falseQ312-3120230001740332http://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsCurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#CostOfGoodsAndServicesSold00017403322023-01-012023-09-3000017403322023-10-20xbrli:shares00017403322023-09-30iso4217:USD00017403322022-12-31iso4217:USDxbrli:shares00017403322023-07-022023-09-3000017403322022-07-032022-10-0100017403322022-01-012022-10-0100017403322021-12-3100017403322022-10-010001740332us-gaap:CommonStockMember2023-07-010001740332us-gaap:AdditionalPaidInCapitalMember2023-07-010001740332us-gaap:RetainedEarningsMember2023-07-010001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-010001740332us-gaap:TreasuryStockCommonMember2023-07-0100017403322023-07-010001740332us-gaap:RetainedEarningsMember2023-07-022023-09-300001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-022023-09-300001740332us-gaap:CommonStockMember2023-07-022023-09-300001740332us-gaap:AdditionalPaidInCapitalMember2023-07-022023-09-300001740332us-gaap:TreasuryStockCommonMember2023-07-022023-09-300001740332us-gaap:CommonStockMember2023-09-300001740332us-gaap:AdditionalPaidInCapitalMember2023-09-300001740332us-gaap:RetainedEarningsMember2023-09-300001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-300001740332us-gaap:TreasuryStockCommonMember2023-09-300001740332us-gaap:CommonStockMember2022-07-020001740332us-gaap:AdditionalPaidInCapitalMember2022-07-020001740332us-gaap:RetainedEarningsMember2022-07-020001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-020001740332us-gaap:TreasuryStockCommonMember2022-07-0200017403322022-07-020001740332us-gaap:RetainedEarningsMember2022-07-032022-10-010001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-032022-10-010001740332us-gaap:CommonStockMember2022-07-032022-10-010001740332us-gaap:AdditionalPaidInCapitalMember2022-07-032022-10-010001740332us-gaap:TreasuryStockCommonMember2022-07-032022-10-010001740332us-gaap:CommonStockMember2022-10-010001740332us-gaap:AdditionalPaidInCapitalMember2022-10-010001740332us-gaap:RetainedEarningsMember2022-10-010001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-10-010001740332us-gaap:TreasuryStockCommonMember2022-10-010001740332us-gaap:CommonStockMember2022-12-310001740332us-gaap:AdditionalPaidInCapitalMember2022-12-310001740332us-gaap:RetainedEarningsMember2022-12-310001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001740332us-gaap:TreasuryStockCommonMember2022-12-310001740332us-gaap:RetainedEarningsMember2023-01-012023-09-300001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-09-300001740332us-gaap:CommonStockMember2023-01-012023-09-300001740332us-gaap:AdditionalPaidInCapitalMember2023-01-012023-09-300001740332us-gaap:TreasuryStockCommonMember2023-01-012023-09-300001740332us-gaap:CommonStockMember2021-12-310001740332us-gaap:AdditionalPaidInCapitalMember2021-12-310001740332us-gaap:RetainedEarningsMember2021-12-310001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001740332us-gaap:TreasuryStockCommonMember2021-12-310001740332us-gaap:RetainedEarningsMember2022-01-012022-10-010001740332us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-10-010001740332us-gaap:CommonStockMember2022-01-012022-10-010001740332us-gaap:AdditionalPaidInCapitalMember2022-01-012022-10-010001740332us-gaap:TreasuryStockCommonMember2022-01-012022-10-010001740332us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberrezi:GenesisCableMember2023-09-300001740332rezi:SftySAMember2023-08-09xbrli:pure0001740332rezi:BTXTechnologiesIncMember2023-01-230001740332rezi:TekniqueLimitedMember2022-12-230001740332rezi:ElectronicCustomerDistributorsIncMember2022-07-050001740332rezi:FirstAlertMember2022-03-31rezi:segment0001740332rezi:ProductsAndSolutionsSegmentMember2023-07-022023-09-300001740332rezi:ProductsAndSolutionsSegmentMember2022-07-032022-10-010001740332rezi:ProductsAndSolutionsSegmentMember2023-01-012023-09-300001740332rezi:ProductsAndSolutionsSegmentMember2022-01-012022-10-010001740332rezi:ADIGlobalDistributionSegmentMember2023-07-022023-09-300001740332rezi:ADIGlobalDistributionSegmentMember2022-07-032022-10-010001740332rezi:ADIGlobalDistributionSegmentMember2023-01-012023-09-300001740332rezi:ADIGlobalDistributionSegmentMember2022-01-012022-10-010001740332us-gaap:OperatingSegmentsMemberrezi:ProductsAndSolutionsSegmentMember2023-07-022023-09-300001740332us-gaap:OperatingSegmentsMemberrezi:ProductsAndSolutionsSegmentMember2022-07-032022-10-010001740332us-gaap:OperatingSegmentsMemberrezi:ProductsAndSolutionsSegmentMember2023-01-012023-09-300001740332us-gaap:OperatingSegmentsMemberrezi:ProductsAndSolutionsSegmentMember2022-01-012022-10-010001740332us-gaap:OperatingSegmentsMemberrezi:ADIGlobalDistributionSegmentMember2023-07-022023-09-300001740332us-gaap:OperatingSegmentsMemberrezi:ADIGlobalDistributionSegmentMember2022-07-032022-10-010001740332us-gaap:OperatingSegmentsMemberrezi:ADIGlobalDistributionSegmentMember2023-01-012023-09-300001740332us-gaap:OperatingSegmentsMemberrezi:ADIGlobalDistributionSegmentMember2022-01-012022-10-010001740332us-gaap:CorporateNonSegmentMember2023-07-022023-09-300001740332us-gaap:CorporateNonSegmentMember2022-07-032022-10-010001740332us-gaap:CorporateNonSegmentMember2023-01-012023-09-300001740332us-gaap:CorporateNonSegmentMember2022-01-012022-10-010001740332rezi:AirMemberrezi:ProductsAndSolutionsSegmentMember2023-07-022023-09-300001740332rezi:AirMemberrezi:ProductsAndSolutionsSegmentMember2022-07-032022-10-010001740332rezi:AirMemberrezi:ProductsAndSolutionsSegmentMember2023-01-012023-09-300001740332rezi:AirMemberrezi:ProductsAndSolutionsSegmentMember2022-01-012022-10-010001740332rezi:SafetyAndSecurityMemberrezi:ProductsAndSolutionsSegmentMember2023-07-022023-09-300001740332rezi:SafetyAndSecurityMemberrezi:ProductsAndSolutionsSegmentMember2022-07-032022-10-010001740332rezi:SafetyAndSecurityMemberrezi:ProductsAndSolutionsSegmentMember2023-01-012023-09-300001740332rezi:SafetyAndSecurityMemberrezi:ProductsAndSolutionsSegmentMember2022-01-012022-10-010001740332us-gaap:EnergyServiceMemberrezi:ProductsAndSolutionsSegmentMember2023-07-022023-09-300001740332us-gaap:EnergyServiceMemberrezi:ProductsAndSolutionsSegmentMember2022-07-032022-10-010001740332us-gaap:EnergyServiceMemberrezi:ProductsAndSolutionsSegmentMember2023-01-012023-09-300001740332us-gaap:EnergyServiceMemberrezi:ProductsAndSolutionsSegmentMember2022-01-012022-10-010001740332rezi:ProductsAndSolutionsSegmentMemberus-gaap:PublicUtilitiesInventoryWaterMember2023-07-022023-09-300001740332rezi:ProductsAndSolutionsSegmentMemberus-gaap:PublicUtilitiesInventoryWaterMember2022-07-032022-10-010001740332rezi:ProductsAndSolutionsSegmentMemberus-gaap:PublicUtilitiesInventoryWaterMember2023-01-012023-09-300001740332rezi:ProductsAndSolutionsSegmentMemberus-gaap:PublicUtilitiesInventoryWaterMember2022-01-012022-10-010001740332rezi:ADIGlobalDistributionSegmentMemberrezi:USAndCanadaMember2023-07-022023-09-300001740332rezi:ADIGlobalDistributionSegmentMemberrezi:USAndCanadaMember2022-07-032022-10-010001740332rezi:ADIGlobalDistributionSegmentMemberrezi:USAndCanadaMember2023-01-012023-09-300001740332rezi:ADIGlobalDistributionSegmentMemberrezi:USAndCanadaMember2022-01-012022-10-010001740332us-gaap:EMEAMemberrezi:ADIGlobalDistributionSegmentMember2023-07-022023-09-300001740332us-gaap:EMEAMemberrezi:ADIGlobalDistributionSegmentMember2022-07-032022-10-010001740332us-gaap:EMEAMemberrezi:ADIGlobalDistributionSegmentMember2023-01-012023-09-300001740332us-gaap:EMEAMemberrezi:ADIGlobalDistributionSegmentMember2022-01-012022-10-010001740332rezi:ADIGlobalDistributionSegmentMembersrt:AsiaPacificMember2023-07-022023-09-300001740332rezi:ADIGlobalDistributionSegmentMembersrt:AsiaPacificMember2022-07-032022-10-010001740332rezi:ADIGlobalDistributionSegmentMembersrt:AsiaPacificMember2023-01-012023-09-300001740332rezi:ADIGlobalDistributionSegmentMembersrt:AsiaPacificMember2022-01-012022-10-010001740332srt:MinimumMember2022-01-012022-12-310001740332srt:MaximumMember2022-01-012022-12-3100017403322022-01-012022-12-310001740332us-gaap:PensionPlansDefinedBenefitMember2023-07-022023-09-300001740332us-gaap:PensionPlansDefinedBenefitMember2023-01-012023-09-3000017403322023-04-022023-07-010001740332us-gaap:EmployeeStockOptionMember2023-07-010001740332us-gaap:PerformanceSharesMember2023-01-012023-09-300001740332us-gaap:PerformanceSharesMember2022-01-012022-10-010001740332us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300001740332us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-10-010001740332rezi:KeyEmployeesMember2023-01-012023-09-300001740332rezi:NonEmployeeDirectorsMember2023-01-012023-09-300001740332rezi:ProductsAndSolutionsSegmentMember2022-12-310001740332rezi:ADIGlobalDistributionSegmentMember2022-12-310001740332rezi:ProductsAndSolutionsSegmentMember2023-09-300001740332rezi:ADIGlobalDistributionSegmentMember2023-09-300001740332us-gaap:PatentedTechnologyMember2023-09-300001740332us-gaap:PatentedTechnologyMember2022-12-310001740332us-gaap:CustomerRelationshipsMember2023-09-300001740332us-gaap:CustomerRelationshipsMember2022-12-310001740332us-gaap:TrademarksMember2023-09-300001740332us-gaap:TrademarksMember2022-12-310001740332us-gaap:ComputerSoftwareIntangibleAssetMember2023-09-300001740332us-gaap:ComputerSoftwareIntangibleAssetMember2022-12-310001740332rezi:CostOfGoodsSoldMember2023-07-022023-09-300001740332rezi:CostOfGoodsSoldMember2022-07-032022-10-010001740332rezi:CostOfGoodsSoldMember2023-01-012023-09-300001740332rezi:CostOfGoodsSoldMember2022-01-012022-10-010001740332us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-07-022023-09-300001740332us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-07-032022-10-010001740332us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-09-300001740332us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-10-010001740332rezi:A4OfSeniorUnsecuredNotesDue2029Member2023-09-300001740332rezi:A4OfSeniorUnsecuredNotesDue2029Member2022-12-310001740332rezi:SevenYearVariableRateTermLoanBDueInTwoThousandTwentyEightMember2023-09-300001740332rezi:SevenYearVariableRateTermLoanBDueInTwoThousandTwentyEightMember2022-12-310001740332rezi:AmendedAndRestatedTermBFacilityMemberrezi:AmendedAndRestatedCreditAgreementMember2021-02-122021-02-120001740332rezi:AmendedAndRestatedTermBFacilityMemberrezi:AmendedAndRestatedCreditAgreementMember2021-02-120001740332rezi:AmendedAndRestatedTermBFacilityMemberrezi:AmendedAndRestatedCreditAgreementMember2023-09-300001740332rezi:AmendedAndRestatedRevolvingCreditFacilityMemberrezi:AmendedAndRestatedCreditAgreementMember2021-02-122021-02-120001740332rezi:AmendedAndRestatedRevolvingCreditFacilityMemberrezi:AmendedAndRestatedCreditAgreementMember2021-02-120001740332rezi:SecuredOvernightFinancingRateSOFRMemberrezi:AmendedAndRestatedRevolvingCreditFacilityMemberrezi:AmendedAndRestatedCreditAgreementMember2023-06-302023-06-300001740332rezi:AmendedAndRestatedTermBFacilityMember2023-09-300001740332rezi:AmendedAndRestatedTermBFacilityMember2022-12-310001740332rezi:AmendedAndRestatedRevolvingCreditFacilityMemberrezi:SeniorCreditFacilitiesMember2022-12-310001740332rezi:AmendedAndRestatedRevolvingCreditFacilityMemberrezi:SeniorCreditFacilitiesMember2023-09-300001740332rezi:SeniorCreditFacilitiesMemberus-gaap:LetterOfCreditMember2023-09-300001740332rezi:SeniorCreditFacilitiesMemberus-gaap:LetterOfCreditMember2022-12-310001740332rezi:SwapAgreementsMember2021-03-31rezi:derivative0001740332rezi:SwapAgreementsMember2023-03-012023-04-300001740332rezi:SwapAgreementsMember2023-04-300001740332rezi:SwapAgreementsMember2023-03-310001740332rezi:SwapAgreementsMember2023-09-300001740332rezi:SwapAgreementsMember2023-06-230001740332rezi:SwapAgreementsMembersrt:MaximumMember2023-06-230001740332us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherCurrentAssetsMember2023-09-300001740332us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherCurrentAssetsMember2022-12-310001740332us-gaap:InterestRateSwapMemberus-gaap:OtherAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-09-300001740332us-gaap:InterestRateSwapMemberus-gaap:OtherAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-12-310001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-01-012023-09-300001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-01-012022-12-310001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-07-010001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-07-020001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-12-310001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2021-12-310001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-07-022023-09-300001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-07-032022-10-010001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-01-012022-10-010001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-09-300001740332us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-10-010001740332rezi:AAndRTermBFacilityMember2023-09-300001740332rezi:AAndRTermBFacilityMember2022-12-310001740332us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-300001740332us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001740332rezi:HoneywellMemberus-gaap:IndemnificationGuaranteeMember2018-10-292018-10-290001740332srt:MaximumMemberrezi:HoneywellMemberus-gaap:IndemnificationGuaranteeMember2018-10-290001740332rezi:ReimbursementAgreementMemberrezi:HoneywellMember2022-12-310001740332rezi:HoneywellMemberrezi:TaxMattersAgreementMember2022-12-310001740332rezi:HoneywellMember2022-12-310001740332rezi:ReimbursementAgreementMemberrezi:HoneywellMember2023-01-012023-09-300001740332rezi:HoneywellMemberrezi:TaxMattersAgreementMember2023-01-012023-09-300001740332rezi:HoneywellMember2023-01-012023-09-300001740332rezi:ReimbursementAgreementMemberrezi:HoneywellMember2023-09-300001740332rezi:HoneywellMemberrezi:TaxMattersAgreementMember2023-09-300001740332rezi:HoneywellMember2023-09-300001740332us-gaap:IndemnificationGuaranteeMember2023-09-300001740332rezi:HoneywellMemberus-gaap:AccountsPayableAndAccruedLiabilitiesMember2023-09-300001740332rezi:HoneywellMemberus-gaap:AccountsPayableAndAccruedLiabilitiesMember2022-12-310001740332rezi:HoneywellMemberrezi:ObligationsPayableUnderIndemnificationAgreementsMember2023-09-300001740332rezi:HoneywellMemberrezi:ObligationsPayableUnderIndemnificationAgreementsMember2022-12-310001740332us-gaap:OtherExpenseMember2023-07-022023-09-300001740332us-gaap:OtherExpenseMember2023-01-012023-09-300001740332us-gaap:OtherExpenseMember2022-07-032022-10-010001740332us-gaap:OtherExpenseMember2022-01-012022-10-010001740332rezi:TrademarkLicenseAgreementMemberrezi:HoneywellMember2023-07-022023-09-300001740332rezi:TrademarkLicenseAgreementMemberrezi:HoneywellMember2023-01-012023-09-300001740332rezi:TrademarkLicenseAgreementMemberrezi:HoneywellMember2022-07-032022-10-010001740332rezi:TrademarkLicenseAgreementMemberrezi:HoneywellMember2022-01-012022-10-0100017403322022-11-172022-11-1700017403322023-02-030001740332rezi:OptionsAndOtherRightsMember2023-07-022023-09-300001740332rezi:OptionsAndOtherRightsMember2023-01-012023-09-300001740332rezi:PerformanceBasedUnitAwardsMember2023-07-022023-09-300001740332rezi:PerformanceBasedUnitAwardsMember2023-01-012023-09-300001740332rezi:OptionsAndOtherRightsMember2022-07-032022-10-010001740332rezi:OptionsAndOtherRightsMember2022-01-012022-10-010001740332rezi:PerformanceBasedUnitAwardsMember2022-07-032022-10-010001740332rezi:PerformanceBasedUnitAwardsMember2022-01-012022-10-0100017403322023-08-030001740332us-gaap:CommonStockMember2023-07-022023-09-30

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

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

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

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

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

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of October 20, 2023 was 146,087,992 shares.

Resideo Technologies, Inc. (“Resideo”, the “Company”, “we”, “us”, or “our”) 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. We are also a leading wholesale distributor of low-voltage security products including access control, fire detection, fire suppression, security, and video products, and participate significantly in the broader related markets of audio, communications, data communications, networking, power, ProAV, smart home, and wire and cable. Our global footprint serves both commercial and residential end markets.

The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the Unaudited Consolidated Financial Statements do not include all of the information and notes required by 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 our financial position, results of operations and cash flows for the periods indicated. Operating results for the period from January 1, 2023 through September 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023.

For additional information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report on Form 10-K”), filed with the United States Securities and Exchange Commission (the “SEC”) on February 21, 2023.

We report financial information on a fiscal quarter basis using a modified four-four-five week calendar. Our fiscal calendar begins on January 1 and ends on December 31. We have elected the first, second and third quarters to end on a Saturday in order to not disrupt business processes. The effects of this election are generally not significant to reported results for any quarter and only exist within a reporting year.

For the purpose of comparability, certain prior period amounts have been reclassified to conform to current period classification.

On September 19 2023, we announced that we entered into a definitive agreement to sell the Genesis Wire & Cable (“Genesis”) business in a cash transaction to Southwire Company, LLC (the “buyer”) for $87.5 million, subject to customary adjustments. Genesis is reported within the Products and Solutions Segment. The divestiture does not represent a strategic shift, nor will it have a significant impact on our Unaudited Consolidated Statements of Operations. As such, we have reclassified the related assets and liabilities to held for sale within other current assets and accrued liabilities, respectively, on the Unaudited Consolidated Balance Sheets. The estimated fair value less costs exceeds the carrying amount for Genesis, therefore no impairment was recognized for the three and nine months ended September 30, 2023. The transaction closed in October 2023.

The following is a summary of the major categories of assets and liabilities that have been classified as held for sale within other current assets and accrued liabilities on the Unaudited Consolidated Balance Sheets at September 30, 2023:

Our significant accounting policies are detailed in Note 2. Summary of Significant Accounting Policies of the Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes to these policies that have had a material impact on the Unaudited Consolidated Financial Statements and accompanying notes for the three and nine months ended September 30, 2023.

We consider the applicability and impact of all recent accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) and disclose only those that may have a material impact.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and subsequent amendment to the initial guidance: ASU 2021-01, Reference Rate Reform (Topic 848): Scope (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. This guidance may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2024. The impact of the adoption of this standard on our financial statements and related disclosures, including accounting policies, processes, and systems, was not material. Refer to Note 12. Long-Term Debt and Note 13. Derivative Financial Instruments to the Unaudited Consolidated Financial Statements for further discussion.

Pro forma results of operations for the following acquisitions have not been presented, as the impacts on our consolidated financial results were not material.

Sfty SA—On August 9, 2023, we acquired 100% of the outstanding equity of Sfty SA, a developer of cloud-based services providing alerts to multifamily homes and property managers with smoke, carbon monoxide and water leak detection products.

We report Sfty SA’s results within the Products and Solutions segment. We have made a preliminary purchase price allocation that is subject to change as additional information is obtained.

BTX Technologies, Inc.—On January 23, 2023, we acquired 100% of the outstanding equity of BTX Technologies, Inc., (“BTX”) a leading distributor of professional audio, video, data communications, and broadcast equipment. We report BTX’s results within the ADI Global Distribution segment. We have made a preliminary purchase price allocation that is subject to change as additional information is obtained.

Teknique Limited—On December 23, 2022, we acquired 100% of the outstanding equity of Teknique Limited, a developer and producer of edge-based, artificial intelligence-enabled video camera solutions. We report Teknique Limited’s results within the Products and Solutions segment. Purchase consideration included cash and a note payable with the former owner. We have made a preliminary purchase price allocation that is subject to change as additional information is obtained.

Electronic Custom Distributors, Inc.—On July 5, 2022, we acquired 100% of the outstanding equity of Electronic Custom Distributors, Inc., a regional distributor of residential audio, video, automation, security, wire and telecommunication products. We report Electronic Customer Distributors, Inc.’s results within the ADI Global Distribution segment. We completed the accounting for the acquisition during the first quarter of 2023, which did not result in any adjustments.

First Alert, Inc.—On March 31, 2022, we acquired 100% of the outstanding equity of First Alert, Inc., a leading provider of home safety products. We report First Alert, Inc.’s results within the Products and Solutions segment. We completed the accounting for the acquisition during the first quarter of 2023, which did not result in any adjustments.

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

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

Corporate expenses relate to functions within the corporate office that support the operating segments such as acquisition-related costs, legal, tax, treasury, human resources, IT, strategy, accounting, communications, innovation, business development, facilities management, corporate travel expenses and other executive costs. Additionally, included within Corporate are unallocated non-operating items such as pension expense, Reimbursement Agreement expense, 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:

The Company’s Chief Executive Officer, its 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 reported.

We have two operating segments, Products and Solutions and ADI Global Distribution. Disaggregated revenue information for Products and Solutions is presented by product grouping, while ADI Global Distribution is presented by region.

The following table presents revenue by business line and geographic location, as we believe this presentation best depicts how the nature, amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors:

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

(2)APAC represents Asia and Pacific countries.

During the third quarter of 2023, we initiated additional restructuring programs (“2023 Plan”) in order to align our cost structure with market conditions. For the three and nine months ended September 30, 2023, we recognized restructuring and impairment expenses of $38 million and $42 million, respectively. These expenses primarily related to workforce reductions.

Restructuring and impairment expenses recognized were $25 million in the Product and Solutions segment, $10 million in the ADI Global Distribution segment and $3 million in the Corporate segment, respectively, for the three months ended September 30, 2023, and $27 million in the Product and Solutions segment, $12 million in the ADI Global Distribution segment and $3 million in the Corporate segment, respectively, for the nine months ended September 30, 2023.

No restructuring and impairment expenses were recognized for the three and nine months ended October 1, 2022.

In 2022, we initiated certain restructuring programs to lower costs, increase gross and operating margins and position us for growth. Refer to Note 6. Restructuring Expenses in our 2022 Annual Report on Form 10-K for further discussion of our 2022 restructuring programs.

We expect to fully execute our restructuring initiatives and programs over the next 12 to 24 months, and we may incur future additional restructuring expenses associated with these plans. We are unable at this time to make a good faith determination of cost estimates, or ranges of cost estimates, associated with future phases of the plans or the total costs we may incur in connection with these plans.

The following table summarizes the status of our restructuring expenses included within accrued liabilities on the Unaudited Consolidated Balance Sheets.

(1) Usage primarily relates to cash payments associated with employee termination costs.

As a result of a voluntary lump sum window offering and the purchase of a group annuity contract that transferred a portion of the assets and liabilities to an insurance company during the first quarter of 2023, we triggered settlement accounting and performed a remeasurement of our U.S. qualified defined benefit pension plan. As a result, we recognized non-cash pension settlement losses within other expense, net in the Unaudited Consolidated Statements of Operations of $3 million and $6 million for the three and nine months ended September 30, 2023, respectively. The loss for the three months ended September 30, 2023 is mainly related to an adjustment to our estimate of the losses from settlements that occurred during the first quarter of 2023. The corresponding remeasurement of our U.S. qualified defined benefit pension plan resulted in decreases of $80 million in plan assets and $75 million in liabilities for the nine months ended September 30, 2023.

The Stock Incentive Plans, which consists of the Amended and Restated 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., provide for the grant of stock options, stock appreciation rights, restricted stock units, restricted stock, and other stock-based awards.

During the second quarter of 2023, the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates was further amended to increase the number of shares of our common stock available for issuance by 3.5 million shares for an aggregate of 19.5 million shares with no more than 7.5 million shares being available for grant in the form of stock options.

A summary of awards granted as part of our annual long-term compensation follows:

Annual RSU awards to our key employees generally have a three-year service or performance period. RSU awards to our non-employee directors have a one-year service period. The fair value is determined at the grant date. PSUs granted in 2023 were issued with the shares awarded per unit being based on the difference in performance between the total stockholders’ return of our common stock against that of the S&P 600 Industrials Index. PSUs granted prior to 2023 were issued with the shares awarded per unit being based on the difference in performance between the total stockholders’ return of our common stock against that of the S&P 400 Industrials Index.

Stock-based compensation expense, net of tax was $11 million and $36 million for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended October 1, 2022, stock-based compensation expense, net of tax was $13 million and $36 million, respectively.

The following table summarizes the details of our inventories, net:

Our goodwill balance and changes in carrying value by segment are as follows:

(1) Primarily relates to the divestiture of our Genesis business as discussed in Note 1. Nature of Operations and Basis of Presentation.

The following table summarizes the net carrying amount of intangible assets:

Intangible assets subject to amortization consisted of the following:

Intangible assets amortization expense was $9 million and $28 million for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended October 1, 2022, intangible assets amortization expense was $10 million and $25 million, respectively.

Total operating lease costs are as follows:

Total operating lease costs include variable lease costs of $6 million and $18 million for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended October 1, 2022, total operating lease costs include variable lease costs of $6 million and $15 million, respectively.

The following table summarizes the carrying amounts of our operating lease assets and liabilities:

Supplemental cash flow information related to operating leases was as follows:

Long-term debt is comprised of the following:

On February 12, 2021, we entered into an Amendment and Restatement Agreement with JP Morgan Chase Bank N.A. as administrative agent (the “A&R Credit Agreement”). The A&R Credit Agreement provides for (i) an initial seven-year senior secured Term B loan facility in an aggregate principal amount of $950 million, which was later amended to add $200 million in additional term loans (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”).

The A&R Senior Credit Facilities contain customary LIBOR replacement language, including, but not limited to, the use of rates based on secured overnight financing rate (“SOFR”), which is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities in the repurchase agreement market and is administered by the Federal Reserve Bank of New York. On June 30, 2023, we modified the calculation of interest under the A&R Senior Credit Facilities from being calculated based on LIBOR to being calculated based on SOFR. Therefore, the A&R Senior Credit Facilities bears interest at a rate per annum of Term SOFR plus a credit spread adjustment of 10 basis points for the A&R Revolving Credit Facility and varying credit spread adjustments for the A&R Term B Facility, based on the tenor of each individual borrowing. No other material terms of the A&R Senior Credit Facilities were amended.

At September 30, 2023 and December 31, 2022, the weighted average interest rate for the A&R Term B Facility, excluding the effect of the interest rate swaps, was 7.69% and 6.78%, respectively, and there were no borrowings and no letters of credit issued under the A&R Revolving Credit Facility. As of September 30, 2023, we were in compliance with all covenants related to the A&R Senior Credit Facilities.

We entered into certain interest rate swap agreements in March 2021, which were amended in June 2023, to transition from a hedge of LIBOR-based cash flows to a hedge of SOFR-based cash flows. These interest rate swap agreements effectively convert a portion of our variable-rate debt to fixed rate debt. Refer to Note 13. Derivative Financial Instruments for further discussion.

Refer to Note 11. Long-Term Debt in our 2022 Annual Report on Form 10-K for further discussion.

In March 2021, we entered into eight interest rate swap agreements (“Swap Agreements”) with several financial institutions for a combined notional value of $560 million. The Swap Agreements were entered into to reduce the consolidated interest rate risk associated with variable rate, long-term debt.

In March and April 2023, we modified two of the eight Swap Agreements, each with a notional value of $70 million that matures in May 2024 as follows: (i) the original interest rate swap agreements were cancelled for no termination payment and (ii) we simultaneously entered into new pay-fixed interest rate swap agreements with a notional amount of $70 million each, effectively blending the asset positions of the original interest rate swap agreements into new interest swap agreements and extending the term of our hedged positions to February 2027. In connection with these transactions, no cash was exchanged between us and the counterparty. The new pay-fixed interest rate swap agreements qualify as a hybrid instrument in accordance with Accounting Standards Codification 815, Derivatives and Hedging, consisting of financing components and embedded at-market derivatives that were designated as cash flow hedges. The amounts remaining in accumulated other comprehensive loss for the modified interest rate swap agreements as of September 30, 2023 were approximately $4 million in aggregate and are being amortized as a reduction to interest expense over the effective period of the original interest rate swap agreements, or May 2024. The financing components are accounted for at amortized cost over the life of the swap while the embedded at-market derivatives are accounted for at fair value.

On June 23, 2023, we amended the Swap Agreements to transition from a hedge of LIBOR-based cash flows to a hedge of SOFR-based cash flows. Under the amended Swap Agreements, we convert a portion of our variable interest rate obligations based on Term SOFR with a minimum rate of 0.39% per annum to a base fixed weighted average rate of 1.13% over the remaining terms. We designated the Swap Agreements as cash flow hedges of the variability in expected cash outflows for interest payments.

The Swap Agreements are adjusted to fair value on a quarterly basis. The fair value of each swap is presented within the Unaudited Consolidated Balance Sheets, and we recognize any changes in the fair value as an adjustment of accumulated other comprehensive loss within equity to the extent the swap is effective. As interest expense is accrued on the debt obligation, amounts in accumulated other comprehensive loss related to the Swap Agreements are reclassified into income resulting in a net interest expense on the hedged amount of the underlying debt obligation equal to the effective yield of the fixed rate of the swap.

The following table summarizes the fair value and presentation of derivative instruments in the Unaudited Consolidated Balance Sheets as well as the changes in fair value recorded in accumulated other comprehensive loss:

The following table summarizes the effect of derivative instruments designated as cash flow hedges in other comprehensive income and the Unaudited Consolidated Statements of Operations:

Unrealized gains expected to be reclassified from accumulated other comprehensive loss in the next 12 months are estimated to be $27 million as of September 30, 2023.

The estimated fair value of our financial instruments held, and when applicable, issued to finance our operations, is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that we would realize upon disposition, nor do they indicate our intent or ability to dispose of the financial instrument. Assets and liabilities that are carried at fair value are required to be classified and disclosed in one of the following three categories:

Level 1—quoted market prices in active markets for identical assets and liabilities

Level 2—observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3—unobservable inputs that are not corroborated by market data

Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. There were no changes in the methodologies used in our valuation practices as of September 30, 2023.

The fair values of long-term debt instruments were determined using quoted market prices in inactive markets or discounted cash flows based upon current observable market interest rates and therefore were classified as Level 2 measurements in the fair value hierarchy.

The following table provides a summary of the carrying amount and fair value of outstanding debt:

Refer to Note 12. Long-Term Debt to the Unaudited Consolidated Financial Statements for further discussion.

Interest Rate Risk—We have exposure to movements in interest rates associated with cash and borrowings. We have entered, and in the future may enter, into various interest rate protection agreements in order to limit the impact of movements in interest rates. The fair values of interest rate swaps have been determined based on market value equivalents at the balance sheet date, taking into account the current interest rate environment and therefore, were classified as Level 2 measurements in the fair value hierarchy.

The following table provides a summary of the carrying amount and fair value of our interest rate swaps:

Refer to Note 13. Derivative Financial Instruments to the Unaudited Consolidated Financial Statements for further discussion.

There are no Level 1 or Level 3 assets or liabilities for the periods presented. The carrying amounts of cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued and other liabilities approximate fair value because of the short-term maturity of these amounts.

Accrued liabilities consist of the following:

(1) Relates to the divestiture of our Genesis business as discussed in Note 1. Nature of Operations and Basis of Presentation.

(2) Other includes accruals for advertising, legal and professional reserves, freight, royalties, interest, and other miscellaneous items.

The Indemnification Agreements are further described in Note 16. Commitments and Contingencies to the Unaudited Consolidated Financial Statements.

We are subject to various federal, state, local, and foreign government requirements relating to the protection of the environment and accrue costs related to environmental matters when it is probable that we have incurred a liability related to a contaminated site and the amount can be reasonably estimated. We believe that, as a general matter, our policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and personal injury and that our handling, manufacture, use and disposal of hazardous substances are in accordance with environmental and safety laws and regulations. We have incurred remedial response and voluntary cleanup costs for site contamination and are a party to claims associated with environmental and safety matters, including products containing hazardous substances. Additional claims and costs involving environmental matters are likely to continue to arise in the future.

Environment-related expenses for sites owned and operated by us are presented within cost of goods sold for operating sites. For the three and nine months ended September 30, 2023 and October 1, 2022, environmental expenses related to these operating sites were not material. Liabilities for environmental costs were $22 million at September 30, 2023 and December 31, 2022.

The Reimbursement Agreement and the Tax Matters Agreement (collectively, the “Indemnification Agreements”) are further described below.

We separated from Honeywell International Inc. (“Honeywell”) on October 29, 2018, becoming an independent publicly traded company as a result of a pro rata distribution of our common stock to shareholders of Honeywell (the “Spin-off”). In connection with the Spin-Off, we entered into the Reimbursement Agreement, pursuant to which we have an obligation to make cash payments to Honeywell in amounts equal to 90% of payments for certain Honeywell environmental-liability payments, which include amounts billed (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). While the amount payable by us in respect of such liabilities arising in any given year is subject to a cap of $140 million under the Reimbursement Agreement, the estimated liability for resolution of pending and future environmental-related liabilities recorded on our balance sheets are calculated as if we were responsible for 100% of the environmental-liability payments associated with certain sites.

Refer to Note 15. Commitments and Contingencies in our 2022 Annual Report on Form 10-K for further discussion.

In connection with the Spin-Off, we entered into the Tax Matters Agreement with Honeywell, pursuant to which we are 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.

We are required to indemnify Honeywell for any taxes resulting from the failure of the Spin-Off and related internal transactions to qualify for their intended tax treatment under U.S. federal, state and local income tax law, as well as foreign tax law, where such taxes result from our action or omission not permitted by the Separation and Distribution Agreement between Honeywell and Resideo dated as of October 19, 2018 or the Tax Matters Agreement.

The following table summarizes information concerning the Reimbursement and Tax Matter Agreements’ liabilities:

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

The liabilities related to the Reimbursement and Tax Matters Agreements are included in the following balance sheet accounts:

For the three and nine months ended September 30, 2023, net expenses related to the Reimbursement Agreement were $43 million and $128 million, respectively, and for the three and nine months ended October 1, 2022, net expenses related to the Reimbursement Agreement were $30 million and $116 million, respectively, and are recorded in other expense, net.

We do not currently possess sufficient information to reasonably estimate the amounts of indemnification liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with such indemnification liability payments can be determined although they could be material to our consolidated results of operations and operating cash flows in the periods recognized or paid.

Independent of our payments under the Reimbursement Agreement, we will have ongoing liability for certain environmental claims, which are part of our ongoing business.

We entered into a 40-year Trademark Agreement with Honeywell that authorizes our use of the Honeywell Home trademark in the operation of our business for the advertising, sale and distribution of certain licensed products. In exchange, we pay Honeywell a royalty fee based on net revenue related to such licensed products, which is recorded in selling, general and administrative expense in the Unaudited Consolidated Statements of Operations.

For the three and nine months ended September 30, 2023, royalty fees were $4 million and $13 million, respectively. For the three and nine months ended October 1, 2022, royalty fees were $7 million and $16 million, respectively.

We are subject to lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, acquisitions and divestitures, employee matters, intellectual property, and environmental, health, and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses, 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 our financial statements. Refer to Note 15. Commitments and Contingencies in our 2022 Annual Report on Form 10-K for further discussion of these matters.

Certain current or former directors and officers were defendants in a consolidated derivative action, In re Resideo Technologies, Inc. Derivative Litigation (the “Consolidated Federal Derivative Action”), which was stayed pending entry of final judgment in the related securities litigation and Delaware Chancery derivative action. An additional suit was filed in the Court of Chancery of the State of Delaware in 2021 and not consolidated with the Consolidated Federal Derivative Action. On November 17, 2022, the parties executed a Confidential Term Sheet summarizing the agreed terms of a global settlement to resolve all of the pending lawsuits and derivative claims. Under the terms of the settlement, we agreed to implement or codify certain corporate governance reforms and reimburse the plaintiffs’ attorneys’ fees of up to $1.6 million. On February 3, 2023, the parties executed a definitive stipulation of settlement. The U.S. District Court for the District of Minnesota preliminarily approved the settlement, and a fairness hearing was held on June 22, 2023. The final settlement remains subject to, among other things, court approval. The settlement liability is included in the other accrued liabilities in the Unaudited Consolidated Balance Sheets, and the expected insurance recovery of approximately $0.6 million is included in accounts receivable, net.

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

Plaintiff seeks to represent a putative class of other persons in the U.S. who purchased the Products. Plaintiff, on behalf of himself and the putative class, seeks damages in an unknown amount, which he describes as the cost to repair and/or replace the Products and/or the diminution in value of the Products.

We believe we have strong defenses against the allegations and claims asserted in the Badalamenti Lawsuit and our motion to dismiss Plaintiff's complaint was fully briefed on March 3, 2023. We continue to defend the matter vigorously; however, there can be no assurance that we will be successful in such defense. In light of the early stage of the Badalamenti Lawsuit, we are unable to estimate the total costs to defend the matter or the potential liability to us in the event that we are not successful in our defense.

On June 28, 2023, Lisset Tredo, a Company employee, filed a putative class action complaint in the San Diego County Superior Court on behalf of all non-exempt employees in California, in which she alleges violations by the Company of the California Labor Code related to sick leave pay, accurate wage statements, recordkeeping, and pay timing, and on August 28, 2023 she filed a first amended complaint adding a claim under the California Private Attorneys General Act (the “Tredo Lawsuit”). In the Tredo Lawsuit, Tredo seeks alleged unpaid wages, restitution, interest, statutory penalties, attorneys’ fees and costs in an unknown amount.

The Company answered the Tredo lawsuit in which it asserted a general denial of plaintiff’s allegations and asserted various defenses.

We are investigating the allegations and defenses. The parties have agreed to attend mediation in January 2024 and to stay formal discovery pending the outcome of the mediation. If the case is not resolved at mediation, we intend to defend the matter vigorously; however, there can be no assurance that we will be successful in such defense. In light of the early stage of the Tredo Lawsuit, we are unable to estimate the total costs to defend the matter or the potential liability to us in the event that we are not successful in our defense.

In the normal course of business, we issue product warranties and product performance guarantees. We accrue for the estimated cost of product warranties and product performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in accrued and other liabilities. The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees:

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

For the three and nine months ended September 30, 2023, the net tax expense was $16 million and $84 million, respectively, and for the three and nine months ended October 1, 2022, net tax expense was $33 million and $104 million, respectively, and consists primarily of interim period tax expense based on year-to-date pretax income multiplied by our forecasted effective tax rate. In addition to items specific to the period, our income tax rate is impacted by the mix of earnings across the jurisdictions in which we operate, non-deductible expenses, and U.S. taxation of foreign earnings.

The reconciliation of the numerator and denominator used for the computation of basic and diluted earnings per share follows:

Diluted earnings per share is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the period. For the three and nine months ended September 30, 2023, average options and other rights to purchase approximately 1.0 million and 1.5 million shares of common stock, respectively, were outstanding and anti-dilutive, and therefore excluded from the computation of diluted earnings per share. In addition, an average of 1.6 million and 1.1 million shares of PSU awards are excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2023, respectively, as the contingency had not been satisfied. For the three and nine months ended October 1, 2022, average options and other rights to purchase approximately 0.8 million and 0.4 million shares of common stock, respectively, were outstanding and anti-dilutive, and therefore excluded from the computation of diluted income per share. In addition, an average of 1.5 million and 0.8 million shares of PSU awards are excluded from the computation of diluted earnings per share for the three and nine months ended October 1, 2022, respectively, as the contingency had not been satisfied.

On August 3, 2023, we announced that our Board of Directors authorized a share repurchase program for the repurchase of up to $150 million of our common stock over an unlimited time period (the “Share Repurchase Program”). Under the Share Repurchase Program, we may repurchase common stock from time-to-time through various methods, including in open market transactions, block trades, accelerated share repurchases, privately negotiated transactions, derivative transactions or otherwise, certain of which may be made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in compliance with applicable state and federal securities laws. The Share Repurchase Program can be modified or terminated by our Board of Directors at any time.

The timing, as well as the number and value of common stock repurchased under the Share Repurchase Program, will be determined at our discretion and will depend on a variety of factors, including our assessment of the intrinsic value and market price of our common stock, general market and economic conditions, available liquidity, compliance with our debt and other agreements, applicable legal requirements, the nature of other investment opportunities available to us and other considerations.

During the three months ended September 30, 2023, we repurchased 1.8 million shares of common stock in the open market at a total cost of $30 million. As of September 30, 2023, the Company had approximately $120 million of authorized repurchases remaining under the Share Repurchase Program. Common stock repurchases are recorded at cost and presented as a deduction from stockholders’ equity.

The following information should be read in conjunction with the Unaudited Consolidated Financial Statements included herein under “Item 1. Unaudited Consolidated Financial Statements” and the Audited Consolidated Financial Statements and the notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) included in our 2022 Annual Report on Form 10-K.

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

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

•our ability to identify consumer preferences and industry standards, develop and protect intellectual property related thereto, and successfully market new technologies, products, and services to consumers;

•our reliance on certain suppliers;

•the impact of disruptions in our supply chain from third-party suppliers and manufacturers, including our inability to obtain necessary product components, production equipment or replacement parts;

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

•the impact of earthquakes, hurricanes, fires, power outages, floods, pandemics, epidemics, natural disasters and other catastrophic events or other public health emergencies, such as COVID-19;

•the impact of potentially volatile global market and economic conditions and industry and end market cyclicality, including factors such as interest rates, inflation, availability of financing, consumer spending habits and preferences, housing market changes, and employment rates;

•failure to achieve and maintain a high level of product and service quality, including the impact of warranty claims, product recalls, and product liability actions that may be brought against us;

•our ability to retain or expand relationships with significant customers;

•the significant failure or inability to comply with specifications and manufacturing requirements or delays or other problems with existing or new products or inability to meet price requirements;

•inability to successfully execute transformation programs or to effectively manage our workforce;

•the failure to increase productivity through sustainable operational improvements;

•economic, political, regulatory, foreign exchange and other risks of international operations;

•the potential adverse impacts of enhanced tariff, import/export restrictions, or other trade barriers on global economic conditions, financial markets and our business;

•our dependence upon IT infrastructure and network operations having adequate cyber-security functionality;

•risks associated with the Reimbursement Agreement, the other agreements we entered into with Honeywell in connection with the Spin-Off, and our relationships with Honeywell, including our reliance on Honeywell for the Honeywell Home trademark and potential material environmental liabilities;

•regulations and societal actions to respond to global climate change;

•failure to comply with the broad range of current and future standards, laws and regulations in the jurisdictions in which we operate;

•the impact of potential material litigation matters, government proceedings, and other contingencies and uncertainties;

•our ability to borrow funds and access capital markets in light of the terms of our debt documents or otherwise;

•our ability to recruit and retain qualified personnel;

•currency exchange rate fluctuations; and

•other risks detailed under the caption “Risk Factors” in this Quarterly Report, in Part I, Item 1A in our 2022 Annual Report on Form 10-K, and other filings we make with the SEC.

There have been no material changes to the risk factors described in our 2022 Annual Report on Form 10-K. These risks could cause actual results to differ materially from those implied by forward-looking statements in this Quarterly Report. Even if our results of operations, financial condition and liquidity and the development of the industries in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.

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

We are a leading global manufacturer and distributor of technology-driven products and solutions that help homeowners and businesses stay connected and in control of their comfort, security and energy use. We are a leader in the home heating, ventilation and air conditioning controls markets, smoke and carbon monoxide detection home safety and fire suppression products, and security markets. We have a global footprint serving commercial and residential end-markets. We manage our business operations through two operating segments, Products and Solutions and ADI Global Distribution. The Products and Solutions operating segment, consistent with our industry, has a higher gross and operating profit profile in comparison to the ADI Global Distribution operating segment.

Our Products and Solutions operating segment offerings include temperature and humidity control, energy products and solutions, water and air solutions, smoke and carbon monoxide detection home safety products, security panels, sensors, peripherals, wire and cable, communications devices, video cameras, other home-related lifestyle convenience solutions, cloud infrastructure, installation and maintenance tools, and related software.

Our ADI Global Distribution business (“ADI”) is a leading wholesale distributor of low-voltage products including access control, fire detection, security, 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. Our ADI strategy is focused on growth in our omni-channel presence, expansion into adjacent markets, and continued enhancements to our value-add services to support our professional installers’ efficiency and profitability.

Our financial performance is influenced by macroeconomic factors such as repair and remodeling activity, residential and non-residential construction, employment rates, interest rates and bank lending standards, supply chain dynamics, and the overall macroeconomic environment. Our visibility toward future performance is more limited due to uncertainty surrounding the prevailing macroeconomic environment. While we believe supply chain and logistics will continue to normalize over the remainder of 2023, customer demand continues to moderate as inventories rebalance over the period and uncertainties remain including the potential for changes in inflation and interest rates, increased labor costs, reduced consumer spending due to softening labor markets, elevated mortgage rates, the resumption of student loan repayments, unfavorable foreign currency impacts from a stronger U.S. Dollar, and potential market and other disruption from the ongoing conflicts in Ukraine and Israel.

During the third quarter of 2023, we announced a restructuring program to align our cost structure with market conditions. For the three and nine months ended September 30, 2023, we recognized restructuring and impairment expenses of $38 million and $42 million, respectively. These expenses primarily related to workforce reductions.

On August 3, 2023, we announced that our Board of Directors authorized a share repurchase program for the repurchase of up to $150 million of our common stock over an unlimited time period. During the three and nine months ended September 30, 2023, we repurchased 1.8 million shares of common stock in the open market at a total cost of $30 million.

On August 9, 2023, we acquired 100% of the outstanding equity of Sfty SA, a developer of cloud-based services providing alerts to multifamily homes and property managers with smoke, carbon monoxide and water leak detection products. This acquisition will allow us to further expand our safety and security service offerings in the Products and Solutions business segment.

On September 19, 2023, we announced that we entered into a definitive agreement to sell our Genesis Wire & Cable business in a cash transaction to Southwire Company, LLC for $87.5 million, subject to customary adjustments. The transaction closed in October 2023.

•Net revenue of $1.55 billion, down 4.0% from $1.62 billion in the third quarter of 2022

•Income from operations of $109 million, or 7.0% of revenue, compared to $155 million, or 9.6% of revenue in the third quarter of 2022

•Fully diluted earnings per share of $0.14, compared to $0.42 per share in the third quarter of 2022

•Cash Flow From Operations was $60 million in the third quarter of 2023 as compared to $37 million in the third quarter of 2022

The following table summarizes our current fourth quarter 2023 and updated full year 2023 outlook. This outlook includes an estimated gain on the sale of Genesis of approximately $24 million. The transaction closed in October 2023 for estimated pre-tax cash proceeds of approximately $85 million.

The following table represents results of operations on a consolidated basis for the periods indicated: