact of adopting this standard but do not expect it to have a material impact on our Financial Statements.

~~NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS~~

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Under this standard, 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 standard 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 Financial Statements, including accounting policies, processes, and systems, was not material.

~~(In millions, unless otherwise noted)~~

~~(Unaudited)~~

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~~standard, along with its subsequent clarifications, is effective from March 12, 2020 through December 31, 2022 and is applicable ~~for the Company’s~~to our 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 standard and do not expect it to have a material impact on our Financial Statements. Refer to Note ~~13.~~17. Long-term Debt and Credit Agreement for further details on the Company’s A&R Senior Credit Facilities and Note 14. Derivative Instruments for further details on the Company's Swap Agreements. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.details.

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 1, 2022

(In millions, unless otherwise noted)

(Unaudited)

Note 3. ~~Revenue Recognition~~Segment Financial Data

~~Disaggregated Revenue~~We monitor our business operations through our two operating segments: Products & Solutions and ADI Global Distribution.

These operating segments follow the same accounting policies used for the Financial Statements. We evaluate a segment’s performance on a U.S. GAAP basis, primarily operating income before corporate expenses.

Corporate expenses primarily include unallocated 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).

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

~~Revenues by geography and business line are as follows:~~The following table represents summary financial data attributable to the segments:

Three Months Ended

Nine Months Ended

October 2,
2021

September 26,
2020

October 2,
2021

September 26,
2020

Comfort

$
303

$
297

$
877

$
725

Security

172

142

512

379

Residential Thermal Solutions

156

133

446

341

Products & Solutions

631

572

1,835

1,445

U.S. and Canada

727

650

2,125

1,758

EMEA (1)

128

129

402

338

APAC (2)

10

11

30

29

ADI Global Distribution

865

790

2,557

2,125

Net revenue

$
1,496

$
1,362

$
4,392

$
3,570


	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net revenue:
Products & Solutions	$	707	$	631	$	2,090	$	1,835
ADI Global Distribution		911		865		2,720		2,557
Total Net revenue	$	1,618	$	1,496	$	4,810	$	4,392

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

~~(2) APAC represents Asia and Pacific countries.~~


	Three Months Ended						Nine Months Ended
	October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Income from operations:
Products & Solutions	$	124		$	157		$	431		$	416
ADI Global Distribution		78			73			244			198
Corporate		(47	)		(63	)		(162	)		(196	)
Total Income from operations	$	155		$	167		$	513		$	418

The ~~Company recognizes the majority of~~Company’s Chief Executive Officer, its ~~revenue from~~Chief Operating Decision Maker, does not use segment assets information to allocate resources or to assess performance ~~obligations outlined in contracts with its customers that are satisfied at a point in time. Approximately~~ 3% of the ~~Company’s revenue is satisfied over time. As of October 2, 2021~~segments and ~~September 26, 2020, contract~~therefore, total segment assets ~~and liabilities were~~have not ~~material.~~been reported.

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 1, 2022

(In millions, unless otherwise noted)

(Unaudited)

Note 4. ~~Segment Financial Data~~Revenue Recognition

~~During the fourth quarter of 2020, the format of the Chief Operating Decision Maker’s reporting package was modified which resulted in changes to how business operations are presented.~~ Disaggregated Revenue

The Company ~~continues to monitor its business operations through~~ 2has two operating segments, Products & Solutions and ADI Global Distribution. ~~The Company now reports Corporate separately from the~~ 2 ~~operating segments. The reporting package also includes segment Operating profit, which replaces Segment Adjusted EBITDA as a performance metric.~~

~~These changes were designed to better align accountability and authority, give a clearer view into the operational performance of the two segments, and increase accountability~~Disaggregated revenue information for ~~management of corporate spending. As a result, the Company recast prior periods to conform with the new presentation.~~

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

~~ADI Global Distribution—The~~presented by product grouping while ADI Global Distribution is presented by region. Beginning January 1, 2022, the Products & Solutions operating 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 ~~the leading global distributor of low-voltage security products including intrusion, access control, and video products and participates significantly~~included in the

~~RESIDEO TECHNOLOGIES, INC.~~

~~NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS~~

~~(In millions, unless otherwise noted)~~

~~(Unaudited)~~

~~broader related markets of smart home, fire, access control, power, audio, ProAV, networking, communications, wire~~ Security and ~~cable, and data communications.~~

~~Corporate~~—Corporate includes expenses associated with legal, finance, information technology, human resources, strategy, and communications related to the Corporate office as well as supporting the operating segments, but do not relate directly to revenue-generating activities.

Safety grouping.

~~Segment information is consistent with how management reviews the businesses, makes investing~~Revenues by product grouping and ~~resource allocation decisions, and assesses operating performance.~~region are as follows:

Three Months Ended

Nine Months Ended

October 2,
2021

September 26,
2020

October 2,
2021

September 26,
2020

Revenue

Total Products & Solutions revenue

$
726

$
674

$
2,121

$
1,715

Less: Intersegment revenue

95

102

286

270

External Products & Solutions revenue

631

572

1,835

1,445

External ADI Global Distribution revenue

865

790

2,557

2,125

Total revenue

$
1,496

$
1,362

$
4,392

$
3,570


	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Products & Solutions:
Security and Safety	$	248	$	172	$	670	$	512
Air		245		215		721		612
Energy		142		156		455		446
Water		72		88		244		265
Total Products & Solutions	$	707	$	631	$	2,090	$	1,835

ADI Global Distribution:
U.S. and Canada	$	792	$	727	$	2,335	$	2,125
EMEA (1)		111		128		360		402
APAC (2)		8		10		25		30
Total ADI Global Distribution		911		865		2,720		2,557
Total Net revenue	$	1,618	$	1,496	$	4,810	$	4,392

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

Three Months Ended

Nine Months Ended

October 2,
2021

September 26,
2020

October 2,
2021

September 26,
2020

Operating profit (loss)

Products & Solutions

$
157

$
141

$
416

$
241

ADI Global Distribution

73

56

198

135

Corporate

(63
)

(66
)

(196
)

(217
)
Total

$
167

$
131

$
418

$
159

~~The Company’s Chief Operating Decision Maker does not use segment assets information to allocate resources or to assess performance of the segments~~(2) APAC represents Asia and ~~therefore, total segment assets have not been disclosed.~~Pacific countries.

We recognize the majority of our revenue from performance obligations outlined in contracts with our customers that are satisfied at a point in time. Less than 3% of our revenue is satisfied over time. As of October 1, 2022 and October 2, 2021, contract assets and liabilities were not material.

Note 5. Stock-Based Compensation Plans

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

During the three and nine months ended October 1, 2022, we recorded share-based compensation expense for all awards of $13million and $36 million, respectively. During the three and nine months ended October 2, 2021, we recorded share-based compensation expense for all awards of $10million and $29million, respectively.

Employee awards

During the nine months ended October ~~2, 2021,~~1, 2022, as part of ~~the Company’s~~our 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~~we granted ~~500,227~~669,551 market-based ~~RSUs~~PSUs and ~~1,125,136~~1,711,282 service-based RSUs to eligible employees. The weighted average grant date fair value per share for market-based ~~RSUs~~PSUs and service-based RSUs was $~~42.89~~36.11 and $~~27.41~~22.68, respectively.

~~Stock Options~~

During the nine months ended October 2, 2021, we granted ~~, as part of the Company’s annual long-term compensation under the Stock Incentive Plan,~~ ~~150,000~~497,645 ~~stock options were granted~~market-based PSUs and 1,075,887 service-based RSUs to eligible ~~employees at a weighted average exercise price per share of $25.48~~ ~~and~~employees. The weighted average grant date fair value per share offor market-based PSUs and service-based RSUs was $~~7.69~~42.98. and $27.26, respectively.

During the nine months ended October 1, 2022, as part of our annual long-term compensation under the 2018 Stock Incentive Plan for Non-Employee Directors of Resideo Technologies, Inc., as may be amended from time to time, we granted 66,580 service-based RSUs to eligible non-employee directors. The weighted average grant date fair value per share for service-based RSUs was $23.62. During the nine months ended October 1, 2022, we did not grant any PSUs to eligible non-employee directors. During the nine months ended October 2, 2021, we granted 39,891 service-based RSUs to eligible non-employee directors. The weighted average grant date fair value per share for service-based RSUs was $31.75.

Annual awards to our key employees generally have a three- or four-year service or performance period. RSU awards to our non-employee directors have a one-year service period. The fair value is determined at the date of grant.

~~Total~~total operating lease ~~costs include~~expense includes variable lease ~~costs~~expenses of $5 million and $13 million, respectively.

In addition to the monthly base rent, we are often charged separately for ~~the three~~common area maintenance which is considered a non-lease component. These non-lease component payments are expensed as incurred and ~~nine months ended October 2, 2021. For the three and nine months ended September 26, 2020, total~~are not included in operating lease ~~costs~~assets or liabilities.

A short-term lease is a lease with a term of 12 months or less and does not include ~~variable~~the option to purchase the underlying asset that we would expect to exercise. We have elected to adopt the short-term lease ~~costs of $~~5 ~~million~~exemption in ASC 842 and, $12 ~~million, respectively. Total operating~~as such have not recognized a right-of-use asset or lease ~~costs also include offsetting sublease income~~liability for these short-term leases which isare immaterial for the three and nine months ended October 1, 2022 and October 2, ~~2021 and September 26, 2020.~~2021.

As of October 2, 2021, the Company has additional operating leases that have not yet commenced. Obligations under these leases are not material. Additionally, as a lessor, the Company leases all or a portion of certain owned properties. Rental income for the three and nine months ended October 2, 2021 and September 26, 2020 was not material.

~~Note 7. Income Taxes~~

~~The Company recorded tax expense of $~~29 ~~million and $~~76 ~~million for the three and nine months ended October 2, 2021, respectively.~~

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 is required to apply separate forecasted effective tax rates to those jurisdictions rather than including them in the consolidated forecasted effective tax rate.

~~For the three months ended October 2, 2021 the net tax expense of $~~29 ~~million consists primarily of interim period tax expense of $~~32 ~~million based on year-to-date pretax income multiplied by the Company’s forecasted effective tax rate, partially offset by a tax benefit specific to the period of approximately $~~3 million consisting primarily of changes in estimates related to prior years. In addition to items specific to the period, the Company’s income tax rate is impacted by the mix of earnings across the jurisdictions in which the Company operates, non-deductible expenses, and U.S. taxation of foreign earnings.

~~For the nine months ended October 2, 2021, the net tax expense of $~~76 ~~million consists primarily of interim period tax expense of $~~80 ~~million based on year-to-date pretax income multiplied by the Company’s forecasted effective tax rate, offset by tax benefits specific to the period of approximately $~~4 million, consisting primarily of excess deductions for share-based compensation and changes in estimates related to prior years. In addition to items specific to the period, the Company’s income tax rate is impacted by the mix of earnings across the jurisdictions in which the Company operates, non-deductible expenses, and U.S. taxation of foreign earnings.

The settlement liability related to pre-Spin-Off litigation is included in the Other current liabilities of the Financial Statements as of October 1, 2022.

Refer to Note 16. Commitments and Contingencies for further details on the Reimbursement Agreement.

Note 8. Income Taxes

For interim periods, income tax is equal to the total of (1) year-to-date pretax income multiplied by the forecasted effective tax rate plus (2) tax expense items specific to the period. In situations where we expect to report losses where we do not expect to receive tax benefits, we apply separate forecast effective tax rates to those jurisdictions rather than including them in the consolidated forecast effective tax rate.

For the three and nine months ended October 1, 2022, the net tax expense was $33 million and $104 million, respectively, and consists primarily of interim period tax expense based on year-to-date pretax income multiplied by our forecast effective tax rate. In addition to items specific to the period, the Company’s 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. Tax expense was $29 million and $76 million for the three and nine months ended October 2, 2021, respectively.

Note 9. Earnings ~~(Loss)~~ Per 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):

Three Months Ended

Nine Months Ended

October 2,
2021

September 26,
2020

October 2,
2021

September 26,
2020

Net income (loss)

$
68

$
75

$
175

$
(22
)

Shares used in computing basic earnings per share

144,284

123,421

143,865

123,194

Effect of dilutive securities:

Dilutive effect of common stock equivalents

4,275

1,814

4,395

-

Shares used in computing diluted earnings per share

148,559

125,235

148,260

123,194

Earnings (loss) per share:

Basic

$
0.47

$
0.61

$
1.22

$
(0.18
)
Diluted

$
0.46

$
0.60

$
1.18

$
(0.18
)


	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Numerator for Basic and Diluted Earnings Per Share
Net income	$	63	$	68	$	244	$	175
Denominator for Basic and Diluted Earnings Per Share
Weighted average basic number of shares outstanding		145,755		144,284		145,442		143,865
Add: dilutive effect of share equivalents		3,403		4,275		3,530		4,395
Weighted average diluted number of shares outstanding		149,158		148,559		148,972		148,260

Earnings per share:
Basic	$	0.43	$	0.47	$	1.68	$	1.22
Diluted	$	0.42	$	0.46	$	1.64	$	1.18

Diluted earnings per 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~~our common stock for the three and nine months ended October 1, 2022 and October 2, ~~2021 and September 26, 2020. In periods where the Company has a net loss,~~ 0 ~~dilutive common shares are included in the calculation for diluted shares as they are considered anti-dilutive.~~2021. For the three and nine months ended October 1, 2022, average options and other rights to purchase approximately 0.8 million and 0.4 million shares of common stock, respectively, were outstanding and anti-dilutive, and therefore excluded from the computation of diluted earnings per share. In addition, an average of 1.5 million and 0.8 million shares of performance-based unit awards are excluded from the computation of diluted earnings per share for the three and nine months ended October 1, 2022, respectively, as the contingency had not been satisfied. For the three and nine months ended October 2, 2021, average options and other rights to purchase approximately 0.2 million shares of common stock were outstanding and anti-dilutive, and therefore excluded from the computation of diluted ~~earnings~~income per common share. ~~In addition, an~~An average of approximately 0.8 million and 0.7 million shares of performance-based unit awards are excluded from the computation of diluted earnings per ~~common~~ share for the three and nine months ended October 2, 2021, respectively, as the contingency ~~has not been satisfied. For the three and nine months ended September 26, 2020, average options and other rights to purchase approximately~~ ~~1.1~~ ~~million and~~ ~~3.6~~ ~~million shares of common stock, respectively, were outstanding and anti-dilutive, and therefore excluded from the computation of diluted income per common share. An average of approximately~~ ~~0.8~~ ~~million and~~ ~~0.6~~ ~~million shares of performance-based unit awards are excluded from the computation of diluted earnings per common share for the three and nine months ended September 26, 2020, as the contingency has~~had not been satisfied.

Note 10. ~~Inventories—~~Accounts Receivable, Net

Accounts receivable, net consists of the following:

October 2, 2021

December 31, 2020

Raw materials

$
161

$
127

Work in process

18

19

Finished products

531

526

$
710

$
672


	October 1, 2022			December 31, 2021
Accounts receivable	$	1,052		$	885
Allowance for doubtful accounts		(9	)		(9	)
Accounts receivable, net	$	1,043		$	876

Note 11. Inventories, Net

The components of inventories were as follows:


	October 1, 2022		December 31, 2021
Raw materials	$	256	$	174
Work in process		25		17
Finished products		676		549
Total Inventories, net	$	957	$	740

Note 12. Property, Plant, and Equipment, Net

Property, plant and equipment, at cost, consists of the following major asset classes:


	October 1, 2022			December 31, 2021
Machinery and equipment	$	625		$	602
Buildings and improvements		292			292
Construction in progress		64			35
Other		7			4
Total Property, plant, and equipment, at cost		988			933
Less: Accumulated depreciation		(637	)		(646	)
Property, plant, and equipment, net	$	351		$	287

Depreciation expense for both the three months ended October 1, 2022 and October 2, 2021 was $15 million, respectively. Depreciation expense for both the nine months ended October 1, 2022 and October 2, 2021 was $44 million, respectively.

Note 13. Acquisitions

On July 5, 2022, we acquired 100% of the outstanding equity of Electronic Custom Distributors Inc., a regional distributor of residential audio, video, automation, security, wire and telecommunication products and is included within the ADI Global Distribution operating segment. We have made a preliminary purchase price allocation based on information as of October 1, 2022 that is subject to change as additional information is obtained.

On March 31, 2022, we acquired 100% of the issued and outstanding capital stock of First Alert, a leading provider of home safety products for an aggregate cash purchase price of $613 million, net of cash acquired of $2 million. First Alert expands and leverages our footprint in the home with complementary smoke and carbon monoxide detection home safety products and fire suppression products. The business is included within the Products & Solutions operating segment.

The following table presents the preliminary purchase price allocation, for First Alert, at estimated fair value as of October 1, 2022:

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED ~~INTERIM~~ FINANCIAL STATEMENTS

October 1, 2022

(In millions, unless otherwise noted)

(Unaudited)


Cash	$	2
Accounts receivable, net		72
Inventories, net		117
Other current assets		2
Property, plant and equipment		82
Goodwill (1)		86
Other intangible assets		349
Other assets (non-current)		31
Total assets		741
Accounts payable		57
Accrued liabilities		33
Other liabilities		36
Total liabilities		126
Net assets acquired	$	615

(1) The $86 million of preliminary goodwill was allocated to the Products & Solutions operating segment. Goodwill from this acquisition is partially deductible for tax purposes.

On February 14, 2022, we acquired 100% of the outstanding equity of Arrow Wire and Cable Inc., a leading regional distributor of data communications, connectivity and security products. The business is included within the ADI Global Distribution operating segment and is expected to strengthen our global distribution portfolio in the data communications category with an assortment of copper and fiber cabling and connectivity, connectors, racking solutions, and network equipment.

Note ~~11.~~15. Accrued Liabilities

Accrued liabilities consist of the following:

October 2, 2021

December 31, 2020

Obligations payable under Indemnification Agreements

$
140

$
140

Taxes payable

55

62

Compensation, benefit and other employee-related

105

105

Customer rebate reserve

73

91

Litigation reserve

55

3

Restructuring reserve

10

24

Other

179

170

$
617

$
595


	October 1, 2022		December 31, 2021
Obligations payable under Indemnification Agreements	$	140	$	140
Compensation, benefit and other employee-related		101		114
Customer rebate reserve		84		94
Current operating lease liability		37		32
Taxes payable		33		54
Other (1)		199		167
Total Accrued liabilities	$	594	$	601

(1) Other includes accrued freight, accrued advertising, accrued legal reserves. accrued interest, accrued restructuring, and other miscellaneous accruals.

Refer to Note ~~12.~~16. Commitments and Contingencies for further details on Obligations payable under Indemnification Agreements.

Note ~~12.~~16. Commitments and Contingencies

Environmental Matters

~~The Company is~~We are subject to various federal, state, local, and foreign government requirements relating to the protection of the environment and ~~accrues~~accrue costs related to environmental matters when it is probable that ~~it has~~we have incurred a liability related to a contaminated site and the amount can be reasonably estimated. ~~Environmental-related~~Environment-related expenses for sites owned and operated by ~~Resideo~~us are presented within Cost of goods sold for operating sites. For the three and nine months ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020,~~ environmental expenses related to these operating sites were not material. Liabilities for environmental costs were $22 million ~~as of~~for both October ~~2, 2021~~1, 2022 and December 31, ~~2020.~~

The Company does not currently possess sufficient information to reasonably estimate the amounts of environmental 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 environmental matters 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.2021.

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

~~On October 29, 2018, in~~In connection with the Spin-Off, ~~the Company~~we entered into the Reimbursement Agreement with Honeywell ~~pursuant to which the Company has an obligation~~that obligates us to make cash payments to Honeywell in amounts equal to 90% of payments for certain Honeywell environmental-liability payments, which include amounts billed (“payments”), 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 “recoveries”). The amount payable by ~~the Company~~us in respect of such liabilities arising in respect of any given year is subject to a cap of $140 million. ~~See~~Refer to Note ~~19.~~17. Commitments and Contingencies in the Company’s ~~2020~~2021 Annual Report on Form 10-K for further discussion.

16Tax Matters Agreement

~~RESIDEO TECHNOLOGIES, INC.~~

~~NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS~~

(In ~~millions, unless otherwise noted)~~

~~(Unaudited)~~connection with the Spin-Off, we entered into the Tax Matters Agreement with Honeywell that obligates us to 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.

The following table summarizes information concerning the ~~Company’s Reimbursement Agreement~~Indemnification Agreements’ liabilities:

Nine Months Ended

October 2,
2021

September 26,
2020

Beginning balance

$
591

$
585

Accruals for indemnification liabilities deemed probable and reasonably estimable

111

107

Indemnification payment

(105
)

(70
)
Ending balance (1)

$
597

$
622


	Reimbursement			Tax Matters
	Agreement			Agreement			Total
Beginning Balance, December 31, 2021	$	597		$	128		$	725
Accruals for liabilities deemed probable and reasonably estimable (1)		116			(2	)		114
Payments to Honeywell		(105	)		(19	)		(124	)
Balance as of October 1, 2022	$	608		$	107		$	715

(1)

Reimbursement Agreement liabilities deemed probable and reasonably estimable, however, it is possible ~~the Company~~we could pay $140 million per year (exclusive of any late payment fees up to 5% per annum) until the earlier of (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million.

The liabilities related to the Indemnification Agreements are included in the following balance sheet accounts:

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 1, 2022

(In millions, unless otherwise noted)

(Unaudited)


	October 1, 2022		December 31, 2021
Accrued liabilities	$	140	$	140
Obligations payable under Indemnification Agreements		575		585
	$	715	$	725

For the three and nine months ended October 1, 2022, net expenses related to the Reimbursement Agreement were $30 million and $116 million, respectively, and for the three and nine months ended October 2, 2021, net expenses related to the Reimbursement Agreement were $39 million and $111 million, respectively, and ~~for the three and nine months ended September 26, 2020, net expenses related to the Reimbursement Agreement were $~~38 ~~million and $107~~ ~~million, respectively, and~~ are recorded in Other expense, net.

~~Reimbursement Agreement liabilities are included in the following balance sheet accounts:~~

October 2, 2021

December 31, 2020

Accrued liabilities

$
140

$
140

Obligations payable under Indemnification Agreements

457

451

$
597

$
591

~~The Company does~~We do 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~~our 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. As of October 2, 2021 and December 31, 2020, the Company had an indemnity liability owed to Honeywell for future tax payments of $~~130~~ ~~million and $139~~ ~~million, respectively, which is included in Obligations payable under Indemnification Agreements.~~

~~Trademark Agreement~~

~~In connection with the Spin-Off, the Company and Honeywell entered into a~~ 40-year Trademark License Agreement (the “Trademark Agreement”) that authorizes the Company’s use of certain licensed trademarks in the operation of Resideo’s business for the advertising, sale, and distribution of certain licensed products. In exchange, the Company pays a royalty fee of ~~1.5~~% on net revenue to Honeywell related to such licensed products which is recorded in Selling, general and administrative expense on the unaudited Consolidated Interim Statements of Operations. For the three and nine months ended October 2, 2021, royalty fees were $5 ~~million and $~~14 ~~million, respectively. For the three and nine months ended September 26, 2020, royalty fees were $~~7 ~~million and $~~18 ~~million, respectively.~~

~~RESIDEO TECHNOLOGIES, INC.~~

~~NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS~~

~~(In millions, unless otherwise noted)~~

~~(Unaudited)~~

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~~We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. ~~The Company~~We continually ~~assesses~~assess 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.~~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 are named defendants of a class action securities suit in the U.S. District Court for the District of Minnesota styled ~~In re Resideo Technologies, Inc. Securities Litigation~~, 19-cv-02863 (the “Securities Litigation”). The defendants filed a motion to dismiss the complaint on July 10, 2020. On March 30, 2021, United States District Judge Wilhelmina M. Wright issued an order and decision denying the motion to dismiss. On April 13, 2021, the Defendants filed an answer in the Securities Litigation.

On July 30, 2021, the Company executed a term sheet with plaintiffs’ representatives setting forth an agreement in principle to settle the claims alleged in the complaint, as amended. The total amount to be paid in settlement of the claims as set forth in the agreement in principle is $55 ~~million. Insurance recoveries of approximately $~~39 million are expected related to the settlement. The claim settlement payment and related insurance recoveries are recorded in Accrued liabilities and Other current assets, respectively. The net expense of $16 ~~million from the claim settlement and related insurance recoveries is recorded in Selling, general and administrative expenses.~~

On August 18, 2021 the Company and plaintiffs’ representative executed a definitive Stipulation and Agreement of Settlement reflecting the terms of the agreement in principle and other customary terms and conditions (the “Settlement”). That same day, on August 18, 2021, the plaintiffs’ representatives filed a motion with the Court seeking preliminary approval of the Settlement. The motion for preliminary approval was deemed fully submitted by the Court on September 14, 2021. On October 21, 2021, the Court granted preliminary approval of the Settlement and scheduled the Settlement hearing for January 27, 2022. The Company intends to vigorously pursue approval of the Settlement, but there can be no assurance that court approval will be granted.

Certain current or former directors and officers of the Company ~~are~~were defendants in a consolidated derivative action ~~pending in the District Court for the District of Delaware under the caption~~ In re Resideo Technologies, Inc. Derivative Litigation ~~20-cv-00915~~ (the ~~“Federal~~“Consolidated Federal Derivative Action”)~~, which has been~~ and was stayed ~~by agreement~~pending entry of ~~the parties.~~

~~On September 21, 2021, the parties filed a stipulation requesting the Federal Derivative Action be transferred to the District of Minnesota, where~~final judgement in the Securities Litigation ~~is pending, to reserve judicial resources~~ and ~~for~~ the ~~convenience of the parties. The Court ordered the transfer of the Federal~~Delaware Chancery Derivative ~~Action on September 23, 2021. The Company intends to defend this action vigorously, but there can be no assurance that the defense will be successful.~~

~~On September 1, 2021, an~~Action. An additional ~~shareholder derivative complaint~~suit was filed by Riviera Beach, part of the leadership group in the Federal Derivative Action, and City of Hialeah Employees Retirement System against certain current or former directors and officers of the Company in the District of Minnesota, alleging substantially 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 parties intend to seek consolidation of that action, captioned ~~Riviera Beach Police Pension Fund v. Nefkens, 21-cv-1965, and the Federal Derivative Action in the Minnesota Court. The Company intends to defend this action vigorously, but there can be no assurance that the defense will be successful.~~

~~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 in 2021 and not consolidated with the Federal Derivative Suits. On October 4, 2022, we reached an agreement in principle to resolve all of the pending lawsuits. Under the terms of the settlement, we have agreed to implement or codify certain corporate governance reforms and reimburse the plaintiffs’ attorneys’ fees of $1.6 million. The proposed settlement is subject to, among other things, the execution of definitive settlement documentation and court approval. The settlement liability is included in the Accrued liabilities in the Consolidated Balance Sheets, the expected insurance recovery of approximately $0.6 million is included in Accounts receivable, net.

On September 16, 2022, Salvatore Badalamenti (“Plaintiff”) filed a putative class action lawsuit (the “Badalamenti Lawsuit”) in the United States District Court for the District of New Jersey against Honeywell International Inc. and the Company. Plaintiff alleges, among other things, that the Company violated certain consumer protection laws by falsely advertising the Company’s combination-listed single data-bus burglar and fire alarms system control units (the “Products”) as conforming to Underwriters Laboratories, Inc. (the “UL”) or the National Fire Protection Association (“NFPA”) standards and/or failing to disclose such non-nonconformance. Plaintiff further alleges that the Company’s Products are defective because they do not conform to the UL and NFPA industry standards. Plaintiff does not allege that he, or anyone else, has experienced any adverse event due to the alleged product defect or that the Products did not work. Plaintiff alleges causes of action for violation of the New Jersey Consumer Fraud Act, fraud, negligent misrepresentation, breach of express and implied warranties, violation of the Magnuson-Moss Warranty Act, unjust enrichment, and violation of the Truth-in-Consumer Contract, Warranty, and Notice Act.

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED ~~INTERIM~~ FINANCIAL STATEMENTS

October 1, 2022

(In millions, unless otherwise noted)

(Unaudited)

~~State~~

Plaintiff seeks to represent a putative class of ~~Delaware, captioned~~ ~~Bud & Sue Frashier Trust U/A DTD 05/05/98 v. Fradin, 2021-0556 (“Delaware Chancery Derivative Action”). The Delaware Chancery Derivative Action remains stayed by agreement~~other persons in the United States who purchased the Products. Plaintiff, on behalf of himself and the putative class, seeks damages in an unknown amount, which he describes as the cost to repair and/or replace the Products and/or the diminution in value of the ~~parties. The Company intends~~Products.

We believe we have strong defenses against the allegations and claims asserted in the Badalamenti Lawsuit. We intend to defend ~~this action vigorously, but~~the matter vigorously; however, there can be no assurance that ~~the defense~~we will be ~~successful.~~

~~On August 20, 2021, Alice Burstein, a purported shareholder~~successful in such defense. In light of the ~~Company, sent a letter demanding that the Company’s Board of Directors undertake an independent internal investigation into certain current or former directors~~early stage of the ~~Company for violations of state and/~~Badalamenti Lawsuit, we are unable to estimate the total costs to defend the matter or ~~federal law related~~the potential liability to ~~the same conduct alleged~~us in the ~~Securities Litigation and derivative complaints (the “Demand Letter”). On September 13, 2021, the Company responded to the Demand Letter stating~~event that the Board had reviewed and considered the demand and determined the best interests of the shareholders and the Company would be served by deferring an investigation pending adjudication or resolution of the outstanding derivative actions.

~~See Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements~~we are not successful in ~~the Company’s 2020 Annual Report on Form 10-K for further discussion of these matters.~~our defense.

Warranties and Guarantees

In the normal course of business, ~~the Company issues~~we issue product warranties and product performance guarantees. ~~It accrues~~We accrue 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:

Nine Months Ended

October 2,
2021

September 26,
2020

Beginning of period

$
22

$
25

Accruals for warranties/guarantees issued during the year

12

13

Adjustment of pre-existing warranties/guarantees

(1
)

-

Settlement of warranty/guarantee claims

(13
)

(12
)
End of period

$
20

$
26


	Nine Months Ended
	October 1, 2022			October 2, 2021
Beginning of period	$	23		$	22
Accruals for warranties/guarantees issued during the period		15			12
Additions from acquisitions		14			-
Settlements and adjustments		(17	)		(14	)
End of period	$	35		$	20

Note 18. Derivative Financial Instruments

We use derivative financial instruments to manage interest rate risk. Our policy is not to use derivative instruments for trading or speculative purposes. We have written policies and procedures that place all financial instruments under the direction of corporate treasury and restrict all derivative transactions to those intended for hedge accounting.

All derivatives are recorded at fair value in the Consolidated Balance Sheets. Our derivatives are designated as cash flow hedges and the ~~Revolving Credit Facility. The Company determined that the Revolving Credit Facility approximated fair value. The A&R Term B Facility and the Senior Notes due 2029’s~~effective changes in fair values are ~~approximately $948~~ ~~million and $295~~ ~~million, respectively. The fair values of the debt are based on the quoted inactive prices~~recorded in Accumulated other comprehensive loss and are ~~therefore classified as Level 2 within~~included in unrealized gains (losses) until the ~~valuation hierarchy.~~underlying hedged item is recognized in earnings.

~~RESIDEO TECHNOLOGIES, INC.~~

~~NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS~~

~~(In millions, unless otherwise noted)~~

~~(Unaudited)~~

~~Note 14. Derivative Instruments~~

~~The Company uses~~We use interest rate swap agreements to manage exposure to interest rate risks. ~~The Company does~~We do 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, net in the ~~Interim~~ 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 ~~Interim~~ Statements of Operations based on an assessment of the agreements at the time of termination.

InOn March 31, 2021, ~~the Company~~we entered into 8eight interest rate swap agreements (the “Swap Agreements”) with several financial institutions for a combined notional value of $560 million. The effect of the Swap Agreements is to convert 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 terms ranging from ~~three~~two to ~~five years~~four. years remaining. The Swap Agreements are adjusted to fair value on a quarterly basis. The estimated fair value is based on Level 2 inputs primarily including the forward LIBOR curve available to swap dealers. Contract gains recognized in other comprehensive income (loss) totaled $14 million and ~~amounts~~$38 million for the three and nine months ended October 1, 2022, respectively. Contract gains or losses recognized in other comprehensive income (loss) were immaterial for the three and nine months ended October 2, 2021. Amounts reclassified from Accumulated other comprehensive loss into earnings were not material for any of the periods presented. The fair value of the Swap Agreements atas of October 1, 2022 was $46 million, of which $18 million was recognized in Other current assets and $28 million was recognized in Other assets. The fair value of the Swap Agreements as of October 2, 2021 was ~~not material. Amounts~~immaterial. Unrealized gains expected to be reclassified from Accumulated other comprehensive loss into earnings in the next 12 months ~~were not material~~are estimated to be $17 million as of October ~~2, 2021.~~1, 2022.

Note ~~15. Pension~~19. Fair Value

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 1, 2022

(In millions, unless otherwise noted)

(Unaudited)

Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, requires us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs.

Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the assets or liabilities.

Fair Value of Financial Instruments

The ~~Company sponsors~~carrying amounts of cash and cash equivalents, restricted cash, trade accounts receivable and accounts payable approximate fair value as of October 1, 2022 and December 31, 2021 because of their relatively short maturities. As of October 1, 2022, there were no borrowings and no letters of credit issued under the A&R Revolving Credit Facility. The fair values of the remaining financial instruments not currently recognized at fair value on our Consolidated Balance Sheets at the respective period ends were:


	October 1, 2022				December 31, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

4.000% Senior Notes due 2029	$	300	$	241	$	300	$	294
Seven-year variable rate term loan due 2028	$	1,134	$	1,103	$	943	$	943

The fair value of the A&R Term B Facility and the 4% Senior notes due 2029 was based on the quoted inactive prices and are therefore classified as Level 2 within the valuation hierarchy.

Fair Value Measurements

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used as of October 1, 2022 and December 31, 2021.

Credit and Market Risk—Wecontinually monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. The terms and conditions of credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer.

Foreign Currency Risk Management—We conduct business on a multinational basis in a wide variety of foreign currencies. We are exposed to market risks from changes in currency exchange rates. These exposures may impact future earnings and/or operating cash flows. The 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 the exposures and may supplement this approach from time to time by entering into forward and option hedging contracts. As of October 1, 2022 and December 31, 2021, we had no forward or option hedging contracts.

Interest rate swaps—Interest rate swaps are based on cash flow hedge contracts that have fixed rate structures and are measured against market-based LIBOR yield curves. These interest rate swaps are classified within Level 2 of the fair value hierarchy because they are valued using alternative pricing sources or models that utilized market observable inputs, including current and forward interest rates.

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 1, 2022

(In millions, unless otherwise noted)

(Unaudited)

The following tables summarize information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of October 1, 2022 and December 31, 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


		October 1, 2022						December 31, 2021
		Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
	Interest rate swap assets	$	-	$	46	$	46	$	-	$	7	$	7
Liabilities:
	Interest rate swap liabilities		-		-		-		-		1		1
Total		$	-	$	46	$	46	$	-	$	6	$	6

There were no Level 3 assets or liabilities for the periods presented.

Note 20. Pension Plans

We sponsor multiple funded and unfunded U.S. and non-U.S. defined benefit pension plans. Pension benefits for many of ~~its~~our U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit plans. ItWe also ~~sponsors~~sponsor 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~~ Our pension obligations as of October ~~2, 2021~~1, 2022 and December 31, ~~2020~~2021 were $~~166~~101 million and $~~168~~115 million, respectively, and are included in Other liabilities inof the ~~unaudited Consolidated Interim Balance Sheets. Net~~Financial Statements as of October 1, 2022.

The following table summarizes the components of the periodic benefit cost, ~~recognized in Comprehensive income (loss)~~before tax for the ~~three and nine months ended October 2, 2021 is $~~2 ~~million and $~~7 ~~million, respectively. Net periodic benefit cost recognized in Comprehensive income (loss) for the three and nine months ended September 26, 2020 was $~~2 ~~million and $~~6 ~~million, respectively.~~periods indicated:

The components of net periodic benefit costs other than the service cost are included in Other expense, net in the unaudited Consolidated Interim Statements of Operations for the three and nine months ended October 2, 2021 and September 26, 2020.


	U.S. Plans
	Three months ended						Nine months ended
	October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Periodic benefit cost:
Service cost	$	2		$	2		$	5		$	6
Interest cost		3			5			8			7
Expected return on plan assets		(4	)		(8	)		(13	)		(12	)
Net periodic benefit cost	$	1		$	(1	)	$	0		$	1

	Non-U.S. Plans
	Three months ended						Nine months ended
	October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Periodic benefit cost:
Service cost	$	1		$	2		$	4		$	5
Interest cost		-			-			1			1
Expected return on plan assets		-			-			-			-
Net periodic benefit cost	$	1		$	2		$	5		$	6

22The Company is not required to make contributions to the defined benefit plans in 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~(In millions, except per share amounts)~~

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 nine months ended October ~~2, 2021~~1, 2022 and should be read in conjunction with the unaudited Consolidated ~~Interim~~ Financial Statements and the notes thereto contained elsewhere in this Form 10-Q. The financial information as of October ~~2, 2021~~1, 2022 should be read in conjunction with the consolidated and combined financial statements for the year ended December 31, ~~2020~~2021 contained in our ~~2020~~2021 Annual Report on Form 10-K (the ~~“2020~~“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:

•

industry cyclicality;

•

competition from other companies in our markets and segments, as well as in new markets and emerging markets;

•

our ability to successfully develop new technologies and products and develop and protect the intellectual property related to the same and to defend against IP threats of others;

•

inability to obtain necessary product components, production equipment or replacement parts;

•

the impact of pandemics, epidemics, natural disasters and other public health emergencies, such as COVID-19;

•

failure to achieve and maintain a high level of product and service quality;

•

inability to compete in the market for potential acquisitions;

•

inability to consummate acquisitions on satisfactory terms or to integrate such acquisitions effectively;

•

our ability to retain or expand relationships with significant customers;

•

dependence upon information technology infrastructure having adequate cyber-security functionality;

•

economic, political, regulatory, foreign exchange and other risks of international operations, including the potential adverse effects of a global economic slowdown or recession, geo-political instability and recent world events that have increased the risks posed by international trade disputes, tariffs and sanctions;

•

our failure to execute on key business transformation programs and activities;

•

the failure to increase productivity through sustainable operational improvements;

•

the impact of inflation on employee expenses, shipping costs, raw material costs, energy and fuel costs and other production costs;

•

fluctuation in financial results due to the seasonal nature of portions of our business;

•

our ability to recruit and retain qualified personnel;

•

labor disputes, work stoppages, other disruptions, or the need to relocate any of our facilities;

•

changes in legislation or government regulations or policies;

•

the significant failure or inability to comply with the specifications and manufacturing requirements of our original equipment manufacturers (“OEMs”) customers;

•

the operational constraints and financial distress of third parties;

•

our ability to borrow funds and access capital markets;

•

the amount of our obligations and nature of our contractual restrictions pursuant to, and disputes that have or may hereafter arise under, the Reimbursement Agreement and the other agreements we entered into with Honeywell in connection with the Spin-Off;

•

our reliance on Honeywell for the Honeywell Home trademark;

•

potential material environmental liabilities;

•

our inability to maintain intellectual property agreements necessary to our business;

•

potential material costs as a result of warranty rights or claims, including product recalls, and product liability actions that may be brought against us;

•

potential material litigation matters;

•

unforeseen U.S. federal income tax and foreign tax liabilities; and

•

certain factors discussed elsewhere in this Form 10-Q.

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 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.

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 operating segment ~~consists of comfort, security, and residential thermal products and solutions. Our~~ offerings include temperature and humidity control, ~~thermal~~energy products and ~~combustion~~ solutions, water and air solutions, ~~as well as~~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 ~~intrusion,~~ 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, ~~fire, power, audio, ProAV, networking, communications,~~and wire and ~~cable, and data communications.~~cable. The Products & Solutions operating segment, consistent with our industry, has a higher gross and operating profit margin profile in comparison to the ADI Global Distribution segment.

~~During~~In March 2022, we completed the ~~fourth quarter~~acquisition of ~~2020, we made~~First Alert, Inc. (“First Alert”), a ~~change to our reportable segments. Previously we allocated corporate costs to~~leading provider of home safety products. This acquisition was integrated into the Products & Solutions ~~segment as well as~~portfolio and expands our footprint in the ADI Global Distribution segment. We now report corporate costs separately, as Corporate, from the two operating segments. In addition, during the fourth quarter of 2020, our Chief Operating Decision Maker moved towards making financial decisionshome with complementary smoke and ~~allocating resources based on segment Operating profit, rather than Segment Adjusted EBITDA. These changes were designed to better align accountability~~carbon monoxide detection home safety and ~~authority, give a clearer view into the operational performance of the two segments~~fire suppression products.

COVID-19 and ~~increase accountability for management of corporate spending.~~Recent Macroeconomic Environment

Our financial performance is influenced by ~~several macro~~macroeconomic factors such as repair and remodeling activity, residential and non-residential construction, employment rates, and overall macro environment. The global outbreak of a novel coronavirus disease (“COVID-19”) created economic disruption. Starting at the end of the first quarter of 2020, we experienced constrained supply and slowed customer demand, as well as temporary closures of several of our ADI Global Distribution branches, that adversely impacted business, results of operations and overall financial performance. Although there remains uncertainty as to the continuing implications of COVID-19, customer demand has improved and ongoing cost actions and transformation efforts contributed to the improvements in the Company’s operations and overall financial performance. We continue to experience constrained supply.

~~Third Quarter Highlights~~

Net revenue increased $134 million in the third quarter of 2021 compared to the same quarter of 2020, primarily due to volume and sales price increases. Gross profit as a percent of net revenues increased to 28% in the third quarter of 2021 from 27% in the third quarter of 2020. The primary items driving the 100 basis point (“bps”) increase in gross profit percentage were a 200 bps benefit from sales price increases and sales mix, 100 bps benefit from customer rebate favorability, and a 100 bps benefit from reduced obsolete and surplus inventory charges. These favorable changes were partially offset by a 200 bps unfavorable impact from increased material costs and a 100 bps impact from increased freight costs.

~~Third quarter net income was $68 million for the three months ended October 2, 2021 compared to net income of $75 million for the three months ended September 26, 2020.~~

Selling, general and administrative expense for the three months ended October 2, 2021 was $229 million, an increase of $8 million from $221 million for the three months ended September 26, 2020. The increase was driven by impairment charges resulting from the relocation of our Austin, Texas corporate headquarters location to a lower cost site, commercial investments, increased incentives expense, increased stock-based compensation expense, and labor and other inflation totaling $37 million. These increases were partially offset by lower Spin-Off and restructuring related expenses, transformation programs cost savings, and other cost reductions totaling $29 million.

Research and development expense for the three months ended October 2, 2021 was $20 million, an increase of $2 million from $18 million for the three months ended September 26, 2020. The increase was driven by labor and other items totaling $2 million.

We ended the third quarter with $686 million in cash and cash equivalents. Net cash provided by operating activities was $203 million for the nine months ended October 2, 2021. At October 2, 2021, accounts receivable were $932 million, inventories were $710 million, accounts payable were $905 million, and there were no borrowings under our revolving credit facility.

~~COVID-19 Pandemic~~

The World Health Organization (“WHO”) declared COVID-19 a pandemic in March 2020. The broader implications of COVID-19 on our results of operations and overall financial performance remain uncertain. During the second half of 2020 and into 2021 customer demand has improved versus the first half of 2020 and on-going cost actions and transformation efforts contributed to the improvements in the Company’s results of operations and overall financial performance. As viruses constantly change through mutation, new variants of the COVID virus have occurred and are expected to continue to occur over time. The CDC and other world health agencies have identified multiple variants which are circulating globally. As new information emerges it may have an impact on potential restrictions globally in areas including travel, freight, shipping, and commercial operations. As there remains uncertainty around the impacts ofinterest rates, the COVID-19 pandemic ~~we address~~ and ~~evaluate~~ the ~~impacts frequently.~~

U.S. and international government responses to the COVID-19 outbreak have included “shelter in place,” “stay at home”, and similar types of orders. In the United States, Canada, and certain other countries globally, these orders exempt certain products and services needed to maintain continuity of operations of critical infrastructure sectors as determined by the federal government. If additional lockdown orders are put in place or if any of the applicable exemptions are curtailed or revoked in the future, that could adversely impact our business, operating results, and financial condition. Furthermore, to the extent these exemptions do not extend to our key suppliers and customers, this could also adversely impact our business, operating results, and financial condition. Finally, we are incurring increased costs associated with other employee safety measures.

overall 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 uncertainty surrounding the ~~mitigation measures that are implemented by governmental authorities. We also expect~~prevailing macroeconomic environment. For example, recent business conditions ~~to remain challenging, with~~have been impacted by supply chain disruptions and global shortages in key materials and components, ~~in certain instances impacting~~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 and other costs, and unfavorable foreign currency impacts from a stronger U.S. dollar. In response to these challenges, we ~~will continue~~have, among other measures, aggressively managed supplier relationships to ~~focus on those factors that we can control: closely managing and controlling our expenses; aligning~~mitigate some of these shortages, developed contingency plans for future supply, aligned our production schedules with demand in a proactive manner, ~~as there are changes in market conditions to minimize our cash operating costs;~~ and ~~pursuing~~pursued further improvements in the productivity and effectiveness of our manufacturing, selling, and administrative activities.

~~Current Quarter Developments~~In February 2022, Russian military forces launched a military action in Ukraine and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of the ongoing military action in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in government agency budgets and funding preferences as well as increases in cyberattacks and cyber and corporate espionage. To date we have not experienced any material interruptions in our infrastructure, supplies, technology systems or networks needed to support our operations. We are actively monitoring

~~Senior Notes~~26

the situation in Ukraine and assessing its impact on our business. Any of the above-mentioned factors could affect our business, financial condition and results of operations.

Third Quarter Highlights

~~On August 26, 2021, we redeemed~~Net revenue increased $122 million, or 8%, over the ~~remaining $260~~third quarter prior year primarily from $135 million in ~~principal amount~~revenue from acquisitions and $99 million in revenue from higher selling prices for our products in response to the current inflationary environment. Partially offsetting these increases were lower organic sales volume of $61 million and unfavorable foreign currency fluctuations of approximately 300 bps or $51 million.

Gross profit as a percent of net revenues was 27% for the three months ended October 1, 2022, a decrease of approximately 100 basis points (“bps”) over the same period last year. The drivers of the ~~Senior Notes due 2026 at a redemption price of 105.594% of par plus accrued interest. As~~decrease include unfavorable impacts from higher costs as a result ~~debt extinguishment costs~~ of ~~$18 million were recorded in Other expense, net.~~

~~On August 26, 2021, we issued $300 million in principal amount 4% senior unsecured notes due in 2029.~~

~~Basis~~the current inflationary environment of ~~Presentation~~

Our financial statements are presented on a consolidated basis (collectively, the “Interim Financial Statements”). The Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

~~Reclassification~~

~~The prior year segment information was recast to present Corporate separately~~100 bps, as well as ~~present~~lower volume leverage primarily from the Products & Solutions operating segment ~~Operating profit which replaces Segment Adjusted EBITDA. See Note 4. Segment Financial Data~~ of Notes to Consolidated Interim Financial Statements for additional information. Certain reclassifications have been made to prior period financial statements to conform to the classification adopted in the current period.100 bps. These impacts were partially offset by a favorable price and sales mix of 100 bps.

~~The prior year unaudited Consolidated Interim Statements of Operations were reclassified to present~~ Research and development expenses ~~as a separate line item within~~for the ~~statements. Research~~three months ended October 1, 2022 were $29 million, an increase of $9 million from $20 million for the three months ended October 2, 2021. The increase was driven by acquisitions and ~~development expenses were formerly included within~~ new product investments.

Selling, general and administrative ~~expenses.~~expenses for the three months ended October 1, 2022 were $236 million, an increase of $9 million or 4% from $227 million for the three months ended October 2, 2021. The increase was primarily driven by increased costs associated with the First Alert acquisition of $19 million, investment in marketing and sales of $5 million, and labor inflation of $4 million, partially offset by lower impairment charges resulting from the relocation of our Austin, Texas corporate headquarters to a lower cost site in 2021 of $10 million, an indemnification accrual release of $8 million, and foreign currency impacts of $9 million.

~~Components~~

Net income for the three months ended October 1, 2022 was $63 million compared to net income of ~~Operating Results~~$68 million for the three months ended October 2, 2021, a 7% decrease and $0.04 decrease in earnings per share. The decrease is a result of the factors discussed above.

Unrestricted cash on hand was approximately $252 million and liquidity was approximately $752 million as of October 1, 2022. Also, there were no borrowings under the $500 million the A&R Revolving Credit Facility.

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

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

(Unaudited)


	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net revenue	$	1,618	$	1,496	$	4,810	$	4,392
Cost of goods sold		1,188		1,075		3,475		3,210
Gross profit		430		421		1,335		1,182
Research and development expenses		29		20		81		63
Selling, general and administrative expenses		236		227		716		678
Intangible asset amortization		10		7		25		23
Income from operations		155		167		513		418
Other expense, net		44		58		125		130
Interest expense		15		12		40		37
Income before taxes		96		97		348		251
Provision for income taxes		33		29		104		76
Net income	$	63	$	68	$	244	$	175
Earnings per share
Basic	$	0.43	$	0.47	$	1.68	$	1.22
Diluted	$	0.42	$	0.46	$	1.64	$	1.18
Weighted average number of common shares outstanding
Basic		145,755		144,284		145,442		143,865
Diluted		149,158		148,559		148,972		148,260

Net Revenue

~~We manage our global business operations through two operating segments, Products & Solutions and ADI Global Distribution:~~


	Three Months Ended					Nine Months Ended
	October 1, 2022			October 2, 2021		October 1, 2022			October 2, 2021
Net revenue	$	1,618		$	1,496	$	4,810		$	4,392
% change compared with prior period		8	%				10	%

Three months ended

Net revenue increased $122 million, or 8%, over the third quarter prior year primarily due to $135 million in revenue from the acquisitions and $99 million in revenue from higher selling prices. Partially offsetting these increases were lower organic sales volume of $61 million and unfavorable foreign currency fluctuations of approximately 300 bps or $50 million.

~~Products & Solutions:~~

We generate the majority of our Product & Solutions net revenue primarily from residential end-markets. Our Products & Solutions segment includes traditional products, as well as connected products, which we define as any device with the capability to be monitored or controlled from a remote location by an end-user or service provider. Our products are sold through a network of HVAC, plumbing, security, and electrical distributors including our ADI Global Distribution business, OEMs, and service providers such as HVAC contractors, security dealers, and plumbers. We also sell some products via retail and online channels.Nine months ended

~~ADI Global Distribution:~~

~~We generate~~Net revenue ~~through~~for the ~~distribution~~nine months ended October 1, 2022 was $4,810 million, an increase of low-voltage electronic and security products, as well as smart home, fire, power, audio and ProAV, networking, communications, wire and cable, and data communications that are delivered through a comprehensive network of professional contractors, distributors and OEMs, as well as major retailers and online merchants. In addition to our own security products, ADI Global Distribution distributes products$418 million, or 10%, from industry-leading manufacturers and also carries a line of private label products. We sell these products to contractors that service non-residential and residential end-users. 14% of ADI Global Distribution’s net revenue is supplied by our Products & Solutions segment. Management estimates that$4,392 million for the nine months ended October 2, 2021. The increase in ~~2020 and 2021 approximately two-thirds of ADI Global Distribution’s~~ net revenue was ~~attributed to non-residential end markets~~driven primarily by $288 million in revenue from the acquisitions, and ~~one-third to residential end markets.~~higher selling prices of $305 million. Partially offsetting these increases were foreign currency fluctuations of approximately 300 bps or $115 million and lower sales volumes of $60 million.

2528

Cost of Goods Sold and Gross Profit


	Three Months Ended						Nine Months Ended
	October 1,			October 2,			October 1,			October 2,
	2022			2021			2022			2021
Cost of goods sold	$	1,188		$	1,075		$	3,475		$	3,210
% change compared with prior period		11	%					8	%
Gross profit percentage		27	%		28	%		28	%		27	%

Three months ended

Gross profit as a percentage of net sales was 27% for the three months ended October 1, 2022, compared to 28%, a 100 bps decrease over the same period last year. The drivers of the decrease include unfavorable impacts from higher costs as a result of the current inflationary environment of 100 bps, as well as lower volume leverage primarily from the Products & ~~Solutions:Cost~~Solutions operating segment of ~~goods sold includes costs associated with raw materials, assembly, shipping~~100 bps. These impacts were partially offset by favorable price and ~~handling~~sales mix of ~~those products; costs~~100 bps.

Nine months ended

Gross profit as a percentage of ~~personnel-related expenses, including pension benefits,~~net sales was 28% for the nine months ended October 1, 2022, compared to 27% for the nine months ended October 2, 2021. The primary items driving the increase in gross profit percentage were a 200 bps impact from price increases and ~~equipment associated with manufacturing support, logistics~~favorable sales mix. This impact was partially offset by an unfavorable impact of 100 bps from increased material costs.

Research and ~~quality assurance, non-research~~Development Expenses


	Three Months Ended						Nine Months Ended
	October 1,			October 2,			October 1,			October 2,
	2022			2021			2022			2021
Research and development expenses	$	29		$	20		$	81		$	63
% of revenue		2	%		1	%		2	%		1	%

Three months ended

Research and development ~~engineering costs,~~expenses for the three months ended October 1, 2022 were $29 million, an increase of $9 million from $20 million for the three months ended October 2, 2021. The increase was driven by acquisitions of $3 million and ~~costs~~new product investments of ~~certain intangible assets.~~$2 million.

~~ADI Global~~

Nine months ended

~~Distribution:~~

~~Cost~~Research and development expenses for the nine months ended October 1, 2022 were $81 million, an increase of ~~goods sold consists primarily~~$18 million from $63 million for the nine months ended October 2, 2021. The increase was driven by the inclusion of ~~inventory-related costs~~acquisitions of $8 million and ~~includes labor and personnel-related expenses.~~planned investment to support new product launches of $7 million.

Selling, General and Administrative ~~Expense~~Expenses


	Three Months Ended						Nine Months Ended
	October 1,			October 2,			October 1,			October 2,
	2022			2021			2022			2021
Selling, general and administrative expenses	$	236		$	227		$	716		$	678
% of revenue		15	%		15	%		15	%		15	%

Three months ended

Selling, general and administrative ~~expense includes trademark royalty~~ expenses for the three months ended October 1, 2022 were $236 million, an increase of $9 million, or 4%, from $227 million for the three months ended October 2, 2021. The increase was primarily driven by increased costs associated with the First Alert acquisition of $19 million, investment in marketing and sales ~~incentives~~of $5 million, and ~~commissions, professional fees,~~labor inflation of $4 million partially offset by lower impairment charges resulting from the relocation of our Austin, Texas corporate headquarters to a lower cost site in 2021 of $10 million, an indemnification accrual release of $8 million, and foreign currency impacts of $9 million.

Nine months ended

Selling, general and administrative expenses for the nine months ended October 1, 2022 were $716 million, an increase of $38 million from $678 million for the nine months ended October 2, 2021. The increase was primarily driven by increased costs associated with the First Alert acquisition of $35 million, investment in marketing and sales of $16 million, labor inflation of $13 million, and transaction costs associated with the First Alert acquisition of $10 million partially offset by lower legal ~~fees, promotional~~expenses as a result of the previously disclosed 2021 securities class action litigation settlement net of insurance recoveries of $16 million, lower impairment charges resulting from the relocation of our Austin, Texas corporate headquarters to a lower cost site in 2021 of $10 million, indemnification accrual release of $8 million, and ~~advertising expenses, personnel-related expenses, including stock compensation expense and pension benefits, and research and development expenses.~~foreign currency impacts.

Other Expense, Net


	Three Months Ended				Nine Months Ended
	October 1,		October 2,		October 1,		October 2,
	2022		2021		2022		2021
Other expense, net	$	44	$	58	$	125	$	130

Three months ended

Other expense, net ~~consists~~for the three months ended October 1, 2022 was $44 million, a decrease of $14 million from $58 million for the three months ended October 2, 2021. The decrease was primarily driven by $18 million from 2021 debt extinguishment costs incurred as a result of the redemption of the remaining Senior Notes due 2026, $9 million in lower expenses related to the Honeywell Reimbursement Agreement, and partially offset by $13 million in legal expenses ~~for certain Honeywell environmental liability payments. For further information see~~as a result of the “Reimbursement Agreement” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 12. Commitments and Contingencies of Notes to Interim Financial Statements of this Form 10-Q. pre-Spin-Off litigation matter settlement.

Nine months ended

Other expense, net ~~also includes~~for the nine months ended October 1, 2022 was $125 million, a decrease of $5 million from $130 million for the nine months ended October 2, 2021. The decrease was primarily driven by $41 million from 2021 debt extinguishment costs incurred as a result of the Senior Notes due 2026 redemption and the execution of the A&R Credit Agreement, ~~as well as foreign exchange gains~~ and ~~losses and other non-operating related expense or income.~~

~~Interest Expense~~

Interest expense consists of interest on our short and long-term obligations, including our senior notes, term credit facilities, revolving credit facilities, and any realized gains or losses from our interest rate swaps. Interest expense on our obligations includes contractual interest, amortization of the debt discount, and amortization of deferred financing costs.

~~Tax Expense~~

Provision for income taxes includes both domestic and foreign income taxes at the applicable statutory tax rates, adjusted for U.S. taxation of foreign earnings, non-deductible expenses, and other permanent differences.

~~Results of Operations~~

~~The following table sets forth our selected unaudited consolidated interim statements of operations for the periods presented:~~

~~Unaudited Consolidated Interim Statements of Operations~~

~~(In millions except share and per share data)~~

Three Months Ended

Nine Months Ended

October 2,
2021

September 26,
2020

October 2,
2021

September 26,
2020

Net revenue

$
1,496

$
1,362

$
4,392

$
3,570

Cost of goods sold

1,080

992

3,227

2,680

Gross profit

416

370

1,165

890

Selling, general and administrative expenses

229

221

684

676

Research and development expenses

20

18

63

55

Operating profit

167

131

418

159

Other expense, net

58

35

130

106

Interest expense

12

14

37

49

Income before taxes

97

82

251

4

Tax expense

29

7

76

26

Net income (loss)

$
68

$
75

$
175

$
(22
)
Weighted Average Number of Common Shares Outstanding (in thousands)

Basic

144,284

123,421

143,865

123,194

Diluted

148,559

125,235

148,260

123,194

Earnings (Loss) Per Share

Basic

$
0.47

$
0.61

$
1.22

$
(0.18
)
Diluted

$
0.46

$
0.60

$
1.18

$
(0.18
)

~~Results of Operations for the Three and Nine Months Ended October 2, 2021 and September 26, 2020~~

~~Net Revenue~~

Three Months Ended

Nine Months Ended

October 2,
2021

September 26,
2020

October 2,
2021

September 26,
2020

Net revenue

$
1,496

$
1,362

$
4,392

$
3,570

% change compared with prior period

10
%

23
%

~~Three months ended~~

Net revenue for the three months ended October 2, 2021 was $1,496 million, an increase of $134 million, or 10%, from $1,362 for the three months ended September 26, 2020. The increase in net revenue was primarily due to volume and sales price increases.

~~Nine months ended~~

Net revenue for the nine months ended October 2, 2021 was $4,392 million, an increase of $822 million, or 23% from $3,570 for the nine months ended September 26, 2020, which was negatively impacted by the emergence of COVID-19. The increase is mainly due to volume increases.

~~A discussion of net revenue by segment can be found in the Review of Business Segments section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

~~Cost of Goods Sold~~

Three Months Ended

Nine Months Ended

October 2,

September 26,

October 2,

September 26,

2021

2020

2021

2020

Cost of goods sold

$
1,080

$
992

$
3,227

$
2,680

% change compared with prior period

9
%

20
%

Gross profit percentage

28
%

27
%

27
%

25
%

~~Three months ended~~

~~Cost of goods sold for the three months ended October 2, 2021 was $1,080 million, an increase of $88 million, or 9%, from $992 million for the three months ended September 26, 2020.~~

This increase in cost of goods sold was driven by higher revenue volumes, increased material costs, increased freight costs, foreign currency translation, and labor inflation totaling $128 million. These increased costs were partially offset by ~~favorable changes~~$13 million in ~~sales mix, lower charges related to obsolete and surplus inventory, transformation programs cost savings, and other cost savings totaling $40 million.~~

Gross profit percentage was 28% for the three months ended October 2, 2021, compared to 27% for the three months ended September 26, 2020. The primary items driving the increase in gross profit percentage were a 200 bps impact from sales price increases and sales mix, a 100 bps impact from customer rebate favorability, and a 100 bps impact from reduced obsolete and surplus inventory charges. These favorable changes were partially offset by a 200 bps impact from increased material costs and a 100 bps impact from increased freight costs.

~~Nine months ended~~

~~Cost of goods sold for the nine months ended October 2, 2021 was $3,227 million, an increase of $547 million, or 20%, from $2,680 for the nine months ended September 26, 2020.~~

This increase in cost of goods sold was driven by higher revenue volumes, increased freight costs, foreign currency translation, increased material costs, foreign currency translation and labor inflation totaling $656 million. These increased costs were partially offset by favorable changes in sales mix, lower charges related to obsolete and surplus inventory, decreased restructuring related costs, transformation programs cost savings, and other cost savings totaling $109 million.

Gross profit percentage was 27% for the nine months ended October 2, 2021, compared to 25% for the nine months ended September 26, 2020. The primary items driving the increase in gross profit percentage were a 100 bps benefit from sales price increases and sales mix, a 100 bps benefit resulting from higher revenue volume, a 100 bps benefit from lower charges related to obsolete and surplus inventory, and a 100 bps benefit from sourcing productivity. These benefits were partially offset by a 100 bps unfavorable impact from increased freight costs and a 100 bps unfavorable impact from increased material costs.

~~Selling, General and Administrative Expenses~~

Three Months Ended

Nine Months Ended

October 2,

September 26,

October 2,

September 26,

2021

2020

2021

2020

Selling, general and administrative expenses

$
229

$
221

$
684

$
676

% of revenue

15
%

16
%

16
%

19
%

~~Three months ended~~

Selling, general and administrative expense for the three months ended October 2, 2021 was $229 million, an increase of $8 million from $221 million for the three months ended September 26, 2020. The increase was driven by impairment charges resulting from the relocation of our Austin, Texas corporate headquarters location to a lower cost site, commercial investments, increased incentives expense, increased stock-based compensation expense, and labor inflation and other items totaling $37 million. These increases were partially offset by lower Spin-Off and restructuring relatedlegal expenses ~~transformation programs cost savings, and other cost reductions totaling $29 million.~~

~~Nine months ended~~

Selling, general and administrative expense for the nine months ended October 2, 2021 was $684 million, an increase of $8 million from $676 million for the nine months ended September 26, 2020. The increase was driven by commercial investments, the pending securities class action litigation settlement net of insurance recoveries, increased incentives expense, foreign currency translation, impairment charges resulting from the relocation of our Austin, Texas corporate headquarters location to a lower cost site, increased stock-based compensation expense, and labor inflation and other items totaling $109 million. These increases were partially offset by lower Spin-Off and restructuring related expenses, transformation programs cost savings, and other cost reductions totaling $101 million.

~~Research and Development Expenses~~

Three Months Ended

Nine Months Ended

October 2,

September 26,

October 2,

September 26,

2021

2020

2021

2020

Research and development expenses

$
20

$
18

$
63

$
55

% of revenue

1
%

1
%

1
%

2
%

~~Three months ended~~

~~Nine months ended~~

Research and development expense for the nine months ended October 2, 2021 was $63 million, an increase of $8 million from $55 million for the nine months ended September 26, 2020. The increase was driven by investments to support new product launches, labor inflation and other items totaling $15 million. These increases were partially offset by transformation programs cost savings, lower restructuring related expenses, and other cost reductions totaling $7 million.

~~Other Expense, Net~~

Three Months Ended

Nine Months Ended

October 2,

September 26,

October 2,

September 26,

2021

2020

2021

2020

Other expense, net

$
58

$
35

$
130

$
106

~~Three months ended~~

Other expense, net for the three months ended October 2, 2021 was $58 million, an increase of $23 million from $35 million for the three months ended September 26, 2020. Other expense, net increased $18 million from debt extinguishment costs incurred as a result of the ~~redemption of the remaining Senior Notes due 2026, $2 million in foreign exchange impact, and $3 million in increased other non-operating expense.~~

~~Nine months ended~~

Other expense, net for the nine months ended October 2, 2021 was $130 million, an increase of $24 million from $106 million for the nine months ended September 26, 2020. Other expense, net increased $41 million from debt extinguishment costs incurred as a result of the Senior Notes due 2026 redemption and the execution of the A&R Credit Agreement, partially offset by $6 million in favorable foreign exchange impact, apre-Spin-Off litigation matter settlement, $9 million reduction in the 2021 accruals related to the Tax Matters Agreement, $5 million in lower expenses related to the Honeywell Reimbursement Agreement, and ~~a $2~~$9 million ~~decrease~~ in other non-operating ~~expense.~~income.

Tax Expense


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	October 2,			September 26,			October 2,			September 26,			October 1,			October 2,			October 1,			October 2,
	2021			2020			2021			2020			2022			2021			2022			2021
Tax expense	$	29		$	7		$	76		$	26
Provision for income taxes													$	33		$	29		$	104		$	76
Effective tax rate		30	%		8	%		30	%		729	%		34	%		30	%		30	%		30	%

~~The Company recorded tax expense of $29million and $76 million for the three and nine months ended October 2, 2021.~~30

For interim periods, income tax is equal to the total of (1) year-to-date pretax income multiplied by our forecasted effective tax rate plus (2) tax expense items specific to the period. In situations where we expect to report losses for which we do not expect to receive tax benefits, we are required to apply separate forecasted effective tax rates to those jurisdictions rather than including them in the consolidated forecasted effective tax rate.

Three months ended

For the three months ended October ~~2, 2021~~1, 2022, the net tax expense of ~~$29~~$33 million consists primarily of ~~interim period tax expense of $32 million based on~~ year-to-date pretax income multiplied by our ~~forecasted~~forecast effective tax ~~rate partially offset by a tax benefit specific to the period of approximately $3 million consisting primarily of changes in estimates related to prior years.~~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.

Nine months ended

For the nine months ended October ~~2, 2021~~1, 2022, the net tax expense of ~~$76~~$104 million consists primarily of ~~interim period tax expense of $80 million based on~~ year-to-date pretax income multiplied by our ~~forecasted~~forecast effective tax ~~rate, offset by tax benefits specific to the period of approximately $4 million, consisting primarily of excess deductions for share-based compensation and changes in estimates related to prior years.~~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.

~~Review~~Results of ~~Business~~Operations - Operating Segments

Products & Solutions

Three Months Ended

Nine Months Ended

October 2,

September 26,

October 2,

September 26,

2021

2020

% Change

2021

2020

% Change

Total revenue

$
726

$
674

$
2,121

$
1,715

Less: Intersegment revenue

95

102

286

270

External revenue

$
631

$
572

10
%

$
1,835

$
1,445

27
%
Operating profit

$
157

$
141

11
%

$
416

$
241

73
%


	Three Months Ended									Nine Months Ended
	October 1,			October 2,						October 1,			October 2,
	2022			2021			% Change			2022			2021			% Change
Net revenue	$	707		$	631			12	%	$	2,090		$	1,835			14	%
Income from operations	$	124		$	157			(21	)%	$	431		$	416			4	%
Income from operations percentage		18	%		25	%	(700 bps)				21	%		23	%	(200 bps)

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~~Net revenue increased ~~10%~~$76 million or 12%, mainly due to ~~increased volume~~$112 million in acquisition revenue and price increases of $64 million, partially offset by foreign exchange fluctuations of $30 million and lower organic sales ~~price increases. Operating profit increased~~volumes of $70 million. Income from ~~$141~~operations decreased from $157 million to ~~$157~~$124 million, or ~~11%~~21%, primarily from lower sales volumes of $35 million, partially offset by price increases, net of inflationary cost increases of $7 million.

Nine months ended

Net revenue increased $255 million or 14%, mainly due to acquisition revenue of $225 million and price increases of $181 million, partially offset by foreign exchange fluctuations of $69 million and lower organic sales volumes of $82 million. Income from operations increased $15 million, or 4%. ~~Operating profit~~Income from operations was positively impacted by ~~increased volume, sales~~ price increases ~~customer rebate favorability, a decrease in restructuring related expenses, lower charges related to obsolete~~ and ~~surplus inventory, transformation programs~~favorable sales mix, net of inflationary cost ~~savings,~~increases of $51 million, contributions from the First Alert acquisition of $11 million and other cost ~~reduction efforts totaling $66 million.~~reductions. These impacts were partially offset by ~~increased material costs, increased freight costs, increased incentives expense,~~lower organic sales volumes of $39 million and ~~labor inflation totaling $50~~new product investment of $7 million.

~~Nine months ended~~

Products & Solutions revenue increased 27%, mainly due to increased volume. Operating profit increased from $241 million to $416 million, or 73%. Operating profit was positively impacted by higher revenue, a decrease in Spin-Off and restructuring related expenses, lower charges related to obsolete and surplus inventory, sales price increases, transformation programs cost savings, favorable changes in sales mix, and other cost reduction efforts totaling $295 million. These impacts were partially offset by increased freight costs, increased material costs, investments to support new product launches, increased incentives expense, and labor inflation totaling $120 million.

ADI Global Distribution

Three Months Ended

Nine Months Ended

October 2,

September 26,

October 2,

September 26,

2021

2020

% Change

2021

2020

% Change

External revenue

$
865

$
790

9
%

$
2,557

$
2,125

20
%
Operating profit

$
73

$
56

30
%

$
198

$
135

47
%


	Three Months Ended									Nine Months Ended
	October 1,			October 2,						October 1,			October 2,
	2022			2021			% Change			2022			2021			% Change
Total revenue	$	911		$	865			5	%	$	2,720		$	2,557			6	%
Income from operations	$	78		$	73			7	%	$	244		$	198			23	%
Income from operations percentage		9	%		8	%	100 bps				9	%		8	%	100 bps

During 2021, ADI Global Distribution completed the acquisition of Norfolk Wire & Electronics, a regional distributor of data communications products and Shoreview Distribution, a U.S. distributor of Pro AV products. Both acquisitions are an example of our strategy to utilize M&A to accelerate expansion in attractive adjacent categories.

Three months ended

~~ADI Global Distribution~~

Net revenue increased ~~9%,~~$46 million, or 5% highlighted by strong growth in the U.S. and Canada ~~primarily~~ driven by ~~volume~~price increases of $36 million, and ~~sales price increases. Operating profit~~the impact of acquisitions of $23 million, partially offset by foreign exchange fluctuations of $22 million. Income from operations increased ~~from $56 million to $73~~$5 million, or ~~30%~~7%. ~~Operating profit~~Income from operations was favorably impacted primarily by ~~favorable~~ changes in sales mix, ~~higher revenue,~~price increases, impact of acquisitions, and other expense productivity totaling ~~$28~~$14 million. These positive impacts were partially offset by commercial investments and increased freight costs, as well as labor inflation totaling $9 million.

Nine months ended

Net revenue increased $163 million, or 6% driven by price increases of $125 million and the impact of acquisitions of $64 million, partially offset by foreign exchange fluctuations of $46 million. Income from operations increased $46 million, or 23%. Income from operations was favorably impacted by changes in sales mix, price increases, impact of acquisitions, and other expense productivity totaling $74 million. These positive impacts were partially offset by commercial investments, increased freight costs, ~~and increased incentives expense,~~ as well as labor inflation totaling ~~$11~~$28 million.

~~Nine months ended~~

ADI Global Distribution revenue increased 20%, highlighted by strong growth in the U.S. and Canada, as well as EMEA. Operating profit increased from $135 million to $198 million, or 47%. Operating profit was favorably impacted primarily by higher revenue, favorable changes in sales mix, and other expense productivity totaling $90 million. These positive impacts were partially offset by commercial investments, increased freight costs, and increased incentives expenses, as well as labor inflation totaling $27 million.

Corporate

Three Months Ended

Nine Months Ended

October 2,

September 26,

October 2,

September 26,

2021

2020

% Change

2021

2020

% Change

Corporate costs

$
(63
)

$
(66
)

(5
)%

$
(196
)

$
(217
)

(10
)%


	Three Months Ended							Nine Months Ended
	October 1,		October 2,					October 1,		October 2,
	2022		2021		% Change			2022		2021		% Change
Corporate expenses	$	47	$	63		(25	)%	$	162	$	196		(17	)%

Three months ended

Corporate ~~costs~~expenses for the three months ended October ~~2, 2021 were $63~~1, 2022 decreased $16 million, ~~a decrease from $66 million for the three months ended September 26, 2020,~~ or 5%25%. The decrease was ~~driven by~~due primarily to lower ~~Spin-Off and restructuring related expenses, transformation programs cost savings, and other cost reductions totaling $19 million. These decreases were partially offset by~~ impairment charges resulting from the relocation of our Austin, Texas corporate headquarters ~~location~~ to a lower cost site ~~increased consulting expense, increased incentives expense,~~in 2021 of $10 million and ~~labor inflation totaling $16~~indemnification accrual releases of $8 million.

Nine months ended

Corporate ~~costs~~expenses for the nine months ended October ~~2, 2021 were $196~~1, 2022 decreased $34 million, ~~a decrease from $217 million for the nine months ended September 26, 2020,~~ or ~~10%~~17%. The decrease was ~~driven by lower Spin-Off and restructuring related expenses, transformation programs cost savings, and other cost reductions totaling $74 million. These decreases were partially offset by~~due primarily to the ~~pending~~2021 securities class action litigation settlement net of insurance recoveries ~~increased consulting expense,~~of $16 million, lower impairment charges resulting from the relocation of our Austin, Texas corporate headquarters ~~location~~ to a lower cost site ~~increased incentives expense, foreign currency translation,~~in 2021 of $10 million, indemnification accrual releases of $8 million, lower consulting spend of $7 million, and ~~labor inflation totaling $53~~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:

•

~~Cash flows~~Net cash provided by operating activities was $13 million for the nine months ended October 1, 2022 compared to cash provided by operating activities of $203 million for the nine months ended October 2, ~~2021 compared to $92 million for the nine months ended September 26, 2020.~~2021.

•

As of October ~~2, 2021, total~~1, 2022, cash and cash equivalents were ~~$686~~$252 million.

•

AtAs of October ~~2, 2021, there~~1, 2022, long-term debt was $1,407 million and current maturities of long-term debt were $12 million. There were no borrowings and no letters of credit issued under our $500 million revolving credit facility.

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 ~~addition~~

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.~~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 nine months ended October ~~2, 2021~~1, 2022 was $105 million. ~~See~~Refer to Note ~~12.~~16. Commitments and Contingencies of Notes to Consolidated ~~Interim~~ Financial Statements of ~~the~~this Form 10-Q and Note ~~19.~~17. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements in our ~~2020~~2021 Annual Report on Form 10-K for further discussion.

Cash Flow Summary for the nine months ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~

Our cash flows from operating, investing and financing activities for the nine months ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020,~~ as reflected in the unaudited ~~Interim Financial~~Consolidated Statements of Cash Flows, are summarized as follows:


	Nine Months Ended						Nine months ended
	October 2,			September 26,			October 1,			October 2,
	2021			2020			2022			2021
Cash provided by (used for):
Operating activities	$	203		$	92		$	13		$	203
Investing activities		(56	)		(85	)		(707	)		(56	)
Financing activities		28			135			182			28
Effect of exchange rate changes on cash and cash equivalents		(6	)		(4	)
Net increase in cash and cash equivalents	$	169		$	138
Effect of exchange rate changes on cash, cash equivalents and restricted cash								(12	)		(6	)
Net (decrease) increase in cash, cash equivalents and restricted cash							$	(524	)	$	169

~~Cash~~Net cash provided by operating activities for the nine months ended October ~~2, 2021 increased~~1, 2022 decreased by ~~$111~~$190 million, primarily due to ~~increased profitability, offset by~~ an increase in ~~working capital balances as a result~~net income of ~~revenue growth.~~$69 million, more than offset by non-cash operating activities totaling $28 million, an increase in cash used in operating activities for accounts receivable, inventory, and accrued liabilities totaling $204 million, and cash used in other assets and liabilities totaling $27 million.

~~Cash~~Net cash used for investing activities ~~decreased~~increased by ~~$29~~$651 million, primarily due to ~~$24~~$649 million of additional cash paid for acquisitions in the nine months ended ~~September 26, 2020.~~October 1, 2022.

Net cash provided by financing activities ~~decreased~~for the nine months ended October 1, 2022 increased by ~~$107~~$154 million. The ~~decrease in cash provided by financing activities~~increase was primarily due to ~~a decrease of $150~~$196 million of net proceeds from ~~our revolving credit facility that was used to increase our cash position in 2020 in light of~~ the ~~economic uncertainty surrounding the COVID-19 pandemic,~~March 2022 Amended A&R Credit Agreement, partially offset by ~~$31~~principal debt payments totaling $9 million and other financing activities totaling $5 million in 2022, as compared to $26 million of net proceeds resulting from the 2021 execution of the A&R Credit Agreement, debt issuance, modification costs, repayments of long-term debt, and ~~redemption of the Senior Notes due 2026, $6 million of decreased debt repayments, and $6 million of~~cash provided by other financing ~~activities.~~activities totaling $2 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.

Critical Accounting Policies

~~The preparation of our unaudited Interim Financial Statements~~Our financial statements are prepared in accordance with U.S. ~~GAAP is based on the selection and application~~GAAP. The preparation of ~~accounting policies that require us~~these financial statements requires management to make ~~significant~~ estimates and assumptions ~~about~~that affect the ~~effects~~reported amounts of ~~matters that are inherently uncertain.~~assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We ~~consider the~~review our critical accounting policies ~~discussed~~throughout the year. We have concluded that there have been no significant changes to our critical accounting policies or estimates, as described in our ~~2020~~ Annual Report on Form 10-K ~~to be critical to~~for the ~~understanding of our unaudited Interim Financial Statements included in this Form 10-Q. There have been no changes in our critical accounting policies as compared to what was disclosed in~~year ended December 31, 2021, during the 2020 Annual Report on Form 10-K. Actual results could differ from our estimates and assumptions, and any such differences could be material to our unaudited Interim Financial Statements. As there remains uncertainty around the impacts of the COVID-19 pandemic, we intend to address and evaluate the impacts frequently.nine months ended October 1, 2022.

Other Matters

Litigation, Environmental Matters and Reimbursement Agreement

~~See~~ Refer to Note ~~12.~~16. Commitments and Contingencies of Notes to Consolidated ~~Interim~~ Financial Statements of this Form 10-Q for a discussion of environmental and other litigation matters.

Recent Accounting Pronouncements

~~See~~Refer to Note 2. ~~Summary of~~ Significant Accounting Policies of Notes to Consolidated ~~Interim~~ 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, commodity price risk 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 October ~~2, 2021, $945~~1, 2022, $1,134 million of our total debt, excluding unamortized deferred financing costs, ~~of $1,245 million~~ 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 ~~three~~two to ~~five~~four years. For more information on the Swap Agreements, ~~see~~ refer to Note ~~14.~~18. Derivative Financial Instruments of Notes to Consolidated ~~Interim~~ 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. AtAs of October ~~2, 2021,~~1, 2022, an increase or decrease in the interest rate by 100 basis points would have an approximate $4$6 million impact on our annual interest ~~expense, while a decrease in interest rate is not possible due to the interest rate floor on our variable rate debt.~~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 Euro, British Pound, ~~Indian Rupee,~~ Canadian Dollar, Mexican Peso, Czech Koruna, and ~~Mexican Peso.~~Indian Rupee. 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 October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, we have no outstanding foreign currency hedging arrangements.

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, ~~including our Chief Accounting Officer,~~ 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 October ~~2, 2021~~1, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART IIII. Other Information

Item 1. Legal Proceedings

~~See~~Refer to Note ~~12.~~16. Commitments and Contingencies — Other Matters of Notes to Consolidated ~~Interim~~ 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 ~~2020~~2021 Annual Report on Form 10-K.

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
4.1		Third Supplemental Indenture, dated ~~as of~~September 26, 2022, to the Senior Notes Indenture, dated August 26, 2021, ~~among Resideo Funding, Inc., as issuer, Resideo Technologies, Inc.,~~relating to the ~~other guarantors named therein, and U.S. Bank National Association, as trustee. (incorporated by reference to Exhibit 4.1 to Resideo's Form 8-K filed on August 27, 2021)~~Issuer's 4.000% Senior Notes due 2029 (filed herewith)

10.1		Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Restricted Stock Unit Agreement amended as of July 28, 2022 (filed herewith)

10.2		Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Performance Stock Unit Agreement amended as of July 28, 2022 (filed herewith)

10.3		Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Omnibus Amendment to Performance Stock Unit Agreements (for outstanding PSU awards) (filed herewith)

31.1		Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2		Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

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)

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: November ~~4, 2021~~1, 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: November ~~4, 2021~~1, 2022	By:	/s/ ~~AnnMarie Geddes~~Tina Beskid
		~~AnnMarie Geddes~~Tina Beskid
		Vice President, Controller, and Chief Accounting Officer (Principal Accounting Officer)


Delaware		82-5318796
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~901 E 6~~th16100 N 71st Street ~~Austin~~, ~~Texas~~Suite 550 Scottsdale, Arizona		~~78702~~85254
(Address of principal executive offices)		(Zip Code)


Title of each class:	Trading Symbol:	Name of each exchange on which registered:
Common Stock, par value $0.001 per share	REZI	New York Stock Exchange


	October 1, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	252		$	775
Accounts receivable, net		1,043			876
Inventories, net		957			740
Other current assets		198			150
Total current assets		2,450			2,541
Property, plant and equipment, net		351			287
Goodwill		2,678			2,661
Other intangible assets, net		460			120
Other assets		323			244
Total assets	$	6,262		$	5,853
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	936		$	883
Current maturities of long-term debt		12			10
Accrued liabilities		594			601
Total current liabilities		1,542			1,494
Long-term debt, net of current maturities		1,407			1,220
Obligations payable under Indemnification Agreements		575			585
Other liabilities		338			302
Total liabilities		3,862			3,601
COMMITMENTS AND CONTINGENCIES
Stockholders’ equity:
Common shares, $0.001 par value, 700,000 shares authorized, 147,703 and 145,838 shares issued and outstanding as of October 1, 2022, 146,248 and 144,808 shares issued and outstanding as of December 31, 2021, respectively		-			-
Additional paid-in capital		2,162			2,121
Retained earnings		561			317
Accumulated other comprehensive loss, net		(292	)		(165	)
Treasury shares		(31	)		(21	)
Total stockholders’ equity		2,400			2,252
Total liabilities and stockholders’ equity	$	6,262		$	5,853


	October 2, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	686		$	517
Accounts receivable – net		932			863
Inventories – net		710			672
Other current assets		179			173
Total current assets		2,507			2,225
Property, plant and equipment – net		290			318
Goodwill		2,671			2,691
Other assets		366			376
Total assets	$	5,834		$	5,610
LIABILITIES
Current liabilities:
Accounts payable	$	905		$	936
Current maturities of debt		10			7
Accrued liabilities		617			595
Total current liabilities		1,532			1,538
Long-term debt		1,222			1,155
Obligations payable under Indemnification Agreements		587			590
Other liabilities		335			334
COMMITMENTS AND CONTINGENCIES (Note 12)
EQUITY
Common stock, $0.001 par value, 700,000 shares authorized, 145,616 and 144,383 shares issued and outstanding as of October 2, 2021, 143,959 and 143,059 shares issued and outstanding as of December 31, 2020, respectively		0			0
Additional paid-in capital		2,111			2,070
Treasury stock, at cost		(16	)		(6	)
Retained earnings		250			75
Accumulated other comprehensive loss		(187	)		(146	)
Total equity		2,158			1,993
Total liabilities and equity	$	5,834		$	5,610


Three Months Ended October 2, 2021	Common Shares		Treasury Shares		Common Stock		Treasury Stock			Additional Paid- In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity
Balance at July 3, 2021		144,171		1,188	$	-	$	(14	)	$	2,098	$	182		$	(163	)	$	2,103
Net income		-		-		-		-			-		68			-			68
Other comprehensive loss, net of tax		-		-		-		-			-		-			(24	)		(24	)
Stock issuances, net of shares withheld for taxes		212		45		-		(2	)		3		-			-			1
Stock-based compensation		-		-		-		-			10		-			-			10
Balance at October 2, 2021		144,383		1,233	$	-	$	(16	)	$	2,111	$	250		$	(187	)	$	2,158

Three Months Ended September 26, 2020	Common Shares		Treasury Shares		Common Stock		Treasury Stock			Additional Paid- In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity
Balance at June 27, 2020		123,378		852	$	-	$	(5	)	$	1,775	$	(59	)	$	(216	)	$	1,495
Net income		-		-		-		-			-		75			-			75
Other comprehensive income, net of tax		-		-		-		-			-		-			28			28
Stock issuances, net of shares withheld for taxes		65		29		-		-			-		-			-			0
Stock-based compensation		-		-		-		-			7		-			-			7
Balance at September 26, 2020		123,443		881	$	-	$	(5	)	$	1,782	$	16		$	(188	)	$	1,605

Nine Months ended October 2, 2021	Common Shares		Treasury Shares		Common Stock		Treasury Stock			Additional Paid- In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity
Balance at January 1, 2021		143,059		900	$	-	$	(6	)	$	2,070	$	75		$	(146	)	$	1,993
Net income		-		-		-		-			-		175			-			175
Other comprehensive loss, net of tax		-		-		-		-			-		-			(41	)		(41	)
Stock issuances, net of shares withheld for taxes		1,324		333		-		(10	)		12		-			-			2
Stock-based compensation	-		-			-		-			29		-		-				29
Balance at October 2, 2021		144,383		1,233	$	-	$	(16	)	$	2,111	$	250		$	(187	)	$	2,158

Nine Months Ended September 26, 2020	Common Shares		Treasury Shares		Common Stock		Treasury Stock			Additional Paid- In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity
Balance at January 1, 2020		122,873		615	$	-	$	(3	)	$	1,761	$	38		$	(194	)	$	1,602
Net loss		-		-		-		-			-		(22	)		-			(22	)
Other comprehensive income, net of tax		-		-		-		-			-		-			6			6
Stock issuances, net of shares withheld for taxes		570		266		-		(2	)		-		-			-			(2	)
Stock-based compensation	-		-			-		-			21		-		-				21
Balance at September 26, 2020		123,443		881	$	-	$	(5	)	$	1,782	$	16		$	(188	)	$	1,605


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


	Item		Page

Part I.		Item 1. Financial Statements	5

	1.	Financial Statements	5

		Consolidated Interim Statements of Operations (unaudited) – Three and Nine Months Ended October 2, 2021 and September 26, 2020	5

		Consolidated Interim Statements of Comprehensive Income (Loss) (unaudited) – Three and Nine Months Ended October 2, 2021 and September 26, 2020	6

		Consolidated Interim Balance Sheets (unaudited) – October 2, 2021 and December 31, 2020	7

		Consolidated Interim Statements of Cash Flows (unaudited) – Nine Months Ended October 2, 2021 and September 26, 2020	8

		Consolidated Interim Statements of Equity (unaudited) – Three and Nine Months Ended October 2, 2021 and September 26, 2020	9

		Notes to Consolidated Interim Financial Statements (unaudited)	10

	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

	3.	Quantitative and Qualitative Disclosures About Market Risk	34

	4.	Controls and Procedures	35

Part II.	1.	Legal Proceedings	36

	1A.	Risk Factors	36

	6.	Exhibits	37

		Signatures	38


	Part I. Financial Information	Page

Item 1.	Unaudited Consolidated Financial Statements

	Unaudited Consolidated Balance Sheets as of October 1, 2022 and December 31, 2021	3

	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended October 1, 2022 and October 2, 2021	4

	Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 1, 2022 and October 2, 2021	5

	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended October 1, 2022 and October 2, 2021	6

	Unaudited Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended October 1, 2022 and October 2, 2021	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	35

	Part II. Other Information

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 6.	Exhibits	37

	Signatures	38


	Nine Months Ended
	October 2, 2021			September 26, 2020
Cash flows provided by operating activities:
Net income (loss)	$	175		$	(22	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		67			64
Stock compensation expense		29			21
Loss on extinguishment of debt		41			-
Other		4			20
Changes in assets and liabilities, net of acquired companies:
Accounts receivable		(78	)		(64	)
Inventories – net		(40	)		64
Other current assets		(6	)		15
Accounts payable		(19	)		(62	)
Accrued liabilities		26			52
Obligations payable under Indemnification Agreements		(3	)		(8	)
Other		7			12
Net cash provided by operating activities		203			92
Cash flows used for investing activities:
Expenditures for property, plant, equipment and other intangibles		(48	)		(50	)
Cash paid for acquisitions, net of cash acquired		(11	)		(35	)
Other		3			-
Net cash used for investing activities		(56	)		(85	)
Cash flows provided by financing activities:
Proceeds from long-term debt		1,250			-
Payment of debt facility issuance and modification costs		(39	)	-
Net proceeds from revolving credit facility		-			150
Repayment of long-term debt		(1,185	)		(11	)
Other		2			(4	)
Net cash provided by financing activities		28			135
Effect of foreign exchange rate changes on cash and cash equivalents		(6	)		(4	)
Net increase in cash and cash equivalents		169			138
Cash and cash equivalents at beginning of period		517			122
Cash and cash equivalents at end of period	$	686		$	260


Fiscal Quarters	Common Shares		Common Shares ($)		Additional Paid- In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Shares		Treasury Shares ($)			Total Stockholders’ Equity
Balance as of July 2, 2022		145,684	$	-	$	2,147	$	498	$	(220	)		1,844	$	(31	)	$	2,394
Net income		-		-		-		63		-			-		-			63
Other comprehensive loss, net of tax		-		-		-		-		(72	)		-		-			(72	)
Share issuances, net of shares withheld for taxes		154		-		2		-		-			21		-			2
Share-based compensation		-		-		13		-		-			-		-			13
Balance as of October 1, 2022		145,838	$	-	$	2,162	$	561	$	(292	)		1,865	$	(31	)	$	2,400

Balance as of July 3, 2021		144,171	$	-	$	2,098	$	182	$	(163	)		1,188	$	(14	)	$	2,103
Net income		-		-		-		68		-			-		-			68
Other comprehensive (loss), net of tax		-		-		-		-		(24	)		-		-			(24	)
Share issuances, net of shares withheld for taxes		212		-		3		-		-			45		(2	)		1
Share-based compensation		-		-		10		-		-			-		-			10
Balance as of October 2, 2021		144,383	$	-	$	2,111	$	250	$	(187	)		1,233	$	(16	)	$	2,158

Fiscal Year to Date Periods	Common Shares		Common Shares ($)		Additional Paid- In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Shares		Treasury Shares ($)			Total Stockholders’ Equity
Balance as of December 31, 2021		144,808	$	-	$	2,121	$	317	$	(165	)		1,440	$	(21	)	$	2,252
Net income		-		-		-		244		-			-		-			244
Other comprehensive loss, net of tax		-		-		-		-		(127	)		-		-			(127	)
Share issuances, net of shares withheld for taxes		1,030		-		5		-		-			425		(10	)		(5	)
Share-based compensation	-			-		36		-	-			-			-			36
Balance as of October 1, 2022		145,838	$	-	$	2,162	$	561	$	(292	)		1,865	$	(31	)	$	2,400

Balance as of December 31, 2020		143,059	$	-	$	2,070	$	75	$	(146	)		900	$	(6	)	$	1,993
Net income		-		-		-		175		-			-		-			175
Other comprehensive loss, net of tax		-		-		-		-		(41	)		-		-			(41	)
Share issuances, net of shares withheld for taxes		1,324		-		12		-		-			333		(10	)		2
Share-based compensation	-			-		29		-	-			-			-			29
Balance as of October 2, 2021		144,383	$	-	$	2,111	$	250	$	(187	)		1,233	$	(16	)	$	2,158


	Financial Statement Line Item	At October 2, 2021		At December 31, 2020
Operating right-of-use assets	Other assets	$	134	$	133
Operating lease liabilities - current	Accrued liabilities	$	33	$	33
Operating lease liabilities - noncurrent	Other liabilities	$	112	$	107


	Financial Statement Line Item	As of October 1, 2022		As of December 31, 2021
Operating right-of-use assets	Other assets	$	187	$	141
Operating lease liabilities - current	Accrued liabilities	$	37	$	32
Operating lease liabilities - noncurrent	Other long-term liabilities	$	161	$	120


	As of October 1, 2022
2022	$	11
2023		45
2024		37
2025		31
2026		28
Thereafter		91
Total future minimum lease payments		243
Less: Imputed interest		45
Present value of future minimum lease payments	$	198
Weighted-average remaining lease term (years)		6.96
Weighted-average incremental borrowing rate		5.74	%


	Range of Life (Years)	Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
As of October 1, 2022
Other intangible assets, net:
Patents and technology	3-10	10	$	62	$	(24	)	$	38
Customer relationships	7-15	14		289		(104	)		185
Trademarks (1)	10-Indefinite	10		193		(8	)		185
Software	2-7	6		167		(115	)		52
Total intangible assets			$	711	$	(251	)	$	460

As of December 31, 2021
Other intangible assets, net:
Patents and technology	3-10	9	$	31	$	(23	)	$	8
Customer relationships	7-15	14		162		(106	)		56
Trademarks	10	10		14		(8	)		6
Software	2-7	6		162		(112	)		50
Total intangible assets			$	369	$	(249	)	$	120


	Nine Months Ended
	October 2, 2021			September 26, 2020
Beginning balance	$	591		$	585
Accruals for indemnification liabilities deemed probable and reasonably estimable		111			107
Indemnification payment		(105	)		(70	)
Ending balance (1)	$	597		$	622


	October 2, 2021			December 31, 2020
4.000% notes due 2029	$	300		$	0
6.125% notes due 2026		0			400
Five-year variable rate term loan A due 2023		0			315
Seven-year variable rate term loan B due 2025		0			465
Seven-year variable rate term loan B due 2028		945			0
Unamortized deferred financing costs		(13	)		(18	)
Total outstanding indebtedness		1,232			1,162
Less: Amounts expected to be paid within one year		10			7
Total long-term debt due after one year	$	1,222		$	1,155