RESIDEO TECHNOLOGIES INC
For the period ended Sep 28, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 28, 2024 · Filed Nov 7, 2024
REZI$19.40-1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-29; filed 2024-08-09.
0001740332-24-000053
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-28; filed 2024-11-07.
0001740332-24-000059
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 130 previous paragraphs and 130 current paragraphs.
72 unchanged; 40 reworded; 16 added; 15 removed; 3 previous and 2 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
For the fourth quarter of 2024, we anticipate executing our business against a mixed global macro-economic environment. There are a number of positive indicators, such as an improving interest rate environment and an uptick in new home sales in the United States. There are, however, some negative indicators, such as continued softness in existing home sales in the United States and market weakness in EMEA.
Current report
Research and development expenses for the three months ended September 28, 2024 of $23 million were down $5 million compared with the same period in 2023. The decrease was primarily driven by lower third-party spend and personnel costs due to optimization efforts and an enhanced focus on strategic new product programs.
Current report
Research and development expenses for the nine months ended September 28, 2024 of $69 million were down $15 million compared with the same period in 2023. The decrease was primarily driven by lower third-party spend and personnel costs due to optimization efforts and an enhanced focus on strategic new product programs.
Current report
Selling, general and administrative expenses for the three months ended September 28, 2024 were $317 million, an increase of $84 million, or 36.1%, as compared to the same period in 2023. The increase was primarily driven by $76 million of incremental expenses from the Snap One acquisition, which includes operating expenses and integration costs. Further, there was an increase in bad debt expense of $7 million and additional IT costs of $2 million at the Product and Solutions segment. The increase was partially offset by lower expenses of $2 million from the divestiture of the Genesis business during the fourth quarter of 2023.
Current report
Selling, general and administrative expenses for the nine months ended September 28, 2024 were $828 million, an increase of $109 million, or 15.2%, as compared to the same period in 2023. The increase was driven by $122 million of incremental expenses from the Snap One acquisition, which includes operating expenses and acquisition costs, and $8 million of higher labor costs. The increase was partially offset by lower employee expenses of $10 million from restructuring efforts, and lower expenses of $8 million from the divestiture of the Genesis business during the fourth quarter of 2023.
Current report
Other expenses, net for the three months ended September 28, 2024 were $55 million, a decrease of $1 million, or 1.8%, as compared to the same period in 2023. The decrease was driven primarily by favorable foreign currency impacts of $4 million and reduced pension costs of $3 million. The decrease was partially offset by a loss on sale of certain assets and related liabilities of $3 million during the current year at the Product and Solutions segment, and an increase of $2 million related to the Reimbursement Agreement expenses.
Current report
Other expenses, net for the nine months ended September 28, 2024 were $145 million, an increase of $7 million, or 5.1%, as compared to the same period in 2023. The increase was primarily driven by loss on sale of certain assets and related liabilities of $8 million during the current year at the Product and Solutions segment, and $7 million of additional Reimbursement Agreement expenses. The increase was partially offset by reduced pension costs of $5 million and gain of $4 million from the sale of an investment.
Current report
Interest expense, net increased $11 million for the three months ended September 28, 2024 as compared to the same period in 2023, due to an increase in our long-term debt resulting in $10 million of higher interest expense. This amount was partially offset by a $1 million decrease in interest expense as a result of a decrease in weighted average interest rates on our debt.
Current report
Products and Solutions net revenue decreased $9 million, or 1%, as compared to the same period in 2023, primarily due to $32 million from the divestiture of the Genesis business during the fourth quarter of 2023 and unfavorable foreign currency fluctuations of $1 million. The decrease was partially offset by volume and price increases of $18 million and $6 million, respectively.
Current report
The chart below presents net revenue and income from operations for the nine months ended September 28, 2024 and September 30, 2023.
Current report
ADI Global Distribution net revenue increased $283 million, or 31.4%, as compared to the same period in 2023. The increase was driven by $251 million of revenue from the acquisition of Snap One and $41 million from higher volumes. The increase was partially offset byunfavorable impacts from the decrease in price of $9 million.
Current report
The chart below presents net revenue and income from operations for the nine months ended September 28, 2024 and September 30, 2023.
Current report
Income from operations decreased $40 million, or 21%, due to an unfavorable sales mix of $23 million, higher operational costs of $7 million, incremental operating loss of $6 million from the acquisition of Snap One , integration costs of $2 million, and higher restructuring costs of $4 million.
Current report
In July 2024, we issued $600 million in aggregate principal of 6.500% Notes due 2032. The Senior Notes due 2032 were used to repay $596 million principal amount outstanding indebtedness under the Company’s A&R Term B Facility.
Current report
In July 2024, we issued $600 million in aggregate principal of 6.500% Senior Notes due 2032. The Senior Notes due 2032 were used to repay $596 million principal amount outstanding indebtedness under the Company’s A&R Term B Facility.
Current report
Net cash provided by operating activities for the nine months ended September 28, 2024 was $241 million. Compared to the nine months ended September 30, 2023, net cash provided by operating activities increased $64 million. The increase was primarily driven by improved working capital dynamics and cash earnings.
Removed paragraphs (15)
Previous report
Expectations for key macro trends expected to impact our business for the full year include residential repair and remodel activity flat to down low-single-digits year-over-year, and residential new construction starts expected to grow low to mid single digits. We expect ADI’s key commercial markets to be flat to up low-single-digits with continued headwinds in residential focused markets. We expect these trends to support our 2024 year-over-year revenue outlook of flat to down low single-digits.
Previous report
Research and development expenses for the three months ended June 29, 2024 of $21 million were down $8 million compared with the same period in 2023. The decrease is primarily due to a $6 million shift in resource allocation to align IT with the Products and Solutions strategy.
Previous report
Research and development expenses for the six months ended June 29, 2024 of $46 million were down $10 million compared with the same period in 2023. The decrease is primarily due to an $8 million shift in resource allocation to align IT with the Products and Solutions strategy as well as a reduction in third-party spend of $2 million.
Previous report
Selling, general and administrative expenses for the three months ended June 29, 2024 were $280 million, an increase of $38 million, or 15.7%, as compared to the same period in 2023. The increase was primarily driven by acquisition costs of $34 million and $12 million from incremental Snap One operating expenses. The increase was partially offset by lower employee expenses of $8 million.
Previous report
Selling, general and administrative expenses for the six months ended June 29, 2024 were $511 million, an increase of $25 million, or 5.1%, as compared to the same period in 2023. The increase was driven by acquisition costs of $34 million and $12 million from incremental Snap One operating expenses. The increase was partially offset by lower employee expenses of $21 million.
Previous report
Other expenses, net consists primarily of Reimbursement Agreement expenses in the amount of $47 million for the three months ended June 29, 2024 as compared to $44 million of Reimbursement Agreement expenses for the three months ended July 1, 2023.
Previous report
Other expenses, net consists primarily of Reimbursement Agreement expenses in the amount of $90 million for the six months ended June 29, 2024 as compared to $85 million of Reimbursement Agreement expenses for the six months ended July 1, 2023.
Previous report
The chart below presents net revenue and income from operations for the six months ended June 29, 2024 and July 1, 2023.
Previous report
Products and Solutions net revenue decreased $85 million, or 6.4%, as compared to the same period in 2023, primarily due to $68 million from the divestiture of the Genesis business during the fourth quarter of 2023, lower sales volume of $28 million and unfavorable foreign currency fluctuations of $6 million. The decrease was partially offset by price increases of $17 million. The volume declines impacted several categories including original equipment manufacturing, security distribution and HVAC, partially offset by expansion in electrical distribution.
Previous report
The chart below presents net revenue and income from operations for the six months ended June 29, 2024 and July 1, 2023.
Previous report
ADI Global Distribution net revenue increased by $9 million, or 0.5%, as compared to the same period in 2023, due to additional $45 million from incremental Snap One revenue and favorable foreign currency fluctuations of $3 million. The increase was partially offset by adecrease in volume and price of $25 million and $14 million, respectively. The volume declines impacted several categories including residential security, access control and video, partially offset by expansion in fire and data communications.
Previous report
Income from operations decreased $24 million, or 18%, due to an unfavorable sales mix of $16 million, unfavorable manufacturing costs of $6 million and lower sales volume of $2 million.
Previous report
Net cash provided by operating activities for the six months ended June 29, 2024 was $94 million. Compared to the six months ended July 1, 2023, net cash provided by operating activities decreased $23 million. This is primarily due to a decrease in net income of $34 million and unfavorable changes in working capital of $7 million. These amounts are offset by an increase in non-cash charges of $18 million.
Previous report
Capital Expenditures
Previous report
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.
Reworded paragraphs (40)
Previous wording
•compatibility and ease of integration with third-party products and services, outside of our control;
Current wording
•compatibility and ease of integration of our products and solutions with third-party products and services and our ability to control such third party integrations;
Previous wording
•risks associated with the Reimbursement Agreement, the other agreements we entered into with Honeywell in connection with the Spin-Off, and our relationships with Honeywell, including our reliance on Honeywell for the Honeywell Home trademark and potential material environmental liabilities;
Current wording
•risks associated with the Reimbursement Agreement, the other agreements we entered into with Honeywell in connection with the Spin-Off, and our relationships with Honeywell, including our reliance on Honeywell for the Honeywell Home trademark;
Previous wording
•our ability to maintain effective internal controls, deliver timely financial statements, and avoid the financial statements to become impaired and damage public opinion, including the process we are currently undertaking to assess the internal controls over financial reporting of Snap One, which had disclosed a material weakness at the time we acquired the business;
Current wording
•our ability to maintain effective internal controls, deliver timely financial statements, and avoid the financial statements to become impaired and damage public opinion;
Previous wording
There have been no material changes to the risk factors described in our 2023 Annual Report on Form 10-K. These risks could cause actual results to differ materially from those implied by forward-looking statements in this Quarterly Report. Even if our results of operations, financial condition and liquidity and the development of the industries in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.
Current wording
These risks could cause actual results to differ materially from those implied by forward-looking statements in this Quarterly Report. Even if our results of operations, financial condition and liquidity and the development of the industries in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.
Previous wording
We are a leading global manufacturer and distributor of technology-driven products and solutions that help homeowners and businesses stay connected and in control of their comfort, security and energy use. We are a leader in the home heating, ventilation and air conditioning controls markets, smoke and carbon monoxide detection home safety and fire suppression products, and security markets. We have a global footprint serving commercial and residential end-markets. We manage our business operations through two operating segments, Products and Solutions and ADI Global Distribution. The Products and Solutions operating segment, consistent with our industry, has a higher gross and operating profit profile in comparison to the ADI Global Distribution operating segment. In the second quarter of 2024, we expanded the business through the acquisition of Snap One, which has been incorporated into the ADI Global Distribution segment. The acquisition expands our distribution into and reach with smart-living products, services, and software.
Current wording
We are a leading global manufacturer and distributor of technology-driven sensing and controls products and solutions that help homeowners and businesses stay connected and in control of their comfort, security and energy use. We are a leader in the home heating, ventilation and air conditioning controls markets, smoke and carbon monoxide detection home safety and fire suppression products, and security markets. We have a global footprint serving commercial and residential end-markets. We manage our business operations through two operating segments, Products and Solutions and ADI Global Distribution. The Products and Solutions operating segment, consistent with our industry, has a higher gross and operating profit profile in comparison to the ADI Global Distribution operating segment. In the second quarter of 2024, we expanded the business through the acquisition of Snap One, which has been incorporated into the ADI Global Distribution segment. The acquisition expands our distribution into and reach with smart-living products, services, and software.
Previous wording
Our Products and Solutions operating segment offerings include temperature and humidity control, energy products and solutions, water and air solutions, smoke and carbon monoxide detection home safety products, security panels, sensors, peripherals, wire and cable, communications devices, video cameras, other home-related lifestyle convenience solutions, cloud infrastructure, installation and maintenance tools, and related software.
Current wording
Our Products and Solutions operating segment offerings include temperature and humidity control, energy products and solutions, water and air solutions, smoke and carbon monoxide detection home safety products, security panels, sensors, peripherals, communications devices, video cameras, other home-related lifestyle convenience solutions, cloud infrastructure, installation and maintenance tools, and related software.
Previous wording
Our ADI Global Distribution business is a leading wholesale distributor of low-voltage security products including access control, fire detection, fire suppression, security, and video products and participates significantly in the broader related markets of audio, communications, data communications, networking, power, ProAV, smart home, and wire and cable. Our ADI Global Distribution strategy is focused on growth in our omni-channel presence, expansion into adjacent markets, and continued enhancements to our value-add services to support our professional installers’ efficiency and profitability.
Current wording
Our ADI Global Distribution business is a leading wholesale distributor of low-voltage security products including access control, fire detection, fire suppression, security, and video products and participates significantly in the broader related markets of audio, communications, data communications, networking, power, residential and professional audio-visual solutions, smart-living, software solutions, and wire and cable. Our ADI Global Distribution strategy is focused on growth in our omni-channel presence, expansion into adjacent markets, and continued enhancements to our value-add services to support our professional installers’ efficiency and profitability.
Previous wording
Our financial performance is influenced by macroeconomic factors such as repair and remodeling activity, residential and non-residential construction, new and existing home sales, employment rates, interest rates and bank lending standards, supply chain dynamics, and the overall macroeconomic environment. The ongoing uncertainty and volatility in the global macroeconomic conditions have affected and could continue to affect our visibility toward future performance. While supply chain and logistics continue to normalize over 2024, customer demand continues to moderate as inventories rebalance over the period and uncertainties remain including the potential for changes in inflation and interest rates, increased labor costs, reduced consumer spending due to softening labor markets, elevated mortgage rates, unfavorable foreign currency impacts from a stronger U.S. dollar, and potential market and other disruption from the ongoing conflict between Russia and Ukraine as well as the Middle East crisis between Hamas and Israel.
Current wording
Our financial performance is influenced by macroeconomic factors underlying end user demand such as repair and remodeling activity, residential and non-residential construction, new and existing home sales, employment rates, interest rates and bank lending standards, and supply chain dynamics that can be influenced by geopolitics. The ongoing uncertainty and volatility in the global macroeconomic conditions have affected and could continue to affect our visibility toward future performance. While supply chain and logistics continue to normalize over 2024, customer demand continues to moderate as uncertainties remain including the potential for changes in inflation and interest rates, increased labor costs, reduced consumer spending due to softening labor markets, elevated mortgage rates, unfavorable foreign currency impacts from a stronger U.S. dollar, shift to cleaner energy, and potential market and other disruption from the ongoing conflict between Russia and Ukraine as well as the Middle East crisis.
Previous wording
•Net revenue of $1.59 billion, down 0.8% from $1.60 billion in the second quarter of 2023
Current wording
•Net revenue of $1.83 billion, up 17.6% from $1.55 billion in the third quarter of 2023
Previous wording
•Income from operations of $122 million, or 7.7% of revenue, compared to $153 million, or 9.6% of revenue in thesecond quarter of 2023
Current wording
•Income from operations of $126 million, or 6.9% of revenue, compared to $109 million, or 7.0% of revenue in thethird quarter of 2023
Previous wording
•Fully diluted earnings per common share of $0.19, compared to $0.34 per common share in thesecond quarter of 2023
Current wording
•Fully diluted earnings per common share of $0.07, compared to $0.14 per common share in thethird quarter of 2023
Previous wording
•Cash Flow From Operations of $92 million in the second quarter of 2024, compared to $121 million in the second quarter of 2023
Current wording
•Cash Flow From Operations of $147 million in the third quarter of 2024, compared to $60 million in the third quarter of 2023
Previous wording
Net revenue for the three months ended June 29, 2024 was $1,589 million, a decrease of $13 million, or 0.8%, from the same period in 2023, due to $33 million of lower sales from the divestiture of the Genesis business during the fourth quarter of 2023, lower sales volume of $16 million, unfavorable price impacts of $10 million at the ADI Global Distribution segment, and unfavorable foreign currency fluctuations of $6 million. The decrease was partially offset by $45 million of revenues from Snap One and price increases of $8 million at the Product and Solutions segment.
Current wording
Net revenue for the three months ended September 28, 2024 was $1,828 million, an increase of $274 million, or 17.6%, from the same period in 2023, primarily due to $251 million of revenue from the acquisition of Snap One and higher sales volume of $58 million. The increase was partially offset by $32 million of lower sales from the divestiture of the Genesis business during the fourth quarter of 2023, and $3 million of unfavorable price impacts driven by the ADI Global Distribution segment.
Previous wording
Net revenue for the six months ended June 29, 2024 was $3,075 million a decrease of $76 million, or 2.4%, from the same period in 2023, driven by $68 million of lower sales from the divestiture of the Genesis business during the fourth quarter of 2023, lower sales volume of $53 million, unfavorable price impacts of $14 million at the ADI Global Distribution segment and unfavorable foreign currency fluctuations of $3 million. The decrease was partially offset by $45 million of revenues from Snap One and price increases of $17 million at the Product and Solutions segment.
Current wording
Net revenue for the nine months ended September 28, 2024 was $4,903 million an increase of $198 million, or 4.2%, from the same period in 2023, driven primarily by $298 million of revenue from the acquisition of Snap One and net volume increases of $5 million driven by the ADI Global Distribution segment. The increase was partially offset by $100 million of lower sales from the divestiture of the Genesis business during the fourth quarter of 2023, and unfavorable foreign currency fluctuations of $3 million.
Previous wording
Gross profit of $447 million increased $11 million and gross margin of 28.1% was up 90 basis points (“bps”) as compared to the same period in 2023. The change in gross margin was driven by favorable manufacturing costs of 140 bps, favorable pricing of 40 bps and favorable impacts from acquisitions, net of the Genesis divestiture of 60 bps, which was partially offset by unfavorable margin mix shift of 180 bps.
Current wording
Gross profit of $524 million increased $107 million and gross margin of 28.7% was up 180 basis points (“bps”) as compared to the same period in 2023. The increase in gross margin was driven by lower manufacturing costs of 140 bps, favorable impacts from acquisitions, net of the Genesis divestiture of 120 bps, and higher pricing of 30 bps, which was partially offset by the impact from lower volumes of 50 bps and unfavorable margin mix shift of 60 bps.
Previous wording
The chart below presents the drivers of the gross profit variance from thesix months ended July 1, 2023 to thesix months ended June 29, 2024.
Current wording
The chart below presents the drivers of the gross profit variance from thenine months ended September 30, 2023 to thenine months ended September 28, 2024.
Previous wording
Gross profit $847 million decreased $9 million and gross margin of 27.5% was up 38 basis points (“bps”) as compared to the same period in 2023. The change in gross margin was driven by favorable manufacturing costs of 130 bps, favorable pricing of 50 bps and favorable impacts from acquisitions net of Genesis divestiture of 50 bps, which was partially offset by unfavorable margin mix shift of 180 bps.
Current wording
Gross profit of $1,371 million increased $98 million and gross margin of 28.0% was up 90 basis points (“bps”) as compared to the same period in 2023. The increase in gross margin was driven by lower manufacturing costs of 140 bps, favorable impacts from acquisitions, net of Genesis divestiture of 70 bps, and higher pricing of 50 bps, which was partially offset by unfavorable margin mix shift of 130 bps and the impact from lower volumes of 20 bps.
Previous wording
Intangible asset amortization increased $3 million for the three months ended June 29, 2024 compared with the same period in 2023. The increase was due to additional amortization expense associated with the new intangibles from the Snap One acquisition.
Current wording
Intangible asset amortization increased $20 million for the three months ended September 28, 2024 compared with the same period in 2023. The increase was due to additional amortization expense associated with the new intangibles from the Snap One acquisition.
Previous wording
Intangible asset amortization increased $3 million for the six months ended June 29, 2024 compared with the same period in 2023. The increase was due to additional amortization expense associated with the new intangibles from the Snap One acquisition
Current wording
Intangible asset amortization increased $23 million for the nine months ended September 28, 2024 compared with the same period in 2023. The increase was due to additional amortization expense associated with the new intangibles from the Snap One acquisition
Previous wording
For the three and six months ended June 29, 2024 we recorded $5 million in impairment expense related to an equity security and $6 million in debt extinguishment costs as part of the Snap One acquisition. In addition, we continue to take actions to align our cost structure with market conditions. The intent of these actions is to lower costs, increase margins, and position us for long-term growth. For the three months ended June 29, 2024, we incurred no additional restructuring expenses compared to $2 million for the three months ended July 1, 2023. We incurred $7 million and $4 million of restructuring expenses for the six months ended June 29, 2024 and July 1, 2023, respectively. Restructuring expenses primarily related to employee termination costs.
Current wording
For the three months ended September 28, 2024, we recorded a $1 million debt extinguishment loss related to the repayment of a portion of the principal amount under the Company’s A&R Term B Facility using the proceeds from the issuance of the Senior Notes due 2032. Further, during the nine months ended September 28, 2024, we recorded $5 million in impairment expense related to an equity security and $6 million in debt extinguishment loss in connection with the Snap One acquisition financing. In addition, we continue to take actions to align our cost structure with market conditions. The intent of these actions is to lower costs, increase margins, and position us for long-term growth. For the three months ended September 28, 2024, we incurred $28 million of restructuring expenses compared to $38 million for the three months ended September 30, 2023. We incurred $35 million and $42 million of restructuring expenses for the nine months ended September 28, 2024 and September 30, 2023, respectively. Restructuring expenses primarily related to employee termination costs.
Previous wording
Interest expense, net decreased $2 million for the three months ended June 29, 2024 as compared to the same period in 2023, due to higher interest income as a result of effectively investing excess cash.
Current wording
Interest expense, net increased $5 million for the nine months ended September 28, 2024 due to an increase in our long-term debt resulting in $11 million of higher interest expense and $1 million higher interest expense relate to an increase in interest rates on our weighted average debt. This amount was partially offset by $7 million higher interest income as a result of effectively investing excess cash.
Previous wording
Income tax expense decreased by $9 million for the six months ended June 29, 2024 compared to the same period in 2023. The effective income tax rate increased by 580 bps for the six months ended June 29, 2024 compared to the same period in 2023. The changes are primarily driven by lower income before taxes, the mix of earnings across the jurisdictions in which we operate, relatively fixed non-deductible expenses, and U.S. taxation of foreign earnings.
Current wording
Income tax expense increased by $8 million for the three months ended September 28, 2024 compared to the same period in 2023. The effective income tax rate increased by 1,130 bps for the three months ended September 28, 2024 compared to the same period in 2023. The changes are primarily driven by the mix of earnings across the jurisdictions in which we operate, relatively fixed non-deductible expenses, and U.S. taxation of foreign earnings.
Previous wording
Income tax expense decreased by $15 million for the three months ended June 29, 2024 compared to the same period in 2023. The effective income tax rate increased by 230 bps for the three months ended June 29, 2024 compared to the same period in 2023. The changes are primarily driven by lower income before taxes, the mix of earnings across the jurisdictions in which we operate, relatively fixed non-deductible expenses, and U.S. taxation of foreign earnings.
Current wording
Income tax expense decreased by $1 million for the nine months ended September 28, 2024 compared to the same period in 2023. The effective income tax rate increased by 750 bps for the nine months ended September 28, 2024 compared to the same period in 2023. The changes are primarily driven by lower income before taxes, the mix of earnings across the jurisdictions in which we operate, relatively fixed non-deductible expenses, and U.S. taxation of foreign earnings.
Previous wording
On January 1, 2024, certain corporate functions were decentralized into the operating segments aligning with the business strategy. For the three and six months ended July 1, 2023, $13 million and $25 million of corporate expenses have been reclassified into the Products and Solutions segment while $8 million and $16 million of corporate expenses have been reclassified into the ADI Global Distribution segment, respectively, decreasing reported Income from Operations to conform to the current year presentation.
Current wording
On January 1, 2024, certain corporate functions were decentralized into the operating segments aligning with the business strategy. For the three and nine months ended September 30, 2023, $13 million and $38 million of corporate expenses have been reclassified into the Products and Solutions segment while $8 million and $24 million of corporate expenses have been reclassified into the ADI Global Distribution segment, respectively, decreasing reported Income from Operations to conform to the current year presentation.
Previous wording
Income from opera tions increased $15 million, or 13%, from the same period in 2023, primarily due to lower material, freight and other manufacturing costs of $29 million, favorable pricing impact of $8 million and lower selling, general and administrative expenses of $7 million. Partially offsetting the favorable impacts to income from operations was unfavorable mix of $21 million from mix shifts to lower priced products, lower volumes of $4 million and $5 million from the divestiture of the Genesis business during the fourth quarter of 2023.
Current wording
Income from opera tions increased $34 million, or 36%, from the same period in 2023, primarily due to lower material, freight and other manufacturing costs of $24 million, lower restructuring costs of $18 million, and favorable pricing impact of $6 million. Partially offsetting the favorable impacts to income from operations were higher selling, general and administrative expenses of $6 million, $5 million from the divestiture of the Genesis business during the fourth quarter of 2023, and unfavorable mix of $3 million.
Previous wording
Products and Solutions net revenue decreased $47 million, or 7%, as compared to the same period in 2023, primarily due to $33 million from the divestiture of the Genesis business during the fourth quarter of 2023, lower sales volume of $16 million and unfavorable foreign currency fluctuations of $5 million. The decrease was partially offset by price increases of $8 million.
Current wording
Products and Solutions net revenue decreased $94 million, or 4.7%, as compared to the same period in 2023, primarily due to $100 million from the divestiture of the Genesis business during the fourth quarter of 2023, lower sales volume of $10 million and unfavorable foreign currency fluctuations of $7 million. The decrease was partially offset by price increases of $24 million.
Previous wording
Income from operations increased $22 million, or 10%, from the same period in 2023, primarily due to lower material, freight and other manufacturing costs of $40 million, lower selling, general and administrative expenses of $20 million and favorable pricing impact of $17 million. Partially offsetting the favorable impacts to income from operations was unfavorable mix of $37 million from mix shifts to lower priced products, lower volumes of $10 million and $8 million from the divestiture of the Genesis business during the fourth quarter of 2023.
Current wording
Income from operations increased $56 million, or 18%, from the same period in 2023, primarily due to lower material, freight and other manufacturing costs of $64 million, a favorable pricing impact of $24 million, lower restructuring expenses of $15 million, lower selling, general and administrative expenses of $13 million, and lower research and development expenses of $4 million. Partially offsetting the favorable impacts to income from operations was unfavorable mix of $41 million from mix shifts to lower priced products, impact from the divestiture of the Genesis business during the fourth quarter of 2023 of $12 million, and lower volumes of $11 million.
Previous wording
Income from operations decreased $9 million, or 13%, as compared to the same period in 2023. The decrease was primarily due to unfavorable sales mix of $7 million and unfavorable manufacturing costs of $3 million.
Current wording
Income from operations decreased $16 million, or 31%, as compared to the same period in 2023. The decrease was primarily due to unfavorable sales mix of $7 million, incremental operating loss of $8 million from the acquisition of Snap One, higher restructuring costs of $5 million, higher operational costs of $2 million, and integration costs of $2 million. The decrease was partially offset by $7 million from higher volumes.
Previous wording
ADI Global Distribution net revenue increased $34 million, or 3.7%, as compared to the same period in 2023. The increase was driven by acquisition revenues of $45 million partially offset bydecrease in price of $10 million and unfavorable foreign currency fluctuations of $1 million.
Current wording
ADI Global Distribution net revenue increased by $292 million, or 10.8%, as compared to the same period in 2023, due to $298 million of revenue from the acquisition of Snap One, $15 million from higher volumes, andfavorable foreign currency fluctuations of $4 million. The increase was partially offset by adecrease in price of $23 million.
Previous wording
Corporate costs for the three months ended June 29, 2024 were $70 million and $33 million for the comparable period. The increase in Corporate costs was driven by $30 million of Snap One acquisition costs, $6 million of debt extinguishment costs, and $5 million impairment of an equity security. These increases are partially offset by lower employee expenses of $5 million.
Current wording
Corporate costs for the nine months ended September 28, 2024 were $141 million and $101 million for the comparable period. The increase in Corporate costs was driven by $32 million of Snap One acquisition costs, $7 million of debt extinguishment costs, and a $5 million impairment of an equity security. These increases are partially offset by lower personnel expenses of $4 million.
Previous wording
As of June 29, 2024, total cash and cash equivalents were $413 million, of which 52% were held by foreign subsidiaries. Our liquidity is primarily dependent on our ability to continue to generate positive cash flows from operations, supplemented by external sources of capital, as needed. Additional liquidity may also be provided through access to the capital markets and our $500 million A&R Revolving Credit Facility.
Current wording
As of September 28, 2024, total cash and cash equivalents were $531 million, of which 44% were held by foreign subsidiaries. Our liquidity is primarily dependent on our ability to continue to generate positive cash flows from operations, supplemented by external sources of capital, as needed. Additional liquidity may also be provided through access to the capital markets and our $500 million A&R Revolving Credit Facility.
Previous wording
In June 2024, we completed the acquisition of Snap One. This was partially financed in the amount of $600 million in incremental term loans under our A&R Term B Facility, with a maturity date of May 14, 2031. Additionally, we issued Preferred Stock on June 14, 2024 for $500 million to partially finance the Snap One acquisition. The remainder of the cash purchase price was financed with our existing cash.
Current wording
In June 2024, we completed the acquisition of Snap One. This was partially financed with $600 million in incremental term loans under our A&R Term B Facility, with a maturity date of May 14, 2031. Additionally, we issued Preferred Stock on
Previous wording
As of June 29, 2024, we had $1,991 million of long-term debt outstanding under our A&R Credit Agreement and Senior Notes due 2029, of which $12 million is due in the next 12 months. We have entered into certain interest rate swap agreements to effectively convert a portion of our variable-rate debt to fixed rate debt. Additionally, as part of our acquisition of Snap One, we acquired an interest rate cap with a notional of $346 million and a strike rate of 4.79%, which effectively caps SOFR on the notional amount at that rate.
Current wording
As of September 28, 2024, we had $1,989 million of net long-term debt outstanding under our A&R Credit Agreement, Senior Notes due 2029, and Senior Notes due 2032, of which $6 million is due in the next 12 months. We have entered into certain interest rate swap agreements to effectively convert a portion of our variable-rate debt to fixed-rate debt. Additionally, as part of our acquisition of Snap One, we acquired an interest rate cap with a notional of $345 million and a strike rate of 4.79%, which effectively caps SOFR on the notional amount at that rate.
Previous wording
On August 3, 2023, we announced that our Board of Directors authorized a share repurchase program for the repurchase of up to $150 million of our common stock over an unlimited time period. During the June 29, 2024 period, we did not make any common share repurchases. As of June 29, 2024, we had $108 million of authorized repurchases remaining under the Share Repurchase Program.
Current wording
On August 3, 2023, we announced that our Board of Directors authorized a share repurchase program for the repurchase of up to $150 million of our common stock over an unlimited time period. During the three months ended September 28, 2024, we did not make any common share repurchases. As of September 28, 2024, we had $108 million of authorized repurchases remaining under the Share Repurchase Program.
Previous wording
Cash Flow Summary for the Six Months Ended June 29, 2024 and July 1, 2023
Current wording
Cash Flow Summary for the Nine Months Ended September 28, 2024 and September 30, 2023
Previous wording
Our cash flows from operating, investing and financing activities for the six months ended June 29, 2024 and July 1, 2023, as reflected in the Unaudited Consolidated Financial Statements, are summarized as follows:
Current wording
Our cash flows from operating, investing and financing activities for the nine months ended September 28, 2024 and September 30, 2023, as reflected in the Unaudited Consolidated Financial Statements, are summarized as follows:
Previous wording
Net cash used for investing activities for the six months ended June 29, 2024 was $1,364 million. Compared to the six months ended July 1, 2023, net cash used for investing activities decreased $1,309 million, primarily due to an increase in cash used for acquisitions of $1,328 million related to the Snap One acquisition offset by favorable changes in capital expenditures of $13 million.
Current wording
Net cash used for investing activities for the nine months ended September 28, 2024 was $1,386 million. Compared to the nine months ended September 30, 2023, net cash used for investing activities increased $1,296 million, primarily due to an increase in cash used for acquisitions of $1,318 million mainly related to the Snap One acquisition offset by favorable changes in capital expenditures of $16 million and $6 million of favorable changes in other investing activities, including proceeds from sales of assets.
Previous wording
Net cash provided by financing activities for the six months ended June 29, 2024 was $1,052 million. Compared to the six months ended July 1, 2023, net cash used for financing activities increased $1,070 million, primarily due to an increase of $582 million incremental term loan borrowings under our A&R Term B Facility, and an increase in the issuance of Preferred Stock in the amount of $482 million each related to the Snap One acquisition.
Current wording
Net cash provided by financing activities for the nine months ended September 28, 2024 was $1,043 million. Compared to the nine months ended September 30, 2023, net cash used for financing activities increased $1,090 million, primarily due to an increase of $1,176 million incremental term loan borrowings under our A&R Term B Facility, and the issuance of Preferred Stock in the amount of $482 million, each related to the Snap One acquisition. This increase was partially offset by an increase in debt repayments of $593 million as well as a decrease in common stock repurchases of $27 million.
Previous wording
In connection with the Spin-Off, we entered into the Reimbursement Agreement with Honeywell. As of June 29, 2024, a liability of $672 million was deemed probable and reasonably estimable; however, it is possible we could pay $140 million per year (exclusive of any late payment fees up to 5% per annum) until the earlier of: (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million. During the six months ended June 29, 2024, we paid Honeywell $70 million under the Reimbursement Agreement. For further discussion on the Reimbursement Agreement, refer to Note 16. Commitments and Contingencies to the Unaudited Consolidated Financial Statements.
Current wording
In connection with the Spin-Off, we entered into the Reimbursement Agreement with Honeywell. As of September 28, 2024, a liability of $682 million was deemed probable and reasonably estimable; however, it is possible we could pay $140 million per year (exclusive of any late payment fees up to 5% per annum) until the earlier of: (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million. During the nine months ended September 28, 2024, we paid Honeywell $105 million under the Reimbursement Agreement. For further discussion on the Reimbursement Agreement, refer to Note 16. Commitments and Contingencies to the Unaudited Consolidated Financial Statements.
Previous wording
We have operating lease arrangements for the majority of our manufacturing sites, offices, engineering and lab sites, stocking locations, warehouses, automobiles, and certain equipment. As of June 29, 2024, we had operating lease payment obligations of $248 million, with $52 million payable within 12 months.
Current wording
We have operating lease arrangements for the majority of our manufacturing sites, offices, engineering and lab sites, stocking locations, warehouses, automobiles, and certain equipment. As of September 28, 2024, we had operating lease payment obligations of $238 million, with $50 million payable within 12 months.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Corporate costs for the three months ended September 28, 2024 of $38 million and $36 million for the comparable period. The increase in Corporate costs was primarily driven by $1 million of debt extinguishment costs incurred during the three months ended September 30, 2024.
Current report — wording carried from elsewhere
June 14, 2024 for $500 million to partially finance the Snap One acquisition. The remainder of the cash purchase price was financed with our existing cash.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
•We completed the acquisition of Snap One, expanding our distribution into and reach with smart-living products, services, and software.
Previous report — wording carried elsewhere
Interest expense, net decreased $6 million for the six months ended June 29, 2024 as compared to the same period in 2023, due to higher interest income as a result of effectively investing excess cash.
Previous report — wording carried elsewhere
Corporate costs for the six months ended June 29, 2024 were $103 million and $64 million for the comparable period. The increase in in Corporate costs was primarily driven by $30 million of Snap One acquisition costs, $6 million of debt extinguishment costs, and $5 million of favorable adjustments related to the tax indemnity accrual, and $5 million impairment of an equity security. These increases are partially offset by lower employee expenses of $8 million.