Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 26, 2020 | Nov. 02, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Sep. 26, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Trading Symbol | REZI | |
Entity Registrant Name | Resideo Technologies, Inc. | |
Entity Central Index Key | 0001740332 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 123,494,919 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Shell Company | false | |
Title of 12(b) Security | Common Stock | |
Security Exchange Name | NYSE | |
Entity File Number | 001-38635 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 82-5318796 | |
Entity Address, Address Line One | 901 E 6th Street | |
Entity Address, City or Town | Austin | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 78702 | |
City Area Code | 512 | |
Local Phone Number | 726-3500 | |
Document Quarterly Report | true | |
Document Transition Report | false |
CONSOLIDATED INTERIM STATEMENTS
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Income Statement [Abstract] | ||||
Net revenue | $ 1,362 | $ 1,226 | $ 3,570 | $ 3,684 |
Cost of goods sold | 992 | 917 | 2,680 | 2,720 |
Gross profit | 370 | 309 | 890 | 964 |
Selling, general and administrative expenses | 239 | 250 | 731 | 778 |
Operating profit | 131 | 59 | 159 | 186 |
Other expense, net | 35 | 35 | 106 | 54 |
Interest expense | 14 | 16 | 49 | 51 |
Income before taxes | 82 | 8 | 4 | 81 |
Tax expense | 7 | 26 | 36 | |
Net income (loss) | $ 75 | $ 8 | $ (22) | $ 45 |
Weighted Average Number of Common Shares Outstanding (in thousands) | ||||
Basic | 123,421 | 122,770 | 123,194 | 122,681 |
Diluted | 125,235 | 123,244 | 123,194 | 123,404 |
Earnings (Loss) Per Share | ||||
Basic | $ 0.61 | $ 0.07 | $ (0.18) | $ 0.37 |
Diluted | $ 0.60 | $ 0.06 | $ (0.18) | $ 0.36 |
CONSOLIDATED INTERIM STATEMEN_2
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 75 | $ 8 | $ (22) | $ 45 |
Other comprehensive income (loss), net of tax | ||||
Foreign exchange translation adjustment | 28 | (35) | 6 | (33) |
Total other comprehensive income (loss), net of tax | 28 | (35) | 6 | (33) |
Comprehensive income (loss) | $ 103 | $ (27) | $ (16) | $ 12 |
CONSOLIDATED INTERIM BALANCE SH
CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) - USD ($) $ in Millions | Sep. 26, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 260 | $ 122 |
Accounts receivable – net | 884 | 817 |
Inventories – net | 618 | 671 |
Other current assets | 161 | 175 |
Total current assets | 1,923 | 1,785 |
Property, plant and equipment – net | 311 | 316 |
Goodwill | 2,657 | 2,642 |
Other assets | 378 | 385 |
Total assets | 5,269 | 5,128 |
Current liabilities: | ||
Accounts payable | 858 | 920 |
Current maturities of debt | 181 | 22 |
Accrued liabilities | 606 | 552 |
Total current liabilities | 1,645 | 1,494 |
Long-term debt | 1,141 | 1,158 |
Obligations payable under Indemnification Agreements | 586 | 594 |
Other liabilities | 292 | 280 |
COMMITMENTS AND CONTINGENCIES (Note 13) | ||
EQUITY | ||
Common stock, $0.001 par value, 700,000 shares authorized, 124,324 and 123,443 shares issued and outstanding as of September 26, 2020, 123,488 and 122,873 shares issued and outstanding as of December 31, 2019, respectively | 0 | 0 |
Additional paid-in capital | 1,782 | 1,761 |
Treasury stock, at cost | (5) | (3) |
Retained earnings | 16 | 38 |
Accumulated other comprehensive (loss) | (188) | (194) |
Total equity | 1,605 | 1,602 |
Total liabilities and equity | $ 5,269 | $ 5,128 |
CONSOLIDATED INTERIM BALANCE _2
CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Sep. 26, 2020 | Dec. 31, 2019 |
Statement Of Financial Position [Abstract] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 700,000,000 | 700,000,000 |
Common stock, shares issued | 124,324,000 | 123,488,000 |
Common stock, shares outstanding | 123,443,000 | 122,873,000 |
CONSOLIDATED INTERIM STATEMEN_3
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | ||
Cash flows provided by (used for) operating activities: | |||
Net (loss) income | $ (22) | $ 45 | |
Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities: | |||
Depreciation and amortization | 64 | 55 | |
Restructuring charges, net of payments | 4 | 12 | |
Stock compensation expense | [1] | 21 | 22 |
Other | 20 | 10 | |
Changes in assets and liabilities: | |||
Accounts receivable | (64) | (27) | |
Inventories – net | 64 | (109) | |
Other current assets | 15 | (13) | |
Accounts payable | (62) | (23) | |
Accrued liabilities | 48 | (6) | |
Obligations payable under Indemnification Agreements | (8) | (49) | |
Other | 12 | 13 | |
Net cash provided by (used for) operating activities | 92 | (70) | |
Cash flows used for investing activities: | |||
Expenditures for property, plant, equipment and other intangibles | (50) | (66) | |
Cash paid for acquisitions, net of cash acquired | (35) | (17) | |
Net cash used for investing activities | (85) | (83) | |
Cash flows provided by financing activities: | |||
Net proceeds from revolving credit facility | 150 | 60 | |
Repayment of long-term debt | (11) | (11) | |
Non-operating obligations paid to Honeywell, net | (2) | (24) | |
Tax payments related to stock vestings | (2) | (3) | |
Net cash provided by financing activities | 135 | 22 | |
Effect of foreign exchange rate changes on cash and cash equivalents | (4) | (2) | |
Net increase (decrease) in cash and cash equivalents | 138 | (133) | |
Cash and cash equivalents at beginning of period | 122 | 265 | |
Cash and cash equivalents at end of period | $ 260 | $ 132 | |
[1] | Stock compensation expense adjustment includes only non-cash expenses. |
CONSOLIDATED INTERIM STATEMEN_4
CONSOLIDATED INTERIM STATEMENTS OF EQUITY (Unaudited) - USD ($) $ in Millions | Total | Common Stock | Treasury Shares | Additional Paid-In Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Loss |
Beginning Balance at Dec. 31, 2018 | $ 1,533 | $ 1,720 | $ 2 | $ (189) | ||
Beginning Balance, Shares at Dec. 31, 2018 | 122,499,000 | 468,000 | ||||
Net income (loss) | 45 | 45 | ||||
Other comprehensive (loss) income, net of tax | (33) | (33) | ||||
Issuance of common stock under stock-based compensation plans, net of shares withheld for employee taxes | (3) | $ (3) | ||||
Issuance of common stock under stock-based compensation plans, net of shares withheld for employee taxes, Shares | 287,000 | 128,000 | ||||
Stock-based compensation | 22 | 22 | ||||
Adjustments due to Spin-Off | 9 | 9 | ||||
Ending Balance at Sep. 28, 2019 | 1,573 | $ (3) | 1,751 | 47 | (222) | |
Ending Balance, Shares at Sep. 28, 2019 | 122,786,000 | 596,000 | ||||
Beginning Balance at Jun. 29, 2019 | 1,593 | $ (2) | 1,743 | 39 | (187) | |
Beginning Balance, Shares at Jun. 29, 2019 | 122,710,000 | 558,000 | ||||
Net income (loss) | 8 | 8 | ||||
Other comprehensive (loss) income, net of tax | (35) | (35) | ||||
Issuance of common stock under stock-based compensation plans, net of shares withheld for employee taxes | (1) | $ (1) | ||||
Issuance of common stock under stock-based compensation plans, net of shares withheld for employee taxes, Shares | 76,000 | 38,000 | ||||
Stock-based compensation | 8 | 8 | ||||
Ending Balance at Sep. 28, 2019 | 1,573 | $ (3) | 1,751 | 47 | (222) | |
Ending Balance, Shares at Sep. 28, 2019 | 122,786,000 | 596,000 | ||||
Beginning Balance at Dec. 31, 2019 | 1,602 | $ (3) | 1,761 | 38 | (194) | |
Beginning Balance, Shares at Dec. 31, 2019 | 122,873,000 | 615,000 | ||||
Net income (loss) | (22) | (22) | ||||
Other comprehensive (loss) income, net of tax | 6 | 6 | ||||
Issuance of common stock under stock-based compensation plans, net of shares withheld for employee taxes | (2) | $ (2) | ||||
Issuance of common stock under stock-based compensation plans, net of shares withheld for employee taxes, Shares | 570,000 | 266,000 | ||||
Stock-based compensation | 21 | 21 | ||||
Ending Balance at Sep. 26, 2020 | 1,605 | $ (5) | 1,782 | 16 | (188) | |
Ending Balance, Shares at Sep. 26, 2020 | 123,443,000 | 881,000 | ||||
Beginning Balance at Jun. 27, 2020 | 1,495 | $ (5) | 1,775 | (59) | (216) | |
Beginning Balance, Shares at Jun. 27, 2020 | 123,378,000 | 852,000 | ||||
Net income (loss) | 75 | 75 | ||||
Other comprehensive (loss) income, net of tax | 28 | 28 | ||||
Issuance of common stock under stock-based compensation plans, net of shares withheld for employee taxes, Shares | 65,000 | 29,000 | ||||
Stock-based compensation | 7 | 7 | ||||
Ending Balance at Sep. 26, 2020 | $ 1,605 | $ (5) | $ 1,782 | $ 16 | $ (188) | |
Ending Balance, Shares at Sep. 26, 2020 | 123,443,000 | 881,000 |
Organization, Consolidation and
Organization, Consolidation and Presentation of Financial Statements | 9 Months Ended |
Sep. 26, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization, Operations and Basis of Presentation | Note 1. Organization, Operations and Basis of Presentation Business Description Resideo Technologies, Inc. (“Resideo” or “the Company”), is a global provider of products, software, solutions and technologies that help homeowners stay connected and in control of their comfort, security and energy use. The Company is a leader in the home heating, ventilation and air conditioning controls and security markets, and a leading global distributor of low-voltage electronic and security products. The Company was incorporated in Delaware on April 24, 2018. The Company separated from Honeywell International Inc. (“Honeywell”) on October 29, 2018, becoming an independent publicly traded company as a result of a pro rata distribution of the Company’s common stock to shareholders of Honeywell (the “Spin-Off”). Basis of Presentation The Company’s financial statements are presented on a consolidated basis (collectively, the “Interim Financial Statements”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions have been eliminated for all periods presented. The Interim Financial Statements are unaudited; however, in the opinion of management, they contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods. In periods subsequent to the Spin-Off, we have made adjustments to balances transferred at the Spin-Off, including adjustments to the classification of assets or liabilities transferred. Any such adjustments are recorded directly to equity in Adjustments due to the Spin-Off and are considered immaterial. The Company reports financial information on a fiscal quarter basis using a “ ” Reclassification On January 1, 2020, the Company changed its classification of research and development expenses in the Consolidated Interim Statements of Operations from Cost of goods sold to Selling, general and administrative expenses, such that research and development expenses are excluded from the calculation of Gross profit. The impact on the September 28, 2019 Consolidated Interim Statement of Operations is a reduction of Cost of goods sold, an increase in Gross profit and an increase in Selling, general and administrative expenses for the three and nine months ended September 28, 2019 of $20 million and $66 million, respectively. The impact of the reclassification for the three and nine months ended September 28, 2019 is also reflected in “Note 6. Restructuring and Other Charges”. This reclassification had no effect on the previously reported Net income (loss) or the Company’s Consolidated Interim Statements of Comprehensive Income (Loss), Consolidated Interim Statements of Cash Flows, or Consolidated Interim Balance Sheets. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 26, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies The Company’s accounting policies are set forth in “Note 2. Summary of Significant Accounting Policies” of the Company’s Notes to Consolidated and Combined Financial Statements included in the 2019 Annual Report on Form 10-K. Included herein are certain updates to those policies. The World Health Organization (“WHO”) declared the novel coronavirus disease ("COVID-19") a pandemic in March 2020. Starting at the end of the first quarter and throughout the second quarter, the Company experienced constrained supply and slowed customer demand that adversely impacted the Company’s business, results of operations and overall financial performance. Although there remains uncertainty as to the continuing implications of COVID-19, during the third quarter customer demand improved and cost actions taken during the first half of the year contributed to improvements in the Company’s results of operations and overall financial performance. As there remains uncertainty around the impacts of the COVID-19 pandemic, the Company addresses and evaluates the impacts frequently. At September 26, 2020, the Company believes that the accounting policies most likely to be affected by the COVID-19 pandemic are the following: Use of Estimates —The preparation of the Company’s Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the Consolidated Financial Statements and related disclosures in the accompanying Notes to Consolidated Financial Statements. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed, and the effects of changes are reflected in the Consolidated Financial Statements in the period they are determined to be necessary. Estimates are used when accounting for stock-based compensation, pension benefits, contingent consideration, indemnification liabilities, goodwill and intangible assets, and valuation allowances for accounts receivable, inventory, deferred tax assets, and the amounts of revenue and expenses reported during the period. The Company has used information available to identify potential impacts caused by the COVID-19 pandemic at September 26, 2020 in these estimates. Goodwill — The Company has determined that it is likely that the carrying value of goodwill exceeds the fair value at September 26, 2020. However, the extent to which COVID-19 may adversely impact our business depends on future developments, which are uncertain and unpredictable, depending upon the severity and duration of the outbreak, and the effectiveness of actions taken globally to contain or mitigate its effects. Any resulting financial impact cannot be estimated reasonably at this time but may adversely affect our business and financial results. It is likely that, during the remainder of 2020 and into 2021, macroeconomic conditions will be volatile and could impact our business. If there is an adverse change in facts and circumstances, then an impairment charge may be necessary in the future. Specifically, the fair value of our Products & Solutions reporting unit, with goodwill of approximately $2,012 million at September 26, 2020, exceeded its' carrying value by 10% in the 2019 annual impairment test and therefore is highly sensitive to adverse changes in the facts and circumstances that could result in a possible future impairment. Should the fair value of the Company’s reporting units fall below its' carrying amount because of reduced operating performance, market declines, changes in the discount rate, a more significant impact than expected from the COVID-19 pandemic, or other conditions, charges for impairment may be necessary. The Company regularly monitors its reporting units to determine if there is an indicator of potential impairment. The Company will perform its annual goodwill impairment assessment during the fourth quarter. Recent Accounting Pronouncements —The Company considers the applicability and impact of all recent accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial position or results of operations. In August 2018, the FASB issued guidance that amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. The Company will adopt on January 1, 2021 and does not expect this new standard to have a significant impact to its disclosures. In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combination s that result in a step-up in the tax basis of goodwill. The transition requirements are primarily prospective and the effective date for Resideo is January 1, 2021, with early adoption permitted. The Company early adopted the provisions of this guidance on January 1, 2020. Adoption of this guidance did not have a material financial statement impact. 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, |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 9 Months Ended |
Sep. 26, 2020 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | Note 3. Earnings (Loss) Per Share The following table sets forth the computation of basic and diluted earnings per share (dollars in millions except shares in thousands and per share data): Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Net income (loss) $ 75 $ 8 $ (22 ) $ 45 Shares used in computing basic earnings per share 123,421 122,770 123,194 122,681 Effect of dilutive securities: Dilutive effect of common stock equivalents 1,814 474 - 723 Shares used in computing diluted earnings per share 125,235 123,244 123,194 123,404 Earnings (loss) per share: Basic $ 0.61 $ 0.07 $ (0.18 ) $ 0.37 Diluted $ 0.60 $ 0.06 $ (0.18 ) $ 0.36 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 our common stock for the three and nine months ended September 26, 2020 and September 28, 2019. In periods where the Company has a net loss, no dilutive common shares are included in the calculation for diluted shares as they are considered anti-dilutive. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 26, 2020 | |
Business Combinations [Abstract] | |
Acquisitions | Note 4. Acquisitions On February 10, 2020, the Company completed the acquisition of privately held Herman ProAV, a leading provider and distributer of professional audio-visual products, procurement services and labor resources to systems integrators in the commercial audio-visual industry. The purchase price paid for this acquisition was approximately $36 million. In connection with this acquisition, the Company recognized goodwill and intangible assets of $4 million and $18 million, respectively. This acquisition was integrated into and builds upon ADI Global Distribution’s product portfolio and expands its presence in the pro-AV market. The Herman ProAV acquisition agreements include deferred payments for certain individuals that are contingent upon employment as well as financial performance. The Company determined that these deferred payments are accounted for as compensation expense over the requisite service period. The Company is substantially complete with the allocation of purchase price, however, amounts are still subject to finalization. Pro-forma disclosures are not provided as the acquisition has an immaterial financial statement impact. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 26, 2020 | |
Revenue From Contract With Customer [Abstract] | |
Revenue Recognition | Note 5. Revenue Recognition Disaggregated Revenue Revenues by geography and business line are as follows: Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Comfort $ 297 $ 256 $ 725 $ 799 Security 142 128 379 397 Residential Thermal Solutions 133 128 341 404 Products & Solutions 572 512 1,445 1,600 U.S. and Canada 650 590 1,758 1,705 EMEA (1) 129 109 338 336 APAC (2) 11 15 29 43 ADI Global Distribution 790 714 2,125 2,084 Net revenue $ 1,362 $ 1,226 $ 3,570 $ 3,684 (1) EMEA represents Europe, the Middle East and Africa. (2) APAC represents Asia and Pacific countries. The Company recognizes the majority of its revenue from performance obligations outlined in contracts with its customers that are satisfied at a point in time. Approximately 3% of the Company’s revenue is satisfied over time. As of September 26, 2020 and September 28, 2019, contract assets and liabilities were not material. |
Restructuring and Other Charges
Restructuring and Other Charges | 9 Months Ended |
Sep. 26, 2020 | |
Restructuring And Related Activities [Abstract] | |
Restructuring and Other Charges | Note 6. Restructuring and Other Charges During the fourth quarter of 2019, the Company announced commencement of a comprehensive financial and operational review focused on product cost, gross margin improvement, and general and administrative expense simplification. The review is being overseen by the Strategic and Operational Committee of the board, comprised of independent directors. The Company retained industry-recognized experts in supply chain optimization and organizational excellence to assist in the review. Certain restructuring actions have been and are continuing to be implemented under this program as well as previous programs. Products & Solutions segment restructuring and related expenses for the three and nine months ended September 26, 2020 were $7 million and $24 million, respectively, and for the three and nine months ended September 28, 2019, restructuring and related expense were $9 million and $28 million, respectively. ADI Global Distribution segment restructuring and related expenses for the three and nine months ended September 26, 2020 were $0 million and $3 million, respectively, and for the three and nine months ended September 28, 2019, restructuring and related expenses were $0 million and $6 million, respectively. Restructuring and related expenses for all periods are primarily related to severance. The Company's restructuring expenses for the three and nine months ended September 26, 2020 and September 28, 2019: Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Cost of goods sold $ 2 $ 4 $ 7 $ 11 Selling, general and administrative expenses 5 5 20 23 $ 7 $ 9 $ 27 $ 34 The following table summarizes the status of total restructuring reserves related to severance cost included in Accrued liabilities in the unaudited Consolidated Balance Sheets: Nine Months Ended September 26, 2020 Beginning of period $ 19 Charges 27 Usage – cash payments (23 ) End of period $ 23 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 26, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 7. Income Taxes The Company recorded a tax expense of $7 million and $26 million for the three and nine months ended September 26, 2020, respectively. 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. For the three months ended September 26, 2020, the net tax expense of $7 million was driven by interim period tax expense of $7 million based on year-to-date actual amounts. Tax expense specific to the period was $0. 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. For the nine months ended September 26, 2020, net tax expense of $26 million consisted primarily of interim period tax expense of $11 million based on year-to-date actual amounts, and tax expense specific to the period of approximately $15 million, consisting primarily of $15 million for valuation allowances in foreign jurisdictions, $2 million related to the estimated tax impact of the CARES Act on prior years, and share-based excess cost of $1 million, partially offset by a $3 million tax benefit for changes in estimates related to prior years. 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. |
Inventories Net
Inventories Net | 9 Months Ended |
Sep. 26, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories Net | Note 8. Inventories—Net September 26, December 31, 2020 2019 Raw materials $ 156 $ 154 Work in process 20 18 Finished products 521 568 Inventory reserves (79 ) (69 ) $ 618 $ 671 |
Accrued Liabilities
Accrued Liabilities | 9 Months Ended |
Sep. 26, 2020 | |
Payables And Accruals [Abstract] | |
Accrued Liabilities | Note 9. Accrued Liabilities September 26, December 31, 2020 2019 Obligations payable under Indemnification Agreements $ 175 $ 140 Taxes payable 53 66 Compensation, benefit and other employee-related 82 66 Customer rebate reserve 71 78 Other 225 202 $ 606 $ 552 Refer to “Note 13. Commitments and Contingencies” for further details on Obligations payable under Indemnification Agreements. |
Long-term Debt and Credit Agree
Long-term Debt and Credit Agreement | 9 Months Ended |
Sep. 26, 2020 | |
Debt Disclosure [Abstract] | |
Long-term Debt and Credit Agreement | Note 10. Long-term Debt and Credit Agreement The Company’s debt at September 26, 2020 and December 31, 2019 consisted of the following: September 26, December 31, 2020 2019 6.125% notes due 2026 $ 400 $ 400 Five-year variable rate term loan A due 2023 324 333 Seven-year variable rate term loan B due 2025 468 470 Revolving Credit Facility 150 - Unamortized deferred financing costs and debt discounts (20 ) (23 ) Total outstanding indebtedness 1,322 1,180 Less: amounts due within one year 181 22 Total long-term debt due after one year $ 1,141 $ 1,158 On November 26, 2019, the Company entered into a First Amendment to the Credit Agreement (the “Credit Agreement Amendment”). The Credit Agreement Amendment amended the five-year variable rate term loan A due 2023 (the “Term A Loan Facility”), the seven-year variable rate term loan B due 2025 (the “Term B Loan Facility” and together, the “Term Loans”) and the five-year senior secured first-lien revolving credit facility (the “Revolving Credit Facility”) credit agreement (the “Credit Agreement”) to, among other things: (i) increase the levels of the maximum consolidated total leverage ratio under the Credit Agreement, to not greater than 5.25 4.75 4.25 3.75 As of September 26, 2020, there were $150 million of borrowings and no letters of credit issued under the Revolving Credit Facility. The Company assessed the amount recorded under the Term Loans, the 6.125% senior unsecured notes (the “Senior Notes”), and the Revolving Credit Facility. The Company determined that the Revolving Credit Facility approximated fair value. The Term A Loan Facility, Term B Loan Facility and the Senior Notes’ fair values are approximately $307, $460 and $395 million, respectively. The fair values of the debt are based on the quoted inactive prices and are therefore classified as Level 2 within the valuation hierarchy. At September 26, 2020, the interest rate for the Term Loans was 2.56% and the weighted average interest rate for the Revolving Credit Facility was 2.41% . For more information, please refer to “Note 15. Long-term Debt and Credit Agreement ” in our 2019 Annual Report on Form 10-K. |
Leases
Leases | 9 Months Ended |
Sep. 26, 2020 | |
Leases [Abstract] | |
Leases | Note 11. Leases The Company is party to operating leases for the majority of its manufacturing sites, offices, engineering and lab sites, stocking locations, warehouses, automobiles, and certain equipment. The Company’s operating lease costs for the three and nine months ended September 26, 2020 and September 28, 2019 consisted of the following: Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Cost of goods sold $ 5 $ 4 $ 13 $ 12 Selling, general & administrative 13 10 33 27 Total operating lease costs $ 18 $ 14 $ 46 $ 39 Total operating lease costs include variable lease costs of $5 million and $12 million, respectively, for the three and nine months ended September 26, 2020 The Company recognized the following related to its operating leases: Financial Statement Line Item At September 26, 2020 At December 31, 2019 Operating right-of-use assets Other assets $ 134 $ 137 Operating lease liabilities - current Accrued liabilities $ 33 $ 31 Operating lease liabilities - noncurrent Other liabilities $ 109 $ 111 Maturities of the Company’s operating lease liabilities were as follows: At September 26, 2020 2020 $ 10 2021 39 2022 35 2023 28 2024 16 Thereafter 39 Total lease payments 167 Less: imputed interest 25 Present value of operating lease liabilities $ 142 Weighted-average remaining lease term (years) 5.44 Weighted-average incremental borrowing rate 6.00 % Supplemental cash flow information related to the Company’s operating leases was as follows: Nine Months Ended September 26, September 28, 2020 2019 Operating cash outflows $ 22 $ 28 Operating right-of-use assets obtained in exchange for operating lease liabilities $ 22 $ 47 As of September 26, 2020, 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 September 26, 2020 and September 28, 2019 was not material. |
Stock-Based Compensation Plans
Stock-Based Compensation Plans | 9 Months Ended |
Sep. 26, 2020 | |
Compensation Related Costs [Abstract] | |
Stock-Based Compensation Plans | Note 12. Stock-Based Compensation Plans Restricted Stock Units (“RSUs”) During the nine months ended September 26, 2020, as part of the Company’s annual long-term compensation under the 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates and the 2018 Stock Incentive Plan for Non-Employee Directors of Resideo Technologies, Inc. as may be amended from time to time (together, the “Stock Incentive Plan”), it granted 795,099 performance-based RSUs and 2,168,943 time-based RSUs to eligible employees. The weighted average grant date fair value per share for these shares was $9.18. Stock Options During the nine months ended September 26, 2020, as part of the Company’s annual long-term compensation under the Stock Incentive Plan, 1,083,665 stock options were granted to eligible employees at a weighted average exercise price per share of $9.17 and weighted average grant date fair value per share of $2.61. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 26, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 13. Commitments and Contingencies Environmental Matters The Company is subject to various federal, state, local and foreign government requirements relating to the protection of the environment and accrues costs related to environmental matters when it is probable that it has incurred a liability related to a contaminated site and the amount can be reasonably estimated. Environmental-related expenses for sites owned and operated by Resideo are presented within Cost of goods sold for operating sites. For the three and nine months ended September 26, 2020 and September 28, 2019 environmental expenses related to these operating sites were not material. Liabilities for environmental costs were $22 million as of September 26, 2020 and December 31, 2019. 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 our unaudited consolidated results of operations and operating cash flows in the periods recognized or paid. Obligations P ayable U nder Indemnification Agreements In connection with the Spin-Off, the Company entered into an indemnification and reimbursement agreement with Honeywell (the "Reimbursement Agreement") and a tax matters agreement (the "Tax Matters Agreement") (collectively, the "Indemnification Agreements") which are further described below. Reimbursement Agreement On October 29, 2018, in connection with the Spin-Off, the Company entered into the Reimbursement Agreement with Honeywell Payments in respect of the liabilities arising in a given year will be made quarterly throughout such year on the basis of an estimate of the liabilities and recoveries provided by Honeywell. Following the end of any such year, Honeywell will provide the Company with a calculation of the amount of payments and the recoveries actually received. Payment amounts under the Reimbursement Agreement will be deferred to the extent that a specified event of default has occurred and is continuing under certain indebtedness, including under the Company’s Credit Agreement, or the payment thereof causes the Company to not be compliant with certain financial covenants in certain indebtedness, including the Company’s Credit Agreement, on a pro forma basis, including the maximum total leverage ratio (ratio of consolidated debt to consolidated EBITDA, which excludes any amounts owed under the Reimbursement Agreement), and the minimum interest coverage ratio. A 5% late payment fee will accrue on all amounts that are not otherwise entitled to be deferred under the terms of the Reimbursement Agreement, without prejudice to any other rights that Honeywell may have for late payments. The obligations under the Reimbursement Agreement will continue 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. On April 21, 2020, the Company and Honeywell entered into an amendment to the Reimbursement Agreement (the "Reimbursement Agreement Amendment"). Pursuant to the Reimbursement Agreement Amendment, certain covenants in Exhibit G of the Reimbursement Agreement were modified to conform, if applicable, to the amended covenants included in the Credit Agreement Amendment. In addition, under the Reimbursement Agreement Amendment, the parties agreed to defer until no later than July 30, 2020 (which was further amended as described below) the $35 million quarterly payment otherwise payable to Honeywell on April 30, 2020. Other Agreements On July 28, 2020, the Company and Honeywell entered into the Second Reimbursement Agreement Amendment. Pursuant to the Second Reimbursement Agreement Amendment, the parties agreed to further defer until no later than October 30, 2020 the $35 million quarterly payment that was originally due thirty days following the start of the second quarter of 2020 and was previously deferred until no later than July 30, 2020 pursuant to the Reimbursement Agreement Amendment. The deferred payment was made on October 30, 2020. The following table summarizes information concerning our Reimbursement Agreement liabilities: Nine Months Ended September 26, September 28, 2020 2019 Beginning balance $ 585 $ 616 Accruals for indemnification liabilities deemed probable and reasonably estimable 107 138 Reduction (1) - (81 ) Indemnification payment (70 ) (105 ) Ending balance (2) $ 622 $ 568 (1) Reduction in indemnification liabilities relates to a provision in the Reimbursement Agreement that reduces the obligation due to Honeywell for any proceeds received by Honeywell from a property sale of a site under the agreement. (2) Reimbursement Agreement liabilities deemed probable and reasonably estimable, however, it is possible the Company 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. 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 for the three and nine months ended September 28, 2019, expenses related to the Reimbursement Agreement were $35 million and $57 million, respectively, and are recorded in Other expense, net. Reimbursement Agreement liabilities are included in the following balance sheet accounts: September 26, 2020 December 31, 2019 Accrued liabilities $ 175 $ 140 Obligations payable under Indemnification Agreements 447 445 $ 622 $ 585 The Company does not currently possess sufficient information to reasonably estimate the amounts of indemnification liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can be determined although they could be material to 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 all taxes, including 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 September 26, 2020 and December 31, 2019, the Company had an indemnity outstanding to Honeywell for future tax payments of $139 million and $149 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 September 26, 2020, royalty fees were $7 million and $18 million, respectively. For the three and nine months ended September 28, 2019, royalty fees were $6 million and $20 million, respectively. Other Matters The Company is subject to lawsuits, investigations and disputes arising out of the conduct of its business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee matters, intellectual property, and environmental, health and safety matters. The Company recognizes a liability for any contingency that is probable of occurrence and reasonably estimable. The Company continually assesses the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful 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 District court for the District of Minnesota styled In re Resideo Technologies, Inc. Securities Litigation On July 7 , 2020, Jawad A. Ayaz as Trustee of the Shiv Venkatasetty 2016 Trust (“Derivative Plaintiff”) filed a shareholder derivative complaint (the “Derivative Complaint”) against certain current or former directors and officers of the Company (“Derivative Defendants”) in the District Court for the District of Delaware, captioned Ayaz v. Nefkens, 20-cv-00915 . Derivative Plaintiff alleges generally that Derivative Defendants breached fiduciary duties owed to the Company by allegedly causing or allowing the Company to make materially false and misleading statements to the public regarding the Company’s business operations and financial prospects . Derivative Plaintiff also alleges that the Company’s 2019 proxy statement was materially false and misleading, in violation of Section 14(a) of the Securities Exchange Act of 1934, and asserts claims of corporate waste and unjust enrichment, among other allegations, and relies on a similar set of facts as alleged in the Securities Litigation . The Derivative Complaint seeks declaratory relief and unspecified money damages on behalf of the Company . On July 28 , 2020 , certain of the Derivative Defendants filed a stipulation to stay the proceedings pending the resolution of the motion to dismiss in the Securities Litigation. An additional shareholder derivative complaint was filed on August 12, 2020, by Plaintiff Daniel Sanclemente (the “ Sanclemente Action ” ) on behalf of the Company in the District Court for the District of Delaware, captioned Sanclemente v. Nefkens , 20-cv-1062, alleging substantially the same facts and making substantially the same claims against the same defendants as in the Derivative Complaint . The District Court has consolidated the Derivative Complaint and the Sanclemente Action. The consolidated action is styled In re Resideo Technologies, Inc. Derivative Litigation, 20-cv-00915 (the “ Derivative Action ” ), and lead counsel has been appointed. Additionally, the pending stipulation to stay the proceedings pending the resolution of the motion to dismiss in the Securities Litigation was granted and is applicable to the consolidated action. On August 28, 2020, Riviera Beach Police Pension Fund (“Riviera Beach”) filed a motion to intervene in the Derivative Action, noticing its intent to file a complaint at some point in the future against some or all of the Derivative Defendants. As of September 18, 2020, Riviera Beach and the existing plaintiffs reached an agreement regarding the leadership structure of the Derivative Action in the event that Riviera Beach files its own complaint in the future. The Company intends to defend this action vigorously, but there can be no assurance that the defense will be successful . Warranties and Guarantees In the normal course of business, the Company issues product warranties and product performance guarantees. It accrues for the estimated cost of product warranties and product performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities. The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees: Nine Months Ended September 26, September 28, 2020 2019 Beginning of period $ 25 $ 26 Accruals for warranties/guarantees issued during the year 13 10 Adjustment of pre-existing warranties/guarantees - (1 ) Settlement of warranty/guarantee claims (12 ) (12 ) End of period $ 26 $ 23 |
Pension
Pension | 9 Months Ended |
Sep. 26, 2020 | |
Compensation And Retirement Disclosure [Abstract] | |
Pension | Note 14. Pension The Company sponsors multiple funded and unfunded U.S. and non-U.S. defined benefit pension plans. Pension benefits for many of its U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit plans. It also sponsors defined benefit pension plans which cover non-U.S. employees who are not U.S. citizens, in certain jurisdictions, principally Germany, Austria, Belgium, France, India, Switzerland, and the Netherlands. The 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 September 26, 2020 and September 28, 2019. |
Segment Financial Data
Segment Financial Data | 9 Months Ended |
Sep. 26, 2020 | |
Segment Reporting [Abstract] | |
Segment Financial Data | Note 15. Segment Financial Data The Company globally manages its business operations through two reportable operating segments, Products & Solutions Products & Solutions —The Products & Solutions business is a leading global provider of products, software solutions and technologies that help homeowners stay connected and in control of their comfort, security and energy use. ADI Global Distribution —The ADI Global Distribution business is a leading global distributor of low-voltage electronic and security products. Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions and assesses operating performance. The Company’s Chief Operating Decision Maker evaluates segment performance based on Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as segment net income (loss) before income taxes, net interest expense (income), depreciation and amortization plus environmental expense, Reimbursement Agreement expense, stock compensation expense, restructuring charges and other adjustments. Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Revenue Total Products & Solutions revenue $ 674 $ 595 $ 1,715 $ 1,828 Less: Intersegment revenue 102 83 270 228 External Products & Solutions revenue 572 512 1,445 1,600 External ADI Global Distribution revenue 790 714 2,125 2,084 Total revenue $ 1,362 $ 1,226 $ 3,570 $ 3,684 Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Segment Adjusted EBITDA Products & Solutions $ 136 $ 66 $ 224 $ 222 ADI Global Distribution 52 48 126 141 Segment Adjusted EBITDA $ 188 $ 114 $ 350 $ 363 The table below provides a reconciliation of net income (loss) to Segment Adjusted EBITDA: Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Net income (loss) $ 75 $ 8 $ (22 ) $ 45 Net interest expense (1) 14 16 48 49 Tax expense 7 - 26 36 Depreciation and amortization 22 19 64 55 Reimbursement Agreement expense (2) 38 35 107 57 Stock compensation expense (3) 7 8 21 22 Restructuring charges 7 9 27 34 Other (4) 18 19 79 65 Segment Adjusted EBITDA $ 188 $ 114 $ 350 $ 363 (1) For the three and nine months ended September 26, 2020 net interest expense consists of interest expense of $14 million and $49 million net of interest income of $0 million and $1 million, respectively. For the three and nine months ended September 28, 2019 net interest expense consists of interest expense of $16 million and $51 million net of interest income of $0 million and $2 million, respectively. (2) Represents recorded net expenses related to the Reimbursement Agreement. ( 3 ) Stock compensation expense adjustment includes only non-cash expenses. (4 ) For the three and nine months ended September 26, 2020, Other represents $9 million and $36 million of items related to the Spin-Off, $12 million and $41 million of consulting and other fees related to transformation programs, ($3) million and $1 million of non-operating (income) expense adjustment which excludes net interest (income), and $0 million and $1 million of acquisition-related expenses, respectively. For the three and nine months ended September 28, 2019, Other represents $19 million and $53 million of cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off, and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income), respectively. The Company’s CODM does not use segment assets information to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 26, 2020 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates —The preparation of the Company’s Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the Consolidated Financial Statements and related disclosures in the accompanying Notes to Consolidated Financial Statements. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed, and the effects of changes are reflected in the Consolidated Financial Statements in the period they are determined to be necessary. Estimates are used when accounting for stock-based compensation, pension benefits, contingent consideration, indemnification liabilities, goodwill and intangible assets, and valuation allowances for accounts receivable, inventory, deferred tax assets, and the amounts of revenue and expenses reported during the period. The Company has used information available to identify potential impacts caused by the COVID-19 pandemic at September 26, 2020 in these estimates. |
Goodwill | Goodwill — The Company has determined that it is likely that the carrying value of goodwill exceeds the fair value at September 26, 2020. However, the extent to which COVID-19 may adversely impact our business depends on future developments, which are uncertain and unpredictable, depending upon the severity and duration of the outbreak, and the effectiveness of actions taken globally to contain or mitigate its effects. Any resulting financial impact cannot be estimated reasonably at this time but may adversely affect our business and financial results. It is likely that, during the remainder of 2020 and into 2021, macroeconomic conditions will be volatile and could impact our business. If there is an adverse change in facts and circumstances, then an impairment charge may be necessary in the future. Specifically, the fair value of our Products & Solutions reporting unit, with goodwill of approximately $2,012 million at September 26, 2020, exceeded its' carrying value by 10% in the 2019 annual impairment test and therefore is highly sensitive to adverse changes in the facts and circumstances that could result in a possible future impairment. Should the fair value of the Company’s reporting units fall below its' carrying amount because of reduced operating performance, market declines, changes in the discount rate, a more significant impact than expected from the COVID-19 pandemic, or other conditions, charges for impairment may be necessary. The Company regularly monitors its reporting units to determine if there is an indicator of potential impairment. The Company will perform its annual goodwill impairment assessment during the fourth quarter. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements —The Company considers the applicability and impact of all recent accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial position or results of operations. In August 2018, the FASB issued guidance that amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. The Company will adopt on January 1, 2021 and does not expect this new standard to have a significant impact to its disclosures. In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combination s that result in a step-up in the tax basis of goodwill. The transition requirements are primarily prospective and the effective date for Resideo is January 1, 2021, with early adoption permitted. The Company early adopted the provisions of this guidance on January 1, 2020. Adoption of this guidance did not have a material financial statement impact. 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, |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Computation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share (dollars in millions except shares in thousands and per share data): Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Net income (loss) $ 75 $ 8 $ (22 ) $ 45 Shares used in computing basic earnings per share 123,421 122,770 123,194 122,681 Effect of dilutive securities: Dilutive effect of common stock equivalents 1,814 474 - 723 Shares used in computing diluted earnings per share 125,235 123,244 123,194 123,404 Earnings (loss) per share: Basic $ 0.61 $ 0.07 $ (0.18 ) $ 0.37 Diluted $ 0.60 $ 0.06 $ (0.18 ) $ 0.36 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
Revenue From Contract With Customer [Abstract] | |
Schedule of Disaggregated Revenue | Revenues by geography and business line are as follows: Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Comfort $ 297 $ 256 $ 725 $ 799 Security 142 128 379 397 Residential Thermal Solutions 133 128 341 404 Products & Solutions 572 512 1,445 1,600 U.S. and Canada 650 590 1,758 1,705 EMEA (1) 129 109 338 336 APAC (2) 11 15 29 43 ADI Global Distribution 790 714 2,125 2,084 Net revenue $ 1,362 $ 1,226 $ 3,570 $ 3,684 (1) EMEA represents Europe, the Middle East and Africa. (2) APAC represents Asia and Pacific countries. |
Restructuring and Other Charg_2
Restructuring and Other Charges (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
Restructuring And Related Activities [Abstract] | |
Summary of Restructuring Expenses | The Company's restructuring expenses for the three and nine months ended September 26, 2020 and September 28, 2019: Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Cost of goods sold $ 2 $ 4 $ 7 $ 11 Selling, general and administrative expenses 5 5 20 23 $ 7 $ 9 $ 27 $ 34 |
Summary of Status of Total Restructuring Reserves Related to Severance Cost Included in Accrued Liabilities in the Unaudited Consolidated Balance Sheets | The following table summarizes the status of total restructuring reserves related to severance cost included in Accrued liabilities in the unaudited Consolidated Balance Sheets: Nine Months Ended September 26, 2020 Beginning of period $ 19 Charges 27 Usage – cash payments (23 ) End of period $ 23 |
Inventories Net (Tables)
Inventories Net (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | September 26, December 31, 2020 2019 Raw materials $ 156 $ 154 Work in process 20 18 Finished products 521 568 Inventory reserves (79 ) (69 ) $ 618 $ 671 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
Payables And Accruals [Abstract] | |
Summary of Accrued Liabilities | September 26, December 31, 2020 2019 Obligations payable under Indemnification Agreements $ 175 $ 140 Taxes payable 53 66 Compensation, benefit and other employee-related 82 66 Customer rebate reserve 71 78 Other 225 202 $ 606 $ 552 |
Long-term Debt and Credit Agr_2
Long-term Debt and Credit Agreement (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | The Company’s debt at September 26, 2020 and December 31, 2019 consisted of the following: September 26, December 31, 2020 2019 6.125% notes due 2026 $ 400 $ 400 Five-year variable rate term loan A due 2023 324 333 Seven-year variable rate term loan B due 2025 468 470 Revolving Credit Facility 150 - Unamortized deferred financing costs and debt discounts (20 ) (23 ) Total outstanding indebtedness 1,322 1,180 Less: amounts due within one year 181 22 Total long-term debt due after one year $ 1,141 $ 1,158 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
Leases [Abstract] | |
Schedule of Operating Lease Costs | The Company’s operating lease costs for the three and nine months ended September 26, 2020 and September 28, 2019 consisted of the following: Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Cost of goods sold $ 5 $ 4 $ 13 $ 12 Selling, general & administrative 13 10 33 27 Total operating lease costs $ 18 $ 14 $ 46 $ 39 |
Summary of Lease Recognized Related to Operating Leases | The Company recognized the following related to its operating leases: Financial Statement Line Item At September 26, 2020 At December 31, 2019 Operating right-of-use assets Other assets $ 134 $ 137 Operating lease liabilities - current Accrued liabilities $ 33 $ 31 Operating lease liabilities - noncurrent Other liabilities $ 109 $ 111 |
Maturities of Operating Lease Liabilities | Maturities of the Company’s operating lease liabilities were as follows: At September 26, 2020 2020 $ 10 2021 39 2022 35 2023 28 2024 16 Thereafter 39 Total lease payments 167 Less: imputed interest 25 Present value of operating lease liabilities $ 142 Weighted-average remaining lease term (years) 5.44 Weighted-average incremental borrowing rate 6.00 % |
Supplemental Cash Flow Information Related to Operating Leases | Supplemental cash flow information related to the Company’s operating leases was as follows: Nine Months Ended September 26, September 28, 2020 2019 Operating cash outflows $ 22 $ 28 Operating right-of-use assets obtained in exchange for operating lease liabilities $ 22 $ 47 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
Loss Contingencies [Line Items] | |
Summary of Recorded Obligations for Product Warranties and Product Performance Guarantee | The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees: Nine Months Ended September 26, September 28, 2020 2019 Beginning of period $ 25 $ 26 Accruals for warranties/guarantees issued during the year 13 10 Adjustment of pre-existing warranties/guarantees - (1 ) Settlement of warranty/guarantee claims (12 ) (12 ) End of period $ 26 $ 23 |
Honeywell | |
Loss Contingencies [Line Items] | |
Summary of Reimbursement Agreement Liabilities | The following table summarizes information concerning our Reimbursement Agreement liabilities: Nine Months Ended September 26, September 28, 2020 2019 Beginning balance $ 585 $ 616 Accruals for indemnification liabilities deemed probable and reasonably estimable 107 138 Reduction (1) - (81 ) Indemnification payment (70 ) (105 ) Ending balance (2) $ 622 $ 568 (1) Reduction in indemnification liabilities relates to a provision in the Reimbursement Agreement that reduces the obligation due to Honeywell for any proceeds received by Honeywell from a property sale of a site under the agreement. (2) Reimbursement Agreement liabilities deemed probable and reasonably estimable, however, it is possible the Company 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. |
Summary of Reimbursement Agreement Liabilities Included in Balance Sheet Accounts | Reimbursement Agreement liabilities are included in the following balance sheet accounts: September 26, 2020 December 31, 2019 Accrued liabilities $ 175 $ 140 Obligations payable under Indemnification Agreements 447 445 $ 622 $ 585 |
Segment Financial Data (Tables)
Segment Financial Data (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information | Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions and assesses operating performance. The Company’s Chief Operating Decision Maker evaluates segment performance based on Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as segment net income (loss) before income taxes, net interest expense (income), depreciation and amortization plus environmental expense, Reimbursement Agreement expense, stock compensation expense, restructuring charges and other adjustments. Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Revenue Total Products & Solutions revenue $ 674 $ 595 $ 1,715 $ 1,828 Less: Intersegment revenue 102 83 270 228 External Products & Solutions revenue 572 512 1,445 1,600 External ADI Global Distribution revenue 790 714 2,125 2,084 Total revenue $ 1,362 $ 1,226 $ 3,570 $ 3,684 Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Segment Adjusted EBITDA Products & Solutions $ 136 $ 66 $ 224 $ 222 ADI Global Distribution 52 48 126 141 Segment Adjusted EBITDA $ 188 $ 114 $ 350 $ 363 |
Schedule of Reconciliation of Adjusted EBITDA | The table below provides a reconciliation of net income (loss) to Segment Adjusted EBITDA: Three Months Ended Nine Months Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Net income (loss) $ 75 $ 8 $ (22 ) $ 45 Net interest expense (1) 14 16 48 49 Tax expense 7 - 26 36 Depreciation and amortization 22 19 64 55 Reimbursement Agreement expense (2) 38 35 107 57 Stock compensation expense (3) 7 8 21 22 Restructuring charges 7 9 27 34 Other (4) 18 19 79 65 Segment Adjusted EBITDA $ 188 $ 114 $ 350 $ 363 (1) For the three and nine months ended September 26, 2020 net interest expense consists of interest expense of $14 million and $49 million net of interest income of $0 million and $1 million, respectively. For the three and nine months ended September 28, 2019 net interest expense consists of interest expense of $16 million and $51 million net of interest income of $0 million and $2 million, respectively. (2) Represents recorded net expenses related to the Reimbursement Agreement. ( 3 ) Stock compensation expense adjustment includes only non-cash expenses. (4 ) For the three and nine months ended September 26, 2020, Other represents $9 million and $36 million of items related to the Spin-Off, $12 million and $41 million of consulting and other fees related to transformation programs, ($3) million and $1 million of non-operating (income) expense adjustment which excludes net interest (income), and $0 million and $1 million of acquisition-related expenses, respectively. For the three and nine months ended September 28, 2019, Other represents $19 million and $53 million of cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off, and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income), respectively. |
Organization, Operations and Ba
Organization, Operations and Basis of Presentation - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Date of business spin-off | Oct. 29, 2018 | |||
Cost of goods sold | $ 992 | $ 917 | $ 2,680 | $ 2,720 |
Gross profit | 370 | 309 | 890 | 964 |
Selling, general and administrative expenses | $ 239 | 250 | $ 731 | 778 |
Restatement Adjustment | ||||
Cost of goods sold | (20) | (66) | ||
Gross profit | 20 | 66 | ||
Selling, general and administrative expenses | $ 20 | $ 66 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Millions | Sep. 26, 2020 | Dec. 31, 2019 |
Summary Of Significant Accounting Policies [Line Items] | ||
Goodwill | $ 2,657 | $ 2,642 |
Products & Solutions Reporting Unit | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Goodwill | $ 2,012 | |
Goodwill percentage of fair value in excess of carrying value | 10.00% |
Earnings (Loss) Per Share - Sch
Earnings (Loss) Per Share - Schedule of Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Earnings Per Share [Abstract] | ||||
Net income (loss) | $ 75 | $ 8 | $ (22) | $ 45 |
Shares used in computing basic earnings per share | 123,421 | 122,770 | 123,194 | 122,681 |
Effect of dilutive securities: | ||||
Dilutive effect of common stock equivalents | 1,814 | 474 | 723 | |
Shares used in computing diluted earnings per share | 125,235 | 123,244 | 123,194 | 123,404 |
Earnings (loss) per share: | ||||
Basic | $ 0.61 | $ 0.07 | $ (0.18) | $ 0.37 |
Diluted | $ 0.60 | $ 0.06 | $ (0.18) | $ 0.36 |
Earnings (Loss) Per Share - Add
Earnings (Loss) Per Share - Additional Information (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Earnings Per Share [Line Items] | ||||
Purchase of outstanding common stock were anti-dilutive | 0 | 0 | 0 | 0 |
Options and Other Rights | ||||
Earnings Per Share [Line Items] | ||||
Purchase of outstanding common stock were anti-dilutive | 1,100 | 3,800 | 3,600 | 1,500 |
Performance Based Unit Awards | ||||
Earnings Per Share [Line Items] | ||||
Purchase of outstanding common stock were anti-dilutive | 800 | 300 | 600 | 300 |
Acquisitions - Additional Infor
Acquisitions - Additional Information (Details) - USD ($) $ in Millions | Feb. 10, 2020 | Sep. 26, 2020 | Sep. 28, 2019 | Dec. 31, 2019 |
Business Acquisition [Line Items] | ||||
Business acquisition | $ 35 | $ 17 | ||
Goodwill | $ 2,657 | $ 2,642 | ||
Herman ProAV | ||||
Business Acquisition [Line Items] | ||||
Business acquisition | $ 36 | |||
Goodwill | 4 | |||
Business acquisition, intangible assets acquired | $ 18 |
Revenue Recognition - Schedule
Revenue Recognition - Schedule of Disaggregated Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | ||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | $ 1,362 | $ 1,226 | $ 3,570 | $ 3,684 | |
Products & Solutions | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 572 | 512 | 1,445 | 1,600 | |
Products & Solutions | Comfort | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 297 | 256 | 725 | 799 | |
Products & Solutions | Security | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 142 | 128 | 379 | 397 | |
Products & Solutions | Residential Thermal Solutions | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 133 | 128 | 341 | 404 | |
ADI Global Distribution | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 790 | 714 | 2,125 | 2,084 | |
ADI Global Distribution | U.S. and Canada | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 650 | 590 | 1,758 | 1,705 | |
ADI Global Distribution | EMEA | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | [1] | 129 | 109 | 338 | 336 |
ADI Global Distribution | APAC | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | [2] | $ 11 | $ 15 | $ 29 | $ 43 |
[1] | EMEA represents Europe, the Middle East and Africa. | ||||
[2] | APAC represents Asia and Pacific countries. |
Revenue Recognition - Additiona
Revenue Recognition - Additional Information (Details) | Sep. 26, 2020 |
Restructuring And Related Activities [Abstract] | |
Percentage of revenue satisfied over time | 3.00% |
Restructuring and Other Charg_3
Restructuring and Other Charges - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Restructuring Cost And Reserve [Line Items] | ||||
Restructuring and related expenses | $ 7 | $ 9 | $ 27 | $ 34 |
Severance | Products & Solutions | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Restructuring and related expenses | 7 | 9 | 24 | 28 |
Severance | ADI Global Distribution | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Restructuring and related expenses | $ 0 | $ 0 | $ 3 | $ 6 |
Restructuring and Other Charg_4
Restructuring and Other Charges - Summary of Restructuring Expenses (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Restructuring Cost And Reserve [Line Items] | ||||
Restructuring expenses | $ 7 | $ 9 | $ 27 | $ 34 |
Cost of Goods Sold | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Restructuring expenses | 2 | 4 | 7 | 11 |
Selling, General and Administrative Expenses | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Restructuring expenses | $ 5 | $ 5 | $ 20 | $ 23 |
Restructuring and Other Charg_5
Restructuring and Other Charges - Summary of Status of Total Restructuring Reserves Related to Severance Cost Included in Accrued Liabilities in the Unaudited Consolidated Balance Sheets (Details) - Accrued Liabilities $ in Millions | 9 Months Ended |
Sep. 26, 2020USD ($) | |
Restructuring Cost And Reserve [Line Items] | |
Beginning of period | $ 19 |
Charges | 27 |
Usage – cash payments | (23) |
End of period | $ 23 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 26, 2020 | Sep. 26, 2020 | Sep. 28, 2019 | |
Income Tax Disclosure [Abstract] | |||
Tax expense | $ 7 | $ 26 | $ 36 |
Interim period tax expense (benefit) | 7 | 11 | |
Tax expense (benefit) | $ 0 | 15 | |
Valuation allowance | 15 | ||
Estimated tax impact of CARES Act | 2 | ||
Tax expense for share-based excess cost | 1 | ||
Tax benefit for changes in estimates related to prior years | $ 3 |
Inventories Net (Details)
Inventories Net (Details) - USD ($) $ in Millions | Sep. 26, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 156 | $ 154 |
Work in process | 20 | 18 |
Finished products | 521 | 568 |
Inventory reserves | (79) | (69) |
Inventory, Net | $ 618 | $ 671 |
Accrued Liabilities - Summary o
Accrued Liabilities - Summary of Accrued Liabilities (Details) - USD ($) $ in Millions | Sep. 26, 2020 | Dec. 31, 2019 |
Accrued Liabilities, Current [Abstract] | ||
Obligations payable under Indemnification Agreements | $ 175 | $ 140 |
Taxes payable | 53 | 66 |
Compensation, benefit and other employee-related | 82 | 66 |
Customer rebate reserve | 71 | 78 |
Other | 225 | 202 |
Total accrued liabilities | $ 606 | $ 552 |
Long-term Debt and Credit Agr_3
Long-term Debt and Credit Agreement - Schedule of Debt (Details) - USD ($) $ in Millions | Sep. 26, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
Unamortized deferred financing costs and debt discounts | $ (20) | $ (23) |
Total outstanding indebtedness | 1,322 | 1,180 |
Less: amounts due within one year | 181 | 22 |
Total long-term debt due after one year | 1,141 | 1,158 |
Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving Credit Facility | 150 | |
6.125% notes due 2026 | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 400 | 400 |
Five Year Variable Rate Term Loan A Due 2023 | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 324 | 333 |
Seven Year Variable Rate Term Loan B Due 2025 | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 468 | $ 470 |
Long-term Debt and Credit Agr_4
Long-term Debt and Credit Agreement - Schedule of Debt (Parenthetical) (Details) | Nov. 26, 2019 | Sep. 26, 2020 |
6.125% notes due 2026 | ||
Debt Instrument [Line Items] | ||
Interest rate | 6.125% | |
Debt instrument maturity year | 2026 | |
Five Year Variable Rate Term Loan A Due 2023 | ||
Debt Instrument [Line Items] | ||
Debt instrument maturity year | 2023 | 2023 |
Seven Year Variable Rate Term Loan B Due 2025 | ||
Debt Instrument [Line Items] | ||
Debt instrument maturity year | 2025 | 2025 |
Long-term Debt and Credit Agr_5
Long-term Debt and Credit Agreement - Additional Information (Details) $ in Millions | Nov. 26, 2019 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Sep. 26, 2020USD ($) |
Five Year Variable Rate Term Loan A Due 2023 | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument maturity year | 2023 | 2023 | ||||
Seven Year Variable Rate Term Loan B Due 2025 | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument maturity year | 2025 | 2025 | ||||
6.125% notes due 2026 | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument maturity year | 2026 | |||||
Interest rate | 6.125% | |||||
Senior Notes | ||||||
Debt Instrument [Line Items] | ||||||
Debt Instrument fair value | $ 395 | |||||
Credit Agreement Amendment | ||||||
Debt Instrument [Line Items] | ||||||
Consolidated total leverage ratio | 525.00% | |||||
Increase in applicable interest rate margin | 0.0025 | |||||
Credit Agreement Amendment | London Interbank Offered Rate LIBOR | ||||||
Debt Instrument [Line Items] | ||||||
Applicable interest rate on borrowings | 2.25% | |||||
Credit Agreement Amendment | Base Rate | ||||||
Debt Instrument [Line Items] | ||||||
Applicable interest rate on borrowings | 1.25% | |||||
Credit Agreement Amendment | Term B Loan Facility | London Interbank Offered Rate LIBOR | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Applicable interest rate on borrowings | 2.25% | |||||
Credit Agreement Amendment | Term B Loan Facility | Base Rate | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Applicable interest rate on borrowings | 1.75% | |||||
Credit Agreement Amendment | Term A Loan Facility | London Interbank Offered Rate LIBOR | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Applicable interest rate on borrowings | 1.25% | |||||
Credit Agreement Amendment | Term A Loan Facility | Base Rate | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Applicable interest rate on borrowings | 0.75% | |||||
Credit Agreement Amendment | Scenario Forecast | ||||||
Debt Instrument [Line Items] | ||||||
Consolidated total leverage ratio | 375.00% | 425.00% | 475.00% | |||
Term A Loan Facility | Senior Credit Facilities | ||||||
Debt Instrument [Line Items] | ||||||
Debt Instrument fair value | 307 | |||||
Term B Loan Facility | Senior Credit Facilities | ||||||
Debt Instrument [Line Items] | ||||||
Debt Instrument fair value | 460 | |||||
Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Borrowings from credit facility | 150 | |||||
Revolving Credit Facility | Senior Credit Facilities | ||||||
Debt Instrument [Line Items] | ||||||
Borrowings from credit facility | $ 150 | |||||
Weighted average interest rate | 2.41% | |||||
Letter of Credit | Senior Credit Facilities | ||||||
Debt Instrument [Line Items] | ||||||
Borrowings from credit facility | $ 0 | |||||
Term Loan Facilities | Senior Credit Facilities | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate | 2.56% |
Leases - Schedule of Operating
Leases - Schedule of Operating Lease Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Lessee Lease Description [Line Items] | ||||
Total operating lease costs | $ 18 | $ 14 | $ 46 | $ 39 |
Cost of Goods Sold | ||||
Lessee Lease Description [Line Items] | ||||
Total operating lease costs | 5 | 4 | 13 | 12 |
Selling, General and Administrative Expenses | ||||
Lessee Lease Description [Line Items] | ||||
Total operating lease costs | $ 13 | $ 10 | $ 33 | $ 27 |
Leases - Additional Information
Leases - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Leases [Abstract] | ||||
Variable lease costs | $ 5 | $ 3 | $ 12 | $ 8 |
Leases - Summary of Lease Recog
Leases - Summary of Lease Recognized Related to Operating Leases (Details) - USD ($) $ in Millions | Sep. 26, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Operating right-of-use assets | $ 134 | $ 137 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssets | us-gaap:OtherAssets |
Operating lease liabilities - current | $ 33 | $ 31 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:AccruedLiabilitiesCurrent | us-gaap:AccruedLiabilitiesCurrent |
Operating lease liabilities - noncurrent | $ 109 | $ 111 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | us-gaap:OtherLiabilitiesNoncurrent | us-gaap:OtherLiabilitiesNoncurrent |
Leases - Maturities of Operatin
Leases - Maturities of Operating Lease Liabilities (Details) $ in Millions | Sep. 26, 2020USD ($) |
Leases [Abstract] | |
2020 | $ 10 |
2021 | 39 |
2022 | 35 |
2023 | 28 |
2024 | 16 |
Thereafter | 39 |
Total lease payments | 167 |
Less: imputed interest | 25 |
Present value of operating lease liabilities | $ 142 |
Weighted-average remaining lease term (years) | 5 years 5 months 8 days |
Weighted-average incremental borrowing rate | 6.00% |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information Related to Operating Leases (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 26, 2020 | Sep. 28, 2019 | |
Leases [Abstract] | ||
Operating cash outflows | $ 22 | $ 28 |
Operating right-of-use assets obtained in exchange for operating lease liabilities | $ 22 | $ 47 |
Stock-Based Compensation Plans
Stock-Based Compensation Plans - Additional Information (Details) - 2018 Stock Incentive Plan | 9 Months Ended |
Sep. 26, 2020$ / sharesshares | |
Performance-Based Restricted Stock Units | Employees | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Awards granted | shares | 795,099 |
Time Based Restricted Stock Units | Employees | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Awards granted | shares | 2,168,943 |
Performance-Based and Service Based Restricted Stock Units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted average grant date fair value | $ / shares | $ 9.18 |
Stock Options | Employees | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Awards granted | shares | 1,083,665 |
Weighted average exercise price per share | $ / shares | $ 9.17 |
Weighted average grant date fair value per share | $ / shares | $ 2.61 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) | Jul. 28, 2020USD ($) | Apr. 30, 2020USD ($) | Oct. 29, 2018USD ($)Site | Sep. 26, 2020USD ($) | Sep. 28, 2019USD ($) | Sep. 26, 2020USD ($) | Sep. 28, 2019USD ($) | Dec. 31, 2019USD ($) | |
Loss Contingencies [Line Items] | |||||||||
Environmental liabilities | $ 22,000,000 | $ 22,000,000 | $ 22,000,000 | ||||||
Reimbursement agreement net expenses | [1] | 38,000,000 | $ 35,000,000 | $ 107,000,000 | $ 57,000,000 | ||||
Trademark license agreement | 40 years | ||||||||
Other Expense, Net | |||||||||
Loss Contingencies [Line Items] | |||||||||
Reimbursement agreement net expenses | 38,000,000 | 35,000,000 | $ 107,000,000 | 57,000,000 | |||||
Credit Agreement Amendment | |||||||||
Loss Contingencies [Line Items] | |||||||||
Indemnification payment defer | $ 35,000,000 | ||||||||
Indemnification Agreement | |||||||||
Loss Contingencies [Line Items] | |||||||||
Indemnification payable, late payment fee percentage | 5.00% | ||||||||
Site contingency, number of sites | Site | 230 | ||||||||
Indemnification agreement description | On October 29, 2018, in connection with the Spin-Off, the Company entered into the Reimbursement Agreement with Honeywell pursuant to which the Company has 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 (“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 in respect of such liabilities arising in respect of any given year is subject to a cap of $140 million (exclusive of any late payment fees up to 5% per annum). The scope of the Company’s current environmental remediation obligations subject to the Reimbursement Agreement relates to approximately 230 sites or groups of sites that are undergoing environmental remediation under U.S. federal or state law and agency oversight for contamination associated with Honeywell historical business operations. The ongoing environmental remediation is designed to address contaminants at upland and sediment sites, which include, among others, metals, organic compounds and polychlorinated biphenyls, through a variety of methods, which include, among others, excavation, capping, in-situ stabilization, groundwater treatment and dredging. In addition, the Company obligations subject to the Reimbursement Agreement include certain liabilities with respect to (i) hazardous exposure or toxic tort claims associated with the specified sites that arise after the Spin-Off, if any, (ii) currently unidentified releases of hazardous substances at or associated with the specified sites, (iii) other environmental claims associated with the specified sites and (iv) consequential damages. | ||||||||
Maximum annual reimbursement obligation amount | 25,000,000 | $ 25,000,000 | |||||||
Indemnification Agreement | Maximum | |||||||||
Loss Contingencies [Line Items] | |||||||||
Indemnity liability annual cap | $ 140,000,000 | ||||||||
Tax Matters Agreement | |||||||||
Loss Contingencies [Line Items] | |||||||||
Indemnified amount | 139,000,000 | 139,000,000 | $ 149,000,000 | ||||||
Honeywell | |||||||||
Loss Contingencies [Line Items] | |||||||||
Indemnity liability annual cap | $ 140,000,000 | 140,000,000 | $ 140,000,000 | 140,000,000 | |||||
Honeywell | Second Reimbursement Agreement Amendment | |||||||||
Loss Contingencies [Line Items] | |||||||||
Reimbursement obligation quarterly payment | $ 35,000,000 | ||||||||
Reimbursement obligation quarterly payment description | Pursuant to the Second Reimbursement Agreement Amendment, the parties agreed to further defer until no later than October 30, 2020 the $35 million quarterly payment that was originally due thirty days following the start of the second quarter of 2020 and was previously deferred until no later than July 30, 2020 pursuant to the Reimbursement Agreement Amendment. The deferred payment was made on October 30, 2020. | ||||||||
Honeywell | Trademark Agreement | |||||||||
Loss Contingencies [Line Items] | |||||||||
Royalty fee on net revenue | 1.50% | 1.50% | |||||||
Royalty expense | $ 7,000,000 | 6,000,000 | $ 18,000,000 | $ 20,000,000 | |||||
Honeywell | Maximum | |||||||||
Loss Contingencies [Line Items] | |||||||||
Indemnification payable, late payment fee percentage | 5.00% | 5.00% | |||||||
Maximum annual reimbursement obligation amount | $ 25,000,000 | $ 25,000,000 | $ 25,000,000 | $ 25,000,000 | |||||
Honeywell | Indemnification Agreement | |||||||||
Loss Contingencies [Line Items] | |||||||||
Indemnification payable percentage of payments | 90.00% | ||||||||
Indemnification payable percentage of net insurance receipts | 90.00% | ||||||||
Indemnification payable percentage of net proceeds received | 90.00% | ||||||||
[1] | Represents recorded net expenses related to the Reimbursement Agreement. |
Commitments and Contingencies_2
Commitments and Contingencies - Summary of Reimbursement Agreement Liabilities (Details) - Honeywell - USD ($) $ in Millions | 9 Months Ended | |
Sep. 26, 2020 | Sep. 28, 2019 | |
Accrual for Reimbursement Agreement | ||
Beginning balance | $ 585 | $ 616 |
Accruals for indemnification liabilities deemed probable and reasonably estimable | 107 | 138 |
Reduction | (81) | |
Indemnification payment | (70) | (105) |
Ending balance | $ 622 | $ 568 |
Commitments and Contingencies_3
Commitments and Contingencies - Summary of Reimbursement Agreement Liabilities (Parenthetical) (Details) - Honeywell - USD ($) | 9 Months Ended | |
Sep. 26, 2020 | Sep. 28, 2019 | |
Loss Contingencies [Line Items] | ||
Indemnity liability annual cap | $ 140,000,000 | $ 140,000,000 |
Maximum | ||
Loss Contingencies [Line Items] | ||
Indemnification payable, late payment fee percentage | 5.00% | 5.00% |
Maximum annual reimbursement obligation amount | $ 25,000,000 | $ 25,000,000 |
Commitments and Contingencies_4
Commitments and Contingencies - Summary of Reimbursement Agreement Liabilities Included in Balance Sheet Accounts (Details) - Honeywell - USD ($) $ in Millions | Sep. 26, 2020 | Dec. 31, 2019 | Sep. 28, 2019 | Dec. 31, 2018 |
Loss Contingency, Classification of Accrual [Abstract] | ||||
Reimbursement Agreement liabilities | $ 622 | $ 585 | $ 568 | $ 616 |
Accrued Liabilities | ||||
Loss Contingency, Classification of Accrual [Abstract] | ||||
Reimbursement agreement current portion | 175 | 140 | ||
Obligations Payable under Indemnification Agreements | ||||
Loss Contingency, Classification of Accrual [Abstract] | ||||
Reimbursement agreement Long Term Portion | $ 447 | $ 445 |
Commitments and Contingencies_5
Commitments and Contingencies - Summary of Recorded Obligations for Product Warranties and Product Performance Guarantee (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 26, 2020 | Sep. 28, 2019 | |
Product Warranties and Guarantees [Roll forward] | ||
Beginning of period | $ 25 | $ 26 |
Accruals for warranties/guarantees issued during the year | 13 | 10 |
Adjustment of pre-existing warranties/guarantees | (1) | |
Settlement of warranty/guarantee claims | (12) | (12) |
End of period | $ 26 | $ 23 |
Pension - Additional Informatio
Pension - Additional Information (Details) - Pension Plans - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | Dec. 31, 2019 | |
Defined Benefit Plan Disclosure [Line Items] | |||||
Pension obligations | $ 135 | $ 135 | $ 124 | ||
Net periodic benefit cost | $ 2 | $ 2 | $ 6 | $ 5 |
Segment Financial Data - Additi
Segment Financial Data - Additional Information (Details) | 9 Months Ended |
Sep. 26, 2020Segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Segment Financial Data - Schedu
Segment Financial Data - Schedule of Segment Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Revenue | ||||
Revenue | $ 1,362 | $ 1,226 | $ 3,570 | $ 3,684 |
Segment Adjusted EBITDA | ||||
Total | 131 | 59 | 159 | 186 |
Total | 188 | 114 | 350 | 363 |
Products & Solutions | ||||
Revenue | ||||
Revenue | 572 | 512 | 1,445 | 1,600 |
Segment Adjusted EBITDA | ||||
Total | 136 | 66 | 224 | 222 |
ADI Global Distribution | ||||
Revenue | ||||
Revenue | 790 | 714 | 2,125 | 2,084 |
Segment Adjusted EBITDA | ||||
Total | 52 | 48 | 126 | 141 |
Operating Segments | Products & Solutions | ||||
Revenue | ||||
Revenue | 674 | 595 | 1,715 | 1,828 |
Intersegment Revenue Eliminations | Products & Solutions | ||||
Revenue | ||||
Revenue | $ (102) | $ (83) | $ (270) | $ (228) |
Segment Financial Data - Sche_2
Segment Financial Data - Schedule of Reconciliation of Segment Adjusted EBITDA (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | ||
Segment Reporting [Abstract] | |||||
Net income (loss) | $ 75 | $ 8 | $ (22) | $ 45 | |
Net interest expense | [1] | 14 | 16 | 48 | 49 |
Tax expense | 7 | 26 | 36 | ||
Depreciation and amortization | 22 | 19 | 64 | 55 | |
Reimbursement Agreement expense | [2] | 38 | 35 | 107 | 57 |
Stock compensation expense | [3] | 7 | 8 | 21 | 22 |
Restructuring charges | 7 | 9 | 27 | 34 | |
Other | [4] | 18 | 19 | 79 | 65 |
Total | $ 188 | $ 114 | $ 350 | $ 363 | |
[1] | For the three and nine months ended September 26, 2020 net interest expense consists of interest expense of $14 million and $49 million net of interest income of $0 million and $1 million, respectively. For the three and nine months ended September 28, 2019 net interest expense consists of interest expense of $16 million and $51 million net of interest income of $0 million and $2 million, respectively. | ||||
[2] | Represents recorded net expenses related to the Reimbursement Agreement. | ||||
[3] | Stock compensation expense adjustment includes only non-cash expenses. | ||||
[4] | For the three and nine months ended September 26, 2020, Other represents $9 million and $36 million of items related to the Spin-Off, $12 million and $41 million of consulting and other fees related to transformation programs, ($3) million and $1 million of non-operating (income) expense adjustment which excludes net interest (income), and $0 million and $1 million of acquisition-related expenses, respectively. For the three and nine months ended September 28, 2019, Other represents $19 million and $53 million of cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off, and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income), respectively. |
Segment Financial Data - Sche_3
Segment Financial Data - Schedule of Reconciliation of Segment Adjusted EBITDA (Parenthetical) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Loss Contingencies [Line Items] | ||||
Interest expense | $ 14 | $ 16 | $ 49 | $ 51 |
Interest income | 0 | 0 | 1 | 2 |
Spin-off costs | 7 | 9 | 27 | 34 |
Consulting and other fees related to transformation programs | 12 | 41 | ||
Non-operating (income) expense adjustment | (3) | 0 | 1 | (1) |
Acquisition-related expenses | 0 | 1 | ||
Developments on legal claims prior to spin-off | 0 | 13 | ||
Honeywell | ||||
Loss Contingencies [Line Items] | ||||
Spin-off costs | $ 9 | $ 19 | $ 36 | $ 53 |