Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jul. 02, 2022 | Jul. 29, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Jul. 02, 2022 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q2 | |
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 | 145,686,840 | |
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 | 16100 N 71st Street | |
Entity Address, Address Line Two | Suite 550 | |
Entity Address, City or Town | Scottsdale | |
Entity Address, State or Province | AZ | |
Entity Address, Postal Zip Code | 85254 | |
City Area Code | 480 | |
Local Phone Number | 573-5340 | |
Document Quarterly Report | true | |
Document Transition Report | false |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Income Statement [Abstract] | ||||
Total Net revenue | $ 1,686 | $ 1,477 | $ 3,192 | $ 2,896 |
Cost of goods sold | 1,219 | 1,091 | 2,287 | 2,135 |
Gross profit | 467 | 386 | 905 | 761 |
Research and development expenses | 28 | 22 | 52 | 43 |
Selling, general and administrative expenses | 244 | 236 | 479 | 451 |
Intangible asset amortization | 9 | 7 | 16 | 16 |
Income from operations | 186 | 121 | 358 | 251 |
Other expense, net | 41 | 28 | 81 | 72 |
Interest expense, net | 14 | 12 | 25 | 25 |
Income before taxes | 131 | 81 | 252 | 154 |
Provision for income taxes | 37 | 23 | 71 | 47 |
Net income | $ 94 | $ 58 | $ 181 | $ 107 |
Earnings per common share | ||||
Basic | $ 0.65 | $ 0.40 | $ 1.25 | $ 0.74 |
Diluted | $ 0.63 | $ 0.39 | $ 1.22 | $ 0.72 |
Weighted average number of common shares outstanding | ||||
Weighted average basic number of shares outstanding | 145,457 | 143,939 | 145,286 | 143,657 |
Diluted | 148,829 | 148,328 | 148,836 | 148,050 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 94 | $ 58 | $ 181 | $ 107 |
Other comprehensive income (loss), net of tax | ||||
Foreign exchange translation (loss) gain | (70) | 9 | (79) | (17) |
Changes in unrealized gain (loss) on derivatives, net of tax | 1 | (2) | 24 | |
Total other comprehensive (loss) income, net of tax | (69) | 7 | (55) | (17) |
Comprehensive income | $ 25 | $ 65 | $ 126 | $ 90 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Millions | Jul. 02, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 251 | $ 775 |
Accounts receivable less allowances of $11 million and $9 million, respectively | 1,073 | 876 |
Inventories – net | 971 | 740 |
Other current assets | 186 | 150 |
Total current assets | 2,481 | 2,541 |
Property, plant and equipment, net | 363 | 287 |
Goodwill | 2,695 | 2,661 |
Other intangible assets, net | 463 | 120 |
Other assets | 314 | 244 |
Total assets | 6,316 | 5,853 |
Current liabilities: | ||
Accounts payable | 987 | 883 |
Current maturities of long-term debt | 12 | 10 |
Accrued liabilities | 580 | 601 |
Total current liabilities | 1,579 | 1,494 |
Long-term debt, net of current maturities | 1,410 | 1,220 |
Obligations payable under Indemnification Agreements | 601 | 585 |
Other liabilities | 332 | 302 |
Total liabilities | 3,922 | 3,601 |
COMMITMENTS AND CONTINGENCIES | ||
Stockholders' Equity | ||
Common stock, $0.001 par value, 700,000 shares authorized, 147,528 and 145,684 shares issued and outstanding as of July 2, 2022, 146,248 and 144,808 shares issued and outstanding as of December 31, 2021, respectively | 0 | 0 |
Additional paid-in capital | 2,147 | 2,121 |
Retained earnings | 498 | 317 |
Accumulated other comprehensive loss, net | (220) | (165) |
Treasury stock, at cost | (31) | (21) |
Total stockholders' equity | 2,394 | 2,252 |
Total liabilities and stockholders' equity | $ 6,316 | $ 5,853 |
CONSOLIDATED BALANCE SHEETS (_2
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Millions | Jul. 02, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Allowances for accounts receivable | $ 11 | $ 9 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 700,000,000 | 700,000,000 |
Common stock, shares issued | 147,528,000 | 146,248,000 |
Common stock, shares outstanding | 145,684,000 | 144,808,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 02, 2022 | Jul. 03, 2021 | |
Cash flows from operating activities: | ||
Net income | $ 181 | $ 107 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 45 | 45 |
Share-based compensation expense | 22 | 19 |
Other, net | (5) | 9 |
Changes in operating assets and liabilities, net of effect of acquisitions: | ||
Accounts receivable, net | (145) | (33) |
Inventories, net | (127) | (8) |
Other current assets | (21) | (24) |
Accounts payable | 54 | (15) |
Accrued liabilities | (47) | (1) |
Other, net | 19 | |
Net cash (used in) provided by operating activities | (24) | 99 |
Cash flows from investing activities: | ||
Capital expenditures | (24) | (35) |
Acquisitions, net of cash acquired | (633) | (10) |
Other, net | (13) | 3 |
Net cash used in investing activities | (670) | (42) |
Cash flows from financing activities: | ||
Proceeds from issuance of A&R Term B Facility | 200 | 950 |
Payments of debt facility issuance and modification costs | (4) | (21) |
Repayments of long-term debt | (6) | (923) |
Other, net | (7) | 1 |
Net cash provided by financing activities | 183 | 7 |
Effect of foreign exchange rate changes on cash and cash equivalents | (13) | (2) |
Net (decrease) increase in cash and cash equivalents and restricted cash | (524) | 62 |
Cash, cash equivalents and restricted cash at beginning of period | 779 | 517 |
Cash, cash equivalents and restricted cash at end of period | 255 | 579 |
Supplemental Cash Flow Information: | ||
Interest paid | 21 | 21 |
Income taxes paid, net | $ 79 | $ 46 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Millions | Total | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Shares |
Beginning Balance at Dec. 31, 2020 | $ 1,993 | $ 0 | $ 2,070 | $ 75 | $ (146) | $ (6) |
Beginning Balance, Shares at Dec. 31, 2020 | 143,059,000 | 900,000 | ||||
Net income | 107 | $ 0 | 0 | 107 | 0 | $ 0 |
Other comprehensive income (loss), net of tax | (17) | 0 | 0 | 0 | (17) | 0 |
Stock issuances, net of shares withheld for taxes | 1 | $ 0 | 9 | 0 | 0 | $ (8) |
Stock issuances, net of shares withheld for taxes, Shares | 1,112,000 | 288,000 | ||||
Share-based compensation | 19 | $ 0 | 19 | 0 | 0 | $ 0 |
Ending Balance at Jul. 03, 2021 | 2,103 | $ 0 | 2,098 | 182 | (163) | $ (14) |
Ending Balance, Shares at Jul. 03, 2021 | 144,171,000 | 1,188,000 | ||||
Beginning Balance at Apr. 03, 2021 | 2,032 | $ 0 | 2,088 | 124 | (170) | $ (10) |
Beginning Balance, Shares at Apr. 03, 2021 | 143,819,000 | 1,069,000 | ||||
Net income | 58 | $ 0 | 0 | 58 | 0 | $ 0 |
Other comprehensive income (loss), net of tax | 7 | 0 | 0 | 0 | 7 | 0 |
Stock issuances, net of shares withheld for taxes | (4) | $ 0 | 0 | 0 | 0 | $ (4) |
Stock issuances, net of shares withheld for taxes, Shares | 352,000 | 119,000 | ||||
Share-based compensation | 10 | $ 0 | 10 | 0 | 0 | $ 0 |
Ending Balance at Jul. 03, 2021 | 2,103 | $ 0 | 2,098 | 182 | (163) | $ (14) |
Ending Balance, Shares at Jul. 03, 2021 | 144,171,000 | 1,188,000 | ||||
Beginning Balance at Dec. 31, 2021 | 2,252 | $ 0 | 2,121 | 317 | (165) | $ (21) |
Beginning Balance, Shares at Dec. 31, 2021 | 144,808,000 | 1,440,000 | ||||
Net income | 181 | $ 0 | 0 | 181 | 0 | $ 0 |
Other comprehensive income (loss), net of tax | (55) | 0 | 0 | 0 | (55) | 0 |
Stock issuances, net of shares withheld for taxes | (6) | $ 0 | 4 | 0 | 0 | $ (10) |
Stock issuances, net of shares withheld for taxes, Shares | 876,000 | 404,000 | ||||
Share-based compensation | 22 | $ 0 | 22 | 0 | 0 | $ 0 |
Ending Balance at Jul. 02, 2022 | 2,394 | $ 0 | 2,147 | 498 | (220) | $ (31) |
Ending Balance, Shares at Jul. 02, 2022 | 145,684,000 | 1,844,000 | ||||
Beginning Balance at Apr. 02, 2022 | 2,361 | $ 0 | 2,135 | 404 | (151) | $ (27) |
Beginning Balance, Shares at Apr. 02, 2022 | 145,372,000 | 1,696,000 | ||||
Net income | 94 | $ 0 | 0 | 94 | 0 | $ 0 |
Other comprehensive income (loss), net of tax | (69) | 0 | 0 | 0 | (69) | 0 |
Stock issuances, net of shares withheld for taxes | (3) | $ 0 | 1 | 0 | 0 | $ (4) |
Stock issuances, net of shares withheld for taxes, Shares | 312,000 | 148,000 | ||||
Share-based compensation | 11 | $ 0 | 11 | 0 | 0 | $ 0 |
Ending Balance at Jul. 02, 2022 | $ 2,394 | $ 0 | $ 2,147 | $ 498 | $ (220) | $ (31) |
Ending Balance, Shares at Jul. 02, 2022 | 145,684,000 | 1,844,000 |
Organization, Consolidation and
Organization, Consolidation and Presentation of Financial Statements | 6 Months Ended |
Jul. 02, 2022 | |
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 leading manufacturer and developer of technology-driven products that provide critical comfort, energy, smoke and carbon monoxide detection home safety products, and security solutions to homes globally. The Company is also the leading wholesale distributor of low-voltage security products including access control, fire detection, fire suppression, intrusion, and video products, and participates significantly in the broader related markets of audio, communications, data communications, networking, power, ProAV, smart home, and wire and cable. The Company has a global footprint serving commercial and residential end markets. We acquired First Alert, Inc. (“First Alert”) on March 31, 2022. Refer to Note 11. Acquisitions for further detail on the First Alert acquisition. The Company was incorporated in Delaware on April 24, 2018. The Company separated from Honeywell International Inc. (“Honeywell”) on 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 accompanying unaudited consolidated financial statements (collectively, the “Financial Statements”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments, which consist of normal recurring adjustments, necessary to fairly present the Company’s financial position, results of operations and cash flows for the periods indicated. Operating results for the period from January 1, 2022 through July 2, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. During the three months ended July 2, 2022, the Company changed the presentation of intangible asset amortization. These expenses are now presented as a separate line on the unaudited consolidated statements of operations, whereas they were previously included in cost of goods sold and selling, general and administrative expenses. Prior periods have been reclassified to conform to the current period presentation. The reclassification decreased cost of goods sold by $ 7 million and $ 11 million, and decreased selling, general and administrative expenses by $ 2 million and $ 5 million for the three and six months ended July 2, 2022, respectively. The reclassification decreased cost of goods sold by $ 5 million and $ 12 million, and decreased selling, general and administrative expenses by $ 2 million and $ 4 million for the three and six months ended July 3, 2021, respectively. The reclassification had no impact on total operating costs, income from operations, net income, earnings per common share or total equity Certain reclassifications have been made to prior period amounts in the unaudited consolidated financial statements to conform to the current presentation. For additional information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2022. Reporting Periods The Company’s fiscal quarters are based on a four-four-five week calendar with the periods ending on the Saturday of the last week in the quarter except that December 31 st will always be the year end date. Therefore, the financial results of certain fiscal quarters may not be comparable to prior fiscal quarters. Restricted Cash The following table provides a reconciliation of cash, cash and cash equivalents and restricted cash reported within the consolidated balance sheets that total the amounts shown in the consolidated statements of cash flows (in millions): July 2, 2022 December 31, 2021 Cash and cash equivalents $ 251 $ 775 Restricted cash included in Other current assets (1) 4 4 Total cash, cash equivalents and restricted cash shown in the consolidated statements of cashflows $ 255 $ 779 (1) Primarily collateral to support certain bank guarantees. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jul. 02, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Recent Accounting Pronouncements —The Company considers the applicability and impact of all recent accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial position or results of operations. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which is optional guidance related to reference rate reform that provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance along with its subsequent clarifications, is effective from March 12, 2020 through December 31, 2022 and is applicable for the Company’s A&R Senior Credit Facilities and Swap Agreements, which use LIBOR as a reference rate. The A&R Senior Credit Facilities include a transition clause to a new reference rate in the event LIBOR is discontinued and Swap Agreements will be amended to match the new reference rate. We have evaluated the potential impact of adopting this guidance, and we do not expect it to have a material impact on our consolidated financial statements. Refer to Note 15. Long-term Debt and Credit Agreement for further details on the Company’s Swap Agreements and A&R Senior Credit Facilities. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers . Under this guidance, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We adopted ASU 2021-08 effective April 1, 2022, on a prospective basis. The impact of adoption of this standard on our consolidated financial statements, including accounting policies, processes, and systems, was not material. |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jul. 02, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Note 3. Revenue Recognition Disaggregated Revenue The Company has two operating segments, Products & Solutions and ADI Global Distribution. Disaggregated revenue information for Products & Solutions is presented by product grouping while ADI Global Distribution is presented by region. Beginning January 1, 2022, the Products & Solutions segment further disaggregated the Comfort product grouping into Air and Water and Residential Thermal Solutions is now referenced as Energy. As of April 1, 2022, the First Alert business is included in the results of operations as of its March 31, 2022 acquisition date in the Security and Safety grouping. Revenues by product grouping and region are as follows: Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Products & Solutions Disaggregated Revenue: Air $ 262 $ 206 $ 476 $ 397 Water 81 89 172 177 Energy 154 140 313 290 Security and Safety 267 163 422 340 Total Products & Solutions $ 764 $ 598 $ 1,383 $ 1,204 ADI Global Distribution Disaggregated Revenue: U.S. and Canada 791 731 1,543 1,398 EMEA (1) 123 140 249 274 APAC (2) 8 8 17 20 Total ADI Global Distribution 922 879 1,809 1,692 Total Net revenue $ 1,686 $ 1,477 $ 3,192 $ 2,896 (1) EMEA represents Europe, the Middle East and Africa. (2) APAC represents Asia and Pacific countries. The Company recognizes the majority of its revenue from performance obligations outlined in contracts with its customers that are satisfied at a point in time. Less than 3 % of the Company’s revenue is satisfied over time. As of July 2, 2022 and July 3, 2021 , contract assets and liabilities were not material. |
Segment Financial Data
Segment Financial Data | 6 Months Ended |
Jul. 02, 2022 | |
Segment Reporting [Abstract] | |
Segment Financial Data | Note 4. Segment Financial Data The Company monitors its business operations through two operating segments: Products & Solutions and ADI Global Distribution. These operating segments follow the same accounting policies used for our consolidated financial statements. We evaluate a segment's performance on a U.S. GAAP basis based primarily upon operating income before corporate expenses. Corporate assets consist primarily of cash, investments, prepaid expenses, current and deferred taxes and property, plant and equipment. These items are not allocated to the operating segments. Corporate unallocated expenses primarily include share-based compensation expenses, unallocated pension expense, restructuring charges, acquisition-related costs, and other expenses related to executive, legal, finance, tax, treasury, human resources, information technology, strategy, communications and corporate travel expenses. Additional unallocated amounts primarily include non-operating items such as interest income, interest expense, and other income (expense). Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions, and assesses operating performance. The following table represents summary financial data attributable to the segments: Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Net revenue: Products & Solutions 764 598 1,383 1,204 ADI Global Distribution 922 879 1,809 1,692 Total Net revenue: $ 1,686 $ 1,477 $ 3,192 $ 2,896 Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Income from operations: Products & Solutions $ 154 $ 129 $ 307 $ 259 ADI Global Distribution 86 66 166 125 Corporate ( 54 ) ( 74 ) ( 115 ) ( 133 ) Total Income from operations: $ 186 $ 121 $ 358 $ 251 The Company’s Chief Operating Decision Maker does not use segment assets information to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed. |
Stock-Based Compensation Plans
Stock-Based Compensation Plans | 6 Months Ended |
Jul. 02, 2022 | |
Compensation Related Costs [Abstract] | |
Stock-Based Compensation Plans | Note 5. Stock-Based Compensation Plans Restricted Stock Units (“RSUs”) and Performance Stock Unit (“PSUs”) During the six months ended July 2, 2022, as part of the Company’s annual long-term compensation under the 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates and the 2018 Stock Incentive Plan for Non-Employee Directors of Resideo Technologies, Inc. as may be amended from time to time (together, the “Stock Incentive Plan”), it granted 672,453 market-based PSUs and 1,035,043 service-based RSUs to eligible employees. The weighted average grant date fair value per share for market-based PSUs and service-based RSUs was $ 36.04 and $ 24.54 , respectively. Annual awards to our key employees generally have a three or four year performance period. The fair value is based on the Company’s stock price as of the date of grant. |
Leases
Leases | 6 Months Ended |
Jul. 02, 2022 | |
Leases [Abstract] | |
Leases | Note 6. Leases The Company is party to operating leases for the majority of its manufacturing sites, offices, engineering and lab sites, stocking locations, warehouses, automobiles, and certain equipment. Certain of the Company’s real estate leases include variable rental payments which adjust periodically based on inflation. Generally, the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company’s operating lease expense for the three and six months ended July 2, 2022 and July 3, 2021 consisted of the following: Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Cost of goods sold $ 7 $ 4 $ 10 $ 8 Selling, general and administrative 13 10 25 $ 22 Total operating lease expense $ 20 $ 14 $ 35 $ 30 Total operating lease expense includes variable lease expense of $ 5 million and $ 9 million for the three and six months ended July 2, 2022, respectively. For the three and six months ended July 3, 2021 , total operating lease expense include variable lease expense of $ 4 million and $ 8 million, respectively. Total operating lease expense also include offsetting sublease income which is immaterial for the three and six months ended July 2, 2022 and July 3, 2021. The Company recognized the following related to its operating leases: Financial As of July 2, As of December 31, Operating right-of-use assets Other assets $ 172 $ 141 Operating lease liabilities - current Accrued liabilities $ 36 $ 32 Operating lease liabilities - noncurrent Other long-term liabilities $ 146 $ 120 Future minimum lease payments under non-cancelable leases are as follows: As of July 2, 2022 (excluding the six months ended July 2, 2022) $ 22 2023 42 2024 33 2025 28 2026 24 Thereafter 66 Total future minimum lease payments 215 Less: imputed interest 33 Present value of future minimum lease payments $ 182 Weighted-average remaining lease term (years) 6.36 Weighted-average incremental borrowing rate 5.28 % Supplemental cash flow information related to the Company’s operating leases was as follows: Six Months Ended July 2, 2022 July 3, 2021 Cash paid for amounts included in the measurement of lease liabilities: Cash outflows for operating leases $ 16 $ 17 Non-cash activities: Right of use assets obtained in exchange for new operating lease liabilities $ 56 $ 17 |
Income Taxes
Income Taxes | 6 Months Ended |
Jul. 02, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 7. Income Taxes The Company recorded tax expense of $ 37 million and $ 71 million for the three and six months ended July 2, 2022 , respectively. The Company recorded tax expense of $ 23 million and $ 47 million for the three and six months ended July 3, 2021, respectively. For interim periods, income tax is equal to the total of (1) year-to-date pretax income multiplied by the Company’s forecasted effective tax rate plus (2) tax expense items specific to the period. In situations where the Company expects to report losses for which the Company does not expect to receive tax benefits, the Company applies separate forecasted effective tax rates to those jurisdictions rather than including them in the consolidated forecasted effective tax rate. For the three months ended July 2, 2022, the net tax expense of $ 37 million consists primarily of interim period tax expense based on year-to-date pretax income multiplied by the Company’s forecasted effective tax rate. In addition to items specific to the period, the Company’s income tax rate is impacted by the mix of earnings across the jurisdictions in which the Company operates, non-deductible expenses, and U.S. taxation of foreign earnings. For the six months ended July 2, 2022 , the net tax expense of $ 71 million consists primarily of interim period tax expense based on year-to-date pretax income multiplied by the Company’s forecasted effective tax rate. In addition to items specific to the period, the Company’s income tax rate is impacted by the mix of earnings across the jurisdictions in which the Company operates, non-deductible expenses, and U.S. taxation of foreign earnings. |
Earnings Per Common Share
Earnings Per Common Share | 6 Months Ended |
Jul. 02, 2022 | |
Earnings Per Share [Abstract] | |
Earnings Per Common Share | Note 8. Earnings Per Common Share The following table sets forth the computation of basic and diluted earnings per share (in millions, except shares in thousands, and per share data): Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Numerator for Basic and Diluted Earnings Per Common Share Net income $ 94 $ 58 $ 181 $ 107 Denominator for Basic and Diluted Earnings Per Common Share Weighted average basic number of shares outstanding 145,457 143,939 145,286 143,657 Add: dilutive effect of stock equivalents 3,372 4,389 3,550 4,393 Weighted average diluted number of shares outstanding 148,829 148,328 148,836 148,050 Earnings per common share: Basic $ 0.65 $ 0.40 $ 1.25 $ 0.74 Diluted $ 0.63 $ 0.39 $ 1.22 $ 0.72 Diluted earnings per common share is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of the Company’s common stock for the three and six months ended July 2, 2022 and July 3, 2021. For the three and six months ended July 2, 2022, average options and other rights to purchase approximately 0.9 million shares of common stock were outstanding and anti-dilutive, and therefore excluded from the computation of diluted earnings per common share. In addition, an average of 1.0 million and 0.9 million shares of performance-based unit awards are excluded from the computation of diluted earnings per common share for the three and six months ended July 2, 2022, respectively, as the contingency had not been satisfied. For the three and six months ended July 3, 2021 , average options and other rights to purchase approximately 0.1 million shares of common stock were outstanding and anti-dilutive, and therefore excluded from the computation of diluted income per common share. An average of approximately 0.9 million and 0.8 million shares of performance-based unit awards are excluded from the computation of diluted earnings per common share for the three and six months ended July 3, 2021 , respectively, as the contingency had not been satisfied. |
Inventories Net
Inventories Net | 6 Months Ended |
Jul. 02, 2022 | |
Inventory Disclosure [Abstract] | |
Inventories Net | Note 9. Inventories, Net July 2, 2022 December 31, 2021 Raw materials $ 264 $ 174 Work in process 24 17 Finished products 683 549 Total Inventories, Net $ 971 $ 740 |
Property, Plant, and Equipment,
Property, Plant, and Equipment, Net | 6 Months Ended |
Jul. 02, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant, and Equipment, Net | Note 10. Property, Plant, and Equipment, Net July 2, 2022 December 31, 2021 Machinery and equipment $ 641 $ 602 Buildings and improvements 297 292 Construction in progress 60 35 Other 8 4 Total Gross Property, Plant, and Equipment 1,006 933 Accumulated depreciation ( 643 ) ( 646 ) Property, Plant, and Equipment, Net $ 363 $ 287 Depreciation expense for the three and six months ended July 2, 2022 and July 3, 2021 were $ 29 million and $ 15 million, respectively. |
Acquisitions
Acquisitions | 6 Months Ended |
Jul. 02, 2022 | |
Business Combinations [Abstract] | |
Acquisitions | Note 11. Acquisitions On February 6, 2022 , the Company announced it had entered into a definitive agreement to purchase 100 % of the issued and outstanding capital stock of First Alert, a leading provider of home safety products. The acquisition closed on March 31, 2022 for an aggregate cash purchase price of $ 614 million (including preliminary post-closing adjustments of $ 6 million). First Alert is expected to expand and leverage the Company's footprint in the home with complementary smoke and carbon monoxide detection home safety products and fire suppression products. The business is included within the Products & Solutions segment. The following table summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed as of the date of the acquisition. The Company preliminarily determined the fair value of the tangible and intangible assets and liabilities acquired, and recorded goodwill based on the excess of the fair value of the acquisition consideration over such fair values as follows: Cash and other current assets $ 4 Accounts receivable, net 72 Inventories, net 117 Property, plant and equipment 87 Goodwill (1) 72 Other intangible assets, net 349 Other assets (non-current) 37 Total assets 738 Accounts payable 55 Accrued liabilities 33 Other liabilities 36 Total liabilities 124 Net asset acquired (2) $ 614 (1) The $ 72 million of preliminary goodwill was allocated to the Products & Solutions segment. Goodwill from this acquisition is partially deductible for tax purposes. (2) Reflects preliminary purchase price allocation. First Alert contributed $ 113 million in net revenue for the three months ended July 2, 2022 . The net income for the period was not material. On a pro forma basis, First Alert's net revenue for the three months ended April 2, 2022 and the twelve months ended December 31, 2021 was $ 110 million and $ 395 million, respectively. The pro forma net income for both periods was not material. The Company expensed approximately $ 10 million of costs related to the acquisition of First Alert during the six months ended July 2, 2022. These costs, which consist primarily of advisory, insurance, and legal fees, are included in Selling, general and administrative expenses in the accompanying unaudited Consolidated Statements of Operations. On February 14, 2022, the Company acquired 100 % of the outstanding equity of Arrow Wire and Cable Inc. (“Arrow”), a leading regional distributor of data communications, connectivity and security products, for an aggregate cash purchase price of $ 15 million. The business is included within the ADI Global Distribution segment and is expected to strengthen the Company’s global distribution portfolio in the data communications category with an assortment of copper and fiber cabling and connectivity, connectors, racking solutions, and network equipment. The Company is still assessing the final allocation of the purchase price to the assets and liabilities of the business. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets, Net | 6 Months Ended |
Jul. 02, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets, Net | Note 12. Goodwill and Other Intangible Assets, Net The Company's goodwill balance and changes in the carrying amount of goodwill by segment are as follows (in millions): Products & Solutions ADI Global Distribution Total Balance as of December 31, 2021 $ 2,010 $ 651 $ 2,661 Adjusted Goodwill from acquisitions 72 7 79 Currency translation ( 34 ) ( 11 ) ( 45 ) Balance as of July 2, 2022 $ 2,048 $ 647 $ 2,695 The table that follows presents the major components of intangible assets as of July 2, 2022 and December 31, 2021 . Intangible assets that are fully amortized have been removed from the disclosures. Range of Life (Years) Weighted Average Amortization Period (Years) Cost Accumulated Net As of July 2, 2022 Other intangible assets, net: Patents and technology 3 - 10 10 $ 64 $ ( 24 ) $ 40 Customer relationships 7 - 15 14 294 ( 107 ) 187 Trademarks (1) 10 -Indefinite 10 194 ( 8 ) 186 Software 2 - 7 6 164 ( 114 ) 50 Total intangible assets $ 716 $ ( 253 ) $ 463 As of December 31, 2021 Other intangible assets, net: Patents and technology 3 - 10 9 $ 31 $ ( 23 ) $ 8 Customer relationships 7 - 15 14 162 ( 106 ) 56 Trademarks 10 10 14 ( 8 ) 6 Software 2 - 7 6 162 ( 112 ) 50 Total intangible assets $ 369 $ ( 249 ) $ 120 (1) I ncludes trademarks of $ 180 million that have been assigned an indefinite life. The Company uses the straight-line method of amortization and expects to recognize amortization expense over the next five fiscal years as follows (in millions): 2022 (excluding the six months ended July 2, 2022) $ 19 2023 44 2024 32 2025 31 2026 27 |
Accrued Liabilities
Accrued Liabilities | 6 Months Ended |
Jul. 02, 2022 | |
Payables and Accruals [Abstract] | |
Accrued Liabilities | Note 13. Accrued Liabilities July 2, 2022 December 31, 2021 Obligations payable under Indemnification Agreements $ 140 $ 140 Taxes payable 52 54 Compensation, benefit and other employee-related 88 114 Customer rebate reserve 77 94 Current operating lease liability 36 32 Other 187 167 Total Accrued liabilities $ 580 $ 601 Refer to Note 14. Commitments and Contingencies for further details on Obligations payable under Indemnification Agreements. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jul. 02, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 14. Commitments and Contingencies Environmental Matters The Company is subject to various federal, state, local, and foreign government requirements relating to the protection of the environment and accrues costs related to environmental matters when it is probable that it has incurred a liability related to a contaminated site and the amount can be reasonably estimated. Environmental-related expenses for sites owned and operated by Resideo are presented within Cost of goods sold for operating sites. For the three and six months ended July 2, 2022 and July 3, 2021, environmental expenses related to these operating sites were not material. Liabilities for environmental costs were $ 22 million as of July 2, 2022 and December 31, 2021. Obligations Payable Under Indemnification Agreements The indemnification and reimbursement agreement (the “Reimbursement Agreement”) and the tax matters agreement (the “Tax Matters Agreement”) (collectively, the “Indemnification Agreements”) are described below. Reimbursement Agreement 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. See Note 17. Commitments and Contingencies in the Company’s 2021 Annual Report on Form 10-K for further discussion. The following table summarizes information concerning the Company’s Reimbursement Agreement liabilities: Six Months Ended July 2, 2022 July 3, 2021 Beginning balance $ 597 $ 591 Accruals for indemnification liabilities deemed probable and reasonably estimable 86 72 Indemnification payment ( 70 ) ( 70 ) Ending balance (1) $ 613 $ 593 (1) 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 six months ended July 2, 2022, net expenses related to the Reimbursement Agreement were $ 45 million and $ 86 million, respectively, and for the three and six months ended July 3, 2021 , net expenses related to the Reimbursement Agreement were $ 36 million and $ 72 million, respectively, and are recorded in Other expense, net. Reimbursement Agreement liabilities are included in the following balance sheet accounts: July 2, 2022 December 31, 2021 Accrued liabilities $ 140 $ 140 Obligations payable under Indemnification Agreements 473 457 $ 613 $ 597 The Company does not currently possess sufficient information to reasonably estimate the amounts of indemnification liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with such indemnification liability payments can be determined although they could be material to the Company’s unaudited consolidated results of operations and operating cash flows in the periods recognized or paid. Tax Matters Agreement In connection with the Spin-Off, the Company entered into the Tax Matters Agreement with Honeywell pursuant to which it is responsible and will indemnify Honeywell for certain taxes, including certain income taxes, sales taxes, VAT and payroll taxes, relating to the business for all periods, including periods prior to the consummation of the Spin-Off. In addition, the Tax Matters Agreement addresses the allocation of liability for taxes that are incurred as a result of restructuring activities undertaken to effectuate the Spin-Off. As of July 2, 2022 and December 31, 2021, the Company has recorded a liability in respect to the Tax Matters Agreement of $ 128 million, 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 which is generally equal to 1.5 % on net revenue to Honeywell related to such licensed products which is recorded in Selling, general and administrative expenses on the unaudited Consolidated Statements of Operations. For the three and six months ended July 2, 2022, royalty fees were $ 5 million and $ 11 million, respectively. For the three and six months ended July 3, 2021 , royalty fees were $ 4 million and $ 9 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 analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. No such matters are material to the Company’s unaudited financial statements. The Company, the Company’s former CEO Michael Nefkens, the Company’s former CFO Joseph Ragan, and the Company’s former CIO Niccolo de Masi were named defendants in a class action securities suit that was filed in the U.S. District Court for the District of Minnesota styled In re Resideo Technologies, Inc. Securities Litigation (the “Securities Litigation”). The amended complaint asserted claims under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, broadly alleging, among other things, that the defendants (or some of them) made false and misleading statements regarding, among other things, Resideo’s business, performance, the efficiency of its supply chain, operational and administrative issues resulting from the spin-off from Honeywell, certain business initiatives, and financial guidance in 2019. Following a court-approved settlement resolving the Securities Litigation, on March 25, 2022, the court entered a final judgement, which was amended to provide a dismissal of the Securities Litigation with prejudice on April 14, 2022. Certain current or former directors and officers of the Company were defendants in a consolidated derivative action in the District Court for the District of Delaware under the caption In re Resideo Technologies, Inc. Derivative Litigation (the “Federal Derivative Action”). On September 23, 2021, the Federal Derivative Action was transferred to the District of Minnesota, where Securities Litigation was pending. On September 1, 2021, an additional shareholder derivative complaint was filed by Riviera Beach, part of the leadership group in the Federal Derivative Action, and City of Hialeah Employees Retirement System against certain current or former directors and officers of the Company in the District of Minnesota, alleging substantially that the same facts and making substantially the same claims against the same defendants as in the Federal Derivative Action, and additionally referencing board materials obtained through a demand made pursuant to Section 220 of the Delaware Code Title 8 (the “Riviera Beach Action”). On December 1, 2021, the Federal Derivative Action and the Riviera Beach Action were consolidated into a single action under the caption: In re Resideo Technologies, Inc. Derivative Litigation (the “Consolidated Federal Derivative Action”) and was stayed pending entry of final judgement in the Securities Litigation. On April 19, 2022, after entry of the final judgement in the Securities Litigation, the court entered the parties’ stipulation suspending all deadlines in the case for sixty days to facilitate settlement discussions. On July 8, 2022, the parties participated in a status conference with the Court, following which, on July 19, 2022, the Court entered a sealed order extending the stay and addressing certain matters in respect of the ongoing settlement discussions. On June 25, 2021, the Bud & Sue Frashier Family Trust U/A DTD 05/05/98, filed a shareholder derivative complaint against certain current or former directors and officers of the Company in the Court of Chancery of the State of Delaware, captioned Bud & Sue Frashier Trust U/A DTD 05/05/98 v. Fradin (“Delaware Chancery Derivative Action”). The Delaware Chancery Derivative Action alleges substantially the same facts and makes substantially the same claims as the Federal Derivative Action, and additionally references board materials obtained through a demand made pursuant to Section 220 of the Delaware Code Title 8. The Delaware Chancery Derivative Action remains stayed by order of the Court. While the Company is engaged in discussions concerning potential settlement of the Federal Derivative Action and the Delaware Chancery Derivative Action, there can be no guarantees that a settlement will be reached or approved. In the event that no settlement is reached, the Company intends to defend these actions vigorously, but there can be no assurance that the defense will be successful. See Note 17. Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements in the Company’s 2021 Annual Report on Form 10-K for further discussion of these matters. Warranties and Guarantees In the normal course of business, the Company issues product warranties and product performance guarantees. It accrues for the estimated cost of product warranties and product performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities. The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees: Six Months Ended July 2, 2022 July 3, 2021 Beginning of period $ 23 $ 22 Accruals for warranties/guarantees issued during the year 11 8 Additions from acquisitions 14 - Settlements and adjustments ( 13 ) ( 10 ) End of period $ 35 $ 20 |
Long-term Debt and Credit Agree
Long-term Debt and Credit Agreement | 6 Months Ended |
Jul. 02, 2022 | |
Debt Disclosure [Abstract] | |
Long-term Debt and Credit Agreement | Note 15. Long-term Debt and Credit Agreement The Company’s long-term debt as of July 2, 2022 and December 31, 2021 consisted of the following: July 2, 2022 December 31, 2021 4.000 % notes due 2029 $ 300 $ 300 Seven-year variable rate A&R Term B Facility 1,137 943 Unamortized deferred financing costs ( 15 ) ( 13 ) Total outstanding indebtedness 1,422 1,230 Less: Amounts expected to be paid within one year 12 10 Total long-term debt due after one year $ 1,410 $ 1,220 As of July 2, 2022 and July 3, 2021, the interest rate for the Amendment and Restatement Agreement (“A&R”) Term B Facility (defined below) was 3.59 % and 2.75 %, respectively, and there were no borrowings and no letters of credit issued under the A&R Revolving Credit Facility (as defined below). During the six months ended July 3, 2021, the Company incurred debt extinguishment costs of $ 23 million related to the execution of the A&R Credit Agreement (as defined below) and a partial redemption of previously outstanding senior notes. As of July 2, 2022, the Company was in compliance with all covenants related to the A&R Credit Agreement and the Senior Notes due 2029 (as defined below). The Company assessed the amounts recorded under the Amendment and Restatement Agreement Term B Facility, the Senior Notes due 2029, and the A&R Revolving Credit Facility. The Company determined that the A&R Revolving Credit Facility approximated fair value. As of July 2, 2022, the A&R Term B Facility and the Senior Notes due 2029 had approximate fair values of $ 1,100 million and $ 236 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. Senior Notes due 2029 On August 26, 2021, the Company issued $ 300 million in principal amount of 4 % senior unsecured notes due in 2029 (the “Senior Notes due 2029”). The Senior Notes due 2029 are senior unsecured obligations of Resideo guaranteed by Resideo’s existing and future domestic subsidiaries and rank equally with all of Resideo’s senior unsecured debt and senior to all of Resideo’s subordinated debt. Credit Agreement On February 12, 2021, the Company entered into an Amendment and Restatement Agreement with JP Morgan Chase Bank N.A. as administrative agent (the “A&R Credit Agreement”). This agreement effectively replaced the Company’s previous senior secured credit facilities. The A&R Credit Agreement provides for a (i) seven-year senior secured term B loan facility in an aggregate principal amount of $ 950 million (the “A&R Term B Facility”) and (ii) a five-year senior secured revolving credit facility in an aggregate principal amount of $ 500 million (the “A&R Revolving Credit Facility” and, together with the A&R Term B Facility, the “A&R Senior Credit Facilities”). On March 28, 2022, the A&R Credit Agreement was further amended to include an additional aggregate principal amount of $ 200 million in the loans. Refer to Note 18. Long-Term Debt and Credit Agreement in the Company’s 2021 Annual Report on Form 10-K for further discussion regarding the Company’s long-term debt and credit agreement. |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Jul. 02, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Note 16. Derivative Instruments The Company uses interest rate swap agreements to manage exposure to interest rate risks. The Company does not use interest rate swap agreements for speculative or trading purposes. The gain or loss on the interest rate swaps that qualify as derivatives is recorded in Accumulated other comprehensive loss and is subsequently recognized as Interest expense in the Consolidated Statements of Operations when the hedged exposure affects earnings. If the related debt or the interest rate swap is terminated prior to maturity, the fair value of the interest rate swap recorded in Accumulated other comprehensive loss may be recognized in the Consolidated Statements of Operations based on an assessment of the agreements at the time of termination. On March 31, 2021, the Company entered into eight interest rate swap agreements (the “Swap Agreements”) with several financial institutions for a combined notional value of $ 560 million. The effect of the Swap Agreements is to convert a portion of the Company’s variable interest rate obligations based on three-month LIBOR with a minimum rate of 0.50 % per annum to a base fixed weighted average rate of 0.9289 % over terms ranging from two to four years . The Swap Agreements are adjusted to fair value on a quarterly basis. The estimated fair value is based on Level 2 inputs primarily including the forward LIBOR curve available to swap dealers. Contract gains recognized in other comprehensive income (loss) totaled $ 1 million and $ 24 million for the three and six months ended July 2, 2022, respectively. Contract gains or losses recognized in other comprehensive income (loss) were immaterial for the three and six months ended July 3, 2021, respectively. Amounts reclassified from Accumulated other comprehensive loss into earnings were not material for any of the periods presented. The fair value of the Swap Agreements as of July 2, 2022 was $ 31 million, of which $ 9 million was recognized in Other current assets and $ 22 million was recognized in Other assets. The fair value of the Swap Agreements as of July 3, 2021 was immaterial. Amounts expected to be reclassified into earnings in the next 12 months were not material as of July 2, 2022 . |
Pension
Pension | 6 Months Ended |
Jul. 02, 2022 | |
Retirement Benefits [Abstract] | |
Pension | Note 17. Pension The Company sponsors multiple funded and unfunded U.S. and non-U.S. defined benefit pension plans. Pension benefits for many of its U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit plans. It also sponsors defined benefit pension plans which cover non-U.S. employees who are not U.S. citizens, in certain jurisdictions, principally Germany, Austria, Belgium, France, India, Switzerland, and the Netherlands. The pension obligations as of July 2, 2022 and December 31, 2021 were $ 109 million and $ 115 million, respectively, and are included in Other liabilities in the unaudited Consolidated Balance Sheets. The service cost component of the net periodic benefit cost for the three and six months ended July 2, 2022 and July 3, 2021 was $ 7 million and $ 15 million, respectively, and is recognized where the related employee compensation expenses are recognized. The other components of net periodic benefit cost are recognized in other expense, net. These costs were not material for any of the periods presented. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jul. 02, 2022 | |
Accounting Policies [Abstract] | |
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 March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which is optional guidance related to reference rate reform that provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance along with its subsequent clarifications, is effective from March 12, 2020 through December 31, 2022 and is applicable for the Company’s A&R Senior Credit Facilities and Swap Agreements, which use LIBOR as a reference rate. The A&R Senior Credit Facilities include a transition clause to a new reference rate in the event LIBOR is discontinued and Swap Agreements will be amended to match the new reference rate. We have evaluated the potential impact of adopting this guidance, and we do not expect it to have a material impact on our consolidated financial statements. Refer to Note 15. Long-term Debt and Credit Agreement for further details on the Company’s Swap Agreements and A&R Senior Credit Facilities. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers . Under this guidance, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We adopted ASU 2021-08 effective April 1, 2022, on a prospective basis. The impact of adoption of this standard on our consolidated financial statements, including accounting policies, processes, and systems, was not material. |
Organization, Operations and Ba
Organization, Operations and Basis of Presentation (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Reconciliation of Cash, Cash and Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash and cash equivalents and restricted cash reported within the consolidated balance sheets that total the amounts shown in the consolidated statements of cash flows (in millions): July 2, 2022 December 31, 2021 Cash and cash equivalents $ 251 $ 775 Restricted cash included in Other current assets (1) 4 4 Total cash, cash equivalents and restricted cash shown in the consolidated statements of cashflows $ 255 $ 779 (1) Primarily collateral to support certain bank guarantees. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregated Revenue | Revenues by product grouping and region are as follows: Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Products & Solutions Disaggregated Revenue: Air $ 262 $ 206 $ 476 $ 397 Water 81 89 172 177 Energy 154 140 313 290 Security and Safety 267 163 422 340 Total Products & Solutions $ 764 $ 598 $ 1,383 $ 1,204 ADI Global Distribution Disaggregated Revenue: U.S. and Canada 791 731 1,543 1,398 EMEA (1) 123 140 249 274 APAC (2) 8 8 17 20 Total ADI Global Distribution 922 879 1,809 1,692 Total Net revenue $ 1,686 $ 1,477 $ 3,192 $ 2,896 (1) EMEA represents Europe, the Middle East and Africa. (2) APAC represents Asia and Pacific countries. |
Segment Financial Data (Tables)
Segment Financial Data (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Segment Reporting [Abstract] | |
Summary of Segments Financial Data | The following table represents summary financial data attributable to the segments: Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Net revenue: Products & Solutions 764 598 1,383 1,204 ADI Global Distribution 922 879 1,809 1,692 Total Net revenue: $ 1,686 $ 1,477 $ 3,192 $ 2,896 Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Income from operations: Products & Solutions $ 154 $ 129 $ 307 $ 259 ADI Global Distribution 86 66 166 125 Corporate ( 54 ) ( 74 ) ( 115 ) ( 133 ) Total Income from operations: $ 186 $ 121 $ 358 $ 251 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Leases [Abstract] | |
Schedule of Operating Lease Expense | The Company’s operating lease expense for the three and six months ended July 2, 2022 and July 3, 2021 consisted of the following: Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Cost of goods sold $ 7 $ 4 $ 10 $ 8 Selling, general and administrative 13 10 25 $ 22 Total operating lease expense $ 20 $ 14 $ 35 $ 30 |
Summary of Lease Recognized Related to Operating Leases | The Company recognized the following related to its operating leases: Financial As of July 2, As of December 31, Operating right-of-use assets Other assets $ 172 $ 141 Operating lease liabilities - current Accrued liabilities $ 36 $ 32 Operating lease liabilities - noncurrent Other long-term liabilities $ 146 $ 120 |
Future Minimum Lease Payments Under Non-cancelable Leases | Future minimum lease payments under non-cancelable leases are as follows: As of July 2, 2022 (excluding the six months ended July 2, 2022) $ 22 2023 42 2024 33 2025 28 2026 24 Thereafter 66 Total future minimum lease payments 215 Less: imputed interest 33 Present value of future minimum lease payments $ 182 Weighted-average remaining lease term (years) 6.36 Weighted-average incremental borrowing rate 5.28 % |
Supplemental Cash Flow Information Related to Operating Leases | Supplemental cash flow information related to the Company’s operating leases was as follows: Six Months Ended July 2, 2022 July 3, 2021 Cash paid for amounts included in the measurement of lease liabilities: Cash outflows for operating leases $ 16 $ 17 Non-cash activities: Right of use assets obtained in exchange for new operating lease liabilities $ 56 $ 17 |
Earnings Per Common Share (Tabl
Earnings Per Common Share (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
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 (in millions, except shares in thousands, and per share data): Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Numerator for Basic and Diluted Earnings Per Common Share Net income $ 94 $ 58 $ 181 $ 107 Denominator for Basic and Diluted Earnings Per Common Share Weighted average basic number of shares outstanding 145,457 143,939 145,286 143,657 Add: dilutive effect of stock equivalents 3,372 4,389 3,550 4,393 Weighted average diluted number of shares outstanding 148,829 148,328 148,836 148,050 Earnings per common share: Basic $ 0.65 $ 0.40 $ 1.25 $ 0.74 Diluted $ 0.63 $ 0.39 $ 1.22 $ 0.72 |
Inventories Net (Tables)
Inventories Net (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Inventory Disclosure [Abstract] | |
Inventories | July 2, 2022 December 31, 2021 Raw materials $ 264 $ 174 Work in process 24 17 Finished products 683 549 Total Inventories, Net $ 971 $ 740 |
Property, Plant, and Equipmen_2
Property, Plant, and Equipment, Net (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant, and Equipment, Net | July 2, 2022 December 31, 2021 Machinery and equipment $ 641 $ 602 Buildings and improvements 297 292 Construction in progress 60 35 Other 8 4 Total Gross Property, Plant, and Equipment 1,006 933 Accumulated depreciation ( 643 ) ( 646 ) Property, Plant, and Equipment, Net $ 363 $ 287 |
Acquisitions (Tables)
Acquisitions (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Business Combinations [Abstract] | |
Summary of Preliminary Allocation of Purchase Price | The following table summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed as of the date of the acquisition. The Company preliminarily determined the fair value of the tangible and intangible assets and liabilities acquired, and recorded goodwill based on the excess of the fair value of the acquisition consideration over such fair values as follows: Cash and other current assets $ 4 Accounts receivable, net 72 Inventories, net 117 Property, plant and equipment 87 Goodwill (1) 72 Other intangible assets, net 349 Other assets (non-current) 37 Total assets 738 Accounts payable 55 Accrued liabilities 33 Other liabilities 36 Total liabilities 124 Net asset acquired (2) $ 614 (1) The $ 72 million of preliminary goodwill was allocated to the Products & Solutions segment. Goodwill from this acquisition is partially deductible for tax purposes. (2) Reflects preliminary purchase price allocation. |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets, Net (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill Balance and Changes in Carrying Amount of Goodwill by Segment | The Company's goodwill balance and changes in the carrying amount of goodwill by segment are as follows (in millions): Products & Solutions ADI Global Distribution Total Balance as of December 31, 2021 $ 2,010 $ 651 $ 2,661 Adjusted Goodwill from acquisitions 72 7 79 Currency translation ( 34 ) ( 11 ) ( 45 ) Balance as of July 2, 2022 $ 2,048 $ 647 $ 2,695 |
Schedule of Intangible Assets With Finite Lives | The table that follows presents the major components of intangible assets as of July 2, 2022 and December 31, 2021 . Range of Life (Years) Weighted Average Amortization Period (Years) Cost Accumulated Net As of July 2, 2022 Other intangible assets, net: Patents and technology 3 - 10 10 $ 64 $ ( 24 ) $ 40 Customer relationships 7 - 15 14 294 ( 107 ) 187 Trademarks (1) 10 -Indefinite 10 194 ( 8 ) 186 Software 2 - 7 6 164 ( 114 ) 50 Total intangible assets $ 716 $ ( 253 ) $ 463 As of December 31, 2021 Other intangible assets, net: Patents and technology 3 - 10 9 $ 31 $ ( 23 ) $ 8 Customer relationships 7 - 15 14 162 ( 106 ) 56 Trademarks 10 10 14 ( 8 ) 6 Software 2 - 7 6 162 ( 112 ) 50 Total intangible assets $ 369 $ ( 249 ) $ 120 (1) I ncludes trademarks of $ 180 million that have been assigned an indefinite life. |
Schedule of Estimated Amortization Expense | The Company uses the straight-line method of amortization and expects to recognize amortization expense over the next five fiscal years as follows (in millions): 2022 (excluding the six months ended July 2, 2022) $ 19 2023 44 2024 32 2025 31 2026 27 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Payables and Accruals [Abstract] | |
Summary of Accrued Liabilities | July 2, 2022 December 31, 2021 Obligations payable under Indemnification Agreements $ 140 $ 140 Taxes payable 52 54 Compensation, benefit and other employee-related 88 114 Customer rebate reserve 77 94 Current operating lease liability 36 32 Other 187 167 Total Accrued liabilities $ 580 $ 601 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Loss Contingencies [Line Items] | |
Summary of Reimbursement Agreement Liabilities | The following table summarizes information concerning the Company’s Reimbursement Agreement liabilities: Six Months Ended July 2, 2022 July 3, 2021 Beginning balance $ 597 $ 591 Accruals for indemnification liabilities deemed probable and reasonably estimable 86 72 Indemnification payment ( 70 ) ( 70 ) Ending balance (1) $ 613 $ 593 (1) 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 Recorded Obligations for Product Warranties and Product Performance Guarantee | The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees: Six Months Ended July 2, 2022 July 3, 2021 Beginning of period $ 23 $ 22 Accruals for warranties/guarantees issued during the year 11 8 Additions from acquisitions 14 - Settlements and adjustments ( 13 ) ( 10 ) End of period $ 35 $ 20 |
Honeywell | |
Loss Contingencies [Line Items] | |
Summary of Reimbursement Agreement Liabilities Included in Balance Sheet Accounts | Reimbursement Agreement liabilities are included in the following balance sheet accounts: July 2, 2022 December 31, 2021 Accrued liabilities $ 140 $ 140 Obligations payable under Indemnification Agreements 473 457 $ 613 $ 597 |
Long-term Debt and Credit Agr_2
Long-term Debt and Credit Agreement (Tables) | 6 Months Ended |
Jul. 02, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Long Term Debt | The Company’s long-term debt as of July 2, 2022 and December 31, 2021 consisted of the following: July 2, 2022 December 31, 2021 4.000 % notes due 2029 $ 300 $ 300 Seven-year variable rate A&R Term B Facility 1,137 943 Unamortized deferred financing costs ( 15 ) ( 13 ) Total outstanding indebtedness 1,422 1,230 Less: Amounts expected to be paid within one year 12 10 Total long-term debt due after one year $ 1,410 $ 1,220 |
Organization, Operations and _2
Organization, Operations and Basis of Presentation - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Date of business spin-off | Oct. 29, 2018 | |||
Cost of goods sold | $ 1,219 | $ 1,091 | $ 2,287 | $ 2,135 |
Selling, general and administrative expenses | 244 | 236 | 479 | 451 |
Reclassification, Adjustment | ||||
Cost of goods sold | (7) | (5) | (11) | (12) |
Selling, general and administrative expenses | $ (2) | $ (2) | $ (5) | $ 4 |
Organization, Operations and _3
Organization, Operations and Basis of Presentation - Reconciliation of Cash, Cash and Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Millions | Jul. 02, 2022 | Dec. 31, 2021 | Jul. 03, 2021 | Dec. 31, 2020 | |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract] | |||||
Cash and cash equivalents | $ 251 | $ 775 | |||
Restricted cash | [1] | $ 4 | $ 4 | ||
Restricted Cash, Current, Statement of Financial Position [Extensible Enumeration] | Other Assets, Current | Other Assets, Current | |||
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cashflows | $ 255 | $ 779 | $ 579 | $ 517 | |
[1] Primarily collateral to support certain bank guarantees. |
Revenue Recognition - Schedule
Revenue Recognition - Schedule of Disaggregated Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | ||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | $ 1,686 | $ 1,477 | $ 3,192 | $ 2,896 | |
Products & Solutions | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 764 | 598 | 1,383 | 1,204 | |
Products & Solutions | Air | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 262 | 206 | 476 | 397 | |
Products & Solutions | Water | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 81 | 89 | 172 | 177 | |
Products & Solutions | Energy | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 154 | 140 | 313 | 290 | |
Products & Solutions | Security and Safety | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 267 | 163 | 422 | 340 | |
ADI Global Distribution | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 922 | 879 | 1,809 | 1,692 | |
ADI Global Distribution | U.S. and Canada | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | 791 | 731 | 1,543 | 1,398 | |
ADI Global Distribution | EMEA | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | [1] | 123 | 140 | 249 | 274 |
ADI Global Distribution | APAC | |||||
Disaggregation Of Revenue [Line Items] | |||||
Revenue | [2] | $ 8 | $ 8 | $ 17 | $ 20 |
[1] EMEA represents Europe, the Middle East and Africa. APAC represents Asia and Pacific countries. |
Revenue Recognition - Additiona
Revenue Recognition - Additional Information (Details) | Jul. 02, 2022 |
Maximum | |
Disaggregation of Revenue [Line Items] | |
Percentage of revenue satisfied over time | 3% |
Segment Financial Data - Additi
Segment Financial Data - Additional Information (Details) | 6 Months Ended |
Jul. 02, 2022 Segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Segment Financial Data - Summar
Segment Financial Data - Summary of Segments Financial Data (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Revenue | ||||
Total Net revenue | $ 1,686 | $ 1,477 | $ 3,192 | $ 2,896 |
Operating profit | ||||
Total Income from operations | 186 | 121 | 358 | 251 |
Products & Solutions | ||||
Revenue | ||||
Total Net revenue | 764 | 598 | 1,383 | 1,204 |
Operating profit | ||||
Total Income from operations | 154 | 129 | 307 | 259 |
ADI Global Distribution | ||||
Revenue | ||||
Total Net revenue | 922 | 879 | 1,809 | 1,692 |
Operating profit | ||||
Total Income from operations | 86 | 66 | 166 | 125 |
Corporate | ||||
Operating profit | ||||
Total Income from operations | $ (54) | $ (74) | $ (115) | $ (133) |
Stock-Based Compensation Plans
Stock-Based Compensation Plans - Additional Information (Details) - 2018 Stock Incentive Plan | 6 Months Ended |
Jul. 02, 2022 $ / shares shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Annual terms of award | Annual awards to our key employees generally have a three or four year performance period. |
Market Based Performance Stock Unit | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted average grant date fair value | $ / shares | $ 36.04 |
Market Based Performance Stock Unit | Employees | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Awards granted | shares | 672,453 |
Service-based Restricted Stock Units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted average grant date fair value | $ / shares | $ 24.54 |
Service-based Restricted Stock Units | Employees | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Awards granted | shares | 1,035,043 |
Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Performance period | 3 years |
Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Performance period | 4 years |
Leases - Schedule of Operating
Leases - Schedule of Operating Lease Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Lessee Lease Description [Line Items] | ||||
Total operating lease expense | $ 20 | $ 14 | $ 35 | $ 30 |
Cost of Goods Sold | ||||
Lessee Lease Description [Line Items] | ||||
Total operating lease expense | 7 | 4 | 10 | 8 |
Selling, General and Administrative Expenses | ||||
Lessee Lease Description [Line Items] | ||||
Total operating lease expense | $ 13 | $ 10 | $ 25 | $ 22 |
Leases - Additional Information
Leases - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Leases [Abstract] | ||||
Variable lease expense | $ 5 | $ 4 | $ 9 | $ 8 |
Leases - Summary of Lease Recog
Leases - Summary of Lease Recognized Related to Operating Leases (Details) - USD ($) $ in Millions | Jul. 02, 2022 | Dec. 31, 2021 |
Leases [Abstract] | ||
Operating right-of-use assets | $ 172 | $ 141 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Other assets | Other assets |
Operating lease liabilities - current | $ 36 | $ 32 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued liabilities | Accrued liabilities |
Operating lease liabilities - noncurrent | $ 146 | $ 120 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other liabilities | Other liabilities |
Leases - Future Minimum Lease P
Leases - Future Minimum Lease Payments Under Non-cancelable Leases (Details) $ in Millions | Jul. 02, 2022 USD ($) |
Leases [Abstract] | |
2022 (excluding the six months ended July 2, 2022) | $ 22 |
2023 | 42 |
2024 | 33 |
2025 | 28 |
2026 | 24 |
Thereafter | 66 |
Total future minimum lease payments | 215 |
Less: imputed interest | 33 |
Present value of future minimum lease payments | $ 182 |
Weighted-average remaining lease term (years) | 6 years 4 months 9 days |
Weighted-average incremental borrowing rate | 5.28% |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information Related to Operating Leases (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 02, 2022 | Jul. 03, 2021 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Cash outflows for operating leases | $ 16 | $ 17 |
Non-cash activities: | ||
Right of use assets obtained in exchange for new operating lease liabilities | $ 56 | $ 17 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Income Tax Disclosure [Abstract] | ||||
Tax expense | $ 37 | $ 23 | $ 71 | $ 47 |
Earnings Per Common Share - Sch
Earnings Per Common Share - Schedule of Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Numerator for Basic and Diluted Earnings Per Common Share | ||||
Net income | $ 94 | $ 58 | $ 181 | $ 107 |
Denominator for Basic and Diluted Earnings Per Common Share | ||||
Weighted average basic number of shares outstanding | 145,457 | 143,939 | 145,286 | 143,657 |
Add: dilutive effect of stock equivalents | 3,372 | 4,389 | 3,550 | 4,393 |
Weighted average diluted number of shares outstanding | 148,829 | 148,328 | 148,836 | 148,050 |
Earnings per common share: | ||||
Basic | $ 0.65 | $ 0.40 | $ 1.25 | $ 0.74 |
Diluted | $ 0.63 | $ 0.39 | $ 1.22 | $ 0.72 |
Earnings Per Common Share - Add
Earnings Per Common Share - Additional Information (Details) - shares shares in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Options and Other Rights | ||||
Earnings Per Share [Line Items] | ||||
Purchase of outstanding common stock were anti-dilutive | 0.9 | 0.1 | 0.9 | 0.1 |
Performance Based Unit Awards | ||||
Earnings Per Share [Line Items] | ||||
Purchase of outstanding common stock were anti-dilutive | 1 | 0.9 | 0.9 | 0.8 |
Inventories Net (Details)
Inventories Net (Details) - USD ($) $ in Millions | Jul. 02, 2022 | Dec. 31, 2021 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 264 | $ 174 |
Work in process | 24 | 17 |
Finished products | 683 | 549 |
Total Inventories, Net | $ 971 | $ 740 |
Property, Plant, and Equipmen_3
Property, Plant, and Equipment, Net - Schedule of Property, Plant, and Equipment, Net (Details) - USD ($) $ in Millions | Jul. 02, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Total Gross Property, Plant, and Equipment | $ 1,006 | $ 933 |
Accumulated depreciation | (643) | (646) |
Property, Plant, and Equipment, Net | 363 | 287 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total Gross Property, Plant, and Equipment | 641 | 602 |
Buildings and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total Gross Property, Plant, and Equipment | 297 | 292 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Total Gross Property, Plant, and Equipment | 60 | 35 |
Other | ||
Property, Plant and Equipment [Line Items] | ||
Total Gross Property, Plant, and Equipment | $ 8 | $ 4 |
Property, Plant, and Equipmen_4
Property, Plant, and Equipment, Net - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | |
Property, Plant and Equipment, Net [Abstract] | ||||
Depreciation | $ 29 | $ 15 | $ 29 | $ 15 |
Acquisitions - Additional Infor
Acquisitions - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||
Mar. 31, 2022 | Feb. 14, 2022 | Feb. 06, 2022 | Jul. 02, 2022 | Apr. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | Dec. 31, 2021 | |
Business Acquisition [Line Items] | |||||||||
Business acquisition | $ 633 | $ 10 | |||||||
Total Net revenue | $ 1,686 | $ 1,477 | 3,192 | 2,896 | |||||
ADI Global Distribution | |||||||||
Business Acquisition [Line Items] | |||||||||
Total Net revenue | 922 | $ 879 | $ 1,809 | $ 1,692 | |||||
First Alert, Inc. | |||||||||
Business Acquisition [Line Items] | |||||||||
Acquisition date | Feb. 06, 2022 | ||||||||
Acquisition costs | $ 10 | ||||||||
Total Net revenue | $ 113 | ||||||||
Proforma, net revenue | $ 110 | $ 395 | |||||||
First Alert, Inc. | Capital Stock | |||||||||
Business Acquisition [Line Items] | |||||||||
Percentage of capital stock acquired | 100% | ||||||||
Business acquisition | $ 614 | ||||||||
Preliminary post-closing adjustments | $ 6 | ||||||||
Arrow | ADI Global Distribution | |||||||||
Business Acquisition [Line Items] | |||||||||
Business acquisition | $ 15 | ||||||||
Arrow | Capital Stock | |||||||||
Business Acquisition [Line Items] | |||||||||
Percentage of capital stock acquired | 100% |
Acquisitions - Summary of Preli
Acquisitions - Summary of Preliminary Allocation of Purchase Price (Details) - USD ($) $ in Millions | Jul. 02, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | ||
Business Combinations [Abstract] | |||||
Cash and other current assets | $ 4 | ||||
Accounts receivable, net | 72 | ||||
Inventories, net | 117 | ||||
Property, plant and equipment | 87 | ||||
Goodwill | $ 2,695 | 72 | [1] | $ 2,661 | |
Other intangible assets, net | 349 | ||||
Other assets (non-current) | 37 | ||||
Total assets | 738 | ||||
Accounts payable | 55 | ||||
Accrued liabilities | 33 | ||||
Other liabilities | 36 | ||||
Total liabilities | 124 | ||||
Net asset acquired | [2] | $ 614 | |||
[1] The $ 72 million of preliminary goodwill was allocated to the Products & Solutions segment. Goodwill from this acquisition is partially deductible for tax purposes. Reflects preliminary purchase price allocation. |
Acquisitions - Summary of Pre_2
Acquisitions - Summary of Preliminary Allocation of Purchase Price (Parenthetical) (Details) - USD ($) $ in Millions | Jul. 02, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | |
Business Acquisition [Line Items] | ||||
Goodwill | $ 2,695 | $ 72 | [1] | $ 2,661 |
Products & Solutions | ||||
Business Acquisition [Line Items] | ||||
Goodwill | $ 2,048 | $ 72 | $ 2,010 | |
[1] The $ 72 million of preliminary goodwill was allocated to the Products & Solutions segment. Goodwill from this acquisition is partially deductible for tax purposes. |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets, Net - Schedule of Goodwill Balance and Changes in Carrying Amount of Goodwill by Segment (Details) $ in Millions | 6 Months Ended |
Jul. 02, 2022 USD ($) | |
Goodwill [Line Items] | |
Balance as of December 31, 2021 | $ 2,661 |
Adjusted Goodwill from acquisitions | 79 |
Currency translation | (45) |
Balance as of July 2, 2022 | 2,695 |
Products & Solutions | |
Goodwill [Line Items] | |
Balance as of December 31, 2021 | 2,010 |
Adjusted Goodwill from acquisitions | 72 |
Currency translation | (34) |
Balance as of July 2, 2022 | 2,048 |
ADI Global Distribution | |
Goodwill [Line Items] | |
Balance as of December 31, 2021 | 651 |
Adjusted Goodwill from acquisitions | 7 |
Currency translation | (11) |
Balance as of July 2, 2022 | $ 647 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets, Net - Schedule of Intangible Assets With Finite Lives (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended | |
Jul. 02, 2022 | Dec. 31, 2021 | ||
Finite-Lived Intangible Assets [Line Items] | |||
Cost | $ 716 | $ 369 | |
Accumulated Amortization | (253) | (249) | |
Net Carrying Amount | $ 463 | $ 120 | |
Patents and Technology | |||
Finite-Lived Intangible Assets [Line Items] | |||
Weighted Average Amortization Period (in years) | 10 years | 9 years | |
Cost | $ 64 | $ 31 | |
Accumulated Amortization | (24) | (23) | |
Net Carrying Amount | $ 40 | $ 8 | |
Customer Relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Weighted Average Amortization Period (in years) | 14 years | 14 years | |
Cost | $ 294 | $ 162 | |
Accumulated Amortization | (107) | (106) | |
Net Carrying Amount | $ 187 | $ 56 | |
Trademarks | |||
Finite-Lived Intangible Assets [Line Items] | |||
Weighted Average Amortization Period (in years) | 10 years | [1] | 10 years |
Cost | $ 194 | [1] | $ 14 |
Accumulated Amortization | (8) | [1] | (8) |
Net Carrying Amount | $ 186 | [1] | $ 6 |
Software | |||
Finite-Lived Intangible Assets [Line Items] | |||
Weighted Average Amortization Period (in years) | 6 years | 6 years | |
Cost | $ 164 | $ 162 | |
Accumulated Amortization | (114) | (112) | |
Net Carrying Amount | $ 50 | $ 50 | |
Maximum | Patents and Technology | |||
Finite-Lived Intangible Assets [Line Items] | |||
Range of Life | 10 years | 10 years | |
Maximum | Customer Relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Range of Life | 15 years | 15 years | |
Maximum | Software | |||
Finite-Lived Intangible Assets [Line Items] | |||
Range of Life | 7 years | 7 years | |
Minimum | Patents and Technology | |||
Finite-Lived Intangible Assets [Line Items] | |||
Range of Life | 3 years | 3 years | |
Minimum | Customer Relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Range of Life | 7 years | 7 years | |
Minimum | Trademarks | |||
Finite-Lived Intangible Assets [Line Items] | |||
Range of Life | 10 years | [1] | 10 years |
Minimum | Software | |||
Finite-Lived Intangible Assets [Line Items] | |||
Range of Life | 2 years | 2 years | |
[1] ncludes trademarks of $ 180 million that have been assigned an indefinite life. |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets, Net - Schedule of Intangible Assets With Finite Lives (Parenthetical) (Details) $ in Millions | Jul. 02, 2022 USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Indefinite lived trademarks | $ 180 |
Goodwill and Other Intangible_6
Goodwill and Other Intangible Assets, Net - Schedule of Estimated Amortization Expense (Details) $ in Millions | Jul. 02, 2022 USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2022 (excluding the six months ended July 2, 2022) | $ 19 |
2023 | 44 |
2024 | 32 |
2025 | 31 |
2026 | $ 27 |
Accrued Liabilities - Summary o
Accrued Liabilities - Summary of Accrued Liabilities (Details) - USD ($) $ in Millions | Jul. 02, 2022 | Dec. 31, 2021 |
Accrued Liabilities, Current [Abstract] | ||
Obligations payable under Indemnification Agreements | $ 140 | $ 140 |
Taxes payable | 52 | 54 |
Compensation, benefit and other employee-related | 88 | 114 |
Customer rebate reserve | 77 | 94 |
Current operating lease liability | 36 | 32 |
Other | 187 | 167 |
Total Accrued liabilities | $ 580 | $ 601 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | Dec. 31, 2021 | |
Loss Contingencies [Line Items] | |||||
Environmental liabilities | $ 22,000,000 | $ 22,000,000 | $ 22,000,000 | ||
Trademark license agreement | 40 years | ||||
Other Expense, Net | |||||
Loss Contingencies [Line Items] | |||||
Reimbursement agreement net expenses | 45,000,000 | $ 36,000,000 | $ 86,000,000 | $ 72,000,000 | |
Indemnification Agreement | |||||
Loss Contingencies [Line Items] | |||||
Indemnification agreement description | 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. | ||||
Indemnification Agreement | Maximum | |||||
Loss Contingencies [Line Items] | |||||
Indemnity liability annual cap | 140,000,000 | $ 140,000,000 | |||
Tax Matters Agreement | |||||
Loss Contingencies [Line Items] | |||||
Indemnified amount | 128,000,000 | 128,000,000 | $ 128,000,000 | ||
Honeywell | |||||
Loss Contingencies [Line Items] | |||||
Indemnity liability annual cap | $ 140,000,000 | 140,000,000 | $ 140,000,000 | 140,000,000 | |
Honeywell | Trademark Agreement | |||||
Loss Contingencies [Line Items] | |||||
Royalty fee on net revenue | 1.50% | 1.50% | |||
Royalty expense | $ 5,000,000 | $ 4,000,000 | $ 11,000,000 | $ 9,000,000 | |
Honeywell | Indemnification Agreement | |||||
Loss Contingencies [Line Items] | |||||
Indemnification payable percentage of payments | 90% | ||||
Indemnification payable percentage of net insurance receipts | 90% | ||||
Indemnification payable percentage of net proceeds received | 90% |
Commitments and Contingencies_2
Commitments and Contingencies - Summary of Reimbursement Agreement Liabilities (Details) - Honeywell - USD ($) $ in Millions | 6 Months Ended | |
Jul. 02, 2022 | Jul. 03, 2021 | |
Accrual for Reimbursement Agreement | ||
Beginning balance | $ 597 | $ 591 |
Accruals for indemnification liabilities deemed probable and reasonably estimable | 86 | 72 |
Indemnification payment | (70) | (70) |
Ending balance | $ 613 | $ 593 |
Commitments and Contingencies_3
Commitments and Contingencies - Summary of Reimbursement Agreement Liabilities (Parenthetical) (Details) - Honeywell - USD ($) | 6 Months Ended | |
Jul. 02, 2022 | Jul. 03, 2021 | |
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% | 5% |
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 | Jul. 02, 2022 | Dec. 31, 2021 | Jul. 03, 2021 | Dec. 31, 2020 |
Loss Contingency, Classification of Accrual [Abstract] | ||||
Reimbursement Agreement liabilities | $ 613 | $ 597 | $ 593 | $ 591 |
Accrued Liabilities | ||||
Loss Contingency, Classification of Accrual [Abstract] | ||||
Reimbursement agreement current portion | 140 | 140 | ||
Obligations Payable under Indemnification Agreement | ||||
Loss Contingency, Classification of Accrual [Abstract] | ||||
Reimbursement agreement Long Term Portion | $ 473 | $ 457 |
Commitments and Contingencies_5
Commitments and Contingencies - Summary of Recorded Obligations for Product Warranties and Product Performance Guarantee (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 02, 2022 | Jul. 03, 2021 | |
Product Warranties and Guarantees [Roll forward] | ||
Beginning of period | $ 23 | $ 22 |
Accruals for warranties/guarantees issued during the year | 11 | 8 |
Additions from acquisitions | 14 | |
Settlements and adjustments | (13) | (10) |
End of period | $ 35 | $ 20 |
Long-term Debt and Credit Agr_3
Long-term Debt and Credit Agreement - Schedule of Long Term Debt (Details) - USD ($) $ in Millions | Jul. 02, 2022 | Dec. 31, 2021 |
Debt Instrument [Line Items] | ||
Unamortized deferred financing costs | $ (15) | $ (13) |
Total outstanding indebtedness | 1,422 | 1,230 |
Less: Amounts expected to be paid within one year | 12 | 10 |
Long-term debt, net of current maturities | 1,410 | 1,220 |
4.000% notes due 2029 | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 300 | 300 |
Seven Year Variable Rate A&R Term B Facility | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 1,137 | $ 943 |
Long-term Debt and Credit Agr_4
Long-term Debt and Credit Agreement - Schedule of Long Term Debt (Parenthetical) (Details) - 4.000% notes due 2029 | 6 Months Ended | |
Aug. 26, 2021 | Jul. 02, 2022 | |
Debt Instrument [Line Items] | ||
Interest rate | 4% | 4% |
Debt instrument maturity year | 2029 | 2029 |
Long-term Debt and Credit Agr_5
Long-term Debt and Credit Agreement - Additional Information (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Aug. 26, 2021 | Feb. 12, 2021 | Apr. 03, 2021 | Jul. 02, 2022 | Mar. 28, 2022 | Jul. 03, 2021 | |
A&R Term B Facility | ||||||
Debt Instrument [Line Items] | ||||||
Principal amount issued | $ 200,000,000 | |||||
A&R Credit Agreement | A&R Term B Facility | ||||||
Debt Instrument [Line Items] | ||||||
Principal amount issued | $ 950,000,000 | |||||
Credit facilities term | 7 years | |||||
Interest rate | 3.59% | 2.75% | ||||
Debt extinguishment costs | $ 23,000,000 | |||||
Debt Instrument fair value | $ 1,100,000,000 | |||||
A&R Credit Agreement | A&R Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Principal amount issued | $ 500,000,000 | |||||
Credit facilities term | 5 years | |||||
4% notes due 2029 | ||||||
Debt Instrument [Line Items] | ||||||
Principal amount issued | $ 300,000,000 | |||||
Debt instrument maturity year | 2029 | 2029 | ||||
Interest rate | 4% | 4% | ||||
Debt Instrument fair value | $ 236,000,000 | |||||
Senior Credit Facilities | ||||||
Debt Instrument [Line Items] | ||||||
Credit agreement description | On February 12, 2021, the Company entered into an Amendment and Restatement Agreement with JP Morgan Chase Bank N.A. as administrative agent (the “A&R Credit Agreement”). This agreement effectively replaced the Company’s previous senior secured credit facilities. | |||||
Senior Credit Facilities | Letter of Credit | ||||||
Debt Instrument [Line Items] | ||||||
Borrowings from credit facility for issuance of letters of credit | $ 0 | $ 0 | ||||
Senior Credit Facilities | A&R Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Borrowings from credit facility for issuance of letters of credit | $ 0 | $ 0 |
Derivative Instruments - Additi
Derivative Instruments - Additional Information (Details) - Swap Agreements $ in Millions | 3 Months Ended | 6 Months Ended | |
Mar. 31, 2021 USD ($) Interestrateswap | Jul. 02, 2022 USD ($) | Jul. 02, 2022 USD ($) | |
Derivative [Line Items] | |||
Number of interest rate swap | Interestrateswap | 8 | ||
Notional value | $ 560 | ||
Swap agreement description | The effect of the Swap Agreements is to convert a portion of the Company’s variable interest rate obligations based on three-month LIBOR with a minimum rate of 0.50% per annum to a base fixed weighted average rate of 0.9289% over terms ranging from two to four years. The Swap Agreements are adjusted to fair value on a quarterly basis. | ||
Contract gains recognized in other comprehensive income (loss) | $ 1 | $ 24 | |
Fair value of derivative instruments | 31 | 31 | |
Other Current Assets | |||
Derivative [Line Items] | |||
Fair value of derivative instruments | 9 | 9 | |
Other Assets | |||
Derivative [Line Items] | |||
Fair value of derivative instruments | $ 22 | $ 22 | |
Minimum | |||
Derivative [Line Items] | |||
Fixed weighted average rate | 0.50% | ||
Derivative term | 2 years | ||
Maximum | |||
Derivative [Line Items] | |||
Fixed weighted average rate | 0.9289% | ||
Derivative term | 4 years |
Pension - Additional Informatio
Pension - Additional Information (Details) - Pension Plan - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jul. 02, 2022 | Jul. 03, 2021 | Jul. 02, 2022 | Jul. 03, 2021 | Dec. 31, 2021 | |
Defined Benefit Plan Disclosure [Line Items] | |||||
Pension obligations | $ 109 | $ 109 | $ 115 | ||
Service cost | $ 7 | $ 15 | $ 7 | $ 15 |