10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2019

or

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

For the transition period from ______ to _____

Commission File Number 001-38635

Resideo Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware	82-5318796
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
901 E 6th Street Austin, Texas	78702
(Address of principal executive offices)	(Zip Code)

(763) 954-5204

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

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.

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

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

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

The number of shares outstanding of the Registrant’s common stock, par value $0.001 per share, as of November 1^st, 2019 was 122,818,158 shares.

TABLE OF CONTENTS

	Item		Page
Part I.		Item 1. Financial Statements	5
	1.	Financial Statements	5
		Consolidated and Combined Interim Statement of Operations (unaudited) – Three and Nine Months Ended September 30, 2019 and 2018	5
		Consolidated and Combined Interim Statement of Comprehensive (Loss) Income (unaudited) – Three and Nine Months Ended September 30, 2019 and 2018	6
		Consolidated Interim Balance Sheet (unaudited) – September 30, 2019 and December 31, 2018	7
		Consolidated and Combined Interim Statement of Cash Flows (unaudited) – Nine Months Ended September 30, 2019 and 2018	8
		Consolidated and Combined Interim Statement of Equity (unaudited) – Three and Nine Months Ended September 30, 2019 and 2018	9
		Notes to Consolidated and Combined Interim Financial Statements (unaudited)	10
	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
	3.	Quantitative and Qualitative Disclosures About Market Risk	40
	4.	Controls and Procedures	41
Part II.	1.	Legal Proceedings	42
	1A.	Risk Factors	42
	6.	Exhibits	45
		Signatures	46

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RESIDEO TECHNOLOGIES, INC.

Cautionary Statement about Forward-Looking Statements

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

• lack of operating history as an independent publicly traded company and unreliability of historical combined financial information as an indicator of our future results;

• the level of competition from other companies;

• ability to successfully develop new technologies and introduce new products;

• changes in prevailing global and regional economic conditions;

• natural disasters or inclement or hazardous weather conditions, including, but not limited to cold weather, flooding, tornadoes and the physical impacts of climate change;

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

• ability to operate as an independent publicly traded company without certain benefits available to us as a part of Honeywell;

• dependence upon investment in information technology;

• failure or inability to comply with relevant data privacy legislation or regulations, including the European Union’s General Data Protection Regulation;

• technical difficulties or failures;

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

• economic, political, regulatory, foreign exchange and other risks of international operations, including the impact of tariffs and the recently negotiated USMCA, which, when legislatively approved by each of the US, Mexico and Canada, will serve to replace NAFTA;

• changes in legislation or government regulations or policies;

• our growth strategy is dependent on expanding our distribution business;

• inability to obtain necessary production equipment or replacement parts;

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

• inability to identify and implement actions to achieve the expected results from our operational and financial review;

• the possibility that our goodwill or intangible assets become impaired;

• increases or decreases to the inventory levels maintained by our customers;

• difficulty collecting receivables;

• the failure to protect our intellectual property or allegations that we have infringed the intellectual property of others;

• our inability to maintain intellectual property agreements;

• the failure to increase productivity through sustainable operational improvements;

• inability to grow successfully through future acquisitions;

• inability to recruit and retain qualified personnel;

• the operational constraints and financial distress of third parties;

• changes in the price and availability of raw materials that we use to produce our products;

• labor disputes;

• our ability to borrow funds and access capital markets;

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RESIDEO TECHNOLOGIES, INC.

• the amount of our obligations pursuant to the Honeywell Reimbursement Agreement;

• potential material environmental liabilities;

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

• potential material litigation matters;

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

• U.S. federal income tax reform;

• the inception or suspension in the future of any dividend program; and

• certain factors discussed elsewhere in this Form 10-Q.

These and other factors are more fully discussed in the “Risk Factors” section in our 2018 Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 Annual Report on Form 10-K”) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in this Form 10-Q. There have been no material changes to the risk factors described in our 2018 Annual Report on Form 10-K, except as reflected in the “Risk Factors” section in this Form 10-Q. These risks could cause actual results to differ materially from those implied by forward-looking statements in this Form 10-Q. Even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

Any forward-looking statements made by us in this Form 10-Q speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.

PART I

The financial statements and related footnotes as of September 30, 2019 should be read in conjunction with the financial statements for the year ended December 31, 2018 contained in our 2018 Annual Report on Form 10-K.

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RESIDEO TECHNOLOGIES, INC.

Item 1. Financial Statements

CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS

(Dollars in millions except share and per share data)

(Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2019		2018			2019		2018
Net revenue	$	1,226	$	1,200		$	3,684	$	3,561
Cost of goods sold		937		853			2,786		2,525
Gross profit		289		347			898		1,036
Selling, general and administrative expenses		230		219			712		648
Operating profit		59		128			186		388
Other expense, net		35		144			54		320
Interest expense		16		2			51		2
Income (loss) before taxes		8		(18	)		81		66
Tax expense (benefit)		-		(329	)		36		(323	)
Net income	$	8	$	311		$	45	$	389
Weighted Average Number of Common Shares Outstanding (in thousands)
Basic		122,770		122,967			122,681		122,967
Diluted		123,244		122,967			123,404		122,967
Earnings Per Share
Basic	$	0.07	$	2.53		$	0.37	$	3.16
Diluted	$	0.06	$	2.53		$	0.36	$	3.16

The Notes to unaudited Consolidated and Combined Interim Financial Statements are an integral part of this statement.

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RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED AND COMBINED

INTERIM STATEMENT OF COMPREHENSIVE (LOSS) INCOME

(Dollars in millions)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net income	$	8		$	311		$	45		$	389
Other comprehensive (loss), net of tax
Foreign exchange translation adjustment		(35	)		(5	)		(33	)		(23	)
Changes in fair value of effective cash flow    hedges		-			-			-			(1	)
Total other comprehensive (loss), net of    tax		(35	)		(5	)		(33	)		(24	)
Comprehensive (loss) income	$	(27	)	$	306		$	12		$	365

The Notes to unaudited Consolidated and Combined Interim Financial Statements are an integral part of this statement.

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RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED INTERIM BALANCE SHEET

(Dollars in millions, shares in thousands)

(Unaudited)

	September 30,			December 31,
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	132		$	265
Accounts receivable		845			821
Inventories		729			628
Other current assets		134			95
Total current assets		1,840			1,809
Property, plant and equipment – net		306			300
Goodwill		2,632			2,634
Other intangible assets – net		125			133
Other assets		230			96
Total assets	$	5,133		$	4,972
LIABILITIES
Current liabilities:
Accounts payable	$	932		$	964
Short-term portion of debt		88			22
Accrued liabilities		531			503
Total current liabilities		1,551			1,489
Long-term debt		1,165			1,179
Obligations payable to Honeywell		580			629
Other liabilities		264			142
COMMITMENTS AND CONTINGENCIES (Note 15)
EQUITY
Common stock, $0.001 par value, 700,000 shares authorized,    123,382 and 122,967 shares issued and 122,786    and 122,499 shares outstanding as of September 30, 2019    and December 31, 2018, respectively		-			-
Additional paid-in capital		1,751			1,720
Treasury stock, at cost		(3	)		-
Retained earnings		47			2
Accumulated other comprehensive loss		(222	)		(189	)
Total equity		1,573			1,533
Total liabilities and equity	$	5,133		$	4,972

The Notes to unaudited Consolidated and Combined Interim Financial Statements are an integral part of this statement.

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RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED AND COMBINED INTERIM STATEMENT OF CASH FLOWS

(Dollars in millions)

(Unaudited)

	Nine Months Ended
	September 30,
	2019			2018
Cash flows (used for) provided by operating activities:
Net income	$	45		$	389
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization		55			49
Repositioning charges, net of payments		12			(4	)
Stock compensation expense		22			15
Deferred income taxes		(3	)		(275	)
Other noncash expense		13			17
Changes in assets and liabilities:
Accounts, notes and other receivables		(27	)		(11	)
Inventories		(109	)		(142	)
Other current assets		(13	)		(4	)
Other assets		(6	)		(6	)
Accounts payable		(23	)		151
Accrued liabilities		(6	)		(15	)
Obligations payable to Honeywell		(49	)		-
Other liabilities		19			211
Net cash (used for) provided by operating activities		(70	)		375
Cash flows used for investing activities:
Expenditures for property, plant, equipment and software		(66	)		(63	)
Cash paid for acquisitions, net of cash acquired		(17	)		-
Proceeds received related to amounts due from related parties		-			7
Net cash used for investing activities		(83	)		(56	)
Cash flows provided by (used for) financing activities:
Net proceeds from revolving credit facility		60			-
Repayment of long-term debt		(11	)		-
Non-operating obligations paid to Honeywell, net		(24	)		-
Payments related to amounts due to related parties, net		-			(1	)
Tax payments related to stock vestings		(3	)		-
Net decrease in invested equity		-			(300	)
Cashflow provided by cash pooling		-			115
Net cash provided by (used for) financing activities		22			(186	)
Effect of foreign exchange rate changes on cash and cash equivalents		(2	)		(5	)
Net (decrease) increase in cash and cash equivalents		(133	)		128
Cash and cash equivalents at beginning of period		265			56
Cash and cash equivalents at end of period	$	132		$	184

The Notes to unaudited Consolidated and Combined Interim Financial Statements are an integral part of this statement.

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RESIDEO TECHNOLOGIES, INC.

CONSOLIDATED AND COMBINED INTERIM STATEMENT OF EQUITY

(Dollars in millions, shares in thousands)

(Unaudited)

	Common Shares			Treasury Shares		Common Stock		Treasury Stock			Additional Paid- In Capital		Retained Earnings			Invested Equity			Accumulated Other Comprehensive Loss			Total Equity
Balance at December 31, 2017		-			-	$	-	$	-		$	-	$	-		$	2,703		$	(100	)	$	2,603
Net income		-			-		-		-			-		-			45			-			45
Other comprehensive income, net of tax		-			-		-		-			-		-			-			30			30
Change in invested equity		-			-		-		-			-		-			(89	)		-			(89	)
Balance at March 31, 2018		-			-	$	-	$	-		$	-	$	-		$	2,659		$	(70	)	$	2,589
Net income		-			-		-		-			-		-			33			-			33
Other comprehensive loss, net of tax		-			-		-		-			-		-			-			(49	)		(49	)
Change in invested equity		-			-		-		-			-		-			(93	)		-			(93	)
Balance at June 30, 2018		-			-	$	-	$	-		$	-	$	-		$	2,599		$	(119	)	$	2,480
Net income	-			-		-		-			-		-				311		-				311
Other comprehensive loss, net of tax	-			-		-		-			-		-			-			$	(5	)		(5	)
Change in invested equity	-			-		-		-			-		-				(101	)	-				(101	)
Balance at September 30, 2018		-			-	$	-	$	-		$	-	$	-		$	2,809		$	(124	)	$	2,685
Balance at December 31, 2018		122,499			468	$	-	$	-		$	1,720	$	2		$	-		$	(189	)	$	1,533
Net income		-			-		-		-			-		48		-				-			48
Other comprehensive income, net of tax		-			-		-		-			-		-		-				6			6
Shares issued for employee stock plans		271			-		-		-			-		-			-			-			-
Stock-based compensation	-			-			-		-			7		-			-		-				7
Shares withheld for employees' taxes		(84	)		84		-		(2	)		-		-			-			-			(2	)
Balance at March 31, 2019		122,686			552	$	-	$	(2	)	$	1,727	$	50		$	-		$	(183	)	$	1,592
Net loss		-			-		-		-			-		(11	)		-			-			(11	)
Other comprehensive loss, net of tax		-			-		-		-			-		-			-			(4	)		(4	)
Shares issued for employee stock plans		30			-		-		-			-		-			-			-			-
Stock-based compensation		-			-		-		-			7		-			-			-			7
Shares withheld for employees' taxes		(6	)		6		-		-			-		-			-			-			-
Adjustments due to the Spin-Off		-			-		-		-			9		-			-		-				9
Balance at June 30, 2019		122,710			558	$	-	$	(2	)	$	1,743	$	39		$	-		$	(187	)	$	1,593
Net income		-			-		-		-			-		8			-			-			8
Other comprehensive loss, net of tax		-			-		-		-			-		-			-			(35	)		(35	)
Shares issued for employee stock plans		114			-		-		-			-		-			-			-			-
Stock-based compensation		-			-		-		-			8		-			-			-			8
Shares withheld for employees' taxes		(38	)		38		-		(1	)		-		-			-			-			(1	)
Balance at September 30, 2019		122,786			596	$	-	$	(3	)	$	1,751	$	47		$	-		$	(222	)	$	1,573

The Notes to unaudited Consolidated and Combined Interim Financial Statements are an integral part ofthis statement.

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RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Note 1. Organization, Operations and Basis of Presentation

Business Description

Resideo Technologies, Inc. (“Resideo” or “the Company”), is a global provider of products, software, solutions and technologies that help homeowners stay connected and in control of their comfort, security and energy use. The Company is a leader in the home heating, ventilation and air conditioning controls and security markets, and a leading global distributor of low-voltage electronic and security products.

Separation from Honeywell

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”). On October 3, 2018, Exhibit 99.1 to Amendment No. 2 to the Company’s Registration Statement on Form 10 as filed with the Securities and Exchange Commission (“SEC”) on October 2, 2018 was declared effective by the SEC. On October 29, 2018, Honeywell’s shareholders of record as of October 16, 2018 (“Record Date”) received one share of the Company’s common stock, par value $0.001 per share, for every six shares of Honeywell’s common stock, par value $1.00 per share, held as of the Record Date, and cash for any fractional shares of the Company’s common stock. The Company began trading “regular way” under the ticker symbol “REZI” on the New York Stock Exchange on October 29, 2018.

In connection with the separation, Resideo and Honeywell entered into a Honeywell Reimbursement Agreement (as defined in Note 15. Commitments and Contingencies), a Separation and Distribution Agreement, an Employee Matters Agreement, a Tax Matters Agreement, a Transition Services Agreement, a Trademark License Agreement and a Patent Cross-License Agreement. The agreements govern the relationship between Resideo and Honeywell following the separation and provide for the allocation of various assets, liabilities, rights and obligations. These agreements also include arrangements for transition services to be provided by Honeywell to Resideo and by Resideo to Honeywell.

Basis of Presentation

Prior to the Spin-Off on October 29, 2018, the Company’s historical financial statements were prepared on a stand-alone combined basis and were derived from the consolidated financial statements and accounting records of Honeywell. Accordingly, for periods prior to October 29, 2018, these financial statements are presented on a combined basis and for the periods subsequent to October 29, 2018 are presented on a consolidated basis (collectively, the historical financial statements for all periods presented are referred to as “Consolidated and Combined Interim Financial Statements”). The Consolidated and Combined Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Consolidated and Combined Interim Financial Statements are unaudited; however, in the opinion of management, they contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods.

All intracompany transactions have been eliminated for all periods presented. As described in “Note 5. Related Party Transactions with Honeywell” of Notes to unaudited Consolidated and Combined Interim Financial Statements of this Form 10-Q, all significant transactions between the Company and Honeywell occurring prior to the Spin-Off have been included in the unaudited Combined Interim Financial Statements for the period ended September 30, 2018.

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RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Prior to the Spin-Off, transactions between the Company and Honeywell were reflected in the Combined Balance Sheet as Due from related parties, current or Due to related parties, current. In the unaudited Combined Interim Statement of Cash Flows, the cash flows related to related party notes receivables presented in the Combined Balance Sheet in Due from related parties, current are reflected as investing activities since these balances represent amounts loaned to Honeywell. The cash flows related to related party notes payables presented in the Combined Balance Sheet in Due to related parties, current are reflected as financing activities since these balances represent amounts financed by Honeywell.

While the Company was owned by Honeywell, a centralized approach to cash management and financing was used. Prior to the consummation of the Spin-Off, the majority of the Company’s cash was transferred to Honeywell daily and Honeywell funded the Company’s operating and investing activities as needed. Cash transfers to and from Honeywell’s cash management accounts are reflected in the Combined Balance Sheet as Due to and Due from related parties, current and in the unaudited Combined Interim Statement of Cash Flows as net financing activities.

The unaudited Combined Interim Financial Statements prior to the Spin-Off include certain assets and liabilities that have historically been held at the Honeywell corporate level but were specifically identifiable or otherwise attributable to the Company. The cash and cash equivalents held by Honeywell at the corporate level were not specifically identifiable to the Company and therefore were not attributed for any of the periods presented. Honeywell third-party debt and the related interest expense were not allocated for any of the periods presented as Honeywell’s borrowings were not directly attributable to the Company. In periods subsequent to the Spin-Off, we may have made and may continue to make adjustments to balances transferred at the Spin-Off, including adjustments to the classification of assets or liabilities transferred. Any such adjustments are recorded directly to equity in Adjustments due to the Spin-Off and are considered immaterial.

Prior to the Spin-Off, Honeywell provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Company. The cost of these services has been allocated to the Company on the basis of the proportion of net revenue. The Company and Honeywell consider these allocations to be a reasonable reflection of the benefits received by the Company. However, the financial information presented in these unaudited Consolidated and Combined Interim Financial Statements may not reflect the consolidated and combined financial position, operating results and cash flows of the Company had the Company been a separate stand-alone entity during the periods presented. Actual costs that would have been incurred if the Company had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Both Resideo and Honeywell consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefits received by the Company during the periods presented. After the Spin-Off, a number of the above services have continued under a Transition Services Agreement with Honeywell, which the Company expenses as incurred based on the contractual pricing terms.

The Company reports its quarterly financial information using a calendar convention; the first, second and third quarters are consistently reported as ending on March 31, June 30 and September 30. It is the Company’s practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires its businesses to close their books on the last Saturday of the month in order to minimize the potentially disruptive effects of quarterly closing on business processes. The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year. In the event that differences in actual closing dates are material to year-over-year comparisons of quarterly or year-to-date results, the Company will provide appropriate disclosures. Actual closing dates for the three and nine months ended September 30, 2019 and 2018 were September 28, 2019 and September 29, 2018, respectively.

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RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Note 2. Summary of Significant Accounting Policies

The Company’s accounting policies are set forth in “Note 2. Summary of Significant Accounting Policies” of the Company’s Notes to Consolidated and Combined Financial Statements included in the 2018 Annual Report on Form 10-K. Included herein are certain updates to those policies.

Leases—Effective January 1, 2019, arrangements containing leases are evaluated as an operating or finance lease at lease inception. For operating leases, the Company recognizes an operating right-of-use asset and operating lease liability at lease commencement based on the present value of lease payments over the lease term.

Since an implicit rate of return is not readily determinable for the Company's leases, an incremental borrowing rate is used in determining the present value of lease payments, and is calculated based on information available at the lease commencement date.  The incremental borrowing rate is determined using a portfolio approach based on the rate of interest the Company would have to pay to borrow funds on a collateralized basis over a similar term. The Company references a market yield curve consistent with the Company's credit rating which is risk-adjusted to approximate a collateralized rate in the currency of the lease. These rates are updated on a quarterly basis for measurement of new lease obligations.Most leases include renewal options; however, generally it is not reasonably certain that these options will be exercised at lease commencement. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the Company’s balance sheet. The Company does not separate lease and non-lease components for its real estate and automobile leases.

Recent Accounting Pronouncements—The Company considers the applicability and impact of all recent accounting standardsupdates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed anddetermined to be either not applicable or are expected to have an immaterial impact on the consolidated and combined financial position or results ofoperations.

The Company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. As permitted by the new guidance, the Company elected the package of practical expedients, which among other things, allowed historical lease classification to be carried forward.

Upon adoption of ASU No. 2016-02, the Company recognized an aggregate lease liability of $115 million, calculated based on the present value of the remaining minimum lease payments for qualifying leases as of January 1, 2019, with a corresponding right-of-use asset of $112 million. The cumulative-effect adjustment recognized to opening retained earnings was not material. The adoption of the new guidance did not impact the Company’s unaudited consolidated interim statement of operations or cash flows.

In February 2018, the FASB issued guidance that allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from the U.S. Tax Cuts and Jobs Act (“U.S. Tax Reform”) to retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company adopted the standard on January 1, 2019 and has not reclassified the income tax effects of U.S. Tax Reform from accumulated other comprehensive income to retained earnings. The Company has adopted the aggregate portfolio accounting policy for recognizing the disproportionate income tax effects in accumulated other comprehensive income.

On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides guidance designed to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. From November 2018 to May 2019, amendments to Topic 326 were issued to clarify numerous accounting topics. When determining such expected credit losses, the guidance requires companies to apply a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and

12

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

supportable information to inform credit loss estimates. The amendment is effective on a modified retrospective basis for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for fiscal years and interim periods beginning after December 15, 2018. The Company does not expectadoption of this pronouncement tohave a material financial statement impact.

In August 2018, the FASB issued guidance that amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. The Company does not expect this new standard to have a significant impact to its disclosures.

Note 3. Earnings Per Share

On October 29, 2018, the date of consummation of the Spin-Off, 122,498,794 shares of the Company’s Common Stock, par value $0.001 per share, were distributed to Honeywell shareholders of record as of October 16, 2018. This share amount is being utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Spin-Off as no common stock was outstanding prior to the date of the Spin-Off. For the 2018 year to date calculation, these shares are treated as issued and outstanding from January 1, 2018 for purposes of calculating historical basic earnings per share. For September 30, 2019 and September 30, 2018, this calculation excludes 596,300 and 467,764 of treasury shares, respectively.

The details of the earnings per share calculations for the three and nine months ended September 30, 2019 and 2018 are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Basic:	2019		2018		2019		2018
Net income	$	8	$	311	$	45	$	389
Weighted average common shares outstanding (in thousands)		122,770		122,967		122,681		122,967
Earnings per share - Basic	$	0.07	$	2.53	$	0.37	$	3.16

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Diluted:	2019		2018		2019		2018
Net income	$	8	$	311	$	45	$	389
Weighted average common shares outstanding - Basic (in thousands)		122,770		122,967		122,681		122,967
Dilutive effect of common stock equivalents		474		-		723		-
Weighted average common shares outstanding - Diluted (in thousands)		123,244		122,967		123,404		122,967
Earnings per share - Diluted	$	0.06	$	2.53	$	0.36	$	3.16

13

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Dilutedearnings per share is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the three and nine months ended September 30, 2019.In periods where the Company has a net loss, no dilutive common shares are included in the calculation for diluted shares as they are considered anti-dilutive.For thethree and nine months ended September 30, 2019, average options and other rights to purchase approximately 3.8 million and 1.5 millionshares of common stock were outstanding, respectively, all of which were anti-dilutive during the three and nine months ended September 30, 2019,and therefore excluded from the computation of diluted earnings per common share. Additionally, an average of approximately0.3 million shares of performance-based unit awards are excluded from the computation of diluted earnings per common share for the three and nine months ended September 30, 2019as the contingency has not been satisfied atSeptember 30, 2019.

Note 4. Acquisitions

On March 28, 2019, the Company acquired all of the capital stock of Buoy Labs, for $6 million, which has been integrated into our Products & Solutions segment. Buoy Labs provides innovative Wi-Fi enabled solutions that track the amount of water used in a home, integrating smart software and hardware that can help consumers identify potential leaks and allow consumers to act to prevent them through its subscription-based app services. In connection with the acquisition, the Company recognized preliminary goodwill and intangible assets of $6 million. The acquisition agreement includes deferred payments for certain individuals that are contingent upon employment as well as financial performance. The Company determined that these deferred payments are accounted for as compensation expense over the requisite service period. The Company is still assessing the final allocation of the purchase price to the assets and liabilities of the business.

On May 21, 2019, the Company acquired certain assets relating to innovative energy efficiency from Whisker Labs, for $5 million, which has been integrated into our Products & Solutions segment. The acquired technology creates a thermodynamic model of a home to accurately predict home heating and air conditioning run time and energy use to enable a homeowner to use less energy while maintaining comfort. In connection with the acquisition, the Company recognized preliminary goodwill and intangible assets of $5 million. The Company is still assessing the final allocation of the purchase price to the assets and liabilities of the business.

On June 27, 2019, the Company acquired all of the membership interests of LifeWhere for $6 million, which has been integrated into our Products & Solutions segment. LifeWhere uses machine learning and analytics to predict potential failure on critical home appliances, such as water heaters, furnaces and air conditioners. This service provides the detailed analytics required for professional contractors to dispatch technicians with the right skills to quickly repair the appliance before it causes a catastrophic failure. In connection with the acquisition, the Company recognized preliminary goodwill and intangible assets of $6 million. The Company is still assessing the final allocation of the purchase price to the assets and liabilities of the business.

These acquisitions have an immaterial financial statement impact on both an individual basis and when considered in the aggregate.

Note 5. Related Party Transactions with Honeywell

Prior to the Spin-Off, the unaudited Combined Interim Financial Statements were derived from the unaudited Consolidated Interim Financial Statements and accounting records of Honeywell. Prior to the Spin-Off, Honeywellwas a related party that provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Company. The costs of these services were allocated to the Company on the basis of the proportion of net revenue. The Company and Honeywell consider the allocations to be a reasonable reflection of the benefits received by the Company.

14

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

During thethree and nine months ended September 30, 2018,the Company was allocated $66 million and $203 million, respectively,of general corporate expenses incurred by Honeywell and such amounts are included within Selling, general and administrative expenses in the unaudited Combined Interim Statement of Operations for the nine months ended September 30, 2018.  As certain expenses reflected in the unaudited Combined Interim Financial Statements include allocations of corporate expenses from Honeywell, these statements could differ from those that would have been prepared had the Company operated on a stand-alone basis.

All significant intercompany transactions between the Company and Honeywell have been included in these unaudited Combined Interim Financial Statements. Sales to Honeywell during the three and nine months ended September 30, 2018 were $8 million and $23 million, respectively.  Costs of goods sold to Honeywell during the three and nine months ended September 30, 2018 were $5 million and $18 million, respectively. Purchases from Honeywell during the three and nine months ended September 30, 2018 were $32 million and $149 million, respectively. The total net effect of the settlement of these intercompany transactions is reflected in the unaudited Combined Interim Statement of Cash Flows as a financing activity.

While the Company was owned by Honeywell, a centralized approach to cash management and financing of operations was used. Prior to consummation of the Spin-Off, the Company’s cash was transferred to Honeywell daily and Honeywell funded the Company’s operating and investing activities as needed.

Subsequent to the Spin-Off on October 29, 2018, transactions with Honeywell were not considered related party transactions. Accordingly, no related party transactions with Honeywell were recorded for the three and nine months ended September 30, 2019.

Note 6. Repositioning and Other Charges

During the second quarter of 2019, management began a repositioning plan to reduce operating costs and better align the Company’s workforce with the needs of the business going forward. Repositioning and related expenses were $9 million and $34 million for the three and nine months ended September 30, 2019, respectively, and primarily related to severance.

A summary of repositioning charges follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019			2018
Severance	$	9	$	-	$	35		$	4
Asset impairments		-		-		-			1
Reserve adjustments		-		-		(1	)		-
Total net repositioning charges	$	9	$	-	$	34		$	5

The following table summarizes the pretax distribution of total net repositioning charges by unaudited Consolidated and Combined Statement of Operations classification:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of goods sold	$	5	$	-	$	18	$	4
Selling, general and administrative expenses		4		-		16		1
	$	9	$	-	$	34	$	5

15

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

The following table summarizes the pretax impact of total net repositioning charges by segment:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Products & Solutions	$	9	$	-	$	28	$	5
ADI Global Distribution		-		-		6		-
	$	9	$	-	$	34	$	5

The following table summarizes the status of total repositioning reserves related to severance cost included in Accrued liabilities in the unaudited Consolidated Balance Sheet:

	Nine Months Ended
	September 30,
	2019
Beginning of period	$	13
Charges		35
Usage – cash		(22	)
Adjustments		(1	)
End of period	$	25

Note 7. Revenue Recognition

Disaggregated Revenue

Revenues by channel are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018 (3)		2019		2018 (3)
U.S. and Canada	$	590	$	555	$	1,705	$	1,614
EMEA (1)		109		107		336		338
India		15		12		43		42
ADI Global Distribution		714		674		2,084		1,994
Comfort		256		271		799		787
Security		128		119		397		358
RTS		128		136		404		422
Products & Solutions (2)		512		526		1,600		1,567
Net revenue	$	1,226	$	1,200	$	3,684	$	3,561

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

(2) Products & Solutions sales channel naming convention changed from what was disclosed in our quarterly report for the quarter ended September 30, 2018. Comfort & Care was broken out into Comfort and Residential Thermal Solutions (“RTS”).

(3) The unaudited disaggregated revenue disclosure for the three and nine month periods ended September 30, 2018 contained misallocated revenue between the ADI Global Distribution geographies U.S. and Canada and India.  Correcting this allocation increased U.S. and Canada revenue and reduced India revenue for the three and nine month periods ended September 30, 2018 by $30 million and $35 million, respectively. There is no other impact

16

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

to the unaudited Consolidated and Combined Interim Financial Statements for the three and nine month periods ended September 30, 2018.

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 2% of the Company’s revenue is satisfied over time. As of September 30, 2019, contract assets and liabilities are not material.

Note 8. Income Taxes

The Company recorded a tax benefit of $329 million for the three months ended September 30, 2018 as compared to nil for the three months ended September 30, 2019.  The decrease in the tax benefit is primarily the result of tax benefits generated in 2018 related to the internal restructuring of Resideo’s business in advance of its anticipated Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings, and adjustments to the provisional tax amount related to U.S. Tax Reform.

The effective tax rate for the three months ended September 30, 2019 was lower than the U.S. federal statutory rate of 21% primarily due to a decrease in the forecast of full-year non-deductible expenses and a decrease in the forecast of full-year U.S. taxation of foreign earnings.

The effective tax rate for the nine months ended September 30, 2019 was higher than the U.S. federal statutory rate of 21% primarily attributable to non-deductible expenses and U.S. taxation of foreign earnings.

The effective tax rate for the three months ended September 30, 2018 was higher than the U.S. federal statutory rate of 21% primarily due to tax benefits related to the internal restructuring of Resideo’s business in advance of its anticipated Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings, and adjustments to the provisional tax amount related to U.S. Tax Reform.  The combined effect of the tax benefits recorded in the quarter ended September 30, 2018 resulted in a tax benefit (negative tax expense).  As a result of the tax benefits and in conjunction with a net loss in the quarter ended September 30, 2018, the effective tax rate for the quarter is a positive percentage and significantly more than the US statutory rate. 

The effective tax rate for the nine months ended September 30, 2018 was lower than the U.S. federal statutory rate of 21% primarily from tax benefits related to the internal restructuring of Resideo’s business in advance of its anticipated Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings and adjustments to the provisional tax amount related to U.S. Tax Reform.

Note 9. Inventories

	September 30,		December 31,
	2019		2018
Raw materials	$	143	$	167
Work in process		19		34
Finished products		567		427
	$	729	$	628

17

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Note 10. Accrued Liabilities

	September 30,		December 31,
	2019		2018
Obligations payable to Honeywell	$	140	$	140
Taxes payable		41		76
Compensation, benefit and other employee related		73		73
Other		277		214
	$	531	$	503

Refer to “Note 15. Commitments and Contingencies” of this Form 10-Q for further details on Obligations payable to Honeywell.

Note 11. Long-term Debt and Credit Agreement

The Company’s debt at September 30, 2019 and December 31, 2018 consisted of the following:

	September 30,			December 31,
	2019			2018
6.125% notes due 2026	$	400		$	400
Five-year variable rate term loan A due 2023		341			350
Seven-year variable rate term loan B due 2025		473			475
Revolving Credit Facility		60			-
Unamortized debt issuance costs		(21	)		(24	)
Total outstanding indebtedness		1,253			1,201
Less: amounts due within one year		88			22
Total long-term debt due after one year	$	1,165		$	1,179

In October of 2018, the Company issued $400 million in principal amount of its 6.125% senior unsecured notes (the “Senior Notes”), entered into term loan facilities in the form of a seven-year LIBOR plus 2.00% senior secured first-lien term B loan facility in an aggregate principal amount of $475 million and a five-year LIBOR plus 2.00% senior secured first-lien term A loan facility in an aggregate principal amount of $350 million (the “Term Loans”) and established a five-year senior secured first-lien revolving credit facility in an aggregate principal amount of $350 million (the "Revolving Credit Facility"). The interest rate on the Revolving Credit Facility borrowings are based on, at the option of the Company, either (i) the rate of interest last quoted by The Wall Street Journal as the “prime rate” in the United States, (ii) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (iii) the one month adjusted LIBOR rate, plus 1.00% per annum.

As of September 30, 2019, there were $60 million of borrowings and no of letters of credit issued under the $350 million Revolving Credit Facility. The Company assessed the amount recorded under the Term Loans, the Senior Notes, and the Revolving Credit Facility and determined the Term Loans and the Revolving Credit Facility approximated fair value, and the Senior Notes’ fair value is approximately $422 million. The fair values of the debt are based on the quoted inactive prices and are therefore classified as Level 2 within the valuation hierarchy.

At September 30, 2019, the interest rate for the Term Loans was 4.11% and the weighted average interest rate for the Revolving Credit Facility was 4.09%.   The interest expense for the Revolving Credit Facility, Term Loans and Senior Notes during the three and nine months ended September 30, 2019 was $16 million and $51 million, respectively, which includes the amortization of debt issuance cost and debt discounts.

18

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

For more information, please refer to “Note 15. Long-term Debt” in our 2018 Annual Report on Form 10-K.

Note 12. Leases

As discussed in Note 2, the Company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019. 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, and certain automobile lease agreements include rental payments which fluctuate based on mileage. Generally, the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company’s operating lease costs for the three and nine months ended September 30, 2019 consisted of the following:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019		2019
Operating Lease Costs
Selling, general & administrative	$	10	$	27
Cost of goods sold		4		12
Total operating lease costs	$	14	$	39

Total operating lease costs include variable lease costs of $3 million and $8 million for the three and nine months ended September 30, 2019.  Total operating lease costs also include offsetting sublease income which is immaterial for the three and nine months ended September 30, 2019.

The Company recognized the following related to its operating leases:

	Financial Statement Line Item	At September 30, 2019
Operating right-of-use assets	Other assets	$	130
Operating lease liabilities - current	Accrued liabilities	$	29
Operating lease liabilities - noncurrent	Other liabilities	$	106

19

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Maturities of the Company’s operating lease liabilities were as follows:

	At September 30, 2019
2019	$	9
2020		35
2021		32
2022		27
2023		20
Thereafter		36
Total lease payments		159
Less: imputed interest		24
Present value of operating lease liabilities	$	135
Weighted-average remaining lease term (years)		5.64
Weighted-average incremental borrowing rate		6.00	%

Future minimum lease payments under operating leases having initial or remaining non-cancellable lease terms in excess of one year as of December 31, 2018 were as follows:

	At December 31, 2018
2019	$	39
2020		33
2021		28
2022		22
2023		15
Thereafter		17
	$	154

Supplemental cash flow information related to the Company’s operating leases was as follows:

	Nine Months Ended
	September 30, 2019
Operating cash outflows	$	28
Operating right-of-use assets obtained in exchange for operating lease liabilities	$	47

As of September 30, 2019, the Company has additional operating leases that have not yet commenced. Obligations under these leases are not material.  Additionally, as a lessor, the Company leases all or a portion of certain owned properties. Rental income for the three and nine months ended September 30, 2019 was not material.

20

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Note 13. Accumulated Other Comprehensive Loss

The changes in Accumulated other comprehensive loss are provided in the tables below.

Changes in Accumulated Other Comprehensive Loss by Component

	Foreign Exchange Translation Adjustment			Pension Adjustments			Changes in Fair Value of Effective Cash Flow Hedges			Accumulated Other Comprehensive Loss
Balance at December 31, 2017	$	(100	)	$	-		$	-		$	(100	)
Other comprehensive income before    reclassifications		31			-			-			31
Amounts reclassified from accumulated other    comprehensive income		-			-			(1	)		(1	)
Net current period other comprehensive income		31			-			(1	)		30
Balance at March 31, 2018	$	(69	)	$	-		$	(1	)	$	(70	)
Other comprehensive loss before reclassifications		(49	)		-			-			(49	)
Balance at June 30, 2018	$	(118	)	$	-		$	(1	)	$	(119	)
Other comprehensive loss before reclassifications		(5	)	-				(2	)		(7	)
Amounts reclassified from accumulated other    comprehensive income	-			-			$	2		$	2
Balance at September 30, 2018	$	(123	)	$	-		$	(1	)	$	(124	)
Balance at December 31, 2018	$	(177	)	$	(12	)	$	-		$	(189	)
Other comprehensive income before    reclassifications		6			-			-			6
Balance at March 31, 2019	$	(171	)	$	(12	)	$	-		$	(183	)
Other comprehensive loss before    reclassifications		(4	)		-			-			(4	)
Balance at June 30, 2019	$	(175	)	$	(12	)	$	-		$	(187	)
Other comprehensive loss before reclassifications		(35	)		-			-			(35	)
Balance at September 30, 2019	$	(210	)	$	(12	)	$	-		$	(222	)

Note 14. Stock-Based Compensation Plans

Restricted Stock Units (“RSUs”)

During the nine months ended September 30, 2019, as part of the Company’s annual long-term compensation under the 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates (the “Stock Incentive Plan”), it granted 319,771 performance-based RSUs and 1,255,440 time-based RSUs to eligible employees. The weighted average grant date fair value per share for these shares was $22.06.

Stock Options

During the nine months ended September 30, 2019, as part of the Company’s annual long-term compensation under the Stock Incentive Plan, 1,155,566 stock options were granted to eligible employees at a weighted average exercise price per share of $24.37 and weighted average grant date fair value per share of $6.71.

21

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Note 15. 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 are presented within Cost of goods sold for operating sites, which are the Company’s owned sites. For the three and nine months ended September 30, 2019 and September 30, 2018, environmental expenses related to these operating sites were not material. On October 29, 2018, upon consummation of the Spin-Off, certain environmental liabilities became subject to the Honeywell Reimbursement Agreement (defined below) and were reclassified to Obligations payable to Honeywell.  The expenses related to these sites were recorded within Other expense, net in the unaudited Consolidated and Combined Interim Statement of Operations.  For the three and nine months ended September 30, 2018, environmental expense within Other expense, net was$146 million and $322 million, respectively.  Liabilities for environmental cost were $21 million and $735 million as of September 30, 2019 and September 30, 2018, respectively. For additional information, see Honeywell Reimbursement Agreement below.

The Company does not currently possess sufficient information to reasonably estimate the amounts of environmental liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can be determined although they could be material to our unaudited consolidated and combined results of operations and operating cash flows in the periods recognized or paid.

Honeywell Reimbursement Agreement

On October 29, 2018, in connection with the Spin-Off, the Company entered into an indemnification and reimbursement agreement with Honeywell (the “Honeywell Reimbursement Agreement”) 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 will be subject to a cap of $140 million (exclusive of any late payment fees up to 5% per annum). The scope of the Company’s current environmental remediation obligations subject to the Honeywell Reimbursement Agreement relates to approximately 230 sites or groups of sites that are undergoing environmental remediation under U.S. federal or state law and agency oversight for contamination associated with Honeywell legacy business operations. The ongoing environmental remediation is designed to address contaminants at upland and sediment sites, which include, among others, metals, organic compounds and polychlorinated biphenyls, through a variety of methods, which include, among others, excavation, capping, in-situ stabilization, groundwater treatment and dredging. In addition, the Company obligations subject to the Honeywell Reimbursement Agreement will include certain liabilities with respect to (i) hazardous exposure or toxic tort claims associated with the specified sites that arise after the Spin-Off, if any, (ii) currently unidentified releases of hazardous substances at or associated with the specified sites, (iii) other environmental claims associated with the specified sites and (iv) consequential damages.

Payments in respect of the liabilities arising in a given year will be made quarterly throughout such year on the basis of an estimate of the liabilities and recoveries provided by Honeywell. Following the end of any such year, Honeywell will provide the Company with a calculation of the amount of payments and the recoveries actually received.

22

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Payment amounts under the Honeywell Reimbursement Agreement will be deferred to the extent that a specified event of default has occurred and is continuing under certain indebtedness, including under the Company’s principal credit agreement, or the payment thereof causes the Company to not be compliant with certain financial covenants in certain indebtedness, including the Company’s principal credit agreement on a pro forma basis, including the maximum total leverage ratio (ratio of consolidated debt to consolidated EBITDA, which excludes any amounts owed to Honeywell under the Honeywell Reimbursement Agreement), and the minimum interest coverage ratio. A 5% late payment fee will accrue on all amounts that are not otherwise entitled to be deferred under the terms of the Honeywell Reimbursement Agreement, without prejudice to any other rights that Honeywell may have for late payments.

The obligations under the Honeywell Reimbursement Agreement will continue until the earlier of: (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million.

The following table summarizes information concerning our Honeywell Reimbursement Agreement liabilities:

	Nine Months Ended
	September 30,
	2019
Beginning of period	$	616
Accruals for indemnification liabilities deemed probable and reasonably estimable		138
Reduction (1)		(81	)
Indemnification payment		(105	)
End of period	$	568

(1) Reduction in indemnification liabilities relates to a provision in the Honeywell Reimbursement Agreement that reduces the obligation due to Honeywell for any proceeds received by Honeywell from a property sale of a site under the agreement.

For the three and nine months ended September 30, 2019, expenses related to the Honeywell Reimbursement Agreement were $35 million and $57 million, respectively and are recorded in Other expense, net. Honeywell Reimbursement Agreement liabilities are included in the following balance sheet accounts:

	September 30,
	2019
Accrued liabilities	$	140
Obligations payable to Honeywell		428
	$	568

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

23

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Tax Matters Agreement

In connection with the Spin-Off, the Company entered into a tax matters agreement (the “Tax Matters Agreement”) with Honeywell pursuant to which it is responsible and will indemnify Honeywell for all taxes, including income taxes, sales taxes, VAT and payroll taxes, relating to the business for all periods, including periods prior to the consummation of the Spin-Off. As of September 30, 2019, the Company has indemnified Honeywell for $152 million, which is included in Obligations payable to Honeywell.

Trademark Agreements

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 will pay a royalty fee of 1.5% on net revenue to Honeywell related to such licensed products which is recorded in Selling, general and administrative expense on the unaudited Consolidated and Combined Interim Statement of Operations. For the three and nine months ended September 30, 2019, royalty fees were $6 million and $20 million, respectively.

Other Matters

The Company is subject to other lawsuits, investigations and disputes arising out of the conduct of its business, including matters relating to commercial transactions, settlement agreements, government contracts, product liability, prior acquisitions and divestitures, employee matters, intellectual property, antitrust 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 of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a carefulanalysis of each matter with the assistance of outside legal counsel and, if applicable, other experts.  The Company recorded legal expense of $1 million and $20 million for the three and nine months ended September 30, 2019, respectively. Prior to the Spin-off, legal expenses were paid by Honeywell and then allocated to the Company as part of a corporate expense allocation that did not separately identify the specific expenses. As of September 30, 2019 and December 31, 2018, the Company has a legal reserve of $18 million and $7million, respectively.

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 performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities.

The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees:

	Nine Months Ended
	September 30,
	2019			2018
Beginning of period	$	26		$	17
Accruals for warranties/guarantees issued during the year		10			12
Adjustment of pre-existing warranties/guarantees		(1	)		(2	)
Settlement of warranty/guarantee claims		(12	)		(12	)
End of period	$	23		$	15

24

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Note 16. Pension

Prior to the Spin-Off, certain of Resideo’s employees participated in multiple U.S. and non-U.S. defined benefit pension plans (the “Shared Plans”) sponsored by Honeywell which includes participants from other Honeywell subsidiaries and operations. The Company accounted for participation in the Shared Plans as a multiemployer benefit plan. Accordingly, it did not record an asset or liability to recognize the funded status of the Shared Plans. The related pension expense was allocated based on annual service cost of active participants and reported within Costs of goods sold and Selling, general and administrative expenses in the unaudited Combined Interim Statement of Operations. The pension expense related to participation in the Shared Plan for the three and nine months ended September 30, 2018 was $3 million and $10 million, respectively.

As of the date of separation from Honeywell, these employees’ and certain former Honeywell employees’ entitlement to benefits in Honeywell’s plans were transferred to Resideo sponsored plans.

The Resideo defined benefit pension plans have substantially similar benefit formulas as the Honeywell defined benefit pension plans. Moreover, vesting service, benefit accrual service and compensation credited under the Honeywell defined benefit pension plans apply to the determination of pension benefits under the Resideo defined benefit pension plan.

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, Switzerland, and the Netherlands.The pension obligations as of September 30, 2019 and December 31, 2018 were $93 million and $88 million, respectively, and are included in Other liabilities in the unaudited Consolidated Interim Balance Sheet. Net periodic benefit cost recognized in Comprehensive income for the three and nine months ended September 30, 2019 is $2 million and $5 million, respectively.

The components of net periodic benefit costs other than the service cost are included in Other expense, net in the unaudited Consolidated and Combined Interim Statement of Operations for the three and nine months ended September 30, 2019 and 2018.

Note 17. Segment Financial Data

The Company globally manages its business operations through two reportable operating segments, Products & Solutions and ADI Global Distribution:

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

ADI Global Distribution—The ADI Global Distribution business is a leading global distributor of low-voltage electronic and security products.

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

25

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

Prior to the first quarter of 2019, the Company’s Chief Operating Decision Maker (“CODM”) managed and evaluated its segment performance based on segment profit defined as segment income (loss) before taxes excluding Other expense, net (primarily environmental cost now subject to the Honeywell Reimbursement Agreement), interest expense, pension expense, environmental expense related to Resideo’s owned sites and repositioning charges. Beginning in the first quarter of 2019, the Company’s CODM changed the way segment performance is evaluated bymaking financial decisions and allocating resourcesbased on Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as segment net income before income taxes, net interest (income) expense, depreciation andamortization plus environmental expense, Honeywell Reimbursement Agreement expense, stock compensation expense, repositioning chargesand other adjustments.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue
Total Products & Solutions revenue	$	595	$	603	$	1,828	$	1,803
Less: Intersegment revenue		83		77		228		236
External Products & Solutions revenue		512		526		1,600		1,567
External ADI Global Distribution revenue		714		674		2,084		1,994
Total revenue	$	1,226	$	1,200	$	3,684	$	3,561

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Segment adjusted EBITDA
Products & Solutions	$	66	$	107	$	222	$	333
ADI Global Distribution		48		43		141		124
Segment Adjusted EBITDA	$	114	$	150	$	363	$	457

26

RESIDEO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED AND COMBINED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, unless otherwise noted)

(Unaudited)

The table below provides a reconciliation of net income to Segment Adjusted EBITDA:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2019		2018			2019		2018
Net income	$	8	$	311		$	45	$	389
Net interest expense (income)		16		-			49		(1	)
Tax expense (benefit)		-		(329	)		36		(323	)
Depreciation and amortization		19		16			55		49
Environmental expense (1)		-		146			-		322
Honeywell reimbursement agreement expense (2)		35		-			57		-
Stock compensation expense (3)		8		6			22		15
Repositioning charges		9		-			34		5
Other (4)		19		-			65		1
Segment Adjusted EBITDA	$	114	$	150		$	363	$	457

(1) Represents historical environmental expenses as reported under 100% carryover basis.

(2) Represents recorded expenses related to the Honeywell Reimbursement Agreement. 

(3) Stock compensation expense adjustment includes only non-cash expenses.

(4) Represents $19 million and $53 million in costs directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to the Spin-Off, and ($0) million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019, respectively. For the three and nine months ended September 30, 2018 Other represents other non-operating (income) expense.

The Company’s CODM does not use segment assets information to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed.

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

(Dollars in millions, except per share amounts)

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand the results of operations and financial condition of Resideo Technologies, Inc. and its consolidated subsidiaries (“Resideo” or “the Company”, “we”, “us” or “our”) for the three and nine months ended September 30, 2019 and should be read in conjunction with the unaudited Consolidated and Combined Interim Financial Statements and the notes thereto contained elsewhere in this Form 10-Q. The financial information as of September 30, 2019 should be read in conjunction with the consolidated and combined financial statements for the year ended December 31, 2018 contained in our 2018 Annual Report on Form 10-K (the “2018 Annual Report on Form 10-K”).

Overview and Business Trends

We are a leading global provider of products, software solutions and technologies that help homeowners stay connected and in control of their comfort, security and energy use. We are a leader in the home heating, ventilation and air conditioning controls and security markets. Our products consist of solutions in Comfort, Residential Thermal Solutions (“RTS”) and Security categories and include temperature and humidity control, thermal, water and air solutions and remote patient monitoring software solutions as well as security panels, sensors, peripherals, wire and cable, communications devices, video cameras, awareness solutions, cloud infrastructure, installation and maintenance tools and related software. Our ADI Global Distribution business is the leading wholesale distributor of low-voltage electronic and security products which include video surveillance, intrusion, access control, fire and life safety, wire, networking and professional audio visual systems. We manage our business operations through two segments, Products & Solutions and ADI Global Distribution. The Products & Solutions segment offerings include our Comfort, RTS and Security products, which, consistent with our industry, have a higher gross and operating margin profile in comparison to the ADI Global Distribution segment.

Our financial performance is influenced by several macro factors such as repair and remodeling activity, residential and non-residential construction, employment rates, and overall macro environment. In the third quarter 2019, the ADI Global Distribution business continued its strong performance, enhanced by an ongoing focus on digital transformation, designed to create a seamless experience for professionals online and in the 200 stocking locations around the world. ADI continued to expand its footprint, including recent opening and remodeling of branches in Eastern Europe.

In the third quarter 2019, the Products & Solutions segment experienced revenue declines in the Comfort and RTS businesses. Segment adjusted EBITDA declined due to revenue decline, negative product and channel mix, inventory write-downs, and high product rebates from a pre-spin contract. The RTS business experienced a slowdown across large original equipment manufacturers (“OEMs”) customers, which included impacts by recent regulatory changes. The Comfort business revenue declines were primarily due to lower thermostat sales. We expect the third-quarter headwinds to continue into the peak winter demand period.

Third Quarter Highlights

Net revenues increased $26 million in the recent quarter compared to the third quarter of fiscal 2018, primarily due to increased volume and price partially offset by foreign exchange translation. Gross profit as a percent of net revenues decreased to 24%, or $58 million, in the recent quarter compared to 29% in the third quarter of fiscal 2018. The primary drivers to the decrease in gross profit percentage were a 300 bps impact from sales mix changes, 100 bps impact from material and labor inflation and fixed production costs which include inventory write-downs, and 100 bps impact from headquarter allocations previously classified in selling, general and administrative expense in the carve-out financials.Third-quarter net income was $8 million for the three months ended September 30, 2019 compared to $311 million for the three months ended September 30, 2018, which included an income tax benefit of $329 million.

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Selling, general, and administrative expenses increased by$11 million in the recent quarter compared to the thirdquarter of fiscal 2018.The increase was driven by spin related costs, license fees associated with the Trademark License Agreement, repositioning costs, impact of acquisitions,and labor cost inflation totaling $43 million. These increases were partially offset by the impact of headquarter cost allocations previously classified in selling, general and administrative expense in the carve-out financials, foreign currency translation, and miscellaneous cost reductions totaling $32 million.

We ended the third quarter with $132 million in cash and cash equivalents. Net cash used in operating activities was $70 million for the nine months ended September 30, 2019.  At September 30, 2019, Accounts receivable were $845 million and Inventories were $729 million.

Recent Developments

Separation from Honeywell

The Company was incorporated in Delaware on April 24, 2018. 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”). On October 29, 2018, Honeywell’s shareholders of record as of October 16, 2018 (the “Record Date”) received one share of our common stock, par value $0.001 per share, for every six shares of Honeywell’s common stock, par value $1.00 per share, held as of the Record Date. We began trading “regular way” under the ticker symbol “REZI” on the New York Stock Exchange on October 29, 2018.

In connection with the Spin-Off, we entered into certain agreements with Honeywell, such as the Honeywell Reimbursement Agreement, the Trademark License Agreement, Tax Matters Agreement, Employee Matters Agreement, Patent Cross-License Agreement and Transition Services Agreement, which caused us to incur new costs. See our 2018 Annual Report on Form 10-K for a description of the material terms thereof.

Operational and Financial Review

On October 22, 2019, we announced the commencement of a comprehensive operational and financial review focused on product cost and gross margin improvement, and general and administrative expenses simplification. The review will be overseen by the independent directors of our board. We have retained industry-recognized experts in supply chain optimization and organizational excellence to assist in the review.

Basis of Presentation

Prior to the Spin-Off on October 29, 2018, our historical financial statements were prepared on a stand-alone combined basis and were derived from the consolidated financial statements and accounting records of Honeywell. Accordingly, for periods prior to October 29, 2018, our financial statements are presented on a combined basis and for the periods subsequent to October 29, 2018 are presented on a consolidated basis (collectively, the historical financial statements for all periods presented are referred to as “Consolidated and Combined Interim Financial Statements”). The Consolidated and Combined Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).The historical combined financial information prior to the Spin-Off may not be indicative of our future performance and does not necessarily reflect what our consolidated and combined results of operations, financial condition and cash flows would have been had we operated as a separate, publicly traded company during the periods presented, particularly because of changes that we have experienced and may continue to experience as a result of our separation from Honeywell, including changes in the financing, cash management, operations, cost structure and personnel needs of our Company.

The unaudited Combined Interim Financial Statements prior to the Spin-Off include certain assets and liabilities that were held at the Honeywell corporate level but were specifically identifiable or otherwise attributable to us. Additionally, Honeywell historically provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on our behalf. The costs of these services were allocated to us on the basis of the proportion of net revenue. Actual costs that would have been incurred if we had been a stand-alone company for the entire period being presented would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Both we and Honeywell consider the basis on which the expenses were allocated during the period before the Spin-Off to be a reasonable reflection of the utilization of services provided to or the benefits received by us during the periods presented.

29

Since the completion of the Spin-Off, we have incurred and expect to continue to incur expenditures consisting of employee-related costs, costs to start up certain stand-alone functions and information technology systems and other one-time transaction related costs. Recurring stand-alone costs include establishing the internal audit, treasury, investor relations, tax and corporate secretary functions as well as the annual expenses associated with running an independent publicly traded company including listing fees, compensation of non-employee directors, related board of director fees and other fees and expenses related to insurance, legal and external audit.

Our environmental expenses prior to Spin-Off and our Honeywell reimbursement expenses are reported within Other expense, net in our unaudited Consolidated and Combined Interim Statement of Operations, which reflect an estimated liability for resolution of pending and future environmental-related liabilities. Prior to the Spin-Off, this estimated liability was calculated as if we were responsible for 100% of the environmental-liability payments associated with certain sites. See our 2018 Annual Report on Form 10-K for additional information. In connection with our separation from Honeywell, we became a party to the Honeywell Reimbursement Agreement, which was entered into on October 14, 2018, pursuant to which we agreed to indemnify Honeywell in amounts equal to 90% of payments which include amounts billed with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case including consequential damages (the “liabilities”), in respect of specified properties contaminated through historical business operations, including the legal and other costs of defending and resolving such liabilities, 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. Pursuant to the Honeywell Reimbursement Agreement, we are responsible for paying to Honeywell such amounts, up to a cap of $140 million in respect of liabilities arising in any given calendar year (exclusive of any late payment fees up to 5% per annum).

Components of Operating Results

Our fiscal quarter ended on September 30. The key elements of our operating results include:

Net Revenue

We globally manage our business operations through two reportable segments, Products & Solutions and ADI Global Distribution:

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

ADI Global Distribution. We generate revenue through the distribution of low-voltage electronic and security products that are delivered through a comprehensive network of professional contractors, distributors and OEMs, as well as major retailers and online merchants. In addition to our own Security products, ADI distributes products from industry-leading manufacturers including Assa Abloy, Axis Communications, Honeywell and Nortek Security & Control, and ADI also carries a line of private label products. We sell these products to contractors that service non-residential and residential end-users. 13% of ADI’s net revenue is supplied by our Products & Solutions Segment. Management estimates that in 2018 approximately two-thirds of ADI’s net revenue was attributed to non-residential end markets and one-third to residential end markets.

Cost of Goods Sold

Products & Solutions:Cost of goods sold includes costs associated with raw materials, assembly, shipping and handling of those products; costs of personnel-related expenses, including pension benefits, and equipment associated with manufacturing support, logistics and quality assurance; costs of certain intangible assets; and costs of research and development. Research and development expense consists primarily of development of new products and product applications.

ADI GlobalDistribution: Cost of goods sold consists primarily of inventory-related costs and includes labor and personnel-related expenses.

30

Selling, General, and Administrative Expense

Selling, general and administrative expense includes trademark royalty expenses, sales incentives and commissions, professional fees, legal fees, promotional and advertising expenses, and personnel-related expenses, including stock compensation expense and pension benefits. In addition, prior to the Spin-Off our selling, general and administrative expense included an allocated portion of general corporate expenses.

Other Expense, Net

Other expense, net consists primarily of Honeywell reimbursement expenses (partially offset by certain reductions) for certain environmental claims related to approximately 230 sites or groups of sites that are undergoing environmental remediation under U.S. federal or state law and agency oversight for contamination associated with Honeywell legacy business operations. Prior to the Spin-Off other expenses also included the environmental expenses related to these same sites. For further information see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Honeywell Reimbursement Agreement” and “Note 15. Commitments and Contingencies” of Notes to unaudited Consolidated and Combined Interim Financial Statements of this Form 10-Q.

Interest Expense

Interest expense consists of interest on our short and long-term obligations, including our senior notes, term credit facility, and revolving credit facility. Interest expense on our obligations includes contractual interest, amortization of the debt discount and amortization of debt issuance costs.

Tax Expense (Benefit)

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

Results of Operations

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

31

Unaudited Consolidated Interim Statement of Operations

(Dollars in millions except share and per share data)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2019		2018			2019		2018
Net revenue	$	1,226	$	1,200		$	3,684	$	3,561
Cost of goods sold		937		853			2,786		2,525
Gross profit		289		347			898		1,036
Selling, general and administrative expenses		230		219			712		648
Operating profit		59		128			186		388
Other expense, net		35		144			54		320
Interest expense		16		2			51		2
Income (loss) before taxes		8		(18	)		81		66
Tax expense (benefit)		-		(329	)		36		(323	)
Net income	$	8	$	311		$	45	$	389
Weighted Average Number of Common Shares Outstanding (in thousands)
Basic		122,770		122,967			122,681		122,967
Diluted		123,244		122,967			123,404		122,967
Earnings Per Share
Basic	$	0.07	$	2.53		$	0.37	$	3.16
Diluted	$	0.06	$	2.53		$	0.36	$	3.16

Results of Operations for the Three and Nine Months ended September 30, 2019 and 2018

Net Revenue

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2019			2018		2019			2018
Net revenue	$	1,226		$	1,200	$	3,684		$	3,561
% change compared with prior period		2	%				3	%

The change in net revenue compared to prior year period is attributable to the following:

	Three Months Ended	Nine Months Ended
	September 30, 2019	September 30, 2019
Volume	1 %	3 %
Price	2 %	2 %
Foreign currency translation	(1)%	(2)%
% change compared with prior period	2 %	3 %

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

32

Cost of Goods Sold

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Cost of goods sold	$	937		$	853		$	2,786		$	2,525
% change compared with prior period		10	%					10	%
Gross profit percentage		24	%		29	%		24	%		29	%

Three months ended

Cost of goods sold for the three months ended September 30, 2019 was $937 million, an increase of $84 million, or 10%, from $853 million for the three months ended September 30, 2018.

This increase in cost of goods sold was primarily driven by the Products & Solutions segment changes in sales mix, material and labor inflation and increased production costs including inventory write-downs, headquarter allocations previously classified in selling, general and administrative expense in the carve-out financials. In addition, higher revenue in the ADI Global Distribution segment also increased cost of goods sold. Both segments had repositioning costs and spin related costs. The total impact of these increases was $94 million. The increased costs were partially offset by foreign currency translation and savings in other miscellaneous costs of goods sold totaling $10 million.  

The primary drivers to the decrease in gross profit percentage were a 300 bps impact from sales mix changes, 100 bps impact from material and labor inflation and fixed production costs, and 100 bps impact from headquarter allocations previously classified in selling, general and administrative expense in the carve-out financials.

Nine months ended

Cost of goods sold for the nine months ended September 30, 2019 was $2,786 million, an increase of $261 million, or 10%, from $2,525 million for the nine months ended September 30, 2018.

This increase in cost of goods sold was primarily driven by higher revenue in both the ADI Global Distribution and Products & Solutions segments, material and labor inflation and increased production costs including inventory write-downs, changes in sales mix, headquarter allocations previously classified in selling, general and administrative expense in the carve-out financials, repositioning costs and spin related costs totaling $306 million. The increased costs were partially offset by foreign currency translation and savings in other miscellaneous costs of goods sold totaling $45 million.

The primary drivers to the decrease in gross profit percentage were a 200 bps impact from material and labor inflation and fixed production costs, 200 bps impact from sales mix changes and 100 bps impact from headquarter allocations previously classified in selling, general and administrative expense in the carve-out financials.

Selling, General and Administrative Expense

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Selling, general and administrative expense	$	230		$	219		$	712		$	648
% of revenue		19	%		18	%		19	%		18	%

33

Three months ended

Selling, general and administrative expense for the three months ended September 30, 2019 was $230 million, an increase of $11 million, from $219 million for the three months ended September 30, 2018. The increase was driven by spin related costs, license fees associated with the Trademark License Agreement, repositioning costs, impact of acquisitions and labor cost inflation totaling $43 million. These increases were partially offset by headquarter cost allocation now partially classified in cost of goods sold, foreign currency translation, and miscellaneous cost reductions totaling $32 million.

Nine months ended

Selling, general and administrative expense for the nine months ended September 30, 2019 was $712 million, an increase of $64 million, from $648 million for the nine months ended September 30, 2018. The increase was driven by spin related costs, license fees associated with the Trademark License Agreement, legal expenses, impact of acquisitions, repositioning costs, and labor cost inflation totaling $126 million. These increases were partially offset by headquarter cost allocation now partially classified in cost of goods sold, foreign currency translation, and miscellaneous cost reductions totaling $62 million.

Other Expense, Net

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Other expense, net	$	35	$	144	$	54	$	320

Three months ended

Other expense, net for the three months ended September 30, 2019, was $35 million, a decrease of $109 million from $144 million for the three months ended September 30, 2018. The decrease is due to lower remediation expenses in 2019 resulting from the Honeywell Reimbursement Agreement as compared to environmental expense prior to the Spin-Off. Following the Spin-Off, these environmental expenses are now subject to the Honeywell Reimbursement Agreement where cash payments are capped at $140 million per year.  

Nine months ended

Other expense, net for the nine months ended September 30, 2019, was $54 million, a decrease of $266 million from $320 million for the nine months ended September 30, 2018. The decrease is due to lower remediation expense during the period as well as an $81 million reduction in indemnification liabilities related to a provision in the Honeywell Reimbursement Agreement that reduces the obligation due to Honeywell for any proceeds received from a property sale of a site under the agreement.

Tax Expense (Benefit)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Tax expense (benefit)	$	-		$	(329	)	$	36		$	(323	)
Effective tax rate		0	%		1,828	%		44	%		(489	)%

34

Three months ended

We recognized a $329 million tax benefit for the three months ended September 30, 2018 as compared to tax expense of nil in the three months ended September 30, 2019.  The decrease in the tax benefit is primarily the result of tax benefits generated in 2018 related to the internal restructuring of Resideo’s business in advance of its anticipated Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings and adjustments to the provisional tax amount related to U.S. Tax Reform.

The effective tax rate for the three months ended September 30, 2019 was lower than the U.S. federal statutory rate of 21% primarily due to a decrease in the forecast of full-year non-deductible expenses and a decrease in the forecast of full-year U.S. taxation of foreign earnings.

The effective tax rate for the three months ended September 30, 2018 was higher than the U.S. federal statutory rate of 21% primarily due to tax benefits related to the internal restructuring of Resideo’s business in advance of its anticipated Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings, and adjustments to the provisional tax amount related to U.S. Tax Reform.  The combined effect of the tax benefits recorded in the quarter ended September 30, 2018 resulted in a tax benefit (negative tax expense).  As a result of the tax benefits and in conjunction with a net loss in the quarter ended September 30, 2018, the effective tax rate for the quarter is a positive percentage and significantly more than the US statutory rate.

Nine months ended

The effective tax rate for the nine months ended September 30, 2019 was higher than the U.S. federal statutory rate of 21% which is primarily attributable to non-deductible expenses and U.S. taxation of foreign earnings.

The effective tax rate for the nine months ended September 30, 2018 was lower than the U.S. federal statutory rate of 21% primarily from tax benefits related to the internal restructuring of Resideo’s business in advance of its anticipated Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings and adjustments to the provisional tax amount related to U.S. Tax Reform.

The effective tax rate can vary from quarter to quarter for unusual or infrequently occurring items, such as the tax impacts from the resolution of income tax audits, changes in tax laws, revisions to the amounts from U.S. Tax Reform, or internal restructurings.

Review of Business Segments

We operate two segments: Products & Solutions and ADI Global Distribution. Our Chief Operating Decision Maker evaluates segment performance based on Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as segment net income before income taxes, net interest (income) expense, depreciation and amortization plus or minus, environmental expense, Honeywell Reimbursement Agreement expense, stock compensation expense, repositioning charges and other adjustments.

Products & Solutions

	ThreeMonths Ended September 30,							Nine Months Ended September 30,
	2019		2018		% Change			2019		2018		% Change
Total revenue	$	595	$	603				$	1,828	$	1,803
Less: Intersegment revenue		83		77					228		236
External revenue	$	512	$	526		(3	)%	$	1,600	$	1,567		2	%
Segment Adjusted EBITDA	$	66	$	107		(38	)%	$	222	$	333		(33	)%

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	2019 vs. 2018
	Three Months Ended September 30,						Nine Months Ended September 30,
Factors Contributing to Year-Over-Year Change	Revenue (%)			Segment Adjusted EBITDA (%)			Revenue (%)			Segment Adjusted EBITDA (%)
Constant Currency Growth (Decline)		(1	)%		(36	)%		5	%		(30	)%
Foreign currency translation		(2	)%		(2	)%		(3	)%		(3	)%
Total % Change		(3	)%		(38	)%		2	%		(33	)%

Three months ended

Products & Solutions revenue declined 3% primarily in the Comfort and RTS businesses, partially offset by increased revenue in the Security business.  The RTS business experienced a slowdown across large OEM customers, which included impacts by recent regulatory changes.  The Comfort business revenue declines were primarily due to lower thermostats sales.  Segment Adjusted EBITDA declined from $107 million to $66 million, or 38%. Segment Adjusted EBITDA was negatively impacted $48 million from unfavorable product mix, volume, production cost increases including inventory write-downs, high product rebates from a pre-spin contract, impact of acquisitions and the license fee paid to Honeywell associated with the Trademark License Agreement. These negative impacts were partially offset by $7 million of profit from increased selling prices and material productivity.

Nine months ended

Products & Solutions revenue increased 2% driven primarily by the Security business and the first quarter launch of a new residential intrusion security platform. Segment Adjusted EBITDA declined from $333 million to $222 million, or 33%. Segment Adjusted EBITDA was negatively impacted $150 million from unfavorable product mix, inventory variances, production cost increases including inventory write-downs, high product rebates from a pre-spin contract, impact of acquisitions and the license fee paid to Honeywell associated with the Trademark License Agreement. These negative impacts were partially offset by $40 million of profit from increased volume, increased selling prices and material productivity.

ADI Global Distribution

	ThreeMonths Ended September 30,							Nine Months Ended September 30,
	2019		2018		% Change			2019		2018		% Change
External revenue	$	714	$	674		6	%	$	2,084	$	1,994		5	%
Segment Adjusted EBITDA	$	48	$	43		12	%	$	141	$	124		14	%

	2019 vs. 2018
	Three Months Ended September 30,						Nine Months Ended September 30,
Factors Contributing to Year-Over-Year Change	Revenue (%)			Segment Adjusted EBITDA (%)			Revenue (%)			Segment Adjusted EBITDA (%)
Constant Currency Growth		7	%		13	%		6	%		15	%
Foreign currency translation		(1	)%		(1	)%		(1	)%		(1	)%
Total % Change		6	%		12	%		5	%		14	%

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Three months ended

ADI Global Distribution revenue increased 6% on a reported basis, and 7% on a constant currency basis. ADI Global Distribution segment constant currency performance was driven by increased sales volume in the Americas, EMEA and APAC regions. Segment Adjusted EBITDA increased from $43 million to $48 million, or 12%. This increase was due to increased volume and productivity, net of inflation which was partially offset by unfavorable foreign exchange rates.

Nine months ended

ADI Global Distribution revenue increased 5% on a reported basis, and 6% on a constant currency basis. ADI Global Distribution segment constant currency performance was driven by increased sales volume primarily in the Americas and EMEA regions, partly impacted by one less selling day year over year in the first quarter. Segment Adjusted EBITDA increased from $124 million to $141 million, or 14%. This increase was due to increased volume and productivity, net of inflation which was partially offset by unfavorable foreign exchange rates.

Repositioning Charges

During the second quarter of 2019, management began a repositioning plan to reduce operating costs and better align our workforce with the needs of the business going forward.  These repositioning actions are expected to generate incremental pre-tax savings of $15 million in 2019 compared with 2018 principally from planned workforce reductions. Cash spending related to our repositioning actions was $22 million for the nine months ended September 30, 2019 and was funded through operating cash flows.  We expect to incur an additional $3 million of repositioning expense in 2019.

On October 22^nd, 2019, we announced the commencement of a comprehensive operational and financial review focused on product cost and gross margin improvement, and general and administrative expense simplification. As we are still identifying the actions that will be undertaken, we currently cannot estimate the total costs expected to be incurred.

Net repositioning and related expenses were $9 million and $34 million for the three and nine months ended September 30, 2019 and primarily related to severance.

For further discussion of repositioning activities, refer to Note 6. Repositioning and Other Charges of Notes to unaudited Consolidated and Combined Interim Financial Statements.

Capital Resources and Liquidity

Our liquidity is primarily dependent on our ability to continue to generate positive cash flows from operations. Additional liquidity may also be provided through access to the financial capital markets and a committed global credit facility.

• Operating cash flows from continuing operations was an outflow of $70 million for the nine months ended September 30, 2019 and was an inflow of $375 million for the nine months ended September 30, 2018.

• As of September 30, 2019, total cash and cash equivalents were $132 million.

• At September 30, 2019, there were $60 million of borrowings and no letters of credit issued under our $350 million Revolving Credit Facility.

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Our future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent of research and development projects, potential acquisitions of companies or technologies and the expansion of our sales and marketing activities. We believe our existing cash, cash equivalents, investments and credit under our Credit Facilities are sufficient to meet our capital requirements through at least the next 12 months. We are in discussions with our credit agreement agent bank to consider amendments to our leverage covenant and related definitions to support expenditure for our planned operational review and to maintain flexibility to pursue tuck-in acquisitions. We anticipate any resulting amendment transaction to be undertaken in the fourth quarter of fiscal 2019.

Honeywell Reimbursement Agreement

In connection with the Spin-Off, we entered into the Honeywell Reimbursement Agreement, pursuant to which we have an obligation to make cash payments to Honeywell in amounts equal to 90% of payments for certain Honeywell environmental-liability payments, which include amounts billed, less 90% of Honeywell’s net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales. The amount payable by us in respect of such liabilities arising in any given year is subject to a cap of $140 million (exclusive of any late payment fees up to 5% per annum). The amount paid during the nine months ended September 30, 2019 was $105 million. See “Note 21. Commitments and Contingencies” of Notes to Consolidated and Combined Financial Statements in our 2018 Annual Report on Form 10-K for further discussion.

Cash Flow Summary for the Nine Months Ended September 30, 2019 and 2018

Our cash flows from operating, investing and financing activities for the nine months ended September 30, 2019 and 2018, as reflected in the unaudited Consolidated and Combined Interim Financial Statements are summarized as follows:

	Nine Months Ended September 30,
	2019			2018
Cash (used for) provided by:
Operating activities	$	(70	)	$	375
Investing activities		(83	)		(56	)
Financing activities		22			(186	)
Effect of exchange rate changes on cash and cash equivalents		(2	)		(5	)
Net (decrease) increase in cash and cash equivalents	$	(133	)	$	128

Cash used for operating activities for the nine months ended September 30, 2019 increased by $445 million, primarily due to lower margins on higher sales volume.  This drove a $190 million increase in cash usage as a result of an increase in accounts receivable and a decrease in inventory payables.

Cash used for investing activities increased by $27 million, primarily due to an increase of $17 million cash paid for acquisitions, an increase of $3 million cash paid for capital expenditures, and a decrease of $7 million in proceeds received related to amounts due from related parties.

Net cash provided by financing activities increased by $208 million. The increase in cash provided was primarily due to $185 million in pre-spin activity related to cash outflows of invested equity to Honeywell and cash pooling during the nine months ended September 30, 2018 that is no longer applicable to the post Spin-Off period. For the nine months ended September 30, 2019, $60 million of cash was provided by proceeds from the Revolving Credit Facility. These cash proceeds were partially offset by $24 million of non-operating obligations paid to Honeywell, $11 million of long-term debt repayments and $3 million of tax payments related to stock vestings during the nine months ended September 30, 2019.

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Capital Expenditures

We believe our capital spending in recent years has been sufficient to maintain efficient production capacity, to implement important product and process redesigns and to expand capacity to meet increased demand. Productivity projects have freed up capacity in our manufacturing facilities and are expected to continue to do so. We expect to continue investing to expand and modernize our existing facilities and to create capacity for new product development. Capital expenditures for full year 2019 are expected to be $93 million, of which $35 million relates to costs associated with investments in infrastructure as a stand-alone company.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, net revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The preparation of our unaudited Consolidated and Combined Interim Financial Statements in accordance with U.S. GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. We consider the accounting policies discussed in our 2018 Annual Report on Form 10-K for the year ended December 31, 2018, to be critical to the understanding of our unaudited Consolidated and Combined Interim Financial Statements. There have been no changes in our critical accounting policies as compared to what was disclosed in the 2018 Annual Report on Form 10-K for the year ended December 31, 2018. Actual results could differ from our estimates and assumptions, and any such differences could be material to our unaudited Consolidated and Combined Interim Financial Statements.

Goodwill

As of September 30, 2019, Goodwill recorded on our Consolidated and Combined Interim Balance sheet was $2.6 billion. We perform goodwill impairment testing annually on October 1, or more frequently if indicators of impairment exist. The goodwill impairment test is performed at the reporting unit level, Products & Solutions and ADI Global Distribution.

In the fourth quarter of 2018, we performed our annual goodwill impairment test of each of reporting unit using a weighting of fair values derived from the income approach and the market approach. Fair value under the income approach was based on the present value of estimated future cash flows and under the market approach utilized the public company guideline method. Resulting fair values of both reporting units exceeded the respective carrying values in excess of 40%.  

During the third quarter of 2019, performance in the Products & Solutions reporting unit experienced revenue, as well as Segment EBITDA, declines. Additionally, during the third quarter of 2019, the Company’s stock price experienced a decline, opening the quarter at $21.76 per share on July 1, 2019 and closing at $14.35 per share on September 30, 2019.

Considering the substantial margin by which the fair value of our reporting units exceeded carrying value in our 2018 annual impairment test, and market capitalization exceeding the carrying value of our net assets throughout the third quarter, these events were not considered significant enough to indicate that it is more likely than not that goodwill is impaired and therefore, an interim impairment analysis was not performed.

On October 22, 2019, we revised guidance for the full year of 2019 and our stock declined below our book value per share. If the market price of our common stock does not increase from current levels in the near future, or if circumstances change that would more likely than not reduce the fair value of our reporting units below their respective carrying values, such as projections of future cash flows and financial performance not being achieved, all or a portion of our goodwill may be impaired in future periods.  Any impairment charges that we may take in the future could be material to our results of operations and financial condition.  We will perform our annual goodwill testing in the fourth quarter and will consider the decline in the stock price, reduced operating performance, and any other applicable market conditions in the analysis. 

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Other Matters

Litigation and Environmental Matters

See “Note 15. Commitments and Contingencies” of Notes to unaudited Consolidated and Combined Interim Financial Statements of this Form 10-Q for a discussion of environmental and other litigation matters.

Recent Accounting Pronouncements

See “Note 2. Summary of Significant Accounting Policies” of Notes to unaudited Consolidated and Combined Interim Financial Statements of this Form 10-Q for a discussion of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments.

Interest Rate Risk

As of September 30, 2019, $874 million of our total debt of $1.3 billion carried variable interest rates. The fair market values of our fixed-rate financial instruments are sensitive to changes in interest rates. At September 30, 2019, an increase or decrease in interest rate on our Term Loans by 100 basis points would have an approximate $8 million impact on our annual interest expense on long-term debt.

Foreign Currency Exchange Rate Risk

We are exposed to market risks from changes in currency exchange rates. While we primarily transact with customers in the U.S. Dollar, we also transact in foreign currencies, primarily including the Euro, British Pound, Canadian Dollar, and Czech Koruna. These exposures may impact total assets, liabilities, future earnings and/or operating cash flows. Our exposure to market risk for changes in foreign currency exchange rates arises from transactions arising from international trade, foreign currency denominated monetary assets and liabilities, and international financing activities between subsidiaries. We rely primarily on natural offsets to address our exposures and may supplement this approach from time to time by entering into forward and option hedging contracts.  As of September 30, 2019, we have no outstanding hedging arrangements.

Commodity Price Risk

While we are exposed to commodity price risk, we attempt to pass through significant changes in component and raw material costs to our customers based on the contractual terms of our arrangements. In limited situations, we may not be fully compensated for such changes in costs.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures designed to give reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud have been or will be detected.

Our Chief Executive Officer and Chief Financial Officer, with the assistance of other members of our management, including our Interim Chief Accounting Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have implemented, and continue to refine, internal controls and key system functionality to enable the preparation of financial information related to the new lease standard (ASU No. 2016-02) upon adoption on January 1, 2019. There were no significant changes to our internal control over financial reporting due to the adoption of the new lease standard.

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PART II

Item 1. Legal Proceedings

We are subject to various lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to commercial transactions, settlement agreements, government contracts, product liability, prior acquisitions and divestitures, employee matters, intellectual property, antitrust 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 of 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.

Additionally, in connection with our entry into the Honeywell Reimbursement Agreement, we will be required to make payments to Honeywell in amounts equal to 90% of payments, which include amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case including consequential damages in respect of specified properties contaminated through historical business operations, including the legal and other costs of defending and resolving such liabilities, 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. For further information, see “Note 15. Commitments and Contingencies” of Notes to unaudited Consolidated and Combined Financial Statements of this Form 10-Q.

Item 1A. Risk Factors

We face a variety of risks that are inherent in our business and our industry, including operational, legal and regulatory risks. Such risks could cause our actual results to differ materially from our forward-looking statements, expectations and historical trends. There have been no material changes to the risk factors described in our 2018 Annual Report on Form 10-K, except as reflected in the revised risk factors and one additional risk factor set forth below.

We operate in highly competitive markets.

We operate in highly competitive markets and compete directly with global, national, regional and local providers of our products, services and solutions including manufacturers, distributors, service providers, retailers and online commerce providers. The most significant competitive factors we face are product and service innovation, reputation of our Company and brands, sales and marketing programs, product performance, quality of product training and events, product availability, speed and accuracy of delivery, service and price, technical support, furnishing of customer credit and product reliability and warranty, with the relative importance of these factors varying among our segments and products. In addition to current competitive factors, there may be new market entrants with non-traditional business and customer service models or disruptive technologies and products, resulting in increased competition and changing business dynamics. See “Risks Relating to Our Business—The market for connected home solutions is fragmented, highly competitive, continually evolving and subject to disruptive technologies.” Existing or future competitors may seek to gain or retain market share by reducing prices, and we may be required to lower prices or may lose business, which could adversely affect our business, financial condition, results of operations and cash flows. Also, to the extent that we do not meet changing customer preferences or demands or other market changes, or if one or more of our competitors introduces new products, becomes more successful with private label products, online offerings or establishes exclusive supply relationships, our ability to attract and retain customers could be adversely affected.  In the third quarter of 2019, we experienced lower sales of our non-connected thermostats due in part to a poor pre-spin cutover from the prior generation of non-connected thermostats to the T-Series line which resulted in loss of sales of certain thermostats to competition.

We also have long-standing relationships with customers whose business models may be subject to the risks articulated above. For example, changes in the security system market, such as a shift away from subscription monitoring services, could adversely impact certain of our large customers or cause them to change their business models in ways that adversely impact our business and cash flows. As new market entrants emerge there can be no

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guarantee that we will be successful in developing customer relationships with them, or that such relationships will be as mutually beneficial as our current relationships. Furthermore, if new technologies or business models become ascendant in our customers’ markets our relationships and service commitments with incumbent businesses may become a disadvantage.

To remain competitive, we will need to invest continually in product development, marketing, customer service and support, manufacturing and our distribution networks. We may not have sufficient resources to continue to make such investments and we may be unable to maintain our competitive position. In addition, we anticipate that we may have to reduce the prices of some of our products or solutions to stay competitive, potentially resulting in a reduction in the profit margin for, and inventory valuation of, these products. It is possible that competitive pressures resulting from consolidation, including customers taking manufacturing or distribution in house, moving to a competitor and consolidation among our customers, could affect our growth and profit margins. In addition, competitors in certain high growth regions may have lower costs than we do due to lower local labor costs and favorable government regulation. Countries in high growth regions may have differing codes and standards impacting the cost of doing business and may have fewer protections for, or offer less ability to utilize, existing intellectual property. We may not be able to compete effectively with new competitors from such regions. Existing or future competitors also may seek to compete with us for acquisitions, which could have the effect of increasing the price for, and reducing the number of, suitable acquisitions.

Global climate change could negatively affect our business.

Responses to climate change may cause a shift away from fossil fuels to alternative power sources. Many of our thermal solutions are designed for application with oil and gas systems. A shift away from fossil fuels could affect our OEM customers’ business and result in a loss of business for them and for us. If we fail to adapt our solutions to alternative power sources, it could have an adverse effect on our business, financial condition, results of operations and cash flows.

Cooler than normal summers and warmer than normal winters may depress our sales. In addition, stable temperatures may result in less wear and tear on cooling and heating equipment which may depress Comfort and RTS sales. Demand for our products and our services, particularly our products and solutions geared toward the home construction repair and remodel industry, including our Comfort and RTS businesses, is seasonal and strongly affected by the weather. Cooler than normal summers depress our sales of replacement controls for heating, ventilation, cooling and water heating equipment in certain larger markets. Similarly, warmer than normal winters have the same effect on our heating products and services. Increased public awareness and concern regarding global climate change have led to our development of social responsibility, sustainability and other business policies, which in some instances are more restrictive than current laws and regulations. In light of the current regulatory environment, we also face uncertainty with respect to future climate change initiatives, including regional and/or federal requirements to reduce greenhouse gas emissions.  

Moreover, climate change itself creates financial risk to our business. Unseasonable weather conditions may impact the availability and cost of materials needed for manufacturing and increase insurance and other operating costs and, especially in the case of disruptions at our ADI stores, our ability to make sales during the pendency of site closures. These factors may influence our decisions to construct new facilities or maintain existing facilities in areas that are prone to physical climate risks. We could also face indirect financial risks passed through the supply chain, and process disruptions due to physical climate changes could result in price modifications for our products and the resources needed to produce them.  In the third quarter of 2019, we experienced lower sales of our RTS products due in part to wet weather that slowed housing construction earlier in the year and a relatively mild start to the heating season.

We may not be able to retain or expand relationships with certain large customers.

A number of our customers are large and contribute significantly to our net revenue and operating income. Consolidation or change of control, particularly among our OEM customers, or a decision by any one or more of our customers to outsource all or most manufacturing work to a single equipment manufacturer, may concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on a smaller number of customers. By virtue of our largest customers’ size and the significant portion of revenue that we derive

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from them, they are able to exert significant influence in the negotiation of our commercial agreements and the conduct of our business with them. Furthermore, there is significant consolidation of companies focused on security products, and we have had customers combine with companies with whom we have little or no prior relationship, putting us at risk of loss of sales. If we are unable to retain and expand our business with these large customers on favorable terms, our business, financial condition, results of operations and cash flows will be adversely affected. In the third quarter of 2019, we became aware that a significant customer delayed the start date of expected purchases beyond the fourth quarter.

We can provide no assurance that the operational and financial review we are conducting will result in the effects we are expecting.

In the third quarter of 2019, we experienced lower sales and lower margins than we expected.  As a result, we are conducting a comprehensive operational and financial review of our business.  However, there can be no assurance that this will review will appropriately identify the actions we need to take, or that we will be able to implement actions, in a manner that will resolve the issues we have identified or achieve the results we are forecasting.  In addition, uncertainty around the review could lead to disruption in our business, including our relationships with our customers, suppliers and employees.  

If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.

We test, at least annually, the carrying value of goodwill for impairment, as discussed in Note 2 of the Notes to the Consolidated and Combined Financial Statements included in the 2018 Annual Report on Form 10-K. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. If the assumptions used in our analysis are not realized, it is possible that an impairment charge may need to be recorded in the future. During the third quarter of 2019, performance in the Products & Solutions reporting unit experienced revenue, as well as Segment EBITDA, declines. On October 22, 2019, we revised guidance for the full year of 2019 and our stock declined below our book value per share.  If the market price of our common stock does not increase from current levels in the near future, or if circumstances change that would more likely than not reduce the fair value of our reporting units below their respective carrying values, such as projections of future cash flows and financial performance not being achieved, all or a portion of our goodwill may be impaired in future periods.  Any impairment charges that we may take in the future could be material to our results of operations and financial condition.  There were no impairment charges taken during the years ended 2018, 2017, and 2016.   

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Item 6. Exhibits

The Exhibits listed below on the Exhibit Index are filed or incorporated by reference as part of this Form 10-Q.

EXHIBIT INDEX

Exhibit Number	Exhibit Description
10.1	Resideo Deferred Compensation Plan for Non-Employee Directors‡ (filed herewith)
10.2	Resideo Director Deferred Election Form‡ (filed herewith)
10.3	2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. Form of Restricted Stock Unit Agreement (Annual Grants)‡ (filed herewith)
10.4	Non-Employee Director Form of Deferred Stock Unit Agreement (Deferred Director Fees)‡ (filed herewith)
31.1	Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101.INS	XBRL Instance Document (filed herewith)
101.SCH	XBRL Taxonomy Extension Schema (filed herewith)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF	XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB	XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
*	Certain schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish copies of any of the omitted schedules and similar attachments upon request by the U.S. Securities and Exchange Commission.
‡	Indicates management contracts or compensatory plans or arrangements.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Resideo Technologies, Inc.
Date: November 6th, 2019	By:	/s/ Joseph D. Ragan III
		Joseph D. Ragan III Executive Vice President and Chief Financial Officer (on behalf of the Registrant and as the Registrant’s Principal Financial Officer)

Date: November 6th, 2019	By:	/s/ AnnMarie Geddes
		AnnMarie Geddes Interim Chief Accounting Officer (on behalf of the Registrant and as the Registrant’s Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

Resideo Deferred Compensation Plan

For Non-Employee Directors

(Effective SEPTEMBER 4, 2019)

Article 1 - Purpose

The purpose of the Resideo Deferred Compensation Plan for Non-Employee Directors (the “Plan”) is to provide non-employee directors on the Board of Directors of Resideo Technologies, Inc. with the opportunity to defer a portion of the compensation for Board service.

Article II – Definitions

2.1 “Account” means the separate bookkeeping account maintained on the books of the Company for each Participant.

2.2 “Beneficiary” means the person or persons designated as such under Article VII of the Plan.

2.3 “Board” means the Board of Directors of the Company.

2.4 “Cash Sub-Account” means the portion of the Participant’s Account, if any, that is deemed invested in notional investments other than Company stock.

2.5 “Change in Control” means (a) any one person, or more than one person acting as a group (as defined under U.S. Department of Treasury Regulations §1.409A-3(i)(5)(v)(B)) acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company; or (b) any one person, or more than one person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; or (c) a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or (d) any one person, or more than one person acting as a group (as defined in Treasury Regulation § 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company and its subsidiaries on a consolidated basis that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company and its subsidiaries on a consolidated basis immediately before such acquisition or acquisitions. For purposes of clause (d), “gross fair market value” means the value of the assets of the Company and its subsidiaries on a consolidated basis, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. The foregoing clauses (a) through (d) shall be interpreted in a manner that is consistent with the Treasury Regulations promulgated pursuant to Section 409A of the Code so that all, and only, such transactions or events that could qualify as a “change in control event” within the meaning of Treasury Regulation § 1.409A-3(i)(5)(i) shall be deemed to be a Change in Control for purposes of this Plan.  

Exhibit 10.1

2.6 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

2.7 “Committee” means the compensation committee of the Board or any successor committee or subcommittee of the Board or other committee or subcommittee designated by the Board.

2.8 “Company” means Resideo Technologies, Inc., a Delaware corporation, and its successors.

2.9 “Deferred Stock Unit” means a deferred stock unit credited to a Participant’s Equity Sub-Account.

2.10 “Director” means any member of the Board who is not an employee of the Company or any of its subsidiaries or affiliates.

2.11 “Effective Date” means September 4, 2019.

2.12 “Equity Sub-Account” means the portion of the Participant’s Account, if any, that is allocated to Deferred Stock Units.

2.13 “Fair Market Value” means, as of any date, (i) the average (mean) of the highest and lowest sales prices of a share of Stock, as reported on the New York Stock Exchange (or any other reporting system selected by the Committee, in its sole discretion) on the date as of which the determination is being made or, if no sale of Stock is reported on this date, on the most recent preceding day on which there were sales of Stock reported or (ii) in the event there shall be no public market for the Stock on such date, the fair market value of the Stock as determined in good faith by the Committee.

2.14 “Participant” means a Director who makes a deferred election under Section 4.1 of the Plan and has an Account under the Plan.

2.15 “Plan” means the Resideo Deferred Compensation Plan for Non-Employee Directors.

2.16 “Retainer Fees” means the cash retainer fees and any cash committee fees or other ancillary fees other than reimbursements paid to a Director.  

2.17 “Separation from Service” means a “separation from service” from the Company, within the meaning of Code Section 409A, as applicable to the Participant.

2.18 “Stock” means the common stock, par value $0.001 per share, of the Company.

2.19 “Stock Plan” means the 2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc., as may be amended from time to time, or any successor equity plan applicable to non-employee directors of the board adopted by the Company.  

Exhibit 10.1

Article III – Participation

3.1 Each Director shall be eligible to become a Participant in accordance with the provisions of the Plan.  

3.2 A Participant shall remain a Participant until he or she has received all payments to which he or she is entitled under the terms of the Plan.

Article IV – Deferral Elections

4.1 Deferral Elections.

(a) Generally.  Prior to the first day of each calendar year beginning on or after January 1, 2020, each Director may elect to defer payment of 100% of the Director’s Retainer Fees to be earned in such calendar year, that will be credited to the Participant’s Account.  The election may also designate whether the Director’s Retainer Fees will be deferred into the Cash Sub-Account or the Equity Sub-Account. If such a choice is provided and a Director elects to defer his or her Director Retainer Fees into the Equity Sub-Account, the amount of such equity deferral shall be capped at the maximum annual individual share limit set forth in the Stock Plan, if any, and any Director Retainer Fees in excess of such cap automatically shall be deferred into the Cash Sub-Account.  To be effective, such election must be completed and delivered to the Company prior to the first day of the calendar year in which the services relating to the Retainer Fees are performed. Any election made under this Section shall become irrevocable as of December 31 of the year prior to the year in which the services relating to the Retainer Fees are performed.

(b) Effect of Elections.  Any election made pursuant to this Article IV shall remain in effect for Retainer Fees earned and paid in the following year and for all subsequent years, until the Director makes a new election during the annual election period.  

(c) Initial Participant Elections.  Notwithstanding the foregoing, when a Director first becomes eligible to participate in the Plan, the Director may file an initial election to defer Retainer Fees at any time during the 30-day period beginning on the date such Director first becomes a Director. Such election shall apply to Retainer Fees earned for services performed after the date such election is filed.  

(d) Election Procedures.  An election (or the modification or revocation of an election) must be made in such manner and in accordance with such rules (such as timing of election period, method of electing, etc.) as may be prescribed for this purpose by the Company.

4.2 Vesting.  The Participant’s Account shall be 100% vested at all times.

Exhibit 10.1

4.3 Relation to Stock Plan.  Deferred Stock Units granted or credited in accordance with this Plan shall be considered Restricted Stock Units issued pursuant to Section 6(g) of the Stock Plan. The Deferred Stock Units subsequently credited in lieu of dividends relating to Deferred Stock Units granted under  this Plan also shall be considered Restricted Stock Units issued pursuant to the Stock Plan. The Deferred Stock Units referred to in this paragraph, and Stock issued thereunder, will be subject to the terms and conditions of the Stock Plan, as well as the provisions of this Plan.  In the event of a conflict between the Stock Plan and this Plan, the terms of this Plan will control. The Deferred Stock Units referred to in this paragraph, and Stock issued thereunder, will reduce the authorized share number under Section 5(a) of the Stock Plan to the extent provided in the Stock Plan.

Article V – Accounts

5.1 Accounts Generally. An Account will be established for each Participant.  Accounts are for bookkeeping purposes only and the maintenance of Accounts will not require any segregation of assets by the Company.  The Company will not have any obligation whatsoever to set aside funds for the Plan or for the benefit of any Participant or Beneficiary, and no Participant or Beneficiary will have any rights to any amounts that may be set aside other than the rights of an unsecured creditor of the Company.

5.2 Adjustments to Accounts.  Accounts will be adjusted for deferrals of Retainer Fees, effective as of the dates that the Retainer Fees earned by the Participant would otherwise have been payable to the Participant, in accordance with normal Company procedures.  Cash Sub-Accounts will be adjusted for any earnings under Section 5.3 at such times as provided by the Company.  

5.3 Hypothetical Earnings on Accounts.  

(a) Cash Sub-Account.  Any Cash Sub-Accounts will be adjusted for earnings credits based on the measuring investment selected by the Company, in its sole discretion, for this purpose.  Amounts credited to a Cash Sub-Account will be treated as if they were invested in the selected measuring investment and shall be credited with earnings based on the performance of such measuring investment.  The measuring investment is solely a device for computing the amount of benefits to be paid to the Participant under the Plan and Participants have no claim or right to any actual investment.  

Until a new measuring investment is selected, the measuring investment for the Cash Sub-Accounts shall be the Fidelity U.S. Bond Index Fund.  

(b) Equity Sub-Account.  Subject to Section 4.1(a), any Retainer Fees directed to the Equity Sub-Account shall be credited to the Participant’s Account as of the dates that the associated Retainer Fees earned by the Participant during the applicable Plan Year would otherwise have been payable to the Participant.  The number of Deferred Stock Units to be credited shall be equal to the result of dividing the

Exhibit 10.1

cash amount deferred as of each such date by the Fair Market Value of one share of Common Stock on such date. Only full Deferred Stock Units shall be credited to a Participant’s Equity Sub-Account.  For the first three quarters of the Plan Year, any Retainer Fees remaining due to a fractional Deferred Stock Unit shall carry forward to the next quarter and be added to the deferred Retainer Fees directed to the Equity Sub-Account for such quarter.  For the final quarter of the Plan Year, any Retainer Fees remaining due to a fractional Deferred Stock Unit shall be forfeited.However, if the Participant’s equity deferral for the Plan Year was limited due to the maximum annual individual share limit set forth in the Stock Plan, if any, any Director Retainer Fees in excess of such cap automatically shall be deferred into the Cash Sub-Account.

(c) Cash Dividends.  Whenever any cash dividends are declared on the Stock, the Company will credit the Equity Sub-Account of each Participant on the date such dividend is paid with a number of additional Deferred Stock Units equal to the result of dividing (i) the product of (x) the total number of Deferred Stock Units credited to the Participant’s Sub-Account on the record date for such dividend and (y) the per share amount of such dividend by (ii) the Fair Market Value of one share of Stock on the date such dividend is paid by the Company to the holders of

Stock.

5.4 Statement of Account.  Each Director will be provided access to review his or her Account balance through electronic and such other means as determined by the Committee.

Article VI – Distributions from Accounts

6.1 Separation from Service.  A Participant will receive payment of his or her Account in a lump sum payment as of the first day of the seventh (7^th) calendar month following the Participant’s Separation from Service, subject to acceleration, if applicable under Section 6.2 or Section 6.3.  

6.2 Death of Participant.  If a Participant dies before receiving payment of the full balance of the Participant’s Account, then the balance of the Participant’s Account shall be paid in a lump sum payment to the Participant’s Beneficiary.  The lump sum payment will be made as soon as practicable following the Company’s receipt of notification of the Participant’s death.  However, if the identity of the Beneficiary cannot be determined, or if the Beneficiary cannot be located, payment to the Beneficiary may be delayed to the extent allowed under Code Section 409A and applicable guidance.

6.3 Change in Control.  In the event of a Change in Control, each Participant will receive payment of his or her full Account in a lump sum payment within sixty (60) days following the Change in Control event.  

Exhibit 10.1

6.4 Medium of Payment.

(a) Cash Sub-Account.  A Participant’s Cash Sub-Account, if any, will be paid in cash.

(b) Equity Sub-Account.  A Participant’s Equity Sub-Account, if any, will be paid in shares of Stock equal to the number of Deferred Stock Units credited to the Participant’s Equity Sub-Account on the payment date, provided that any fractional Deferred Stock Unit shall be paid in cash based on the Fair Market Value of one share of Stock on the payment processing date.  Notwithstanding the foregoing, upon a Change in Control, the Equity Sub-Account, if any, will be paid in cash.

(c) Payments from Sub-Accounts.  For administrative reasons, it is possible that payments from a Participant’s Cash Sub-Account and Equity Sub-Account may be made separately, but each such payment will be made within the applicable time frame stated above.

Article VII - Beneficiary

A Participant’s Beneficiary shall be the Participant’s estate.  

Article VIII – Administration

The Plan shall be administered by the Committee. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof as well as any agreement or instrument entered into hereunder; and establish, amend, waive and revoke rules and regulations as it deems necessary or desirable for the administration of the Plan. Further, the Committee shall have full power to make any other determination which may be necessary or advisable for the Plan’s administration. All such interpretations, rules, regulations and conditions shall be final, binding and conclusive upon the Participants and all other persons having or claiming any right or interest in the Plan or the Deferred Stock Units.

For the avoidance of doubt, the ministerial functions of the Plan shall be handled by employees of the Company, in accordance with the rules and regulations established by the Committee.

No member of the Board or Committee, and no officer or employee of the Company to whom the Committee delegates any of its power and authority hereunder or who otherwise assists in the administration of the Plan, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board and the Committee and such officers and employees shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Certificate of Incorporation and/or By-laws) and under any directors’ and officers’ liability insurance that may be in effect from time to time.

Exhibit 10.1

ArticleIX – Amendment and Termination

The Board may amend or terminate the Plan at any time in whole or in part; provided, however, that no amendment or termination shall directly or indirectly reduce the balance of Participant’s Account held hereunder as of the effective date of such amendment or termination; provided. Notwithstanding the foregoing, the Plan may be amended at any time, without the consent of any Participant (or beneficiary) if necessary or desirable, as determined by the Corporation, to comply with the requirements, or avoid the application, of Code Section 409A.

A termination of the Plan will not be effective to cause a deferral election in place under the Plan for the applicable year to be modified or discontinued prior to the end of such year, if such modification or discontinuation would violate Code Section 409A.  The Board may terminate the Plan and provide for the acceleration and liquidation of all benefits remaining due under the Plan pursuant to Treasury Regulations § 1.409A-3(j)(4)(ix). If such a termination and liquidation occurs, all deferrals and credits under the Plan will be discontinued as of the termination date established by the Board, and benefits remaining due will be paid in a lump-sum at the time specified by the Board as part of the action terminating the Plan and consistent with Treasury Regulations § 1.409A-3(j)(4)(ix).  

The Board may terminate the Plan other than pursuant to Treasury Regulations § 1.409A-3(j)(4)(ix).  In the event of such other termination, all deferral and credits under the Plan will be discontinued as of the end of the Plan Year, but all benefits remaining payable under the Plan will be paid at the same time and in the same form as if the termination had not occurred – that is, the termination will not result in any acceleration of any distribution under the Plan.

Article X - Miscellaneous

10.1 Unfunded Plan. The Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any benefits hereunder. No Participant, Beneficiary or any other person shall have any interest in any particular assets of the Company by reason of the right to receive a benefit under the Plan and any such Participant, Beneficiary or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan. All payments hereunder shall be made by the Company from its general assets at the time and in the manner provided for in the Plan. Nothing contained in the Plan shall constitute a guaranty by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder.

10.2 Non-Alienation of Benefits. Neither a Participant nor any other person shall have any rights to sell, assign, transfer, pledge, anticipate, or otherwise encumber the amounts, if any, payable under the Plan to the Participant or any other person. Any attempted sale, assignment, transfer or pledge shall be null and void and without any legal effect. No part of the amounts payable under the Plan shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.  

Exhibit 10.1

10.3 Code Section 409A.This Plan is subject to Code Section 409A and is intended to be maintained in compliance with Code Section 409A and the regulations thereunder applicable to nonqualified deferred compensation plans. To the extent any provision of this Plan does not satisfy the requirements of Code Section 409A or any regulations or other guidance issued by the Treasury Department or the Internal Revenue Service under Code Section 409A, such provision will be applied in a manner consistent with such requirements, regulations or guidance, notwithstanding any provision of the Plan to the contrary, and to the extent not prohibited by Code Section 409A, the provisions of the Plan and the rights of Participants and Beneficiaries hereunder shall be deemed to have been modified accordingly. Each payment and benefit hereunder shall constitute a “separately identified” amount within the meaning of Treasury Regulation §1.409A-2(b)(2). The Committee, in its sole discretion shall determine the requirements of Code Section 409A that are applicable to the Plan and shall interpret the terms of the Plan in a manner consistent therewith. Under no circumstances, however, shall the Company or any affiliate or any of its or their employees, officers, directors, service providers or agents have any liability to any person for any taxes, penalties or interest due on amounts paid or payable under the Plan, including any taxes, penalties or interest imposed under Code Section 409A.

10.4 Severability. If any term or provision of this Plan or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, then the remainder of the Plan, or the application of such term or provision to persons or circumstances other than those as to which it was held invalid or unenforceable, shall not be affected thereby, and each term and provision hereof shall be valid and enforceable to the fullest extent permitted by applicable law.

10.5 Successors in Interest. The obligation of the Company under the Plan shall be binding upon any successor or successors of the Company, whether by merger, consolidation, sale of assets or otherwise, and for this purpose reference herein to the Company shall be deemed to include any such successor or successors.

10.6 Governing Law. The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be determined solely in accordance with the laws of the State of Delaware, without regard to the conflicts of laws provisions thereof.

10.7 No Stockholder Rights.  Neither the Participant or any other person shall have any rights as a stockholder of the Company with respect to the Deferred Stock Units credited to the Participant’s Account until the share of Stock are issued to the Participant (or the Beneficiary of the Participant).

EX-10.2

Exhibit 10.2

RESIDEO TECHNOLOGIES, INC.

NON-EMPLOYEE DIRECTOR DEFERRAL ELECTION

2020 Election Form

As a non-employee director of Resideo Technologies, Inc. (“Resideo”), you are entitled to earn and receive an annual cash retainer for service on the Resideo Board of Directors (the “Board”) and earn and receive other fees relating to your service as a chairperson of the Board or as chairperson or member of any committee of the Board, as applicable (per annum, collectively, the “Annual Director Fees”).  You may also receive an annual grant of restricted stock units of Resideo for service on the Board during 2020 and for each subsequent year thereafter (each an “Annual Equity Award”).

Resideo has adopted the Resideo Deferred Compensation Plan for Non-Employee Directors (the “Director Deferred Plan”) in order to provide you with the ability to defer your Annual Director Fees in order to save on a tax-deferred basis. The Compensation Committee has also permitted you to defer settlement of your Annual Equity Award in accordance with the terms of the  2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. (the “Stock Plan”).

Annual Director Fees Election

The Director Deferred Plan provides participants with an opportunity to voluntarily defer 100% of your Annual Director Fees:

• Cash deferral:  Elect to retain your Annual Director Fees in cash form and defer payment of such amounts, generally until the first day of the seventh (7^th) calendar month following your separation of service from Resideo (“Cash Deferred Fees”).

OR

• Equity deferral:  Elect to convert your Annual Director Fees into deferred stock units of Resideo that each represent the right to receive one share of Resideo’s common stock by dividing (i) the Annual Director Fees that otherwise would have been paid with respect to the applicable calendar quarter but for this executed deferral election by (ii) the Fair Market Value (as defined in the Director Deferred Plan) of a share of Resideo’s common stock as of the payment date, subject to the maximum annual individual share limit (“Maximum Annual Limit”) under the Stock Plan.  Settlement of the units would be deferred, generally until the first day of the seventh (7^th) calendar month following your separation of service from Resideo (“Equity Deferred Fees”). If the number of deferred stock units you are entitled to receive as Equity Deferred Fees when aggregated with any equity grant you have received from Resideo on or prior to the applicable grant date during the year, includingyour Annual Equity Award, would exceed the Maximum Annual Limit, any Annual Director Fees that you receive in excess of the Maximum Annual Limit shall be deferred in cash form and shall instead be considered Cash Deferred Fees. You agree that only full deferred stock units shall be credited to your account.  For the first three quarters of the fiscal year any portion of the Annual Director Fees remaining due to a fractional deferred stock unit shall carry forward to the next fiscal quarter and be added to the deferred Annual Director Fees amount directed to your account for such fiscal quarter.  For the final quarter of the fiscal year, any portion of the Annual Director Fees remaining due to a fractional deferred stock unit shall be forfeited.

If you choose to defer your Annual Director Fees, any such cash deferral or equity deferral is vested as of the date(s) such fees are otherwise payable in cash to non-employee directors of the Board.

AND/OR

Annual Equity Award Deferral Election

Similarly, the Stock Plan provides you with an additional opportunity to voluntarily defer 100% of your Annual Equity Award, once it has vested in accordance with the terms and conditions of the related award agreement and the Stock Plan, generally until the first day of the seventh (7^th) calendar month following your separation of service from Resideo (“Deferred Equity Award”).

Exhibit 10.2

DEFERRAL ELECTIONS

Annual Director Fees (for year 2020 and beyond)

I, ___________________________, being a non-employee member of the Board of Directors of Resideo, hereby elect to
(check only one):

_____Defer 100% of my Annual Director Fees to a cash sub-account in accordance with the Director Deferred Plan and defer receipt of these Cash Deferred Fees until the seventh (7^th) calendar month following my separation of service from Resideo (or such other time as provided under the Director Deferred Plan).

____Receive 100% of my Annual Director Fees in the form of deferred stock units in accordance with the Director Deferred Plan and defer settlement of these units until the seventh (7^th) calendar month following my separation of service from Resideo (or such other time as provided under the Director Deferred Plan), provided that if I become subject to the Stock Plan’s Maximum Annual Limit for the year, the remaining Annual Director Fees that cannot be deferred into deferred stock units will be deferred into the cash sub-account as provided in the Director Deferred Plan.

____Receive 100% of my Annual Director Fees payable in cash on the date(s) such fees are otherwise payable.

Annual Equity Award (for year 2020 and beyond)

I, ___________________________, being a non-employee member of the Board of Directors of Resideo, hereby elect to
(check only one):

____Defer settlement of 100% of my Annual Equity Award, if any, until the seventh (7^th) calendar month following my separation of service from Resideo (or such other time as provided under the Stock Plan or applicable Award).

____Permit the settlement of 100% of my Annual Equity Award in accordance with the terms and conditions of the related award agreement and the Stock Plan.  

Timing of Election; VESTING and Tax Matters

I understand the following in connection with my Annual Director Fees and Annual Equity Award:

• These elections will be effective only if this signed, dated and completed form is received by Erich Barnes, VP Total Rewards (erich.barnes@resideo.com),no later than December 31, 2019.  If I fail to submit this election form by December 31, 2019, I will be deemed to have elected to receive (1) all of my Annual Director Fees in cash on the date(s) such fees are otherwise payable and (2) my Annual Equity Award, if any, pursuant to the terms and conditions of its award agreement and the Stock Plan.

• I have received and reviewed copies of the applicable award agreements, the Director Deferred Plan and the Stock Plan, as applicable.

• My elections will apply to all of my Annual Director Fees earned and received in 2020 and each year thereafter and my Annual Equity Award granted in 2020 and my elections are irrevocable for the duration of 2020.  My elections will also apply to all subsequent years, until I make a new election. If I wish to change my election for 2021 or any subsequent year, I must do so during the annual election period preceding the year in which my services relating to the Annual Director Fees were performed or the Annual Equity Award, if any, was granted (e.g., if I no longer wish to defer my Annual Director Fees and Annual Equity Award in 2022, I would submit my revised deferral election form no later than the end of the election period in 2021).

• I acknowledge and agree that my Annual Equity Award is unvested when granted and shall vest in in accordance with the terms and conditions of the related award agreement and the Stock Plan.  Any portion of my Annual Equity Award that does not vest in accordance with the same shall not be deferred under the Stock Plan and shall be forfeited.

• If I elect to (1) receive my Annual Director Fees in the form of deferred stock units or (2) defer my Annual Equity Grant, I acknowledge that my receipt of shares of Resideo’s common stock in settlement of the related deferred stock units will be taxable as ordinary income to me based on the value of the shares on the date of settlement. I further acknowledge that regardless of my deferral elections, Annual Director Fees are subject to FICA/SECA taxation at the time that they would have been paid, had no deferral occurred under the Director Deferred Plan and similarly my Annual Equity Grant is subject to FICA/SECA taxation upon the first anniversary of the grant date, when the award vests.

Because individual circumstances may vary, Resideo cannot provide tax advice and you should consult with your own tax advisor regarding the income tax consequences of your potential election.

Signature of Non-Employee Director Date

Return to Erich Barnes, VP Total Rewards (erich.barnes@resideo.com), no later than December 31, 2019

US.124068547.07

EX-10.3

Exhibit 10.3

2018 STOCK PLAN FOR

NON-EMPLOYEE DIRECTORS OF

RESIDEO TECHNOLOGIES, INC.

FORM OF RESTRICTED STOCK UNIT AGREEMENT

(Revised effective September 4, 2019)

RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”) as of the [DAY] day of [MONTH, YEAR] (the “Award Date”) between Resideo Technologies, Inc. (the “Company”) and [DIRECTOR NAME].

1. Grant of Award. The Company has granted you [NUMBER] Restricted Stock Units (the “Award”), subject to the terms of this Agreement and the terms of the 2018 Stock Plan For Non-Employee Directors of Resideo Technologies, Inc. (the “Plan”). The Company will hold the Restricted Stock Units in a bookkeeping account on your behalf until they become payable or are forfeited or cancelled.

2. Rights as a Shareholder. You shall have no rights as a stockholder of the Company with respect to any Shares of Common Stock covered by or relating to the Restricted Stock Units until such Shares are actually delivered to you. For purposes of clarification, you shall not have any voting or dividend rights with respect to the Shares of Common Stock underlying the Restricted Stock Units unless and until such Shares are actually delivered to you.

3. Dividend Equivalents. Except as otherwise determined by the Committee, in its sole discretion, if a cash dividend is declared and paid by the Company with respect to its Common Stock prior to the settlement date of the Award specified in Section 6, you will be credited as of the applicable dividend payment date with an additional number of Restricted Stock Units (the “Dividend RSUs”) equal to (i) the total cash dividend you would have received if your then outstanding Restricted Stock Units (including any previously credited Dividend RSUs) had been actual Shares, divided by (ii) the Fair Market Value of a Share as of the applicable dividend payment date (with the quotient rounded down to the nearest whole number).  Prior to the time your Restricted Stock Units are vested, Dividend RSUs will be subject to the same vesting provisions as apply to the Restricted Stock Units to which such Dividend RSUs relate. Once credited to your account and vested as provided in the foregoing sentence, Dividend RSUs will be considered Restricted Stock Units for all purposes of this Agreement.

4. Payment Amount. Each Restricted Stock Unit represents one (1) Share of Common Stock.

5. Vesting. Except in the event of the termination of your directorship due to death, the incurrence of a Disability, or the occurrence of a Change in Control, the Restricted Stock Units will vest as follows: [VESTING PROVISIONS CONSISTENT WITH THE PLAN]. As used herein “Disability” means the permanent inability as a result of accident or sickness to perform any and every duty pertaining to your occupation or employment for which you are suited by reason of your previous training, education and experience; provided, that, to the extent an Award subject to Section 409A of the Code shall become payable upon your Disability, a Disability shall not be deemed to have occurred for such purposes unless the circumstances would also result in a “disability” within the meaning of Section 409A of the Code, unless otherwise provided in this Agreement.

6. Form and Timing of Payment. Vested Restricted Stock Units will be redeemed solely for Shares. Except to the extent that a valid election to defer settlement and payment of vested Restricted Stock Units has been made as provided in Section 12 prior to the grant of this Award, payment of vested Restricted Stock Units will be made as soon as practicable following the applicable vesting date but in no event later than two and one-half (2-1/2) months following the end of the calendar year in which the vesting date occurs. Settlement and payment of any deferred restricted stock units shall be made in accordance with the governing election form. Delivery of Shares in settlement of this Agreement shall be effected by an appropriate entry in the stock register maintained by the Company’s transfer agent with a notice of issuance provided to you, or by the electronic delivery of the Shares to a designated brokerage account, and shall be subject to compliance with all applicable legal requirements, including compliance with the requirements of applicable federal and state securities laws. As determined by the Company in its sole discretion prior to the vesting date, any fractional Shares may be paid in cash or rounded up to the nearest whole Share.

7. Termination of Directorship. If you cease to be a director of the Company for any reason other than your death or Disability, any Restricted Stock Units that have not vested as of the date of the termination of your directorship will immediately be forfeited, and your rights with respect to these Restricted Stock Units will end.

8. Death or Disability. If you cease to be a director of the Company because of your death or Disability, any vesting restrictions on Restricted Stock Units will lapse, and payment will be made in accordance with Section 6. If you are deceased, the Company will make a payment to your estate only after the Committee has determined that the payee is the duly appointed executor or administrator of your estate.

9. Change in Control. Notwithstanding anything herein to the contrary, in the event of a Change in Control (as defined in the Plan), Restricted Stock Units that have not vested or terminated as of the date of Change in Control will immediately vest.

10. Withholdings. The Company shall have the power and the right to deduct or withhold, or require you to remit, prior to any issuance or delivery of Shares underlying Restricted Stock Units, an amount sufficient to satisfy taxes imposed under the laws of any country, state, province, city or other jurisdiction, including but not limited to income taxes, capital gain taxes, transfer taxes, and social security contributions, and National Insurance Contributions, that are required by law to be withheld as determined by the Company.

11. Transfer of Award. You may not transfer the Restricted Stock Units or any interest in such Units except by will or the laws of descent and distribution or except as otherwise permitted by Section 12 of the Plan. Any other attempt to dispose of your interest will be null and void.

12. Deferral of Payment. To the extent you have elected to defer the settlement and payment of the vested Restricted Stock Units subject to this Award by submitting an election form approved by the Committee to the Company not later than the December 31 immediately preceding the Award Date, settlement and payment of this Award will occur as provided in such election form, rather than as provided in Section 6 above.

13. Restrictions on Payment of Shares. Payment of Shares for your Restricted Stock Units is subject to the conditions that, to the extent required at the time of settlement, (i) the Shares underlying the Restricted Stock Units will be duly listed, upon official notice of redemption, upon the New York Stock Exchange, and (ii) a Registration Statement under the Securities Act of 1933 with respect to the Shares will be effective. The Company will not be required to deliver any Common Stock until all applicable federal and state laws and regulations have been complied with and all legal matters in connection with the issuance and delivery of the Shares have been approved by counsel for the Company.

14. Adjustments. Any adjustments to the Restricted Stock Units will be governed by Section 9 of the Plan.

15. Disposition of Securities. By accepting the Award, you acknowledge that you have read and understand the Company’s policy, and are aware of and understand your obligations under applicable securities laws in respect of trading in the Company’s securities. The Company will have the right to recover, or receive reimbursement for, any compensation or profit you realize on the disposition of Shares received for Restricted Stock Units to the extent that the Company has a right of recovery or reimbursement under applicable securities laws.

16. Plan Terms Govern. The vesting and redemption of Restricted Stock Units, the disposition of any Shares received for Restricted Stock Units, the treatment of gain on the disposition of these Shares, and the treatment of Dividend Equivalents are subject to the provisions of the Plan and any rules that the Committee may prescribe. The Plan document, as may be amended from time to time, is incorporated into this Agreement. Capitalized terms used in this Agreement have the meaning set forth in the Plan, unless otherwise stated in this Agreement. In the event of any conflict between the terms of the Plan and the terms of this Agreement, the Plan will control. By accepting the Award, you acknowledge that the Plan and the Plan prospectus, as in effect on the date of this Agreement, have been made available to you for your review.

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17. Personal Data.

a. By entering into this Agreement, and as a condition of the grant of the Restricted Stock Units, you acknowledge that your personal data is collected, used, and transferred in view of the performance of this Agreement as described in this Section 17, which is to the full extent permitted by and in full compliance with applicable law.

b. You understand that the Company holds, by means of an automated data file, certain personal information about you, including, but not limited to, name, home address and telephone number, date of birth, social insurance number, retainer payments, nationality, job title, any shares or directorships held, details of all Restricted Stock Units or other entitlement to shares awarded, canceled, exercised, vested, unvested, or outstanding in your favor, for the purpose of managing and administering the Plan (“Data”).

c. You understand that part or all of your Data may be also collected, used, or held by the Company or its subsidiaries or affiliates (“Affiliates”) for the purposes of managing and administering this award or any previous award/incentive plans. Specifically, your Data is transferred to, and/or collected, used, or held by [the Corporate Executive Compensation Department, the Company’s senior executives (e.g., SVP-HR, CEO, Corporate Secretary’s office), the Committee, the Committee’s compensation consultant, and Morgan Stanley]. The Company stores your Data for this purpose [until the last vesting date described in this Agreement OR for a period of xx years / months / days].

d. You understand that the Company and its Affiliates will transfer Data among themselves as necessary for the purposes of implementation, administration, and management of your participation in the Plan, and that the Company or its Affiliates may transfer data among themselves, and/or each, in turn, further transfer Data to any third parties assisting the Company in the implementation, administration, and management of the Plan (the “Data Recipients”).

e. You understand that the Company or its Affiliates, as well as the Data Recipients, are or may be located in your country of residence or elsewhere, such as the United States. You authorize the Company or its Affiliates, as well as the Data Recipients, to receive, possess, use, retain, and transfer Data in electronic or other form, for the purposes of implementing, administering, and managing your participation in the Plan, including any transfer of such Data, as may be required for the administration of the Plan and/or the subsequent holding of Shares on your behalf, to a broker or third party with whom the Shares may be deposited.

f. You understand that you may show your opposition to the processing and transfer of your Data, and, may at any time, review the Data or request that any necessary amendments be made to it. To exercise your data privacy rights, refer to the Company’s Data Privacy Global Policy [located on the Intranet / provide link to policy / otherwise describe how to find the policy].

g. As soon as your Data is transferred to a third party Data Recipient (e.g., Morgan Stanley or the Committee’s compensation consultant), (i) the Data Recipient becomes responsible for this Data (as a data controller), (ii) the Data will be subject to the Data Recipient’s privacy statements and notices, (iii) the Company and its Affiliates will no longer be responsible for the transferred Data, and (iv) you should refer to the Data Recipient’s statements and notices about its data protection policies and practices.

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18. Discretionary Nature and Acceptance of Award. By accepting this Award, you agree to be bound by the terms of this Agreement and acknowledge that:

a. The Company is granting your Restricted Stock Units, and this Agreement is not derived from any preexisting labor relationship between you and the Company, but rather from a mercantile relationship.

b. The Company may administer the Plan from outside your country of residence and United States law will govern all Restricted Stock Units granted under the Plan.

c. Benefits and rights provided under the Plan do not constitute regular or periodic payments.

19. Limitations. Payment of your Restricted Stock Units is not secured by a trust, insurance contract or other funding medium, and you do not have any interest in any fund or specific asset of the Company by reason of this Award or the account established on your behalf.

20. Incorporation of Other Agreements. This Agreement and the Plan constitute the entire understanding between you and the Company regarding the Restricted Stock Units. This Agreement supersedes any prior agreements, commitments or negotiations concerning the Restricted Stock Units.All capitalized terms used and not defined herein shall have the meaning given to such terms in the Plan.

21. Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of the other provisions of the Agreement, which will remain in full force and effect. Moreover, if any provision is found to be excessively broad in duration, scope or covered activity, the provision will be construed so as to be enforceable to the maximum extent compatible with applicable law.

22. Governing Law. The Plan, this Agreement, and all determinations made and actions taken under the Plan or this Agreement shall be governed by the internal substantive laws, and not the choice of law rules, of the State of Delaware and construed accordingly, to the extent not superseded by applicable federal law.

23. Agreement Changes. The Company reserves the right to change the terms of this Agreement and the Plan without your consent to the extent necessary or desirable to comply with the requirements of Section 409A of the Code, the Treasury regulations and other guidance thereunder.

24. Acknowledgements and Acceptance. By accepting this Agreement, you agree to the following: (i) you have carefully read, fully understand and agree to all of the terms and conditions described in this Agreement, the Plan, the Plan’s prospectus and all accompanying documentation; and (ii) you understand and agree that this Agreement and the Plan constitute the entire understanding between you and the Company regarding the Restricted Stock Units, and that any prior agreements, commitments or negotiations concerning the Restricted Stock Units are replaced and superseded.

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EX-10.4

Exhibit 10.4

RESIDEO TECHNOLOGIES, INC.

NON-EMPLOYEE DIRECTOR

FORM OF DEFERRED STOCK UNIT AGREEMENT (DEFERRED DIRECTOR FEES)

DEFERRED STOCK UNIT AGREEMENT (this “Agreement”) is entered into as of the [DAY] day of [MONTH, YEAR] (the “Award Date”) between Resideo Technologies, Inc. (the “Company”) and [DIRECTOR NAME]. Capitalized terms used in this Agreement have the meaning set forth in the Resideo Deferred Compensation Plan for Non-Employee Directors(the “Deferred Compensation Plan”), unless otherwise stated in this Agreement.

Background

A.  Pursuant to the provisions of the Deferred Compensation Plan and the 2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. (as amended, the “Stock Plan”), you have elected to receive 100% of your (a) annual cash retainer for service on the Company’s Board of Directors (the “Board”) earned and paid during 20[  ], and (b) other fees relating to your service as a chairperson of the Board or chairperson or member of any committee of the Board (other than reimbursements), as applicable, earned and paid during 20[  ] (collectively, the “20[  ] Director Fees”) in the form of restricted stock units deferred pursuant to Section 6(g) of the Stock Plan (“Deferred Stock Units”), each of which represents the right to receive one Share of the Company’s Common Stock. Settlement of the Deferred Stock Units will be deferred until such time as detailed in the Deferred Compensation Plan.

B.  The number of Deferred Stock Units to be credited to your account shall be determined by dividing (i) 100% of the 20[  ] Director Fees that otherwise would have been paid on an applicable payment date by the Fair Market Value of one share of Common Stock on such date (each, a “Deferred Stock Unit Award”).  

C.  Each quarterly Deferred Stock Unit Award during 20[  ] will be evidenced by an electronic grant notification, and each such grant notification when issued by the Company will be incorporated into and made a part of this Agreement.  The terms and conditions of each quarterly Deferred Stock Unit Award are set forth in this Agreement, including the applicable grant notification, and in the Stock Plan and the Deferred Compensation Plan, copies of which you agree you have received and reviewed.

1. Grant of Award. Subject to Sections 7 and 8 below, Deferred Stock Units shall be credited to your account as described in this Section 1 on the date you would have otherwise received a payment of the 20[  ]Director Fees (each such date, a “Grant Date”).  The number of Deferred Stock Units to be credited to your account on the applicable Grant Date shall be equal to the result of dividing the cash amount deferred as of such date by the Fair Market Value of one share of Common Stock on such date, subject to the maximum annual individual share limit (“Maximum Annual Limit”) under the Stock Plan (“Grant Date Calculation”).  If a Grant Date Calculation is performed and after giving effect to any equity award granted to you by the Company on or prior to such Grant Date during 20[  ], including your annual grant of the Company’s restricted stock units for service on the Board during 20[  ] (collectively, the “Equity Grant”), the number of Deferred Stock Units you are entitled to receive when aggregated with the Equity Grant would exceed the Maximum Annual Limit, any 20[  ] Director Fees in excess of the Maximum Annual Limit shall instead be deferred into a cash sub-account pursuant to the terms of the Deferred Compensation Plan. If a Grant Date Calculation is performed relating to a payment of 20[  ] Director Fees other than the payment of the fourth fiscal quarter’s 20[  ] Director Fees and such Grant Date Calculation would otherwise result in a fractional Deferred Stock Unit amount, the remaining cash value not applied to Deferred Stock Units (since fractional units are not allowed under the Stock Plan) shall be rolled forward in cash and added to the next payment of 20[  ] Director Fees and applied to the subsequent Grant Date Calculation.  In the event a fractional amount remains after the fourth fiscal quarter’s Grant Date Calculation, such fractional amount shall be forfeited. Each Deferred Stock Unit will represent the right to receive one share of the Company’s Common Stock.  The Deferred Stock Units granted to you will be credited to an account in your name maintained by the Company.  This account shall be unfunded and maintained for book-keeping purposes only, with the Deferred Stock Units representing an unfunded and unsecured obligation of the Company.

2. Rights as a Stockholder. You shall have no rights as a stockholder of the Company with respect to any Shares of Common Stock covered by or relating to the Deferred Stock Units until such Shares are actually delivered to you. For purposes of clarification, you shall not have any voting or dividend rights with respect to the Shares of Common Stock underlying the Deferred Stock Units unless and until such Shares are actually delivered to you.

3. Dividend Equivalents. Except as otherwise determined by the Committee, in its sole discretion, if a cash dividend is declared and paid by the Company with respect to its Common Stock prior to the settlement date of the Award specified in Section 6, you will be credited on the date such dividend is paid with a number of additional Deferred Stock Units (the “Dividend DSUs”) equal to the result of dividing (i) the product of (x) the total number of Deferred Stock Units credited to your account on the record date for such dividend and (y) the per share amount of such dividend by (ii) the Fair Market Value of one Share on the date such dividend is paid by the Company to the holders of Common Stock.  Once credited to your account, Dividend DSUs will be considered Deferred Stock Units for all purposes of this Agreement.

4. Payment Amount. Each Deferred Stock Unit represents one (1) share of Common Stock.

5. Vesting. The Deferred Stock Units subject to this Agreement are 100% vested as of their respective Grant Dates.

6. Form and Timing of Payment. Deferred Stock Units will be redeemed solely for Shares. Settlement and payment of the Deferred Stock Units shall be made in accordance with the terms of the Deferred Compensation Plan. Delivery of Shares in settlement of this Agreement shall be effected by an appropriate entry in the stock register maintained by the Company’s transfer agent with a notice of issuance provided to you, or by the electronic delivery of the Shares to a designated brokerage account, and shall be subject to compliance with all applicable legal requirements, including compliance with the requirements of applicable federal and state securities laws. As determined by the Company in its sole discretion prior to the settlement date, any fractional Shares may be paid in cash or rounded up to the nearest whole Share.

7. Termination of Directorship. If you cease to be a director of the Company for any reason you will no longer be entitled to receive any additional quarterly Deferred Stock Unit Awards pursuant to this Agreement.  

8. Change in Control. Upon a Change in Control you will no longer be entitled to receive any additional quarterly Deferred Stock Unit Awards pursuant to this Agreement.

9. Withholdings. To the extent applicable, the Company shall have the power and the right to deduct or withhold, or require you to remit, prior to any issuance or delivery of Shares underlying Deferred Stock Units, an amount sufficient to satisfy taxes imposed under the laws of any country, state, province, city or other jurisdiction, including but not limited to income taxes, capital gain taxes, transfer taxes, and social security contributions, and National Insurance Contributions, that are required by law to be withheld as determined by the Company.

10. Transfer of Award. You may not transfer the Deferred Stock Units or any interest in such Units except by will or the laws of descent and distribution or except as otherwise permitted by Section 12 of the Deferred Compensation Plan. Any other attempt to dispose of your interest will be null and void.

11. Restrictions on Payment of Shares. Payment of Shares for your Deferred Stock Units is subject to the conditions that, to the extent required at the time of settlement, (i) the Shares underlying the Deferred Stock Units will be duly listed, upon official notice of redemption, upon the New York Stock Exchange, and (ii) a Registration Statement under the Securities Act of 1933 with respect to the Shares will be effective. The Company will not be required to deliver any Common Stock until all applicable federal and state laws and regulations have been complied with and all legal matters in connection with the issuance and delivery of the Shares have been approved by counsel for the Company.

12. Adjustments. Any adjustments to the Deferred Stock Units will be governed by Section 9 of the Stock Plan.

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13. Disposition of Securities. By accepting the Deferred Stock UnitAward, you acknowledge that you have read and understand the Company’s policy, and are aware of and understand your obligations under applicable securities laws in respect of trading in the Company’s securities. The Company will have the right to recover, or receive reimbursement for, any compensation or profit you realize on the disposition of Shares received for Deferred Stock Units to the extent that the Company has a right of recovery or reimbursement under applicable securities laws.

14. Plan Terms Govern. The redemption of Deferred Stock Units, the disposition of any Shares received for Deferred Stock Units, the treatment of gain on the disposition of these Shares, and the treatment of Dividend Equivalents are subject to the provisions of the Stock Plan, the Deferred Compensation Plan and any rules that the Committee may prescribe. The Stock Plan document, as may be amended from time to time, is incorporated into this Agreement. Capitalized terms used in this Agreement have the meaning set forth in the Deferred Compensation Plan, unless otherwise stated in this Agreement. In the event of any conflict between the terms of the Stock Plan or the Deferred Compensation Plan and the terms of this Agreement, the Stock Plan and the Deferred Compensation Plan will control. In the event of any conflict between the terms of the Stock Plan and the terms of the Deferred Compensation Plan, the Deferred Compensation Plan will control. By accepting the Award, you acknowledge that the Stock Plan and the Stock Plan prospectus as well as the Deferred Compensation Plan, each as in effect on the date of this Agreement, have been made available to you for your review.

15. Personal Data.

a. By entering into this Agreement, and as a condition of the grant of the Deferred Stock Units, you acknowledge that your personal data is collected, used, and transferred in view of the performance of this Agreement as described in this Section 15, which is to the full extent permitted by and in full compliance with applicable law.

b. You understand that the Company holds, by means of an automated data file, certain personal information about you, including, but not limited to, name, home address and telephone number, date of birth, social insurance number, retainer payments, nationality, job title, any shares or directorships held, details of all Deferred Stock Units or other entitlement to shares awarded, canceled, exercised, vested, unvested, or outstanding in your favor, for the purpose of managing and administering the Stock Plan (“Data”).

c. You understand that part or all of your Data may be also collected, used, or held by the Company or its subsidiaries or affiliates (“Affiliates”) for the purposes of managing and administering this award or any previous award/incentive plans. Specifically, your Data is transferred to, and/or collected, used, or held by [the Corporate Executive Compensation Department, the Company’s senior executives (e.g., SVP-HR, CEO, Corporate Secretary’s office), the Committee, the Committee’s compensation consultant, and Morgan Stanley]. The Company stores your Data for this purpose for a period of [xx years / months / days].

d. You understand that the Company and its Affiliates will transfer Data among themselves as necessary for the purposes of implementation, administration, and management of your participation in the Stock Plan, and that the Company or its Affiliates may transfer data among themselves, and/or each, in turn, further transfer Data to any third parties assisting the Company in the implementation, administration, and management of the Stock Plan (the “Data Recipients”).

e. You understand that the Company or its Affiliates, as well as the Data Recipients, are or may be located in your country of residence or elsewhere, such as the United States. You authorize the Company or its Affiliates, as well as the Data Recipients, to receive, possess, use, retain, and transfer Data in electronic or other form, for the purposes of implementing, administering, and managing your participation in the Stock Plan, including any transfer of such Data, as may be required for the administration of the Stock Plan and/or the subsequent holding of Shares on your behalf, to a broker or third party with whom the Shares may be deposited.

3

f. You understand that you may show your opposition to the processing and transfer of your Data, and, may at any time, review the Data or request that any necessary amendments be made to it. To exercise your data privacy rights, refer to the Company’s Data Privacy Global Policy [located on the Intranet / provide link to policy / otherwise describe how to find the policy].

g. As soon as your Data is transferred to a third party Data Recipient (e.g., Morgan Stanley or the Committee’s compensation consultant), (i) the Data Recipient becomes responsible for this Data (as a data controller), (ii) the Data will be subject to the Data Recipient’s privacy statements and notices, (iii) the Company and its Affiliates will no longer be responsible for the transferred Data, and (iv) you should refer to the Data Recipient’s statements and notices about its data protection policies and practices.

16. Discretionary Nature and Acceptance of Award. By accepting this Award, you agree to be bound by the terms of this Agreement and acknowledge that:

a. The Company is granting your Deferred Stock Units, and this Agreement is not derived from any preexisting labor relationship between you and the Company, but rather from a mercantile relationship.

b. The Company may administer the Deferred Compensation Plan and Stock Plan from outside your country of residence and United States law will govern all Deferred Stock Units granted hereunder.

c. Benefits and rights provided under the Stock Plan do not constitute regular or periodic payments.

17. Limitations. Payment of your Deferred Stock Units is not secured by a trust, insurance contract or other funding medium, and you do not have any interest in any fund or specific asset of the Company by reason of this Award or the account established on your behalf.

18. Incorporation of Other Agreements. This Agreement, the Stock Plan and the Deferred Compensation Plan constitute the entire understanding between you and the Company regarding the Deferred Stock Units. This Agreement supersedes any prior agreements, commitments or negotiations concerning the Deferred Stock Units.

19. Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of the other provisions of the Agreement, which will remain in full force and effect. Moreover, if any provision is found to be excessively broad in duration, scope or covered activity, the provision will be construed so as to be enforceable to the maximum extent compatible with applicable law.

20. Governing Law. The Deferred Compensation Plan, the Stock Plan, this Agreement, and all determinations made and actions taken under the Deferred Compensation Plan and the Stock Plan or this Agreement shall be governed by the internal substantive laws, and not the choice of law rules, of the State of Delaware and construed accordingly, to the extent not superseded by applicable federal law.

21. Agreement Changes. The Company reserves the right to change the terms of this Agreement, the Deferred Compensation Plan and the Stock Plan without your consent to the extent necessary or desirable to comply with the requirements of Section 409A of the Code, the Treasury regulations and other guidance thereunder.

22. Acknowledgements and Acceptance. By accepting this Agreement, you agree to the following: (i) you have carefully read, fully understand and agree to all of the terms and conditions described in this Agreement, the Deferred Compensation Plan, the Stock Plan, the Stock Plan’s prospectus and all accompanying documentation; and (ii) you understand and agree that this Agreement and the Deferred Compensation Plan and the Stock Plan constitute the entire understanding between you and the Company regarding the Deferred Stock Units, and that any prior agreements, commitments or negotiations concerning the Deferred Stock Units are replaced and superseded.

4

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Michael G. Nefkens, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Resideo Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6th, 2019	By:	/s/Michael G. Nefkens
		Michael G. Nefkens
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph D. Ragan III, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Resideo Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6th, 2019	By:	/s/Joseph D. Ragan III
		Joseph D. Ragan III
		Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resideo Technologies, Inc. (the Company) on Form 10-Q for the period ending  September 30, 2019 as  filed with the Securities and Exchange Commission on the date hereof (the Report), I, Michael G. Nefkens, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6th, 2019	By:	/s/ Michael G. Nefkens
		Michael G. Nefkens
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resideo Technologies, Inc. (the Company) on Form 10-Q for the period ending  September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Joseph D. Ragan III, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6th, 2019	By:	/s/ Joseph D. Ragan III
		Joseph D. Ragan III
		Executive Vice President and Chief Financial Officer

XML

Revenue Recognition - Schedule of Disaggregated Revenue (Parenthetical) (Details) - ADI Global Distribution - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
U.S. and Canada
Disaggregation Of Revenue [Line Items]
Increase in revenue	$ 30	$ 35
India
Disaggregation Of Revenue [Line Items]
Decrease in revenue	$ 30	$ 35

XML

Acquisitions - Additional Information (Details) - USD ($) $ in Millions				9 Months Ended
	Jun. 27, 2019	May 21, 2019	Mar. 28, 2019	Sep. 30, 2019
Business Acquisition [Line Items]
Business acquisition				$ 17
Buoy Labs | Products & Solutions
Business Acquisition [Line Items]
Business acquisition			$ 6
Business acquisition, goodwill and intangible assets acquired			$ 6
Whisker Labs | Products & Solutions
Business Acquisition [Line Items]
Business acquisition		$ 5
Business acquisition, goodwill and intangible assets acquired		$ 5
LifeWhere | Products & Solutions
Business Acquisition [Line Items]
Business acquisition	$ 6
Business acquisition, goodwill and intangible assets acquired	$ 6

XML

Repositioning and Other Charges - Summary of Pretax Distribution of Total Net Repositioning Charges by Unaudited Consolidated and Combined Statement of Operations (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018
Restructuring Cost And Reserve [Line Items]
Repositioning and related expenses	$ 9	$ 34	$ 5
Cost of Goods Sold
Restructuring Cost And Reserve [Line Items]
Repositioning and related expenses	5	18	4
Selling, General and Administrative Expenses
Restructuring Cost And Reserve [Line Items]
Repositioning and related expenses	$ 4	$ 16	$ 1

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Commitments and Contingencies - Summary of Recorded Obligations for Product Warranties and Product Performance Guarantee (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Product Warranties and Guarantees [Roll forward]
Beginning of period	$ 26	$ 17
Accruals for warranties/guarantees issued during the year	10	12
Adjustment of pre-existing warranties/guarantees	(1)	(2)
Settlement of warranty/guarantee claims	(12)	(12)
End of period	$ 23	$ 15

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Stock-Based Compensation Plans - Additional Information (Details) - 2018 Stock Incentive Plan	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Performance-Based Restricted Stock Units | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted | shares	319,771
Time Based Restricted Stock Units | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted | shares	1,255,440
Performance-Based and Service Based Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average grant date fair value | $ / shares	$ 22.06
Stock Options | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted | shares	1,155,566
Weighted average exercise price per share | $ / shares	$ 24.37
Weighted average grant date fair value per share | $ / shares	$ 6.71

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Leases

Leases—Effective January 1, 2019, arrangements containing leases are evaluated as an operating or finance lease at lease inception. For operating leases, the Company recognizes an operating right-of-use asset and operating lease liability at lease commencement based on the present value of lease payments over the lease term.

Since an implicit rate of return is not readily determinable for the Company's leases, an incremental borrowing rate is used in determining the present value of lease payments, and is calculated based on information available at the lease commencement date.  The incremental borrowing rate is determined using a portfolio approach based on the rate of interest the Company would have to pay to borrow funds on a collateralized basis over a similar term. The Company references a market yield curve consistent with the Company's credit rating which is risk-adjusted to approximate a collateralized rate in the currency of the lease. These rates are updated on a quarterly basis for measurement of new lease obligations.Most leases include renewal options; however, generally it is not reasonably certain that these options will be exercised at lease commencement. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the Company’s balance sheet. The Company does not separate lease and non-lease components for its real estate and automobile leases.

Recent Accounting Pronouncements

Recent Accounting Pronouncements—The Company considers the applicability and impact of all recent accounting standardsupdates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed anddetermined to be either not applicable or are expected to have an immaterial impact on the consolidated and combined financial position or results ofoperations.

The Company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. As permitted by the new guidance, the Company elected the package of practical expedients, which among other things, allowed historical lease classification to be carried forward.

Upon adoption of ASU No. 2016-02, the Company recognized an aggregate lease liability of $115 million, calculated based on the present value of the remaining minimum lease payments for qualifying leases as of January 1, 2019, with a corresponding right-of-use asset of $112 million. The cumulative-effect adjustment recognized to opening retained earnings was not material. The adoption of the new guidance did not impact the Company’s unaudited consolidated interim statement of operations or cash flows.

In February 2018, the FASB issued guidance that allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from the U.S. Tax Cuts and Jobs Act (“U.S. Tax Reform”) to retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company adopted the standard on January 1, 2019 and has not reclassified the income tax effects of U.S. Tax Reform from accumulated other comprehensive income to retained earnings. The Company has adopted the aggregate portfolio accounting policy for recognizing the disproportionate income tax effects in accumulated other comprehensive income.

On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides guidance designed to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. From November 2018 to May 2019, amendments to Topic 326 were issued to clarify numerous accounting topics. When determining such expected credit losses, the guidance requires companies to apply a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendment is effective on a modified retrospective basis for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for fiscal years and interim periods beginning after December 15, 2018. The Company does not expect adoption of this pronouncement to have a material financial statement impact.

In August 2018, the FASB issued guidance that amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. The Company does not expect this new standard to have a significant impact to its disclosures.

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Stock-Based Compensation Plans

9 Months Ended

Sep. 30, 2019

Compensation Related Costs [Abstract]

Stock-Based Compensation Plans

Note 14. Stock-Based Compensation Plans

Restricted Stock Units (“RSUs”)

During the nine months ended September 30, 2019, as part of the Company’s annual long-term compensation under the 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates (the “Stock Incentive Plan”), it granted 319,771 performance-based RSUs and 1,255,440 time-based RSUs to eligible employees. The weighted average grant date fair value per share for these shares was $22.06.

Stock Options

During the nine months ended September 30, 2019, as part of the Company’s annual long-term compensation under the Stock Incentive Plan, 1,155,566 stock options were granted to eligible employees at a weighted average exercise price per share of $24.37 and weighted average grant date fair value per share of $6.71.

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Inventories (Tables)

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Inventories

	September 30,		December 31,
	2019		2018
Raw materials	$	143	$	167
Work in process		19		34
Finished products		567		427
	$	729	$	628

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Accrued Liabilities

9 Months Ended

Sep. 30, 2019

Payables And Accruals [Abstract]

Accrued Liabilities

Note 10. Accrued Liabilities

	September 30,		December 31,
	2019		2018
Obligations payable to Honeywell	$	140	$	140
Taxes payable		41		76
Compensation, benefit and other employee related		73		73
Other		277		214
	$	531	$	503

Refer to “Note 15. Commitments and Contingencies” of this Form 10-Q for further details on Obligations payable to Honeywell.

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Repositioning and Other Charges

9 Months Ended

Sep. 30, 2019

Restructuring And Related Activities [Abstract]

Repositioning and Other Charges

Note 6. Repositioning and Other Charges

During the second quarter of 2019, management began a repositioning plan to reduce operating costs and better align the Company’s workforce with the needs of the business going forward. Repositioning and related expenses were $9 million and $34 million for the three and nine months ended September 30, 2019, respectively, and primarily related to severance.

A summary of repositioning charges follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019			2018
Severance	$	9	$	-	$	35		$	4
Asset impairments		-		-		-			1
Reserve adjustments		-		-		(1	)		-
Total net repositioning charges	$	9	$	-	$	34		$	5

The following table summarizes the pretax distribution of total net repositioning charges by unaudited Consolidated and Combined Statement of Operations classification:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of goods sold	$	5	$	-	$	18	$	4
Selling, general and administrative expenses		4		-		16		1
	$	9	$	-	$	34	$	5

The following table summarizes the pretax impact of total net repositioning charges by segment:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Products & Solutions	$	9	$	-	$	28	$	5
ADI Global Distribution		-		-		6		-
	$	9	$	-	$	34	$	5

The following table summarizes the status of total repositioning reserves related to severance cost included in Accrued liabilities in the unaudited Consolidated Balance Sheet:

	Nine Months Ended
	September 30,
	2019
Beginning of period	$	13
Charges		35
Usage – cash		(22	)
Adjustments		(1	)
End of period	$	25

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Organization, Consolidation and Presentation of Financial Statements

9 Months Ended

Sep. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization, Operations and Basis of Presentation

Note 1. Organization, Operations and Basis of Presentation

Business Description

Resideo Technologies, Inc. (“Resideo” or “the Company”), is a global provider of products, software, solutions and technologies that help homeowners stay connected and in control of their comfort, security and energy use. The Company is a leader in the home heating, ventilation and air conditioning controls and security markets, and a leading global distributor of low-voltage electronic and security products.

Separation from Honeywell

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”). On October 3, 2018, Exhibit 99.1 to Amendment No. 2 to the Company’s Registration Statement on Form 10 as filed with the Securities and Exchange Commission (“SEC”) on October 2, 2018 was declared effective by the SEC. On October 29, 2018, Honeywell’s shareholders of record as of October 16, 2018 (“Record Date”) received one share of the Company’s common stock, par value $0.001 per share, for every six shares of Honeywell’s common stock, par value $1.00 per share, held as of the Record Date, and cash for any fractional shares of the Company’s common stock. The Company began trading “regular way” under the ticker symbol “REZI” on the New York Stock Exchange on October 29, 2018.

In connection with the separation, Resideo and Honeywell entered into a Honeywell Reimbursement Agreement (as defined in Note 15. Commitments and Contingencies), a Separation and Distribution Agreement, an Employee Matters Agreement, a Tax Matters Agreement, a Transition Services Agreement, a Trademark License Agreement and a Patent Cross-License Agreement. The agreements govern the relationship between Resideo and Honeywell following the separation and provide for the allocation of various assets, liabilities, rights and obligations. These agreements also include arrangements for transition services to be provided by Honeywell to Resideo and by Resideo to Honeywell.

Basis of Presentation

Prior to the Spin-Off on October 29, 2018, the Company’s historical financial statements were prepared on a stand-alone combined basis and were derived from the consolidated financial statements and accounting records of Honeywell. Accordingly, for periods prior to October 29, 2018, these financial statements are presented on a combined basis and for the periods subsequent to October 29, 2018 are presented on a consolidated basis (collectively, the historical financial statements for all periods presented are referred to as “Consolidated and Combined Interim Financial Statements”). The Consolidated and Combined Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Consolidated and Combined Interim Financial Statements are unaudited; however, in the opinion of management, they contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods.

All intracompany transactions have been eliminated for all periods presented. As described in “Note 5. Related Party Transactions with Honeywell” of Notes to unaudited Consolidated and Combined Interim Financial Statements of this Form 10-Q, all significant transactions between the Company and Honeywell occurring prior to the Spin-Off have been included in the unaudited Combined Interim Financial Statements for the period ended September 30, 2018.

Prior to the Spin-Off, transactions between the Company and Honeywell were reflected in the Combined Balance Sheet as Due from related parties, current or Due to related parties, current. In the unaudited Combined Interim Statement of Cash Flows, the cash flows related to related party notes receivables presented in the Combined Balance Sheet in Due from related parties, current are reflected as investing activities since these balances represent amounts loaned to Honeywell. The cash flows related to related party notes payables presented in the Combined Balance Sheet in Due to related parties, current are reflected as financing activities since these balances represent amounts financed by Honeywell.

While the Company was owned by Honeywell, a centralized approach to cash management and financing was used. Prior to the consummation of the Spin-Off, the majority of the Company’s cash was transferred to Honeywell daily and Honeywell funded the Company’s operating and investing activities as needed. Cash transfers to and from Honeywell’s cash management accounts are reflected in the Combined Balance Sheet as Due to and Due from related parties, current and in the unaudited Combined Interim Statement of Cash Flows as net financing activities.

The unaudited Combined Interim Financial Statements prior to the Spin-Off include certain assets and liabilities that have historically been held at the Honeywell corporate level but were specifically identifiable or otherwise attributable to the Company. The cash and cash equivalents held by Honeywell at the corporate level were not specifically identifiable to the Company and therefore were not attributed for any of the periods presented. Honeywell third-party debt and the related interest expense were not allocated for any of the periods presented as Honeywell’s borrowings were not directly attributable to the Company. In periods subsequent to the Spin-Off, we may have made and may continue to make adjustments to balances transferred at the Spin-Off, including adjustments to the classification of assets or liabilities transferred. Any such adjustments are recorded directly to equity in Adjustments due to the Spin-Off and are considered immaterial.

Prior to the Spin-Off, Honeywell provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Company. The cost of these services has been allocated to the Company on the basis of the proportion of net revenue. The Company and Honeywell consider these allocations to be a reasonable reflection of the benefits received by the Company. However, the financial information presented in these unaudited Consolidated and Combined Interim Financial Statements may not reflect the consolidated and combined financial position, operating results and cash flows of the Company had the Company been a separate stand-alone entity during the periods presented. Actual costs that would have been incurred if the Company had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Both Resideo and Honeywell consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefits received by the Company during the periods presented. After the Spin-Off, a number of the above services have continued under a Transition Services Agreement with Honeywell, which the Company expenses as incurred based on the contractual pricing terms.

The Company reports its quarterly financial information using a calendar convention; the first, second and third quarters are consistently reported as ending on March 31, June 30 and September 30. It is the Company’s practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires its businesses to close their books on the last Saturday of the month in order to minimize the potentially disruptive effects of quarterly closing on business processes. The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year. In the event that differences in actual closing dates are material to year-over-year comparisons of quarterly or year-to-date results, the Company will provide appropriate disclosures. Actual closing dates for the three and nine months ended September 30, 2019 and 2018 were September 28, 2019 and September 29, 2018, respectively.

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Earnings Per Share - Addtional Information (Details) - $ / shares			3 Months Ended	9 Months Ended
	Oct. 29, 2018	Oct. 16, 2018	Sep. 30, 2019	Sep. 30, 2019	Dec. 31, 2018	Oct. 28, 2018	Sep. 30, 2018
Earnings Per Share [Line Items]
Spin-off transaction, common stock par value per share	$ 0.001		$ 0.001	$ 0.001	$ 0.001
Common stock, shares outstanding			122,786,000	122,786,000	122,499,000	0
Purchase of outstanding common stock were anti-dilutive				0
Options and Other Rights
Earnings Per Share [Line Items]
Purchase of outstanding common stock were anti-dilutive			3,800,000	1,500,000
Performance Based Unit Awards
Earnings Per Share [Line Items]
Purchase of outstanding common stock were anti-dilutive			300,000	300,000
Honeywell | Spin-Off
Earnings Per Share [Line Items]
Shares issued	122,498,794
Distribution made at spin-off date of record		Oct. 16, 2018
Treasury shares excluded from earnings per share calculation			596,300	596,300			467,764

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CONSOLIDATED INTERIM BALANCE SHEET (Unaudited) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 132	$ 265
Accounts receivable	845	821
Inventories	729	628
Other current assets	134	95
Total current assets	1,840	1,809
Property, plant and equipment – net	306	300
Goodwill	2,632	2,634
Other intangible assets – net	125	133
Other assets	230	96
Total assets	5,133	4,972
Current liabilities:
Accounts payable	932	964
Short-term portion of debt	88	22
Accrued liabilities	531	503
Total current liabilities	1,551	1,489
Long-term debt	1,165	1,179
Obligations payable to Honeywell	580	629
Other liabilities	264	142
COMMITMENTS AND CONTINGENCIES (Note 15)
EQUITY
Common stock, $0.001 par value, 700,000 shares authorized, 123,382 and 122,967 shares issued and 122,786 and 122,499 shares outstanding as of September 30, 2019 and December 31, 2018, respectively	0	0
Additional paid-in capital	1,751	1,720
Treasury stock, at cost	(3)
Retained earnings	47	2
Accumulated other comprehensive loss	(222)	(189)
Total equity	1,573	1,533
Total liabilities and equity	$ 5,133	$ 4,972

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Accrued Liabilities (Tables)

9 Months Ended

Sep. 30, 2019

Payables And Accruals [Abstract]

Summary of Accrued Liabilities

	September 30,		December 31,
	2019		2018
Obligations payable to Honeywell	$	140	$	140
Taxes payable		41		76
Compensation, benefit and other employee related		73		73
Other		277		214
	$	531	$	503

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2019

Loss Contingencies [Line Items]

Summary of Recorded Obligations for Product Warranties and Product Performance Guarantee

The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees:

	Nine Months Ended
	September 30,
	2019			2018
Beginning of period	$	26		$	17
Accruals for warranties/guarantees issued during the year		10			12
Adjustment of pre-existing warranties/guarantees		(1	)		(2	)
Settlement of warranty/guarantee claims		(12	)		(12	)
End of period	$	23		$	15

Honeywell

Loss Contingencies [Line Items]

Summary of Honeywell Reimbursement Agreement Liabilities

	Nine Months Ended
	September 30,
	2019
Beginning of period	$	616
Accruals for indemnification liabilities deemed probable and reasonably estimable		138
Reduction (1)		(81	)
Indemnification payment		(105	)
End of period	$	568

(1) Reduction in indemnification liabilities relates to a provision in the Honeywell Reimbursement Agreement that reduces the obligation due to Honeywell for any proceeds received by Honeywell from a property sale of a site under the agreement.

Summary of Honeywell Reimbursement Agreement Liabilities Included in Balance Sheet Accounts

For the three and nine months ended September 30, 2019, expenses related to the Honeywell Reimbursement Agreement were $35 million and $57 million, respectively and are recorded in Other expense, net. Honeywell Reimbursement Agreement liabilities are included in the following balance sheet accounts:

	September 30,
	2019
Accrued liabilities	$	140
Obligations payable to Honeywell		428
	$	568

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Long-term Debt and Credit Agreement - Additional Information (Details) - USD ($) $ in Millions		3 Months Ended	9 Months Ended
	Oct. 30, 2018	Sep. 30, 2019	Sep. 30, 2019
Debt Instrument [Line Items]
Interest expense, debt		$ 16	$ 51
Revolving Credit Facility
Debt Instrument [Line Items]
Borrowings from credit facility		$ 60	$ 60
6.125% notes due 2026
Debt Instrument [Line Items]
Principal amount issued	$ 400
Interest rate	6.125%	6.125%	6.125%
Credit Agreement | Term B Loan Facility
Debt Instrument [Line Items]
Principal amount issued	$ 475
Credit facilities term	7 years
Debt instrument, basis spread on variable rate	2.00%
Credit Agreement | Term A Loan Facility
Debt Instrument [Line Items]
Principal amount issued	$ 350
Credit facilities term	5 years
Debt instrument, basis spread on variable rate	2.00%
Credit Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Credit facilities term	5 years
Credit facility, maximum borrowing amount	$ 350	$ 350	$ 350
Borrowings from credit facility		$ 60	$ 60
Weighted average interest rate		4.09%	4.09%
Credit Agreement | Revolving Credit Facility | Federal Funds Effective Rate and Overnight Bank Funding Rate
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	0.50%
Credit Agreement | Revolving Credit Facility | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	1.00%
Credit Agreement | Letter of Credit
Debt Instrument [Line Items]
Borrowings from credit facility		$ 0	$ 0
Credit Agreement | Term Loan Facilities
Debt Instrument [Line Items]
Interest rate		4.11%	4.11%
Senior Notes
Debt Instrument [Line Items]
Debt Instrument fair value		$ 422	$ 422

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Inventories (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 143	$ 167
Work in process	19	34
Finished products	567	427
Inventory, Net	$ 729	$ 628

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Leases - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2019	Jan. 01, 2019
Leases [Abstract]
2019	$ 9
2020	35
2021	32
2022	27
2023	20
Thereafter	36
Total lease payments	159
Less: imputed interest	24
Present value of operating lease liabilities	$ 135	$ 115
Weighted-average remaining lease term (years)	5 years 7 months 20 days
Weighted-average incremental borrowing rate	6.00%

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Segment Financial Data - Schedule of Reconciliation of Segment Adjusted EBITDA (Parenthetical) (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018
Loss Contingencies [Line Items]
Spin-off costs	$ 9	$ 34	$ 5
Developments on legal claims prior to spin-off	0	13
Non-operating (income) expense adjustment	0	(1)
Honeywell
Loss Contingencies [Line Items]
Spin-off costs	$ 19	$ 53

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Inventories

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Inventories

Note 9. Inventories

	September 30,		December 31,
	2019		2018
Raw materials	$	143	$	167
Work in process		19		34
Finished products		567		427
	$	729	$	628

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Related Party Transactions with Honeywell

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions with Honeywell

Note 5. Related Party Transactions with Honeywell

Prior to the Spin-Off, the unaudited Combined Interim Financial Statements were derived from the unaudited Consolidated Interim Financial Statements and accounting records of Honeywell. Prior to the Spin-Off, Honeywellwas a related party that provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Company. The costs of these services were allocated to the Company on the basis of the proportion of net revenue. The Company and Honeywell consider the allocations to be a reasonable reflection of the benefits received by the Company.

During the three and nine months ended September 30, 2018, the Company was allocated $66 million and $203 million, respectively, of general corporate expenses incurred by Honeywell and such amounts are included within Selling, general and administrative expenses in the unaudited Combined Interim Statement of Operations for the nine months ended September 30, 2018.  As certain expenses reflected in the unaudited Combined Interim Financial Statements include allocations of corporate expenses from Honeywell, these statements could differ from those that would have been prepared had the Company operated on a stand-alone basis.

All significant intercompany transactions between the Company and Honeywell have been included in these unaudited Combined Interim Financial Statements. Sales to Honeywell during the three and nine months ended September 30, 2018 were $8 million and $23 million, respectively.  Costs of goods sold to Honeywell during the three and nine months ended September 30, 2018 were $5 million and $18 million, respectively. Purchases from Honeywell during the three and nine months ended September 30, 2018 were $32 million and $149 million, respectively. The total net effect of the settlement of these intercompany transactions is reflected in the unaudited Combined Interim Statement of Cash Flows as a financing activity.

While the Company was owned by Honeywell, a centralized approach to cash management and financing of operations was used. Prior to consummation of the Spin-Off, the Company’s cash was transferred to Honeywell daily and Honeywell funded the Company’s operating and investing activities as needed.

Subsequent to the Spin-Off on October 29, 2018, transactions with Honeywell were not considered related party transactions. Accordingly, no related party transactions with Honeywell were recorded for the three and nine months ended September 30, 2019.

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CONSOLIDATED INTERIM BALANCE SHEET (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	700,000,000	700,000,000
Common stock, shares issued	123,382,000	122,967,000
Common stock, shares outstanding	122,786,000	122,499,000

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Long-term Debt and Credit Agreement (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Debt

The Company’s debt at September 30, 2019 and December 31, 2018 consisted of the following:

	September 30,			December 31,
	2019			2018
6.125% notes due 2026	$	400		$	400
Five-year variable rate term loan A due 2023		341			350
Seven-year variable rate term loan B due 2025		473			475
Revolving Credit Facility		60			-
Unamortized debt issuance costs		(21	)		(24	)
Total outstanding indebtedness		1,253			1,201
Less: amounts due within one year		88			22
Total long-term debt due after one year	$	1,165		$	1,179

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Segment Financial Data (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Schedule of Segment Information

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

Prior to the first quarter of 2019, the Company’s Chief Operating Decision Maker (“CODM”) managed and evaluated its segment performance based on segment profit defined as segment income (loss) before taxes excluding Other expense, net (primarily environmental cost now subject to the Honeywell Reimbursement Agreement), interest expense, pension expense, environmental expense related to Resideo’s owned sites and repositioning charges. Beginning in the first quarter of 2019, the Company’s CODM changed the way segment performance is evaluated by making financial decisions and allocating resourcesbased on Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as segment net income before income taxes, net interest (income) expense, depreciation and amortization plus environmental expense, Honeywell Reimbursement Agreement expense, stock compensation expense, repositioning charges and other adjustments.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue
Total Products & Solutions revenue	$	595	$	603	$	1,828	$	1,803
Less: Intersegment revenue		83		77		228		236
External Products & Solutions revenue		512		526		1,600		1,567
External ADI Global Distribution revenue		714		674		2,084		1,994
Total revenue	$	1,226	$	1,200	$	3,684	$	3,561

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Segment adjusted EBITDA
Products & Solutions	$	66	$	107	$	222	$	333
ADI Global Distribution		48		43		141		124
Segment Adjusted EBITDA	$	114	$	150	$	363	$	457

Schedule of Reconciliation of Adjusted EBITDA

The table below provides a reconciliation of net income to Segment Adjusted EBITDA:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2019		2018			2019		2018
Net income	$	8	$	311		$	45	$	389
Net interest expense (income)		16		-			49		(1	)
Tax expense (benefit)		-		(329	)		36		(323	)
Depreciation and amortization		19		16			55		49
Environmental expense (1)		-		146			-		322
Honeywell reimbursement agreement expense (2)		35		-			57		-
Stock compensation expense (3)		8		6			22		15
Repositioning charges		9		-			34		5
Other (4)		19		-			65		1
Segment Adjusted EBITDA	$	114	$	150		$	363	$	457

(1) Represents historical environmental expenses as reported under 100% carryover basis.

(2) Represents recorded expenses related to the Honeywell Reimbursement Agreement. 

(3) Stock compensation expense adjustment includes only non-cash expenses.

(4) Represents $19 million and $53 million in costs directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to the Spin-Off, and ($0) million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019, respectively. For the three and nine months ended September 30, 2018 Other represents other non-operating (income) expense.

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 01, 2019
Cover [Abstract]
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Trading Symbol	REZI
Entity Registrant Name	Resideo Technologies, Inc.
Entity Central Index Key	0001740332
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		122,818,158
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Title of 12(b) Security	Common Stock
Security Exchange Name	NYSE
Entity File Number	001-38635
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	82-5318796
Entity Address, Address Line One	901 E 6th Street
Entity Address, City or Town	Austin
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78702
City Area Code	763
Local Phone Number	954-5204
Document Quarterly Report	true
Document Transition Report	false

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

The Company’s accounting policies are set forth in “Note 2. Summary of Significant Accounting Policies” of the Company’s Notes to Consolidated and Combined Financial Statements included in the 2018 Annual Report on Form 10-K. Included herein are certain updates to those policies.

Leases—Effective January 1, 2019, arrangements containing leases are evaluated as an operating or finance lease at lease inception. For operating leases, the Company recognizes an operating right-of-use asset and operating lease liability at lease commencement based on the present value of lease payments over the lease term.

Since an implicit rate of return is not readily determinable for the Company's leases, an incremental borrowing rate is used in determining the present value of lease payments, and is calculated based on information available at the lease commencement date.  The incremental borrowing rate is determined using a portfolio approach based on the rate of interest the Company would have to pay to borrow funds on a collateralized basis over a similar term. The Company references a market yield curve consistent with the Company's credit rating which is risk-adjusted to approximate a collateralized rate in the currency of the lease. These rates are updated on a quarterly basis for measurement of new lease obligations.Most leases include renewal options; however, generally it is not reasonably certain that these options will be exercised at lease commencement. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the Company’s balance sheet. The Company does not separate lease and non-lease components for its real estate and automobile leases.

Recent Accounting Pronouncements—The Company considers the applicability and impact of all recent accounting standardsupdates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed anddetermined to be either not applicable or are expected to have an immaterial impact on the consolidated and combined financial position or results ofoperations.

The Company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. As permitted by the new guidance, the Company elected the package of practical expedients, which among other things, allowed historical lease classification to be carried forward.

Upon adoption of ASU No. 2016-02, the Company recognized an aggregate lease liability of $115 million, calculated based on the present value of the remaining minimum lease payments for qualifying leases as of January 1, 2019, with a corresponding right-of-use asset of $112 million. The cumulative-effect adjustment recognized to opening retained earnings was not material. The adoption of the new guidance did not impact the Company’s unaudited consolidated interim statement of operations or cash flows.

In February 2018, the FASB issued guidance that allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from the U.S. Tax Cuts and Jobs Act (“U.S. Tax Reform”) to retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company adopted the standard on January 1, 2019 and has not reclassified the income tax effects of U.S. Tax Reform from accumulated other comprehensive income to retained earnings. The Company has adopted the aggregate portfolio accounting policy for recognizing the disproportionate income tax effects in accumulated other comprehensive income.

On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides guidance designed to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. From November 2018 to May 2019, amendments to Topic 326 were issued to clarify numerous accounting topics. When determining such expected credit losses, the guidance requires companies to apply a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendment is effective on a modified retrospective basis for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for fiscal years and interim periods beginning after December 15, 2018. The Company does not expect adoption of this pronouncement to have a material financial statement impact.

In August 2018, the FASB issued guidance that amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. The Company does not expect this new standard to have a significant impact to its disclosures.

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Earnings Per Share - Schedule of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic:
Net income	$ 8	$ 311	$ 45	$ 389
Weighted average common shares outstanding (in thousands)	122,770	122,967	122,681	122,967
Earnings per share - Basic	$ 0.07	$ 2.53	$ 0.37	$ 3.16
Diluted:
Dilutive effect of common stock equivalents	474		723
Weighted average common shares outstanding - Diluted (in thousands)	123,244	122,967	123,404	122,967
Earnings per share - Diluted	$ 0.06	$ 2.53	$ 0.36	$ 3.16

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Leases - Summary of Lease Recognized Related to Operating Leases (Details) - USD ($) $ in Millions	Sep. 30, 2019	Jan. 01, 2019
Leases [Abstract]
Operating right-of-use assets	$ 130	$ 112
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	us-gaap:OtherAssets
Operating lease liabilities - current	$ 29
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	us-gaap:AccruedLiabilitiesCurrent
Operating lease liabilities - noncurrent	$ 106
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	us-gaap:OtherLiabilitiesNoncurrent

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Long-term Debt and Credit Agreement - Schedule of Debt (Parenthetical) (Details)	9 Months Ended
	Sep. 30, 2019	Oct. 30, 2018
6.125% notes due 2026
Debt Instrument [Line Items]
Interest rate	6.125%	6.125%
Debt instrument maturity year	2026
Five Year Variable Rate Term Loan A Due 2023
Debt Instrument [Line Items]
Debt instrument maturity year	2023
Seven Year Variable Rate Term Loan B Due 2025
Debt Instrument [Line Items]
Debt instrument maturity year	2025

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Income Taxes - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Tax expense (benefit)		$ (329)	$ 36	$ (323)
U.S. federal statutory rate	21.00%	21.00%	21.00%	21.00%

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Related Party Transactions with Honeywell - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Honeywell
Related Party Transaction [Line Items]
Sales to related party	$ 8	$ 23
Costs of goods sold to related party	5	18
Purchases from related party	32	149
Selling, General and Administrative Expenses
Related Party Transaction [Line Items]
General corporate expenses incurred	$ 66	$ 203

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Repositioning and Other Charges - Summary of Pretax Impact of Total Net Repositioning Charges by Segment (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018
Restructuring Cost And Reserve [Line Items]
Repositioning charges	$ 9	$ 34	$ 5
Products & Solutions
Restructuring Cost And Reserve [Line Items]
Repositioning charges	$ 9	28	$ 5
ADI Global Distribution
Restructuring Cost And Reserve [Line Items]
Repositioning charges		$ 6

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Revenue Recognition - Additional Information (Details)	Sep. 30, 2019
Maximum
Disaggregation Of Revenue [Line Items]
Percentage of revenue satisfied over time	2.00%

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Commitments and Contingencies - Summary of Honeywell Reimbursement Agreement Liabilities Included in Balance Sheet Accounts (Details) - Honeywell - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Loss Contingency, Classification of Accrual [Abstract]
Honeywell Reimbursement Agreement liabilities	$ 568	$ 616
Accrued Liabilities
Loss Contingency, Classification of Accrual [Abstract]
Honeywell Reimbursement agreement current portion	140
Obligations Payable to Honeywell
Loss Contingency, Classification of Accrual [Abstract]
Honeywell Reimbursement Agreement Long Term Portion	$ 428

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Accumulated Other Comprehensive Loss - Summary of Changes in Accumulated Other Comprehensive Loss by Component (Details) - USD ($) $ in Millions	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	$ 1,593	$ 1,592	$ 1,533	$ 2,480	$ 2,589	$ 2,603	$ 1,533	$ 2,603
Other comprehensive income (loss) before reclassifications	(35)	(4)	6	(7)	(49)	31
Amounts reclassified from accumulated other comprehensive income				2		(1)
Total other comprehensive (loss), net of tax	(35)			(5)		30	(33)	(24)
Ending Balance	1,573	1,593	1,592	2,685	2,480	2,589	1,573	2,685
Foreign Exchange Translation Adjustment
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	(175)	(171)	(177)	(118)	(69)	(100)	(177)	(100)
Other comprehensive income (loss) before reclassifications	(35)	(4)	6	(5)	(49)	31
Total other comprehensive (loss), net of tax						31
Ending Balance	(210)	(175)	(171)	(123)	(118)	(69)	(210)	(123)
Pension Adjusments
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	(12)	(12)	(12)				(12)
Ending Balance	(12)	(12)	(12)				(12)
Changes in Fair Value of Effective Cash Flow Hedges
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance				(1)	(1)
Other comprehensive income (loss) before reclassifications				(2)
Amounts reclassified from accumulated other comprehensive income				2		(1)
Total other comprehensive (loss), net of tax						(1)
Ending Balance				(1)	(1)	(1)		(1)
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	(187)	(183)	(189)	(119)	(70)	(100)	(189)	(100)
Ending Balance	$ (222)	$ (187)	$ (183)	$ (124)	$ (119)	$ (70)	$ (222)	$ (124)

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Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2019

Revenue From Contract With Customer [Abstract]

Schedule of Disaggregated Revenue

Revenues by channel are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018 (3)		2019		2018 (3)
U.S. and Canada	$	590	$	555	$	1,705	$	1,614
EMEA (1)		109		107		336		338
India		15		12		43		42
ADI Global Distribution		714		674		2,084		1,994
Comfort		256		271		799		787
Security		128		119		397		358
RTS		128		136		404		422
Products & Solutions (2)		512		526		1,600		1,567
Net revenue	$	1,226	$	1,200	$	3,684	$	3,561

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

(2) Products & Solutions sales channel naming convention changed from what was disclosed in our quarterly report for the quarter ended September 30, 2018. Comfort & Care was broken out into Comfort and Residential Thermal Solutions (“RTS”).

(3) The unaudited disaggregated revenue disclosure for the three and nine month periods ended September 30, 2018 contained misallocated revenue between the ADI Global Distribution geographies U.S. and Canada and India.  Correcting this allocation increased U.S. and Canada revenue and reduced India revenue for the three and nine month periods ended September 30, 2018 by $30 million and $35 million, respectively. There is no other impact to the unaudited Consolidated and Combined Interim Financial Statements for the three and nine month periods ended September 30, 2018.

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Segment Financial Data

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segment Financial Data

Note 17. Segment Financial Data

The Company globally manages its business operations through two reportable operating segments, Products & Solutions and ADI Global Distribution:

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

ADI Global Distribution—The ADI Global Distribution business is a leading global distributor of low-voltage electronic and security products.

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

Prior to the first quarter of 2019, the Company’s Chief Operating Decision Maker (“CODM”) managed and evaluated its segment performance based on segment profit defined as segment income (loss) before taxes excluding Other expense, net (primarily environmental cost now subject to the Honeywell Reimbursement Agreement), interest expense, pension expense, environmental expense related to Resideo’s owned sites and repositioning charges. Beginning in the first quarter of 2019, the Company’s CODM changed the way segment performance is evaluated by making financial decisions and allocating resourcesbased on Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as segment net income before income taxes, net interest (income) expense, depreciation and amortization plus environmental expense, Honeywell Reimbursement Agreement expense, stock compensation expense, repositioning charges and other adjustments.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue
Total Products & Solutions revenue	$	595	$	603	$	1,828	$	1,803
Less: Intersegment revenue		83		77		228		236
External Products & Solutions revenue		512		526		1,600		1,567
External ADI Global Distribution revenue		714		674		2,084		1,994
Total revenue	$	1,226	$	1,200	$	3,684	$	3,561

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Segment adjusted EBITDA
Products & Solutions	$	66	$	107	$	222	$	333
ADI Global Distribution		48		43		141		124
Segment Adjusted EBITDA	$	114	$	150	$	363	$	457

The table below provides a reconciliation of net income to Segment Adjusted EBITDA:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2019		2018			2019		2018
Net income	$	8	$	311		$	45	$	389
Net interest expense (income)		16		-			49		(1	)
Tax expense (benefit)		-		(329	)		36		(323	)
Depreciation and amortization		19		16			55		49
Environmental expense (1)		-		146			-		322
Honeywell reimbursement agreement expense (2)		35		-			57		-
Stock compensation expense (3)		8		6			22		15
Repositioning charges		9		-			34		5
Other (4)		19		-			65		1
Segment Adjusted EBITDA	$	114	$	150		$	363	$	457

(1) Represents historical environmental expenses as reported under 100% carryover basis.

(2) Represents recorded expenses related to the Honeywell Reimbursement Agreement. 

(3) Stock compensation expense adjustment includes only non-cash expenses.

(4) Represents $19 million and $53 million in costs directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to the Spin-Off, and ($0) million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019, respectively. For the three and nine months ended September 30, 2018 Other represents other non-operating (income) expense.

The Company’s CODM does not use segment assets information to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed.

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2019

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Accumulated Other Comprehensive Loss

Note 13. Accumulated Other Comprehensive Loss

The changes in Accumulated other comprehensive loss are provided in the tables below.

Changes in Accumulated Other Comprehensive Loss by Component

	Foreign Exchange Translation Adjustment			Pension Adjustments			Changes in Fair Value of Effective Cash Flow Hedges			Accumulated Other Comprehensive Loss
Balance at December 31, 2017	$	(100	)	$	-		$	-		$	(100	)
Other comprehensive income before    reclassifications		31			-			-			31
Amounts reclassified from accumulated other    comprehensive income		-			-			(1	)		(1	)
Net current period other comprehensive income		31			-			(1	)		30
Balance at March 31, 2018	$	(69	)	$	-		$	(1	)	$	(70	)
Other comprehensive loss before reclassifications		(49	)		-			-			(49	)
Balance at June 30, 2018	$	(118	)	$	-		$	(1	)	$	(119	)
Other comprehensive loss before reclassifications		(5	)	-				(2	)		(7	)
Amounts reclassified from accumulated other    comprehensive income	-			-			$	2		$	2
Balance at September 30, 2018	$	(123	)	$	-		$	(1	)	$	(124	)
Balance at December 31, 2018	$	(177	)	$	(12	)	$	-		$	(189	)
Other comprehensive income before    reclassifications		6			-			-			6
Balance at March 31, 2019	$	(171	)	$	(12	)	$	-		$	(183	)
Other comprehensive loss before    reclassifications		(4	)		-			-			(4	)
Balance at June 30, 2019	$	(175	)	$	(12	)	$	-		$	(187	)
Other comprehensive loss before reclassifications		(35	)		-			-			(35	)
Balance at September 30, 2019	$	(210	)	$	(12	)	$	-		$	(222	)

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CONSOLIDATED AND COMBINED INTERIM STATEMENT OF EQUITY (Unaudited) - USD ($) $ in Millions	Total	Common Stock	Treasury Shares	Additional Paid-In Capital	Retained Earnings	Invested Equity	Accumulated Other Comprehensive Loss
Beginning Balance at Dec. 31, 2017	$ 2,603					$ 2,703	$ (100)
Net income (loss)	45					45
Other comprehensive income (loss), net of tax	30						30
Change in invested equity	(89)					(89)
Ending Balance at Mar. 31, 2018	2,589					2,659	(70)
Beginning Balance at Dec. 31, 2017	2,603					2,703	(100)
Net income (loss)	389
Ending Balance at Sep. 30, 2018	2,685					2,809	(124)
Beginning Balance at Mar. 31, 2018	2,589					2,659	(70)
Net income (loss)	33					33
Other comprehensive income (loss), net of tax	(49)						(49)
Change in invested equity	(93)					(93)
Ending Balance at Jun. 30, 2018	2,480					2,599	(119)
Net income (loss)	311					311
Other comprehensive income (loss), net of tax	(5)						(5)
Change in invested equity	(101)					(101)
Ending Balance at Sep. 30, 2018	2,685					$ 2,809	(124)
Beginning Balance at Dec. 31, 2018	1,533			$ 1,720	$ 2		(189)
Beginning Balance, Shares at Dec. 31, 2018		122,499,000	468,000
Net income (loss)	48				48
Other comprehensive income (loss), net of tax	6						6
Shares issued for employee stock plans, Shares		271,000
Stock-based compensation	7			7
Shares withheld for employees' taxes	(2)		$ (2)
Shares withheld for employees' taxes, Shares		(84,000)	84,000
Ending Balance at Mar. 31, 2019	1,592		$ (2)	1,727	50		(183)
Ending Balance, Shares at Mar. 31, 2019		122,686,000	552,000
Beginning Balance at Dec. 31, 2018	1,533			1,720	2		(189)
Beginning Balance, Shares at Dec. 31, 2018		122,499,000	468,000
Net income (loss)	45
Ending Balance at Sep. 30, 2019	1,573		$ (3)	1,751	47		(222)
Ending Balance, Shares at Sep. 30, 2019		122,786,000	596,000
Beginning Balance at Mar. 31, 2019	1,592		$ (2)	1,727	50		(183)
Beginning Balance, Shares at Mar. 31, 2019		122,686,000	552,000
Net income (loss)	(11)				(11)
Other comprehensive income (loss), net of tax	(4)						(4)
Shares issued for employee stock plans, Shares		30,000
Stock-based compensation	7			7
Shares withheld for employees' taxes, Shares		(6,000)	6,000
Adjustments due to the Spin-Off	9			9
Ending Balance at Jun. 30, 2019	1,593		$ (2)	1,743	39		(187)
Ending Balance, Shares at Jun. 30, 2019		122,710,000	558,000
Net income (loss)	8				8
Other comprehensive income (loss), net of tax	(35)						(35)
Shares issued for employee stock plans, Shares		114,000
Stock-based compensation	8			8
Shares withheld for employees' taxes	(1)		$ (1)
Shares withheld for employees' taxes, Shares		(38,000)	38,000
Ending Balance at Sep. 30, 2019	$ 1,573		$ (3)	$ 1,751	$ 47		$ (222)
Ending Balance, Shares at Sep. 30, 2019		122,786,000	596,000

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2019

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Summary of Changes in Accumulated Other Comprehensive Loss by Component

Changes in Accumulated Other Comprehensive Loss by Component

	Foreign Exchange Translation Adjustment			Pension Adjustments			Changes in Fair Value of Effective Cash Flow Hedges			Accumulated Other Comprehensive Loss
Balance at December 31, 2017	$	(100	)	$	-		$	-		$	(100	)
Other comprehensive income before    reclassifications		31			-			-			31
Amounts reclassified from accumulated other    comprehensive income		-			-			(1	)		(1	)
Net current period other comprehensive income		31			-			(1	)		30
Balance at March 31, 2018	$	(69	)	$	-		$	(1	)	$	(70	)
Other comprehensive loss before reclassifications		(49	)		-			-			(49	)
Balance at June 30, 2018	$	(118	)	$	-		$	(1	)	$	(119	)
Other comprehensive loss before reclassifications		(5	)	-				(2	)		(7	)
Amounts reclassified from accumulated other    comprehensive income	-			-			$	2		$	2
Balance at September 30, 2018	$	(123	)	$	-		$	(1	)	$	(124	)
Balance at December 31, 2018	$	(177	)	$	(12	)	$	-		$	(189	)
Other comprehensive income before    reclassifications		6			-			-			6
Balance at March 31, 2019	$	(171	)	$	(12	)	$	-		$	(183	)
Other comprehensive loss before    reclassifications		(4	)		-			-			(4	)
Balance at June 30, 2019	$	(175	)	$	(12	)	$	-		$	(187	)
Other comprehensive loss before reclassifications		(35	)		-			-			(35	)
Balance at September 30, 2019	$	(210	)	$	(12	)	$	-		$	(222	)

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Millions	Sep. 30, 2019	Jan. 01, 2019
Accounting Policies [Abstract]
Aggregate lease, liability	$ 135	$ 115
Right-of-use asset	$ 130	$ 112

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CONSOLIDATED AND COMBINED INTERIM STATEMENT OF COMPREHENSIVE (LOSS) INCOME (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 8	$ 311	$ 45	$ 389
Other comprehensive (loss), net of tax
Foreign exchange translation adjustment	(35)	(5)	(33)	(23)
Changes in fair value of effective cash flow hedges				(1)
Total other comprehensive (loss), net of tax	(35)	(5)	(33)	(24)
Comprehensive (loss) income	$ (27)	$ 306	$ 12	$ 365

XML

Revenue Recognition

9 Months Ended

Sep. 30, 2019

Revenue From Contract With Customer [Abstract]

Revenue Recognition

Note 7. Revenue Recognition

Disaggregated Revenue

Revenues by channel are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018 (3)		2019		2018 (3)
U.S. and Canada	$	590	$	555	$	1,705	$	1,614
EMEA (1)		109		107		336		338
India		15		12		43		42
ADI Global Distribution		714		674		2,084		1,994
Comfort		256		271		799		787
Security		128		119		397		358
RTS		128		136		404		422
Products & Solutions (2)		512		526		1,600		1,567
Net revenue	$	1,226	$	1,200	$	3,684	$	3,561

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

(2) Products & Solutions sales channel naming convention changed from what was disclosed in our quarterly report for the quarter ended September 30, 2018. Comfort & Care was broken out into Comfort and Residential Thermal Solutions (“RTS”).

(3) The unaudited disaggregated revenue disclosure for the three and nine month periods ended September 30, 2018 contained misallocated revenue between the ADI Global Distribution geographies U.S. and Canada and India.  Correcting this allocation increased U.S. and Canada revenue and reduced India revenue for the three and nine month periods ended September 30, 2018 by $30 million and $35 million, respectively. There is no other impact to the unaudited Consolidated and Combined Interim Financial Statements for the three and nine month periods ended September 30, 2018.

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 2% of the Company’s revenue is satisfied over time. As of September 30, 2019, contract assets and liabilities are not material.

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Earnings Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Note 3. Earnings Per Share

On October 29, 2018, the date of consummation of the Spin-Off, 122,498,794 shares of the Company’s Common Stock, par value $0.001 per share, were distributed to Honeywell shareholders of record as of October 16, 2018. This share amount is being utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Spin-Off as no common stock was outstanding prior to the date of the Spin-Off. For the 2018 year to date calculation, these shares are treated as issued and outstanding from January 1, 2018 for purposes of calculating historical basic earnings per share. For September 30, 2019 and September 30, 2018, this calculation excludes 596,300 and 467,764 of treasury shares, respectively.

The details of the earnings per share calculations for the three and nine months ended September 30, 2019 and 2018 are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Basic:	2019		2018		2019		2018
Net income	$	8	$	311	$	45	$	389
Weighted average common shares outstanding (in thousands)		122,770		122,967		122,681		122,967
Earnings per share - Basic	$	0.07	$	2.53	$	0.37	$	3.16

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Diluted:	2019		2018		2019		2018
Net income	$	8	$	311	$	45	$	389
Weighted average common shares outstanding - Basic (in thousands)		122,770		122,967		122,681		122,967
Dilutive effect of common stock equivalents		474		-		723		-
Weighted average common shares outstanding - Diluted (in thousands)		123,244		122,967		123,404		122,967
Earnings per share - Diluted	$	0.06	$	2.53	$	0.36	$	3.16

Diluted earnings per share is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the three and nine months ended September 30, 2019. In periods where the Company has a net loss, no dilutive common shares are included in the calculation for diluted shares as they are considered anti-dilutive.For the three and nine months ended September 30, 2019, average options and other rights to purchase approximately 3.8 million and 1.5 million shares of common stock were outstanding, respectively, all of which were anti-dilutive during the three and nine months ended September 30, 2019, and therefore excluded from the computation of diluted earnings per common share. Additionally, an average of approximately 0.3 million shares of performance-based unit awards are excluded from the computation of diluted earnings per common share for the three and nine months ended September 30, 2019 as the contingency has not been satisfied at September 30, 2019.

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Long-term Debt and Credit Agreement

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Long-term Debt and Credit Agreement

Note 11. Long-term Debt and Credit Agreement

The Company’s debt at September 30, 2019 and December 31, 2018 consisted of the following:

	September 30,			December 31,
	2019			2018
6.125% notes due 2026	$	400		$	400
Five-year variable rate term loan A due 2023		341			350
Seven-year variable rate term loan B due 2025		473			475
Revolving Credit Facility		60			-
Unamortized debt issuance costs		(21	)		(24	)
Total outstanding indebtedness		1,253			1,201
Less: amounts due within one year		88			22
Total long-term debt due after one year	$	1,165		$	1,179

In October of 2018, the Company issued $400 million in principal amount of its 6.125% senior unsecured notes (the “Senior Notes”), entered into term loan facilities in the form of a seven-year LIBOR plus 2.00% senior secured first-lien term B loan facility in an aggregate principal amount of $475 million and a five-year LIBOR plus 2.00% senior secured first-lien term A loan facility in an aggregate principal amount of $350 million (the “Term Loans”) and established a five-year senior secured first-lien revolving credit facility in an aggregate principal amount of $350 million (the "Revolving Credit Facility"). The interest rate on the Revolving Credit Facility borrowings are based on, at the option of the Company, either (i) the rate of interest last quoted by The Wall Street Journal as the “prime rate” in the United States, (ii) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (iii) the one month adjusted LIBOR rate, plus 1.00% per annum.

As of September 30, 2019, there were $60 million of borrowings and no of letters of credit issued under the $350 million Revolving Credit Facility. The Company assessed the amount recorded under the Term Loans, the Senior Notes, and the Revolving Credit Facility and determined the Term Loans and the Revolving Credit Facility approximated fair value, and the Senior Notes’ fair value is approximately $422 million. The fair values of the debt are based on the quoted inactive prices and are therefore classified as Level 2 within the valuation hierarchy.

At September 30, 2019, the interest rate for the Term Loans was 4.11% and the weighted average interest rate for the Revolving Credit Facility was 4.09%.   The interest expense for the Revolving Credit Facility, Term Loans and Senior Notes during the three and nine months ended September 30, 2019 was $16 million and $51 million, respectively, which includes the amortization of debt issuance cost and debt discounts.

For more information, please refer to “Note 15. Long-term Debt” in our 2018 Annual Report on Form 10-K.

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Segment Financial Data - Schedule of Reconciliation of Segment Adjusted EBITDA (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting [Abstract]
Net income		$ 8	$ 311	$ 45	$ 389
Net interest expense (income)		16		49	(1)
Tax expense (benefit)			(329)	36	(323)
Depreciation and amortization		19	16	55	49
Environmental expense	[1]		146		322
Honeywell reimbursement agreement expense	[2]	35		57
Stock compensation expense	[3]	8	6	22	15
Repositioning charges		9		34	5
Other	[4]	19		65	1
Segment Adjusted EBITDA		$ 114	$ 150	$ 363	$ 457

[1] Represents historical environmental expenses as reported under 100% carryover basis.

[2] Represents recorded expenses related to the Honeywell Reimbursement Agreement.

[3] Stock compensation expense adjustment includes only non-cash expenses.

[4] Represents $19 million and $53 million in costs directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to the Spin-Off, and ($0) million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019, respectively. For the three and nine months ended September 30, 2018 Other represents other non-operating (income) expense.

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Leases - Schedule of Operating Lease Costs (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Operating Lease Costs
Total operating lease costs	$ 14	$ 39
Selling, General and Administrative Expenses
Operating Lease Costs
Total operating lease costs	10	27
Cost of Goods Sold
Operating Lease Costs
Total operating lease costs	$ 4	$ 12

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Accrued Liabilities - Summary of Accrued Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Accrued Liabilities, Current [Abstract]
Obligations payable to Honeywell	$ 140	$ 140
Taxes payable	41	76
Compensation, benefit and other employee related	73	73
Other	277	214
Total accrued liabilities	$ 531	$ 503

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Commitments and Contingencies - Additional Information (Details)			3 Months Ended		9 Months Ended
		Oct. 29, 2018 USD ($) Site	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Loss Contingencies [Line Items]
Environmental expense	[1]			$ 146,000,000		$ 322,000,000
Environmental liabilities			$ 21,000,000	735,000,000	$ 21,000,000	735,000,000
Honeywell reimbursement agreement expense	[2]		35,000,000		$ 57,000,000
Trademark license agreement					40 years
Legal expenses			1,000,000		$ 20,000,000
Legal reserve			18,000,000		$ 18,000,000		$ 7,000,000
Indemnification Agreement
Loss Contingencies [Line Items]
Indemnification payable, late payment fee percentage		5.00%
Site contingency, number of sites | Site		230
Indemnification agreement description					On October 29, 2018, in connection with the Spin-Off, the Company entered into an indemnification and reimbursement agreement with Honeywell (the “Honeywell Reimbursement Agreement”) 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 will be subject to a cap of $140 million (exclusive of any late payment fees up to 5% per annum). The scope of the Company’s current environmental remediation obligations subject to the Honeywell Reimbursement Agreement relates to approximately 230 sites or groups of sites that are undergoing environmental remediation under U.S. federal or state law and agency oversight for contamination associated with Honeywell legacy business operations. The ongoing environmental remediation is designed to address contaminants at upland and sediment sites, which include, among others, metals, organic compounds and polychlorinated biphenyls, through a variety of methods, which include, among others, excavation, capping, in-situ stabilization, groundwater treatment and dredging. In addition, the Company obligations subject to the Honeywell Reimbursement Agreement will include certain liabilities with respect to (i) hazardous exposure or toxic tort claims associated with the specified sites that arise after the Spin-Off, if any, (ii) currently unidentified releases of hazardous substances at or associated with the specified sites, (iii) other environmental claims associated with the specified sites and (iv) consequential damages.
Maximum annual reimbursement obligation amount			25,000,000		$ 25,000,000
Indemnification Agreement | Maximum
Loss Contingencies [Line Items]
Indemnity liability annual cap		$ 140,000,000
Tax Matters Agreement
Loss Contingencies [Line Items]
Indemnified amount			$ 152,000,000		$ 152,000,000
Honeywell | Trademark Agreement
Loss Contingencies [Line Items]
Royalty fee on net revenue			1.50%		1.50%
Royalty Expense			$ 6,000,000		$ 20,000,000
Honeywell | Indemnification Agreement
Loss Contingencies [Line Items]
Indemnification Payable Percentage of Payments		90.00%
Indemnification payable percentage of net insurance receipts		90.00%
Indemnification payable percentage of net proceeds received		90.00%
Other Expenses
Loss Contingencies [Line Items]
Environmental expense				$ 146,000,000		$ 322,000,000
Honeywell reimbursement agreement expense			$ 35,000,000		$ 57,000,000

[1] Represents historical environmental expenses as reported under 100% carryover basis.

[2] Represents recorded expenses related to the Honeywell Reimbursement Agreement.

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Leases - Schedule of Future Minimum Lease Payments under Operating Leases (Details) $ in Millions	Dec. 31, 2018 USD ($)
Leases [Abstract]
2019	$ 39
2020	33
2021	28
2022	22
2023	15
Thereafter	17
Total future minimum lease payments	$ 154

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Pension - Additional Information (Details) - Pension Plans - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Defined Benefit Plan Disclosure [Line Items]
Pension expense		$ 3		$ 10
Pension obligations	$ 93		$ 93		$ 88
Net periodic benefit cost	$ 2		$ 5

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Repositioning and Other Charges - Summary of Repositioning Charges (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018
Restructuring And Related Activities [Abstract]
Severance	$ 9	$ 35	$ 4
Asset impairments			1
Reserve adjustments		(1)
Total net repositioning charges	$ 9	$ 34	$ 5

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Revenue Recognition - Schedule of Disaggregated Revenue (Details) - USD ($) $ in Millions		3 Months Ended			9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	[1]	Sep. 30, 2019	Sep. 30, 2018	[1]
Disaggregation Of Revenue [Line Items]
Revenue		$ 1,226	$ 1,200		$ 3,684	$ 3,561
ADI Global Distribution
Disaggregation Of Revenue [Line Items]
Revenue		714	674		2,084	1,994
ADI Global Distribution | U.S. and Canada
Disaggregation Of Revenue [Line Items]
Revenue		590	555		1,705	1,614
ADI Global Distribution | EMEA
Disaggregation Of Revenue [Line Items]
Revenue	[2]	109	107		336	338
ADI Global Distribution | India
Disaggregation Of Revenue [Line Items]
Revenue		15	12		43	42
Products & Solutions
Disaggregation Of Revenue [Line Items]
Revenue	[3]	512	526		1,600	1,567
Products & Solutions | Comfort
Disaggregation Of Revenue [Line Items]
Revenue		256	271		799	787
Products & Solutions | Security
Disaggregation Of Revenue [Line Items]
Revenue		128	119		397	358
Products & Solutions | RTS
Disaggregation Of Revenue [Line Items]
Revenue		$ 128	$ 136		$ 404	$ 422

[1] The unaudited disaggregated revenue disclosure for the three and nine month periods ended September 30, 2018 contained misallocated revenue between the ADI Global Distribution geographies U.S. and Canada and India. Correcting this allocation increased U.S. and Canada revenue and reduced India revenue for the three and nine month periods ended September 30, 2018 by $30 million and $35 million, respectively. There is no other impact to the unaudited Consolidated and Combined Interim Financial Statements for the three and nine month periods ended September 30, 2018.

[2] EMEA represents Europe, the Middle East and Africa.

[3] Products & Solutions sales channel naming convention changed from what was disclosed in our quarterly report for the quarter ended September 30, 2018. Comfort & Care was broken out into Comfort and Residential Thermal Solutions (“RTS”)

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

The details of the earnings per share calculations for the three and nine months ended September 30, 2019 and 2018 are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Basic:	2019		2018		2019		2018
Net income	$	8	$	311	$	45	$	389
Weighted average common shares outstanding (in thousands)		122,770		122,967		122,681		122,967
Earnings per share - Basic	$	0.07	$	2.53	$	0.37	$	3.16

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Diluted:	2019		2018		2019		2018
Net income	$	8	$	311	$	45	$	389
Weighted average common shares outstanding - Basic (in thousands)		122,770		122,967		122,681		122,967
Dilutive effect of common stock equivalents		474		-		723		-
Weighted average common shares outstanding - Diluted (in thousands)		123,244		122,967		123,404		122,967
Earnings per share - Diluted	$	0.06	$	2.53	$	0.36	$	3.16

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 15. 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 are presented within Cost of goods sold for operating sites, which are the Company’s owned sites. For the three and nine months ended September 30, 2019 and September 30, 2018, environmental expenses related to these operating sites were not material. On October 29, 2018, upon consummation of the Spin-Off, certain environmental liabilities became subject to the Honeywell Reimbursement Agreement (defined below) and were reclassified to Obligations payable to Honeywell.  The expenses related to these sites were recorded within Other expense, net in the unaudited Consolidated and Combined Interim Statement of Operations.  For the three and nine months ended September 30, 2018, environmental expense within Other expense, net was$146 million and $322 million, respectively.  Liabilities for environmental cost were $21 million and $735 million as of September 30, 2019 and September 30, 2018, respectively. For additional information, see Honeywell Reimbursement Agreement below.

The Company does not currently possess sufficient information to reasonably estimate the amounts of environmental liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can be determined although they could be material to our unaudited consolidated and combined results of operations and operating cash flows in the periods recognized or paid.

Honeywell Reimbursement Agreement

On October 29, 2018, in connection with the Spin-Off, the Company entered into an indemnification and reimbursement agreement with Honeywell (the “Honeywell Reimbursement Agreement”) 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 will be subject to a cap of $140 million (exclusive of any late payment fees up to 5% per annum). The scope of the Company’s current environmental remediation obligations subject to the Honeywell Reimbursement Agreement relates to approximately 230 sites or groups of sites that are undergoing environmental remediation under U.S. federal or state law and agency oversight for contamination associated with Honeywell legacy business operations. The ongoing environmental remediation is designed to address contaminants at upland and sediment sites, which include, among others, metals, organic compounds and polychlorinated biphenyls, through a variety of methods, which include, among others, excavation, capping, in-situ stabilization, groundwater treatment and dredging. In addition, the Company obligations subject to the Honeywell Reimbursement Agreement will include certain liabilities with respect to (i) hazardous exposure or toxic tort claims associated with the specified sites that arise after the Spin-Off, if any, (ii) currently unidentified releases of hazardous substances at or associated with the specified sites, (iii) other environmental claims associated with the specified sites and (iv) consequential damages.

Payments in respect of the liabilities arising in a given year will be made quarterly throughout such year on the basis of an estimate of the liabilities and recoveries provided by Honeywell. Following the end of any such year, Honeywell will provide the Company with a calculation of the amount of payments and the recoveries actually received.

Payment amounts under the Honeywell Reimbursement Agreement will be deferred to the extent that a specified event of default has occurred and is continuing under certain indebtedness, including under the Company’s principal credit agreement, or the payment thereof causes the Company to not be compliant with certain financial covenants in certain indebtedness, including the Company’s principal credit agreement on a pro forma basis, including the maximum total leverage ratio (ratio of consolidated debt to consolidated EBITDA, which excludes any amounts owed to Honeywell under the Honeywell Reimbursement Agreement), and the minimum interest coverage ratio. A 5% late payment fee will accrue on all amounts that are not otherwise entitled to be deferred under the terms of the Honeywell Reimbursement Agreement, without prejudice to any other rights that Honeywell may have for late payments.

The obligations under the Honeywell Reimbursement Agreement will continue until the earlier of: (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million.

The following table summarizes information concerning our Honeywell Reimbursement Agreement liabilities:

	Nine Months Ended
	September 30,
	2019
Beginning of period	$	616
Accruals for indemnification liabilities deemed probable and reasonably estimable		138
Reduction (1)		(81	)
Indemnification payment		(105	)
End of period	$	568

(1) Reduction in indemnification liabilities relates to a provision in the Honeywell Reimbursement Agreement that reduces the obligation due to Honeywell for any proceeds received by Honeywell from a property sale of a site under the agreement.

For the three and nine months ended September 30, 2019, expenses related to the Honeywell Reimbursement Agreement were $35 million and $57 million, respectively and are recorded in Other expense, net. Honeywell Reimbursement Agreement liabilities are included in the following balance sheet accounts:

	September 30,
	2019
Accrued liabilities	$	140
Obligations payable to Honeywell		428
	$	568

The Company does not currently possess sufficient information to reasonably estimate the amounts of indemnification liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can be determined although they could be material to our unaudited consolidated and combined 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 a tax matters agreement (the “Tax Matters Agreement”) with Honeywell pursuant to which it is responsible and will indemnify Honeywell for all taxes, including income taxes, sales taxes, VAT and payroll taxes, relating to the business for all periods, including periods prior to the consummation of the Spin-Off. As of September 30, 2019, the Company has indemnified Honeywell for $152 million, which is included in Obligations payable to Honeywell.

Trademark Agreements

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 will pay a royalty fee of 1.5% on net revenue to Honeywell related to such licensed products which is recorded in Selling, general and administrative expense on the unaudited Consolidated and Combined Interim Statement of Operations. For the three and nine months ended September 30, 2019, royalty fees were $6 million and $20 million, respectively.

Other Matters

The Company is subject to other lawsuits, investigations and disputes arising out of the conduct of its business, including matters relating to commercial transactions, settlement agreements, government contracts, product liability, prior acquisitions and divestitures, employee matters, intellectual property, antitrust 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 of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a carefulanalysis of each matter with the assistance of outside legal counsel and, if applicable, other experts.  The Company recorded legal expense of $1 million and $20 million for the three and nine months ended September 30, 2019, respectively. Prior to the Spin-off, legal expenses were paid by Honeywell and then allocated to the Company as part of a corporate expense allocation that did not separately identify the specific expenses. As of September 30, 2019 and December 31, 2018, the Company has a legal reserve of $18 million and $7million, respectively.

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 performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities.

The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees:

	Nine Months Ended
	September 30,
	2019			2018
Beginning of period	$	26		$	17
Accruals for warranties/guarantees issued during the year		10			12
Adjustment of pre-existing warranties/guarantees		(1	)		(2	)
Settlement of warranty/guarantee claims		(12	)		(12	)
End of period	$	23		$	15

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Segment Financial Data - Additional Information (Details)	9 Months Ended
	Sep. 30, 2019 Segment
Segment Reporting [Abstract]
Number of operating segments	2

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Commitments and Contingencies - Summary of Honeywell Reimbursement Agreement Liabilities (Details) - Honeywell $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($)
Accrual for Honeywell Reimbursement Agreement
Beginning of period	$ 616
Accruals for indemnification liabilities deemed probable and reasonably estimable	138
Reduction (1)	(81)
Indemnification payment	(105)
End of period	$ 568

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Leases - Supplemental Cash Flow Information Related to Operating Leases (Details) $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($)
Leases [Abstract]
Operating cash outflows	$ 28
Operating right-of-use assets obtained in exchange for operating lease liabilities	$ 47

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Repositioning and Other Charges - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018
Restructuring Cost And Reserve [Line Items]
Repositioning and related expenses	$ 9	$ 34	$ 5
Severance
Restructuring Cost And Reserve [Line Items]
Repositioning and related expenses	$ 9	$ 34

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Repositioning and Other Charges - Summary of Status of Total Repositioning Reserves Related to Severance Cost Included in Accrued Liabilities (Details) $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($)
Restructuring And Related Activities [Abstract]
Beginning of period	$ 13
Charges	35
Usage – cash	(22)
Adjustments	(1)
End of period	$ 25

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Repositioning and Other Charges (Tables)

9 Months Ended

Sep. 30, 2019

Restructuring And Related Activities [Abstract]

Summary of Repositioning Charges

During the second quarter of 2019, management began a repositioning plan to reduce operating costs and better align the Company’s workforce with the needs of the business going forward. Repositioning and related expenses were $9 million and $34 million for the three and nine months ended September 30, 2019, respectively, and primarily related to severance.

A summary of repositioning charges follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019			2018
Severance	$	9	$	-	$	35		$	4
Asset impairments		-		-		-			1
Reserve adjustments		-		-		(1	)		-
Total net repositioning charges	$	9	$	-	$	34		$	5

Summary of Pretax Distribution of Total Net Repositioning Charges by Unaudited Consolidated and Combined Statement of Operations Classification

The following table summarizes the pretax distribution of total net repositioning charges by unaudited Consolidated and Combined Statement of Operations classification:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of goods sold	$	5	$	-	$	18	$	4
Selling, general and administrative expenses		4		-		16		1
	$	9	$	-	$	34	$	5

Summary of Pretax Impact of Total Net Repositioning Charges by Segment

The following table summarizes the pretax impact of total net repositioning charges by segment:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Products & Solutions	$	9	$	-	$	28	$	5
ADI Global Distribution		-		-		6		-
	$	9	$	-	$	34	$	5

Summary of Status of Total Repositioning Reserves Related to Severance Cost Included in Accrued Liabilities

The following table summarizes the status of total repositioning reserves related to severance cost included in Accrued liabilities in the unaudited Consolidated Balance Sheet:

	Nine Months Ended
	September 30,
	2019
Beginning of period	$	13
Charges		35
Usage – cash		(22	)
Adjustments		(1	)
End of period	$	25

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Pension

9 Months Ended

Sep. 30, 2019

Compensation And Retirement Disclosure [Abstract]

Pension

Note 16. Pension

Prior to the Spin-Off, certain of Resideo’s employees participated in multiple U.S. and non-U.S. defined benefit pension plans (the “Shared Plans”) sponsored by Honeywell which includes participants from other Honeywell subsidiaries and operations. The Company accounted for participation in the Shared Plans as a multiemployer benefit plan. Accordingly, it did not record an asset or liability to recognize the funded status of the Shared Plans. The related pension expense was allocated based on annual service cost of active participants and reported within Costs of goods sold and Selling, general and administrative expenses in the unaudited Combined Interim Statement of Operations. The pension expense related to participation in the Shared Plan for the three and nine months ended September 30, 2018 was $3 million and $10 million, respectively.

As of the date of separation from Honeywell, these employees’ and certain former Honeywell employees’ entitlement to benefits in Honeywell’s plans were transferred to Resideo sponsored plans.

The Resideo defined benefit pension plans have substantially similar benefit formulas as the Honeywell defined benefit pension plans. Moreover, vesting service, benefit accrual service and compensation credited under the Honeywell defined benefit pension plans apply to the determination of pension benefits under the Resideo defined benefit pension plan.

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, Switzerland, and the Netherlands.The pension obligations as of September 30, 2019 and December 31, 2018 were $93 million and $88 million, respectively, and are included in Other liabilities in the unaudited Consolidated Interim Balance Sheet. Net periodic benefit cost recognized in Comprehensive income for the three and nine months ended September 30, 2019 is $2 million and $5 million, respectively.

The components of net periodic benefit costs other than the service cost are included in Other expense, net in the unaudited Consolidated and Combined Interim Statement of Operations for the three and nine months ended September 30, 2019 and 2018.

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CONSOLIDATED and COMBINED INTERIM STATEMENT OF CASH FLOWS (Unaudited) - USD ($) $ in Millions		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018
Cash flows (used for) provided by operating activities:
Net income		$ 45	$ 389
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization		55	49
Repositioning charges, net of payments		12	(4)
Stock compensation expense	[1]	22	15
Deferred income taxes		(3)	(275)
Other noncash expense		13	17
Changes in assets and liabilities:
Accounts, notes and other receivables		(27)	(11)
Inventories		(109)	(142)
Other current assets		(13)	(4)
Other assets		(6)	(6)
Accounts payable		(23)	151
Accrued liabilities		(6)	(15)
Obligations payable to Honeywell		(49)
Other liabilities		19	211
Net cash (used for) provided by operating activities		(70)	375
Cash flows used for investing activities:
Expenditures for property, plant, equipment and software		(66)	(63)
Cash paid for acquisitions, net of cash acquired		(17)
Proceeds received related to amounts due from related parties			7
Net cash used for investing activities		(83)	(56)
Cash flows provided by (used for) financing activities:
Net proceeds from revolving credit facility		60
Repayment of long-term debt		(11)
Non-operating obligations paid to Honeywell, net		(24)
Payments related to amounts due to related parties, net			(1)
Tax payments related to stock vestings		(3)
Net decrease in invested equity			(300)
Cashflow provided by cash pooling			115
Net cash provided by (used for) financing activities		22	(186)
Effect of foreign exchange rate changes on cash and cash equivalents		(2)	(5)
Net (decrease) increase in cash and cash equivalents		(133)	128
Cash and cash equivalents at beginning of period		265	56
Cash and cash equivalents at end of period		$ 132	$ 184

[1] Stock compensation expense adjustment includes only non-cash expenses.

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Schedule of Operating Lease Costs

The Company’s operating lease costs for the three and nine months ended September 30, 2019 consisted of the following:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019		2019
Operating Lease Costs
Selling, general & administrative	$	10	$	27
Cost of goods sold		4		12
Total operating lease costs	$	14	$	39

Summary of Lease Recognized Related to Operating Leases

The Company recognized the following related to its operating leases:

	Financial Statement Line Item	At September 30, 2019
Operating right-of-use assets	Other assets	$	130
Operating lease liabilities - current	Accrued liabilities	$	29
Operating lease liabilities - noncurrent	Other liabilities	$	106

Maturities of Operating Lease Liabilities

Maturities of the Company’s operating lease liabilities were as follows:

	At September 30, 2019
2019	$	9
2020		35
2021		32
2022		27
2023		20
Thereafter		36
Total lease payments		159
Less: imputed interest		24
Present value of operating lease liabilities	$	135
Weighted-average remaining lease term (years)		5.64
Weighted-average incremental borrowing rate		6.00	%

Schedule of Future Minimum Lease Payments under Operating Leases

Future minimum lease payments under operating leases having initial or remaining non-cancellable lease terms in excess of one year as of December 31, 2018 were as follows:

	At December 31, 2018
2019	$	39
2020		33
2021		28
2022		22
2023		15
Thereafter		17
	$	154

Supplemental Cash Flow Information Related to Operating Leases

Supplemental cash flow information related to the Company’s operating leases was as follows:

	Nine Months Ended
	September 30, 2019
Operating cash outflows	$	28
Operating right-of-use assets obtained in exchange for operating lease liabilities	$	47

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Organization, Operations and Basis of Presentation - Additional Information (Details) - $ / shares			9 Months Ended
	Oct. 29, 2018	Oct. 16, 2018	Sep. 30, 2019	Dec. 31, 2018
Spin-off transaction, common stock share conversion	one share	six shares
Spin-off transaction, common stock conversion of par value per share	$ 0.001		$ 0.001	$ 0.001
Spin-off transaction record date			Oct. 16, 2018
Date of business spin-off			Oct. 29, 2018
Spin-off common stock, description			On October 29, 2018, Honeywell’s shareholders of record as of October 16, 2018 (“Record Date”) received one share of the Company’s common stock, par value $0.001 per share, for every six shares of Honeywell’s common stock, par value $1.00 per share, held as of the Record Date, and cash for any fractional shares of the Company’s common stock.
Rezi
Spin-off transaction, common stock conversion of par value per share	$ 0.001
Honeywell
Spin-off transaction, common stock conversion of par value per share		$ 1.00

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CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018		Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Net revenue	$ 1,226	$ 1,200	[1]	$ 3,684	$ 3,561	[1]
Cost of goods sold	937	853		2,786	2,525
Gross profit	289	347		898	1,036
Selling, general and administrative expenses	230	219		712	648
Operating profit	59	128		186	388
Other expense, net	35	144		54	320
Interest expense	16	2		51	2
Income (loss) before taxes	8	(18)		81	66
Tax expense (benefit)		(329)		36	(323)
Net income	$ 8	$ 311		$ 45	$ 389
Weighted Average Number of Common Shares Outstanding (in thousands)
Basic	122,770	122,967		122,681	122,967
Diluted	123,244	122,967		123,404	122,967
Earnings Per Share
Basic	$ 0.07	$ 2.53		$ 0.37	$ 3.16
Diluted	$ 0.06	$ 2.53		$ 0.36	$ 3.16

[1] The unaudited disaggregated revenue disclosure for the three and nine month periods ended September 30, 2018 contained misallocated revenue between the ADI Global Distribution geographies U.S. and Canada and India. Correcting this allocation increased U.S. and Canada revenue and reduced India revenue for the three and nine month periods ended September 30, 2018 by $30 million and $35 million, respectively. There is no other impact to the unaudited Consolidated and Combined Interim Financial Statements for the three and nine month periods ended September 30, 2018.

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Note 12. Leases

As discussed in Note 2, the Company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019. 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, and certain automobile lease agreements include rental payments which fluctuate based on mileage. Generally, the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company’s operating lease costs for the three and nine months ended September 30, 2019 consisted of the following:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019		2019
Operating Lease Costs
Selling, general & administrative	$	10	$	27
Cost of goods sold		4		12
Total operating lease costs	$	14	$	39

Total operating lease costs include variable lease costs of $3 million and $8 million for the three and nine months ended September 30, 2019.  Total operating lease costs also include offsetting sublease income which is immaterial for the three and nine months ended September 30, 2019.

The Company recognized the following related to its operating leases:

	Financial Statement Line Item	At September 30, 2019
Operating right-of-use assets	Other assets	$	130
Operating lease liabilities - current	Accrued liabilities	$	29
Operating lease liabilities - noncurrent	Other liabilities	$	106

Maturities of the Company’s operating lease liabilities were as follows:

	At September 30, 2019
2019	$	9
2020		35
2021		32
2022		27
2023		20
Thereafter		36
Total lease payments		159
Less: imputed interest		24
Present value of operating lease liabilities	$	135
Weighted-average remaining lease term (years)		5.64
Weighted-average incremental borrowing rate		6.00	%

Future minimum lease payments under operating leases having initial or remaining non-cancellable lease terms in excess of one year as of December 31, 2018 were as follows:

	At December 31, 2018
2019	$	39
2020		33
2021		28
2022		22
2023		15
Thereafter		17
	$	154

Supplemental cash flow information related to the Company’s operating leases was as follows:

	Nine Months Ended
	September 30, 2019
Operating cash outflows	$	28
Operating right-of-use assets obtained in exchange for operating lease liabilities	$	47

As of September 30, 2019, the Company has additional operating leases that have not yet commenced. Obligations under these leases are not material.  Additionally, as a lessor, the Company leases all or a portion of certain owned properties. Rental income for the three and nine months ended September 30, 2019 was not material.

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 8. Income Taxes

The Company recorded a tax benefit of $329 million for the three months ended September 30, 2018 as compared to nil for the three months ended September 30, 2019.  The decrease in the tax benefit is primarily the result of tax benefits generated in 2018 related to the internal restructuring of Resideo’s business in advance of its anticipated Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings, and adjustments to the provisional tax amount related to U.S. Tax Reform.

The effective tax rate for the three months ended September 30, 2019 was lower than the U.S. federal statutory rate of 21% primarily due to a decrease in the forecast of full-year non-deductible expenses and a decrease in the forecast of full-year U.S. taxation of foreign earnings.

The effective tax rate for the nine months ended September 30, 2019 was higher than the U.S. federal statutory rate of 21% primarily attributable to non-deductible expenses and U.S. taxation of foreign earnings.

The effective tax rate for the three months ended September 30, 2018 was higher than the U.S. federal statutory rate of 21% primarily due to tax benefits related to the internal restructuring of Resideo’s business in advance of its anticipated Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings, and adjustments to the provisional tax amount related to U.S. Tax Reform.  The combined effect of the tax benefits recorded in the quarter ended September 30, 2018 resulted in a tax benefit (negative tax expense).  As a result of the tax benefits and in conjunction with a net loss in the quarter ended September 30, 2018, the effective tax rate for the quarter is a positive percentage and significantly more than the US statutory rate. 

The effective tax rate for the nine months ended September 30, 2018 was lower than the U.S. federal statutory rate of 21% primarily from tax benefits related to the internal restructuring of Resideo’s business in advance of its anticipated Spin-Off, currency impacts on withholding taxes on undistributed foreign earnings and adjustments to the provisional tax amount related to U.S. Tax Reform.

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Acquisitions

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Acquisitions

Note 4. Acquisitions

On March 28, 2019, the Company acquired all of the capital stock of Buoy Labs, for $6 million, which has been integrated into our Products & Solutions segment. Buoy Labs provides innovative Wi-Fi enabled solutions that track the amount of water used in a home, integrating smart software and hardware that can help consumers identify potential leaks and allow consumers to act to prevent them through its subscription-based app services. In connection with the acquisition, the Company recognized preliminary goodwill and intangible assets of $6 million. The acquisition agreement includes deferred payments for certain individuals that are contingent upon employment as well as financial performance. The Company determined that these deferred payments are accounted for as compensation expense over the requisite service period. The Company is still assessing the final allocation of the purchase price to the assets and liabilities of the business.

On May 21, 2019, the Company acquired certain assets relating to innovative energy efficiency from Whisker Labs, for $5 million, which has been integrated into our Products & Solutions segment. The acquired technology creates a thermodynamic model of a home to accurately predict home heating and air conditioning run time and energy use to enable a homeowner to use less energy while maintaining comfort. In connection with the acquisition, the Company recognized preliminary goodwill and intangible assets of $5 million. The Company is still assessing the final allocation of the purchase price to the assets and liabilities of the business.

On June 27, 2019, the Company acquired all of the membership interests of LifeWhere for $6 million, which has been integrated into our Products & Solutions segment. LifeWhere uses machine learning and analytics to predict potential failure on critical home appliances, such as water heaters, furnaces and air conditioners. This service provides the detailed analytics required for professional contractors to dispatch technicians with the right skills to quickly repair the appliance before it causes a catastrophic failure. In connection with the acquisition, the Company recognized preliminary goodwill and intangible assets of $6 million. The Company is still assessing the final allocation of the purchase price to the assets and liabilities of the business.

These acquisitions have an immaterial financial statement impact on both an individual basis and when considered in the aggregate.

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Segment Financial Data - Schedule of Segment Information (Details) - USD ($) $ in Millions		3 Months Ended			9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018		Sep. 30, 2019	Sep. 30, 2018
Revenue
Total revenue		$ 1,226	$ 1,200	[1]	$ 3,684	$ 3,561	[1]
Segment adjusted EBITDA
Total		59	128		186	388
Segment Adjusted EBITDA		114	150		363	457
Products & Solutions
Revenue
Total revenue	[2]	512	526	[1]	1,600	1,567	[1]
Segment adjusted EBITDA
Total		66	107		222	333
ADI Global Distribution
Revenue
Total revenue		714	674	[1]	2,084	1,994	[1]
Segment adjusted EBITDA
Total		48	43		141	124
Operating Segments | Products & Solutions
Revenue
Total revenue		595	603		1,828	1,803
Intersegment Revenue Eliminations | Products & Solutions
Revenue
Total revenue		$ (83)	$ (77)		$ (228)	$ (236)

[1] The unaudited disaggregated revenue disclosure for the three and nine month periods ended September 30, 2018 contained misallocated revenue between the ADI Global Distribution geographies U.S. and Canada and India. Correcting this allocation increased U.S. and Canada revenue and reduced India revenue for the three and nine month periods ended September 30, 2018 by $30 million and $35 million, respectively. There is no other impact to the unaudited Consolidated and Combined Interim Financial Statements for the three and nine month periods ended September 30, 2018.

[2] Products & Solutions sales channel naming convention changed from what was disclosed in our quarterly report for the quarter ended September 30, 2018. Comfort & Care was broken out into Comfort and Residential Thermal Solutions (“RTS”)

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Leases - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Leases [Abstract]
Variable lease costs	$ 3	$ 8

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Long-term Debt and Credit Agreement - Schedule of Debt (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Unamortized debt issuance costs	$ (21)	$ (24)
Total outstanding indebtedness	1,253	1,201
Less: amounts due within one year	88	22
Total long-term debt due after one year	1,165	1,179
Revolving Credit Facility
Debt Instrument [Line Items]
Revolving Credit Facility	60
6.125% notes due 2026
Debt Instrument [Line Items]
Long-term debt, gross	400	400
Five Year Variable Rate Term Loan A Due 2023
Debt Instrument [Line Items]
Long-term debt, gross	341	350
Seven Year Variable Rate Term Loan B Due 2025
Debt Instrument [Line Items]
Long-term debt, gross	$ 473	$ 475