2020 ANNUAL REPORT
AND NOTICE OF
2021 ANNUAL MEETING
OF SHAREHOLDERS AND
PROXY STATEMENT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:3)(cid:3)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
(cid:4)
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
(State or other jurisdiction of incorporation or organization)
82-5318796
(I.R.S. Employer Identification No.)
901 E. 6th Street
Austin, Texas
(Address of principal executive offices)
78702
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code: (512) 726-3500
Title of each class:
Common Stock, par value $0.001 per share
Trading Symbol:
REZI
Name of each exchange on which registered:
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:3) No (cid:4)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:4) No (cid:3)
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 (cid:3) No (cid:4)
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 (cid:3) No (cid:4)
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
Non-accelerated filer
(cid:3)
(cid:4)
Accelerated filer
Smaller reporting company
Emerging growth company
(cid:4)
(cid:4)
(cid:4)
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. (cid:4)
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over
financial reporting under section 404(b) of the Sarbanes Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit
report (cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No (cid:3)
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of
common stock on the New York Stock Exchange as of June 30, 2020, was $1.6 billion.
The number of shares outstanding of the registrant’s common stock, par value $0.001 per share as of February 19, 2021 was 143,139,475 shares.
Portions of the registrant’s proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the
registrant’s 2021 Annual Meeting of Stockholders, which will be filed subsequent to the date hereof, are incorporated by reference into Part III of this Form 10-K.
Such proxy statement will be filed with the Securities and Exchange Commission not later than 120 days following the end of the registrant’s fiscal year ended
December 31, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Item
Page
Part I. 1.
Business ..................................................................................................................................
1A. Risk Factors ...........................................................................................................................
1B. Unresolved Staff Comments .................................................................................................
2.
3.
Properties ...............................................................................................................................
Legal Proceedings..................................................................................................................
4. Mine Safety Disclosures ........................................................................................................
Part II. 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities .............................................................................................
6.
Selected Financial Data.........................................................................................................
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations ..............................................................................................................................
7A. Quantitative and Qualitative Disclosures About Market Risk .........................................
8.
9.
Financial Statements and Supplementary Data .................................................................
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ...............................................................................................................................
9A. Controls and Procedures ......................................................................................................
9B. Other Information .................................................................................................................
Part III.10. Directors, Executive Officers and Corporate Governance................................................
11. Executive Compensation.......................................................................................................
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters..............................................................................................................
13. Certain Relationships and Related Transactions, and Director Independence ..............
14. Principal Accounting Fees and Services..............................................................................
Part IV. 15. Exhibits, Financial Statement Schedules.............................................................................
16. Form 10-K Summary ............................................................................................................
Signatures...............................................................................................................................
3
8
20
21
21
21
22
23
24
42
42
87
87
88
88
88
88
88
88
89
93
94
2
RESIDEO TECHNOLOGIES, INC.
PART I.
Item 1.
Business
In this Annual Report on Form 10-K, unless the context otherwise dictates, references to “Resideo”, “the
Company”, “we,” “us” or “our” means Resideo Technologies, Inc. and its consolidated subsidiaries.
This Annual Report includes industry and market data that we obtained from various third-party industry
and market data sources. While we believe the projections of the industry sources referenced in this Annual Report
are reasonable, forecasts based upon such data involve inherent uncertainties, and actual results are subject to
change based upon various factors beyond our control. All such industry data is available publicly or for purchase
and was not commissioned specifically for us. While we are not aware of any misstatements regarding any market,
industry or similar data presented herein, forecasts based upon such data involve inherent uncertainties, and actual
results regarding the subject matter of such forecasts are subject to change based upon various factors, including
those beyond our control and those discussed under the headings “Risk Factors” and “Cautionary Statement
Concerning Forward-Looking Statements” in this Annual Report.
On October 29, 2018, we separated from Honeywell International Inc. (“Honeywell”), 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”). The Spin-Off is further described in Note 1. Organization, Operations and Basis of
Presentation of Notes to the Consolidated and Combined Financial Statements included in Item 8. Financial
Statements and Supplementary Data of this Form 10-K. Our common stock began trading “regular way” under the
ticker symbol “REZI” on the NYSE on October 29, 2018.
Description of Business
Resideo is a leading global manufacturer and developer of technology-driven products and solutions that
provide critical comfort, residential thermal and security solutions to over 150 million homes globally. We are also
the leading wholesale distributor of low-voltage security products including intrusion, access control and video
products and participates significantly in the broader related markets of smart home, fire, power, audio, ProAV,
networking, communications, wire and cable, enterprise connectivity, and structured wiring products. We have a
global footprint serving commercial and residential end markets. Our primary focus is on the professional channel
where we are a trusted partner to over 110,000 professional installers. Our global scale, breadth of product offerings,
innovation heritage, and differentiated service and support has enabled our trusted relationship with professional
installers and has been a key driver of our success. Leveraging our underlying strengths, we are transforming our
business with a strategy that includes operational improvements, product innovation, and investments to drive future
growth and value creation. We believe our large presence in the home, both on the wall and behind the wall,
positions us well for the value and convenience consumers will expect out of the connected home in the future.
We operate in large markets that sit at the intersection of multiple secular growth trends. We believe the
increased desire for critical comfort, residential thermal and security solutions in the home, combined with the long-
term impacts of working from home, are driving investment in the home both in terms of time and dollars. We
believe our total addressable market represents approximately a $114 billion inclusive of $27 billion for our comfort,
residential thermal solutions and security, and $88 billion for distribution of low-voltage security products and
additional adjacent products, including intrusion and smart home, fire, video surveillance, access control, power,
audio and video, ProAV, networking, communications, wire and cable, enterprise connectivity and structured wiring.
At the same time, the ability to better understand the functioning of a home through sensors, controls and
connectivity has created a large and fast-growing connected home market. According to Statista, the global
connected home market is expected to grow at a 16% compounded annual growth rate from $80 billion in 2019 to
$195 billion in 2025. To date, we believe this market has been primarily composed of point products and services
from a wide variety of industry participants, creating significant complexity for consumers. Given this complexity,
we believe a significant opportunity exists to provide products, solutions and services to consumers and professional
installers that integrate the disparate sensors, systems and controls inside the home, and enable differentiated insight.
Our meaningful presence in the home derived from our broad portfolio of products and our focus on the
professional installer, combined with our service-focused global distribution footprint, positions us well to take
advantage of this significant market opportunity. We deliver value to our professional customers via two business
3
RESIDEO TECHNOLOGIES, INC.
segments, Products & Solutions and ADI Global Distribution, which respectively contributed 41.8% and 58.2% of
our net revenue for the year ended December 31, 2020.
Products & Solutions: Our comfort, security and energy products and solutions have a presence in over 150
million homes globally and benefit from the trusted, well-established Honeywell Home brand as well as key branded
offerings such as Resideo, Braukmann, and others. Our offerings include temperature and humidity control, thermal
water and air 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.
We are a leading player across the majority of our product categories with 15 million systems installed annually.
Through our whole home presence on the wall and behind the wall, we are an enabler of home connectivity with
approximately 6.7 million connected customers via our software solutions. Our connected solutions harness this data
to provide control, visibility, insights, and alerts to the end user. Our comprehensive product suite has also allowed
us to develop and sustain a long-standing partnership with professional installers who have relied on our selection
and availability of products and configured solutions to help them succeed for over 100 years. Our broad portfolio of
innovative products is delivered through a comprehensive network of over 110,000 professional contractors, more
than 3,000 distributors and over 1,200 original equipment manufacturers (“OEMs”), as well as major retailers and
online merchants.
ADI Global Distribution: Our ADI Global Distribution segment is the leading wholesale distributor of low-
voltage security products including intrusion, access control and video products, and participates significantly in the
broader related markets of smart home, fire, access control, power, audio, ProAV, networking, communications,
wire and cable, enterprise connectivity, and structured wiring products. Through nearly 200 stocking locations in 17
countries, ADI Global Distribution distributes more than 350,000 products from over 1,000 manufacturers to a
customer base of over 100,000 contractors and is independently recognized for superior customer service. We
believe this global footprint gives us distinct scale and network advantages in our core products over our competitors.
Further, we believe our customers derive great value from the advice and recommendations of our knowledgeable
design specialists, allowing our customers to better meet the technical and systems integration expertise
requirements to install and service professional security systems. We continue to be a leader in the industry with
value-added services including presales system design, 24/7 order pick-up, and the selective introduction of new
product categories such as professional audio-visual.
Our industries and markets are highly competitive in both our Products & Solutions and ADI Global
Distribution segments, where we compete with global, national, regional and local providers for our products,
services and solutions, including manufacturers, distributors, service providers, retailers and online commerce
providers, as well as newer entrants to the market with non-traditional business and customer service models or
disruptive technologies and products, including cable, telecommunications, and large technology companies
competing in the connected home space.
Factors influencing our competitive position in the industry include product and service innovation, our
reputation and the reputation of our brands, sales and marketing programs, product performance, reliability and
warranty, quality and breadth of product training and events, product availability, speed and accuracy of delivery,
service and price, technical support, and credit availability.
Our management team has significant experience and a track record of leading tech-enabled businesses,
developing best-in-class products, and executing organizational change. This team is focused on ingraining a culture
of continuous improvement into our organization with the goal of lowering costs, increasing margins and
positioning the Company for growth. Leveraging the Company’s presence in the home and its relationship with
professional installers, management has reorganized the Products & Solutions business to enhance focus and
collaboration across business lines and segments.
With this ongoing transformation underway, we believe we are well-positioned to execute on our growth
strategy across both of our segments. Our strategy in Products & Solutions is focused on accelerating our product
innovation, expanding our presence in the home and buildings, and over time, enabling connected ecosystems
grounded in relationships with professional installers. Our ADI Global Distribution growth strategy is focused on
increasing our omni-channel presence to grow our customer base, expanding into adjacent growth markets, and
continuing to enhance our value-add services to support our professional installers’ efficiency and profitability.
4
RESIDEO TECHNOLOGIES, INC.
Materials and Suppliers
Purchased materials in our manufacture of products include copper, steel, aluminum, plastics, printed
circuit boards, semiconductors and passive electronics. Purchased materials cover a wide range of supplier value-
add, from raw materials and single components to subassemblies and complete finished goods, and there are
considerable expenditures on both commercial off-the-shelf and make-to-print items. Although execution of material
substitutions or supplier changes may be resource intensive, alternatives usually exist in the event that a supplier
becomes unable to provide material. Unforeseen shortages and supply disruptions occur from time to time but are
typically manageable such that adverse impact to customers can be avoided. Raw material price fluctuations, the
ability of key suppliers to meet quality and delivery requirements, and catastrophic events can increase the cost of
our products and services, and impact our ability to meet commitments to customers.
Regulatory and Environmental Compliance and Regulatory Capital Expenditures
We are subject to various federal, state, local and foreign government requirements relating to
environmental health and safety protection standards and permitting, labeling and other requirements regarding,
among other things, electronic and wireless communications, air emissions, wastewater discharges, the use, handling,
and disposal of hazardous or toxic materials, remediation of environmental contamination, data privacy, consumer
protection, licensing, working conditions for and compensation of our employees and others. The Company’s
businesses may also be affected by changes in governmental regulation of energy efficiency and conservation
standards, product safety regulations, and consumer privacy and protection regulations. These and other laws and
regulations impact the manner in which the Company conducts its business, and changes in legislation or
government policies can affect the Company’s worldwide operations, both favorably and unfavorably. For a more
detailed description of the various laws and regulations that affect the Company’s business, see Item 1A. Risk
Factors.
The Company’s efforts to comply with numerous federal, state, and local laws and regulations applicable to
its business and products often results in capital expenditures. As of December 31, 2020, we have recorded a
liability for environmental investigation and remediation of approximately $22 million related to sites owned and
operated by Resideo. The Company makes capital expenditures to design and upgrade its products to comply with or
exceed standards applicable to the industries in which it competes. The Company’s ongoing environmental
compliance programs also results in capital expenditures. Regulatory and environmental considerations are a part of
all significant capital expenditure decisions; however, expenditures in 2020 related solely to regulatory compliance
were not material. It is management’s opinion that the amount of any future capital expenditures related to
compliance with any individual regulation or grouping of related regulations will not have a material adverse effect
on the Company’s financial results or competitive position in any one year. See Note 19. Commitments and
Contingencies of Notes to Consolidated and Combined Financial Statements for further discussion of environmental
matters.
Human Capital
As of December 31, 2020, we employed approximately 14,700 employees in 32 countries. Approximately
3,100 employees were located in the United States, and the remaining 11,600 employees were located primarily in
Mexico, the Czech Republic and the United Kingdom. Approximately 160 employees in the U.S. were subject to
collective bargaining with approximately 1,270 employees outside of the U.S. subject to collective bargaining. We
believe overall our relations with our workforce are good.
Health and Safety: The Company’s commitment to providing a safe and healthy workplace for all
employees continued throughout 2020 and was further heightened by the challenges created by the COVID-19
pandemic. In response to the pandemic, we took numerous actions to protect the health and safety of our employees,
visitors and customers. These actions included formation of a response team, contact tracing and tracking of
exposure and positive cases, enhanced cleaning protocols, moving to work from home where possible, suspension of
most business travel and in-person meetings, the purchase of face coverings, gloves, hand sanitizer, and hand held
scanning devices, installation of thermal scanners at our manufacturing sites, installation of floor demarcations and
plastic shields in our ADI Global Distribution branches and on manufacturing lines, weekly internal audits, external
audits of select sites, leasing of additional vans to permit distancing where we provide transportation to employees,
5
RESIDEO TECHNOLOGIES, INC.
daily symptom self-assessments, curbside and contactless pickup in many locations, enhanced employee benefits,
COVID-19 testing, and policies requiring face coverings and physical distancing.
At the end of 2020, our global Total Case Incident Rate (“TCIR”) (the number of occupational injuries and
illnesses per 100 employees) was 0.28, significantly lower than the North American Industry Classification System
injury rate for Automatic Environmental Controls of 1.7 (as reported by the U.S. Bureau of Labor Statistics). We
monitor our safety through a balanced scorecard of key performance indicators. In addition to reactive incident
management investigation and root cause analysis indicators, we measure and analyze the data generated from our
hazard observation, designated Health, Safety, and Environment Internal Department (“HSE”) inspections by line
managers and internal audit programs by accredited HSE lead auditors to provide insights and intelligence that help
us proactively mitigate issues before they result in incidents.
Total Rewards: Our primary reward strategy is ensuring “pay-for-performance” on an annual basis, as well
as over the long term, which drives a mindset of accountability and productivity. Our compensation guiding
principles are to structure compensation that is simple, aligned and balanced. We structure and administer our
Rewards programs in a manner consistent with good governance practices. We believe that the interests of
employees must be aligned with our shareholders. To that end, in 2020 we launched an employee stock purchase
plan and expanded the use of stock-based incentives to encourage managers to think like owners of Resideo. We
provide comprehensive, competitive and contemporary benefits that recognize the diversity of our workforce and are
designed to meet the varying needs of our employees and promote choice. Our package includes generous paid time
off, flexible work schedules, education assistance programs and more. We believe the combination of our
competitive pay-for-performance compensation programs and our comprehensive benefit programs demonstrate our
commitment to a compelling total rewards value proposition for our employees.
In April 2020, we took the necessary steps to weather the COVID-19 crisis with several cost saving
programs including temporary payroll savings, furloughs, and reduced work schedules. Where employee agreement
was necessary, an overwhelming majority of employees joined their worldwide colleagues in supporting this effort
to help the Company preserve business continuity. In December 2020, we announced a special year-end bonus
payable to current employees who had been directly impacted by COVID-19 cost saving actions, in an amount
generally comparable to the financial impact of the cost savings actions.
Diversity, Equity and Inclusion: In 2020, we adopted a revised Diversity, Equity, and Inclusion statement,
through which we aspire to be a company where employees are empowered to bring their whole, authentic selves to
work each day. We work to advance this mission by actively reaching out to people of diverse backgrounds and
experiences to join our teams and nurturing an inclusive culture. We maintain employee resource groups across six
categories: Women, LGBTQIA+, Black, Latino, Veterans, and People with Differing Abilities. Each group is
sponsored and supported by a senior leader of the company. We encourage our hiring managers and recruiters to
build a network of diverse talent. Our diversity outreach includes reaching out to all categories of diversity job
boards, including Historically Black Colleges and Universities (“HBCUs”). Diversity is a key component of service
level agreements we maintain with our recruiting process outsourcing (“RPO”) partners to ensure they are
accountable and meet our sourcing standards. Our corporate functions and business units continue to track and
report on progress with respect to our diversity and inclusion initiatives.
Talent Acquisition, Management and Development: We have a robust recruiting model to attract all levels
of talent across the regions where we operate. In 2020, our average time to fill open roles was 35 days, and we
hired 6,700 employees, of which approximately 5,600 were production workers. We expanded our virtual
interviewing platforms and onboarding experience to mitigate COVID-19 risk. Internally, strategic talent reviews
and succession planning occur on an annual basis, globally and across all business areas.
We strongly value feedback from our employees and launched a revised Employee Voice Survey in 2020.
This survey allows each function in our company to see its ratings across three levers: Motivation, Ability, and
Knowledge of Expectations. Our score for the first cycle was 7.8 on a 10-point scale, with an Employee Net
Promoter score of 25 on a scale ranging from -100 to +100 (based on industry standards for Employee Net Promoter
score, any score above 10 is considered good). While we are pleased with these results, there is still room for
improvement, and each sub-organization has been tasked with creating an action plan based on feedback received.
6
RESIDEO TECHNOLOGIES, INC.
We recognize that a key facet of an effective and high performing team is the quality of the people
manager. This year we introduced a new initiative, the People Manager Certification, to equip managers with an
understanding of Resideo’s expectations for managers. The certification includes trainings in the skills required to
be a successful manager at Resideo as well as a toolkit for managers to put learnings in action. We also encourage
employees to take responsibility for their own development and provide an extensive learning library in order to
ensure our people have what they need to succeed, both professionally and personally. In response to the COVID-19
pandemic, we provided training to our employees on working successfully from home and developing resiliency
during this stressful time.
Managers and their team members participate in quarterly “Pulse” conversations to set performance
expectations and monitor and evaluate performance. People managers at Resideo are strongly encouraged to give
frequent, informal feedback so that employees are always clear on their performance level. In supporting our
employees’ development, we refined our global mentorship program, which supports employees across all levels
and functions. The program allows for multiple forms of interaction, including one-on-one relationships and
"fireside chats," which improve knowledge transfer and skill development throughout the organization.
Seasonality
Our Products & Solutions business experiences a moderate level of seasonality. Sales activity is generally
highest in the fall and early winter months, with the highest sales at the end of the third quarter and throughout the
fourth quarter in the majority of our geographical markets.
Research and Development and Intellectual Property
We have software centers of excellence in Austin, Texas; Bengaluru, India; and Melville, New York, along
with major product design centers in the U.S., Europe, Asia, and Latin America. In addition, our laboratories are
certified to meet various industry standards, such as FCC and UL, enabling us to test and certify products internally.
We also have a user experience design group that consists of researchers and product and user experience designers
aligned with development sites with the primary studios in Golden Valley, Minnesota. As of December 31, 2020, we
employed over 850 engineers.
Our deep domain expertise, proprietary technology and brands are protected by a combination of patents,
trademarks, copyrights, trade secrets, non-disclosure agreements, and contractual provisions. We own approximately
2,300 worldwide active patents and pending patent applications to protect our research and development investments
in new products and services. We have and will continue to protect our products and technology by asserting our
intellectual property rights against third-party infringers. See Note 19. Commitments and Contingencies of Notes to
Consolidated and Combined Financial Statements for more information. We also have a significant trademark
license with Honeywell in connection with our use of the Honeywell Home trademark as well as certain intellectual
property licensed by Honeywell to us in connection with the Spin-Off. For a more detailed description of the various
intellectual property rights and relationships that affect the Company’s business, see Item 1A. Risk Factors.
Other Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any
amendments to those reports are available free of charge on our website (www.resideo.com) under the heading
Investors (see SEC Filings) immediately after they are filed with, or furnished to, the SEC. All of the reports that we
file or furnish with the SEC are also available on the SEC’s website (www.sec.gov). In addition, in this Form 10-K,
we incorporate by reference certain information from parts of our Proxy Statement for the 2021 Annual Meeting of
Stockholders, which will also be available free of charge on our website. Information contained on, or connected to,
our website does not and will not constitute part of this Form 10-K.
We are a Delaware corporation incorporated on April 24, 2018. Our principal executive offices are located
at 901 E. 6th Street, Austin, Texas 78702. Our telephone number is (512) 726-3500. Our website address is
www.resideo.com.
We disclose public information to investors, the media and others interested in our Company through a
variety of means, including our investor relations website (https://investor.resideo.com), press releases, SEC filings,
blogs, public conference calls and presentations, webcasts and social media, in order to achieve broad, non-
7
RESIDEO TECHNOLOGIES, INC.
exclusionary distribution of information to the public. We use these channels to communicate with our stockholders
and the public about our Company, our products, solutions and other issues. It is possible that the information we
post on social media could be deemed to be material information. We encourage investors, the media and others
interested in our Company to review the information we post on our website and the social media channels listed
below. The list of social media channels we use may be updated from time to time on our investor relations website.
The Company’s News Page (https://www.resideo.com/news)
The Company’s Facebook Page (www.facebook.com/resideo)
The Company’s Twitter Feed (https://twitter.com/resideo)
The Company’s LinkedIn Feed (https://www.linkedin.com/company/resideo1/)
References to our website and other social media channels are made as inactive textual references and
information contained on them is not incorporated by reference into this Annual Report.
Item 1A. Risk Factors
You should carefully consider all of the information in this Form 10-K and each of the risks described
below, which we believe are the material risks that we face.
Any of these risks, could materially and adversely affect our business, financial condition, results of
operations and cash flows and the actual outcome of matters as to which forward-looking statements are made in
this Form 10-K.
The following risk factors are not necessarily presented in order of relative importance and should not be
considered to represent a complete set of all potential risks that could affect us.
Risks Relating to Our Business
We operate in highly competitive markets.
We operate in highly competitive markets in both our Products & Solutions and ADI Global Distribution
segments and compete directly with global, national, regional, and local providers of our products, services and
solutions including manufacturers, distributors, service and software 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, warranty, quality of product training and
events, product availability, speed and accuracy of delivery, price, customer and technical support, and furnishing of
customer credit, with the relative importance of these factors varying among our segments and their respective
products and services.
In addition to current competitive factors, there have been, and in the future, there may be new market
entrants with non-traditional business, new business and customer service models or disruptive technologies and
products, resulting in increased competition and changing business dynamics. Examples of these include cable,
telecommunications and large technology companies competing in the connected home and home security spaces,
utilities expanding their role in the provision of home energy services, OEMs vertically integrating, and the
expansion of direct-to-consumer, retail and e-tail distribution in competition with our ADI Global Distribution
business. Existing or future competitors may seek to gain or retain market share by reducing prices, or shifting
business models to a software based model, 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 or services, 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.
To remain competitive, we will need to invest continually in product and services 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 including due to the
8
RESIDEO TECHNOLOGIES, INC.
fact that our competitors and potential competitors may have greater brand recognition, resources, access to capital,
including greater research and development or sales and marketing funds, more customers, lower costs and more
advanced technology platforms, particularly with our products and services in connected services and in new
geographic regions. It is possible that competitive pressures resulting from consolidation, including customers taking
manufacturing or distribution in house, purchasing directly from a manufacturer instead of from ADI Global
Distribution, moving to a competitor, partnering with third parties and consolidation amongst our customers, could
affect our growth and profit margins. 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 acquisition
targets. We may not be successful in effectively identifying all risks of an acquired business, integrating the acquired
business, product or technology into our existing business and operations or realizing the benefits expected at
acquisition. Our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges
of an acquired business, product or technology, including issues related to intellectual property, product quality or
product architecture, regulatory compliance practices, revenue recognition or other accounting practices or
employee or customer issues. Some of our competitors may also be able to deliver their service solutions more
quickly to market than we can by capitalizing on technology developed in connection with their substantial existing
service models. In addition, some of our competitors have significant bases of customer adoption in other services
and in online content, which they could use as a competitive advantage in the growing connected home solutions
services market or otherwise in our product or distribution businesses. The expansion by large technology
companies into connected home solutions, could result in pricing pressure, a shift in customer preferences towards
the services of these companies and a reduction in our market share.
Our Products & Solutions business' offerings are primarily sold through a network of professional
contractors, distributors, OEMs, retailers and online merchants. Growth of the retail markets and greater e-tail
distribution alternatives relative to the professional installation markets may negatively impact our sales and margins,
which could negatively affect our cash flow and have an adverse effect on our business, financial condition and
results of operations and cash flows.
With respect to our ADI Global Distribution business, if retail outlets, including online commerce or big
box stores increase their participation in wholesale distribution markets, or if buying patterns for our products
become more retail or e-commerce based through these outlets than they currently are, our ADI Global Distribution
business may not be able to effectively compete, which could have an adverse effect on our business, financial
condition, results of operations and cash flows.
Technology in our markets is changing rapidly and our future results and growth are largely dependent upon our
ability to develop and successfully market new technologies and products and develop and protect the intellectual
property related thereto as well as defend against the intellectual property threats of others.
Technology in our markets changes constantly, as new technologies and enhancements to existing
technologies continue to be introduced both in our traditional and connected product markets. Our future results
depend upon a number of factors, including our ability to (i) identify emerging technological trends, (ii) develop and
maintain competitive products, in part by adding innovative features that differentiate our products from those of our
competitors and prevent commoditization of our products, as well as through the use of intellectual property
protections such as patents and trade secrets, (iii) grow our market share, (iv) develop, manufacture and bring
compelling new products to market quickly and cost-effectively, (v) find and effectively partner with and continue
to partner with home connected device platforms and (vi) attract, develop and retain individuals with the requisite
technical expertise and understanding of customers’ needs to develop new technologies and introduce new products.
Our inability to predict the growth of and respond in a timely way to customer preferences and other developments
could have an adverse effect on our business, financial condition, results of operations and cash flows.
9
RESIDEO TECHNOLOGIES, INC.
We rely on a combination of patents, copyrights, trademarks, trade names, trade secrets and other
proprietary rights, as well as contractual arrangements, including licenses, to establish, maintain and protect our
intellectual property rights. Our intellectual property rights may not be sufficient to permit us to take advantage of
some business opportunities. As a result, we may be required to change our plans or acquire necessary intellectual
property rights, which could be costly. Furthermore, our ability to enforce our intellectual property rights in
emerging markets may be limited by legal or practical considerations that have not historically affected our business
in markets with more established intellectual property protection systems.
Our industry experiences significant intellectual property litigation and we could become involved in costly
and lengthy litigation involving patents or other intellectual property rights which could adversely affect our
business. We have received allegations of patent infringement from third parties, including non-practicing entity
patent holders, as well as communications from customers requesting indemnification for allegations brought by
third parties. These have resulted and may continue to result in litigation. These proceedings could subject us to
significant liability, harm our ability to compete, and can divert our management’s time and attention. Often, we
receive offers to license patents for our use. Such offers typically relate to various technologies including electronics,
the “internet of things”, “connected homes”, power systems, controls, and software, as well as, the use of certain
wireless networking methods, and the design of specific products. We believe that we will be able to access any
necessary rights through licensing, cross-licensing, or other mutually beneficial arrangements, although to the extent
we are required but unable to enter into such arrangements on acceptable economic terms, it could adversely impact
us, requiring us to take specific actions including ceasing using, selling or manufacturing certain products, services
or processes or incurring significant costs and time delays to develop alternative technologies or re-design products.
Our operations depend upon third-party technologies, software, and intellectual property. Failure to renew
contracts with existing providers or licensors of technology, software, intellectual property or connectivity solutions,
or to contract with other providers or licensors on commercially acceptable terms or at all, as well as any failure by
such third-party provider to provide such technology solutions may adversely impact our business, financial
condition, results of operations and cash flows. We could also be subjected to claims of infringement regardless of
our lack of involvement in the development of the licensed technology. Although a third-party licensor is typically
obligated to indemnify us if the licensed technology infringes on another party’s intellectual property rights, such
indemnification is typically limited in amount and may be worthless if the licensor becomes insolvent.
Market and economic conditions may adversely affect the economic conditions of our customers, demand for our
products and services and our results of operations.
As a global provider of Comfort, RTS and Security products, services and technologies for the home, as
well as a worldwide wholesale distributor of low-voltage electronics products, as well as smart home, fire, power,
audio and ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring
products, our business is affected by the performance of the global new and repair and remodel construction industry.
Our markets are sensitive to changes in the regions in which we operate and are also influenced by cyclical factors
such as interest rates, inflation, availability of financing, consumer spending habits and confidence, housing market
changes, employment rates and other macroeconomic factors over which we have no control, and which could
adversely affect our business, financial condition, results of operations and cash flows. Our sales are also affected by
fluctuations in demand for Internet-connected devices. If the market for connected home solutions grows more
slowly than anticipated, we may not be able to increase our revenue and earnings.
We may not be able to retain or expand relationships with certain significant customers.
A number of our customers contribute significantly to our net revenue and operating income. Consolidation
or change of control, particularly among our OEM customers (and in certain instances, their authorized dealers), or a
decision by any one or more of our customers to outsource all or most manufacturing work to a single equipment
manufacturer, or partner with third parties may continue to concentrate our business in a limited number of
customers and expose us to increased risks relating to dependence on a smaller number of customers. We generally
have to qualify, and are required to maintain our status, as a supplier for each of our OEM customers. A significant
failure or inability to comply with customer specifications and manufacturing requirements or delays or other
problems with existing or new products or inability to meet price requirements could result in financial penalties,
cancelled orders, increased costs, loss of sales, market share shift, loss of customers or potential breaches of
customer contracts, which have had and could in the future have an adverse effect on our profitability and results of
10
RESIDEO TECHNOLOGIES, INC.
operations. By virtue of certain customers’ size and the significant portion of revenue that we derive from them, they
are able to exert significant influence in the negotiation of our commercial agreements and the conduct of our
business with them. If we are unable to retain and expand our business with these customers on favorable terms, our
business, financial condition, results of operations and cash flows will be adversely affected.
We rely on certain suppliers of products, materials and components and are otherwise subject to raw material
price and supply variability with our suppliers which may impact our ability to meet commitments to customers
and cause us to incur significant liabilities.
Both of our business segments depend on third parties for the supply of certain materials and components
for products we manufacture and those manufactured on our behalf, or sold through our ADI Global Distribution
business, some of which are supplied by single or limited source suppliers/manufacturers. Our business, results of
operations, financial condition and cash flows could be adversely affected by disruptions in supply from our third-
party suppliers and manufacturers, whether due to work stoppages, component failures, natural disasters, pandemics,
economic, political, financial or labor concerns, weather conditions affecting products or shipments or transportation
disruptions or other reasons, or if suppliers lack sufficient quality control or if there are significant changes in their
financial or business condition or otherwise. For example, there is currently a global semiconductor supply shortage.
While our supply chain team has been diligently working to help ensure surety of supple, if our third-party suppliers
and manufacturers fail to deliver materials, products, parts and components on time and at reasonable prices, we
could have difficulties fulfilling our orders or stocking our distribution centers on similar terms or at all, sales and
profits could decline, and our commercial reputation could be damaged. Our ability to manage inventory and meet
delivery requirements may be constrained by our suppliers’ inability to scale production and adjust delivery of long-
lead-time products during times of volatile demand. Our inability to fill our supply needs would jeopardize our
ability to fulfill obligations which could, in turn, result in reduced sales and profits, contract penalties or
terminations, and damage to customer relationships. In particular, terminations of supply or services agreements or a
change in terms or conditions of sale from one or more of our key manufacturers could negatively affect our ADI
Global Distribution’s operating margins, net revenue or the level of capital required to fund operations.
Manufacturers who currently distribute their products through our ADI Global Distribution business may
decide to shift to or substantially increase their existing distribution with other distributors, their own dealer
networks, or directly to resellers or end-users. This could result in more intense competition as distributors strive to
secure distribution rights with these manufacturers, which could have an adverse impact on our ADI Global
Distribution business, financial condition, results of operations and cash flows. In addition, our ADI Global
Distribution business may not be able to acquire from manufacturers certain product lines that we are interested in
adding to our distribution business, and if even we are able to add products, they may not result in sales as expected
and may not be profitable to the overall business.
Failure to achieve and maintain a high level of product and service quality could damage our reputation with
customers and negatively impact our results.
Product and service quality issues could result in a negative impact on customer confidence in our
Company, our products and our brand image. If our offerings do not meet applicable safety standards or our
customers’ expectations regarding safety or quality, or if our products are improperly designed, manufactured,
packaged, or labeled, or are otherwise alleged to cause harm or injury, we may need to recall those items, experience
increased warranty costs or lost sales and increased costs and be exposed to legal, financial and reputational risks
including litigation and government enforcement action, as well as product liability claims. Such actions may
damage our relationship with our customers which may result in a loss of market share; additionally, the financial
expenses related to such events may not be covered by our insurance or may be subject to deductibles. We may not
be able to obtain indemnity or reimbursement from our suppliers or other third parties for the warranty costs or
liabilities associated with our products and there can be no assurance that we will have adequate reserves to cover
any recalls, repair and replacement costs. A significant product recall, warranty claim, or product liability case,
especially with respect to our security and life safety-related products or services, could also result in adverse
publicity, damage to our reputation, and a loss of consumer confidence in our products and services. We have in the
past experienced, and may in the future experience, product recalls and litigation related to our products or services,
none of which have been material to date.
11
RESIDEO TECHNOLOGIES, INC.
Our business, results of operations, financial condition, cash flows and stock price may be materially adversely
impacted by pandemics, epidemics or other public health emergencies, such as the coronavirus (COVID-19)
outbreak.
Our business, results of operations, financial condition, cash flows, and stock price may be adversely
affected by pandemics, epidemics or other public health emergencies, such as the COVID-19 (including newly
discovered variants) virus pandemic as described in this Annual Report, Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations. This outbreak has negatively impacted and could
continue to negatively impact the global economy. While we continue to comply with all applicable health and
sanitation and legal requirements, we cannot ensure uninterrupted operations in geographical areas impacted by
COVID-19. Deterioration in economic conditions could reduce our sales and profitability. Any financial distress of
our customers due to deterioration in economic conditions or lack of continued governmental funding and support of
our customers could result in reduced sales and decreased collectability of accounts receivable which could
negatively impact our results of operations. The COVID-19 outbreak has had, and could continue to have, an impact
on our ability to obtain certain of the raw materials, parts and components we need to manufacture our products as
our suppliers face disruptions in their businesses, and disruptions to other aspects of our business. We depend
greatly on our suppliers for items that are essential to the manufacturing of our products. If our suppliers fail to meet
our manufacturing needs, it could delay our production and our product shipments to customers and negatively
affect our operations. While we believe that we are considered as an essential product and service provider pursuant
to laws, rules and regulations in the majority of regions in which we operate, which has generally provided us with
the ability to continue to operate during the COVID-19 pandemic, we may be subject to changing laws, rules and
regulations, and limitations on the scope of essential businesses, which may impact our ability to operate in such
regions. In addition, we have in the past and may continue in the future during the pendency of the corona virus
pandemic, be subject to government inspections of our manufacturing facilities to confirm compliance with
government regulations related to employee health and safety at our sites.
To the extent the COVID-19 outbreak adversely affects our business and financial results, it may also have
the effect of heightening many of the other risks described in this “Risk Factors” section.
We rely on a dependable IT infrastructure and network operations that have adequate cyber-security
functionality to produce and sell our products and solutions and manage our business.
The efficient operation of our business requires substantial investment in technology infrastructure systems,
including enterprise resource planning (“ERP”) systems, information systems, supply chain management systems,
digital commerce systems and connected solutions platforms and network operations and systems. The failure to
acquire, implement, maintain and upgrade as required, these systems may impact our ability to respond effectively
to changing customer expectations, manage our business, scale our solutions effectively or impact our customer
service levels, which may put us at a competitive disadvantage and negatively impact our business, results of
operations, financial condition and cash flows. Repeated or prolonged interruptions of service, due to problems with
our systems or third- party technologies, whether or not in our control, could have a significant negative impact on
our reputation and our ability to sell products and services. Our business, results of operations, financial condition
and cash flows may be adversely affected if our information systems fail or do not allow us to transmit accurate
information. Failure to properly or adequately address these issues, including the failure to fund upgrades and
improvements to our systems, could impact our ability to perform necessary business operations, which could
adversely affect our reputation, competitive position, business, results of operations, financial condition and cash
flows. Our ability to keep our business operating is highly dependent on the proper and efficient operation of our
network operations centers and data backup systems. In addition, many of our employees are and have been engaged
in remote work from their homes during COVID-19; this further exposes our information technology systems to
potential cyber interference and disruption of work activities based on availability of Wi-Fi in the regions in which
our employees reside.
12
RESIDEO TECHNOLOGIES, INC.
Our information technology (“IT”) and engineering systems may involve sensitive information, including
personal data, trade secrets, and other proprietary information. In addition, our connected products potentially
expose our business and customers to cybersecurity threats. As a result, we are subject to systems interruption and
service and product failures, not only resulting from the failures of our products or services but also from the failures
of third-party service providers, natural disasters, power shortages or terrorist attacks, and cyber or other security
threats. There is no assurance that the comprehensive security measures we have put in place to protect our
information systems and products against unauthorized access and disclosure of personal information or confidential
or trade secret information will be effective in every case.
We have experienced, and expect to continue to experience, cybersecurity threats and incidents, none of
which, to our knowledge, have been material to date. The potential consequences of a material cyber or other
security incident include financial loss, reputational and brand impact, negative media coverage, loss of customers,
litigation with third parties, including class-action litigation, regulatory investigations or actions, theft of intellectual
property, fines, diminution in the value of our investment in research, development and engineering, regulatory
reporting for data breaches, and increased cyber and other security protection and remediation costs due to the
increasing sophistication and proliferation of threats, which in turn could adversely affect our competitiveness,
business, financial condition, results of operations and cash flows. In addition, damages, fines and claims arising
from such incidents may not be covered by, or may exceed the amount of any insurance available or may not be
insurable.
We are subject to the economic, political, health, epidemic, regulatory, foreign exchange and other risks of
international operations.
Our international revenues represented approximately 30% of our net revenue for the year ended
December 31, 2020. Our international geographic footprint subjects us to many risks including: exchange control
regulations(cid:14) wage and price controls(cid:14) antitrust/competition and environmental regulations(cid:14) employment regulations(cid:14)
foreign investment laws(cid:14) monetary and fiscal policies and protectionist measures that may prohibit acquisitions or
joint ventures, establish local content requirements, or impact trade volumes(cid:14) import, export and other trade
restrictions (such as embargoes)(cid:14) violations by our employees of anti-corruption laws (despite our efforts to mitigate
these risks)(cid:14) changes in regulations regarding transactions with state-owned enterprises(cid:14) nationalization of private
enterprises(cid:14) natural and man-made disasters, hazards and losses(cid:14) backlash from foreign labor organizations related to
our restructuring actions(cid:14) violence, civil and labor unrest(cid:14) acts of terrorism(cid:14) health epidemics; and our ability to hire
and maintain qualified staff and maintain the safety of our employees in these regions. Additionally, certain of the
markets in which we operate have adopted increasingly strict data privacy and data protection requirements or may
require local storage and processing of data or similar requirements
Instabilities and uncertainties arising from the global geopolitical environment can negatively impact our
business. The implementation of more restrictive trade policies or the renegotiation of existing trade agreements in
the U.S. or other countries where we sell or manufacture large quantities of products and services or procure
supplies and other materials incorporated into our products could negatively impact our business results of
operations, cash flows and financial condition. For example, a government’s adoption of “buy national” policies or
retaliation by another government against such policies, such as tariffs or quotas, could have a negative impact on
our results of operations.
Tariffs, sanctions and other barriers to trade could adversely affect the business of our customers and
suppliers, which could in turn negatively impact our net revenue and results of operations. Instabilities and
uncertainties arising from the global geopolitical environment, along with the cost of compliance with increasingly
complex regulations worldwide, can impair our flexibility in modifying product, marketing, pricing or other
strategies for growing our businesses, as well as our ability to improve productivity and maintain acceptable
operating margins.
As a result of our global presence, a portion of our net revenue are denominated in currencies other than the
U.S. Dollar, whereas a significant amount of our payment obligations, including pursuant to the Reimbursement
Agreement and Tax Matters Agreement are denominated in U.S. Dollars, which exposes us to foreign exchange risk.
We monitor and may seek to reduce such risk through hedging activities(cid:14) however, foreign exchange hedging
activities bear a financial cost and may not always be available to us or be successful in eliminating such volatility.
13
RESIDEO TECHNOLOGIES, INC.
Finally, we generate significant amounts of cash outside of the United States that is invested with financial and non-
financial counterparties. While we employ comprehensive controls regarding global cash management to guard
against cash or investment loss and to ensure our ability to fund our operations and commitments, a material
disruption to the counterparties with whom we transact business could expose us to financial loss.
We operate in many high-growth regions that require modifications to our products based on local building
codes, regulations, standards, certifications and other factors, which may impact our cost to serve and profitability as
we continue our penetration into these regions.
Failure to increase productivity through sustainable operational improvements, as well as an inability to
successfully execute transformation programs or to effectively manage our workforce, may reduce our
profitability or adversely impact our businesses.
Our profitability and margin growth are dependent upon our ability to drive sustainable improvements. In
addition, we seek productivity and cost savings benefits through transformation and other programs, such as
consolidation and outsourcing of manufacturing operations or facilities, transitions to cost-competitive regions,
workforce reductions, product line rationalizations and other cost-saving initiatives. Risks associated with these
actions include delays in execution of the planned initiatives, additional unexpected costs, asset impairments,
realization of fewer than estimated productivity improvements, and adverse effects on employee morale leading to
reduced production and unanticipated departures. We may not realize the full operational or financial benefits we
expect and the recognition of these benefits may be delayed and these actions may potentially disrupt our operations.
In addition, organizational changes, attrition, labor relations difficulties, or workforce stoppage could have an
adverse effect on our business, reputation, financial condition, results of operations, and cash flows.
Regulations and societal actions to respond to global climate change could negatively affect our business.
Responses to climate change may cause a shift away from fossil fuels to alternative power sources such as
electricity or alternative fuels such as natural gas/hydrogen mixtures. 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. Similarly,
regulations to drive higher fuel efficiency and requirements to support varying fuel mix could shift business away
from us if we fail to adapt our solutions to address these needs in a timely manner.
We are subject to risks associated with the Reimbursement Agreement, pursuant to which we are required to
make substantial cash payments to Honeywell, measured in substantial part by reference to estimates by
Honeywell of certain of its liabilities.
In connection with the Spin-Off, we entered into the Reimbursement Agreement, described in Note 19.
Commitments and Contingencies of Notes to Consolidated and Combined Financial Statements. In each calendar
quarter, our ability to pay dividends and repurchase capital stock, or take other material corporate actions, in such
calendar quarter will be restricted until any amounts payable under the Reimbursement Agreement in such quarter
are paid to Honeywell and we will be required to use available restricted payment capacity under our debt
agreements to make payments in respect of any such amounts. Payment of deferred amounts and certain other
amounts could cause the amount we are required to pay under the Reimbursement Agreement in respect of liabilities
arising in any given calendar year to exceed $140 million. All amounts payable under the Reimbursement
Agreement are guaranteed by certain of our subsidiaries that act as guarantors under our principal credit agreement,
subject to certain exceptions. Under the Reimbursement Agreement, we are subject to certain of the affirmative and
negative covenants that are substantially similar to those presently included in our principal credit agreement.
Further, pursuant to the Reimbursement Agreement, our ability to (i) amend or enter into waivers under our
principal credit agreement or our indenture, (ii) enter into another credit agreement or our indenture or make
amendments or waivers thereto, or (iii) enter into or amend or waive any provisions under other agreements, in each
case, in a manner that would adversely affect the rights of Honeywell under the Reimbursement Agreement, may be
subject to Honeywell’s prior written consent. The covenants contained in the Reimbursement Agreement and/or the
consent right described in the preceding sentence may significantly limit our ability to engage in many types of
significant transactions on favorable terms (or at all), including, but not limited to, equity and debt financings,
liability management transactions, refinancing transactions, mergers, acquisitions, joint ventures, and other strategic
14
RESIDEO TECHNOLOGIES, INC.
transactions. The Reimbursement Agreement may have material adverse effects on our liquidity and cash flows and
on our results of operations, regardless of whether we experience a decline in net revenue. The Reimbursement
Agreement may also require us to accrue significant long-term liabilities on our consolidated balance sheet, the
amounts of which will be dependent on factors outside our control, including Honeywell’s responsibility to manage
and determine the outcomes of claims underlying the liabilities. This may have a significant negative impact on the
calculation of key financial ratios and other metrics that are important to investors, rating agencies and securities
analysts in evaluating our creditworthiness, and the value of our securities. Although we will have access to
information regarding these liabilities as we may reasonably request for certain purposes, as well as the ability to
participate in periodic standing meetings with Honeywell’s remediation management team responsible for
management of the underlying claims, the payment obligations under the Reimbursement Agreement relate to legal
proceedings, costs and remediation efforts that we will not control, and we accordingly do not expect to be able to
make definitive decisions regarding settlements or other outcomes that could influence our potential related
exposure.
If our goodwill, other intangible assets and long-lived 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. Summary
of Significant Accounting Policies of Notes to the Consolidated and Combined Financial Statements included in this
Annual Report. We review other intangible assets and long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of the assets may not be recoverable. 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 or if there
was an adverse change in facts and circumstances, it is possible that an impairment charge may need to be recorded
in the future. If the fair value of the Company’s reporting units falls below its carrying amount because of reduced
operating performance, market declines, changes in the discount rate, or other conditions, charges for impairment
may be necessary. Any such charges may have a material negative impact on our results of operations. There were
no impairment charges taken during the years ended December 31, 2020, 2019 and 2018.
Risks Relating to Legal and Regulatory Matters
Failure to comply with the broad range of standards, laws and regulations in the jurisdictions in which we
operate may result in exposure to substantial disruptions, costs and liabilities.
The laws and regulations impacting us impose complex, stringent and costly compliance activities,
including but not limited to environmental, health, and safety protection standards and permitting, labeling and other
requirements regarding, among other things, electronic and wireless communications, air emissions, wastewater
discharges, the use, handling, and disposal of hazardous or toxic materials, remediation of environmental
contamination, data privacy, consumer protection and working conditions for and compensation of our employees.
We may also be affected by future standards, laws or regulations, including those imposed in response to energy,
climate change, product functionality, geopolitical, corporate social responsibility, privacy or similar concerns. We
expect that the growth of our business may depend on our development of new technologies in response to
legislation and regulation related to efficiency standards, safety, privacy and security, and environmental concerns.
These standards, laws, or regulations may further impact our costs of operation, the sourcing of raw materials, and
the manufacture and distribution of our products and place restrictions and other requirements or impediments on
the products and solutions we can sell in certain geographical locations. The net revenue and margins of our
business are directly impacted by government regulations, including safety, performance and product certification
regulations, particularly those driven by customer demands and national approvals, as well as changes in trade
agreements, tariffs, and environmental and energy efficiency standards. We may develop unexpected legal
contingencies or matters that exceed, or are excluded from, insurance coverage. We are subject to and in the future
may be subject to various claims, including legal claims arising in the normal course of business. Such claims may
include without limitation employment claims, product recall, personal injury, network security, data privacy, or
property damage claims resulting from the use of our products, services, or solutions, as well as exposure to
hazardous materials, contract disputes, or intellectual property disputes. The actual costs of resolving legal claims
may be substantially higher or lower than the level of insurance coverage we hold and/or the amounts accrued for
15
RESIDEO TECHNOLOGIES, INC.
such claims or may be excluded from coverage. In the event of unexpected future developments, it is possible that
the ultimate resolutions of such matters could be unfavorable.
Various laws and regulations apply to the collection, processing, transfer, disposal, disclosure and security
of personal data. The interpretation and application of many privacy and data protection laws and regulations around
the world may be interpreted in a manner that is inconsistent with our existing data management practices or the
features of our products and services. Any such new laws or regulations, any changes to existing laws and
regulations and any such interpretation may affect demand for our products and services, impact our ability to
effectively transfer data across borders in support of our business operations, or increase the cost of providing our
products and services. Additionally, any actual or perceived breach of such laws or regulations may subject us to
claims and may lead to administrative, civil or criminal liability, as well as reputational harm. We could also be
required to fundamentally change our business activities and practices, or modify our products and services, which
could have an adverse effect on our business, financial condition, results of operations, and cash flows. Privacy-
related claims or lawsuits initiated by governmental bodies, customers or other third parties, whether meritorious or
not, could be time consuming, result in costly regulatory proceedings, litigation, penalties and fines, or require us to
change our business practices, sometimes in expensive ways, or other potential liabilities. Unfavorable publicity
regarding our privacy practices could injure our reputation, harm our ability to keep existing customers or attract
new customers or otherwise adversely affect our business, assets, revenue, brands, and reputation.
Changes in laws, regulations or government enforcement of policies concerning the environment, the
discovery of previously unknown contamination or new technology or information related to individual
contaminated sites owned or operated by Resideo, the establishment of stricter state or federal toxicity standards
with respect to certain contaminants, or the imposition of new clean-up requirements or remedial techniques, could
require us to incur additional currently unanticipated costs in the future that would have a negative effect on our
business, financial condition, results of operations, and cash flows.
We are currently subject to laws and regulations regarding labor and employment matters, including
consultation requirements, and may be subject in the future to government investigations and/or employment claims,
allegations and/or work stoppages that may have a negative effect on our business operations and/or financial results.
We cannot predict with certainty the outcome of litigation matters, government proceedings, and other
contingencies and uncertainties.
In the ordinary course of business, we may make certain commitments, including representations,
warranties and indemnities relating to current and past operations, and issue guarantees of third-party obligations.
We are also subject to various lawsuits, investigations and disputes arising out of the conduct of our business,
including matters relating to public disclosure and reporting, commercial transactions, government contracts,
product liability, prior acquisitions and divestitures, labor and employment matters, employee benefit plans,
intellectual property, and environmental, health and safety matters.
We are unable to predict how long such proceedings, in particular, the class action and derivative lawsuits
described in Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial
Statements, will continue, but we anticipate that we may incur significant costs in connection with some or all of
these matters and that these proceedings and any related matters may result in a substantial distraction of
management’s time. In addition, we are currently subject to investigations and inquiries by governmental agencies
(including the SEC) relating to these matters, which may result in fine or penalties which may not be covered by
insurance. We may face future governmental inquiries and investigations on these and other issues.
Our potential liabilities are subject to change over time due to new developments, changes in settlement
strategy or the impact of evidentiary requirements, and we may become subject to or be required to pay damage
awards or settlements that could have an adverse effect on our business, financial condition, results of operations
and cash flows. If we were required to make payments, such payments could be significant and could exceed the
amounts we have accrued with respect thereto, adversely affecting our business, financial condition, results of
operations, and cash flows. While we maintain or may otherwise have access to insurance for certain risks, certain
risks may be excluded and the amount of our insurance coverage may not be adequate to cover the total amount of
all insured claims, legal fees, costs and liabilities and we may have to satisfy high insurance retentions. The
16
RESIDEO TECHNOLOGIES, INC.
incurrence of significant liabilities for which there is no or insufficient insurance coverage (or where there is
available insurance but high retention levels) could adversely affect our liquidity and financial condition, results of
operations and cash flows.
As described in Note 19. Commitments and Contingencies of Notes to Consolidated and Combined
Financial Statements, we are subject to potentially material liabilities related to the investigation and cleanup of
environmental hazards and to claims of personal injuries or property damages that may arise from hazardous
substance releases and exposures. These liabilities arise out of our current and past operations and the operations and
properties of predecessor companies (including off site waste disposal). We are also subject to potentially material
liabilities related to the compliance of sites owned or operated by Resideo with the requirements of various federal,
state, local, and foreign governments that regulate the discharge of materials into the environment and the generation,
handling, storage, treatment, and disposal of and exposure to hazardous substances. If we are found to be in
violation of these laws and regulations, we may be subject to substantial fines, criminal sanctions, trade restrictions,
product recalls, public exposure and be required to install costly equipment or make operational changes to achieve
compliance with such laws and regulations.
Risks related to the Spin-Off and our relationships with Honeywell
The Spin-Off was generally intended to be a tax-free transaction for our shareholders, but any failure to comply
with the relevant tax requirements could result in certain of our shareholders incurring substantial tax liabilities.
In addition, we may have material payment obligations to Honeywell under the Tax Matters Agreement,
including upon the resolution of pending or future disputes with Honeywell regarding the appropriate allocation
of tax liabilities incurred in connection with the Spin-Off.
Completion of the Spin-Off was conditioned on Honeywell’s receipt of separate written opinions from
Cleary Gottlieb Steen & Hamilton and KPMG to the effect that the Spin-Off should qualify for non-recognition of
gain and loss under Section 355 and related provisions of the Internal Revenue Code of 1986, as amended (the
“Code”). The opinions assume that the Spin-Off was completed according to the terms of the Separation and
Distribution Agreement.
If the distribution made in connection with the Spin-Off were determined not to qualify for non-recognition
of gain or loss under Section 355 and related provisions of the Code, then a U.S. Holder who received our common
stock in the Spin-Off generally would be treated as receiving a distribution in an amount equal to the fair market
value of our common stock received. In connection with the Spin-Off, we entered into the Tax Matters Agreement
with Honeywell described in Note 19. Commitments and Contingencies of Notes to Consolidated and Combined
Financial Statements. We presently have, and in the future may have, disputes with Honeywell regarding the
allocation of tax related liabilities between us and Honeywell under the Tax Matters Agreement. While we maintain
reserves for potential liabilities arising under the Tax Matters Agreement, to the extent we are obligated to
indemnify Honeywell for tax related liabilities in respect of matters that are not reserved or in excess of reserved
amounts, including upon resolution of any dispute with Honeywell, such payments could have a material adverse
effect on our business, financial condition and cash flows.
We have certain business conflicts of interest with Honeywell with respect to our past and ongoing relationships.
In addition, the agreements that we entered into with Honeywell in connection with the Spin-Off impose
significant restrictions on us and our subsidiaries and limit our ability to engage in actions that may be in our
long-term best interests, and we may from time to time have disputes with Honeywell under such agreements that
could have a material impact on our business and operations.
Conflicts of interest may or have arisen with Honeywell in a number of areas relating to our past and
ongoing relationships, including:
•
•
•
•
labor, tax, employee benefit, indemnification and other matters arising from our separation from
Honeywell(cid:14)
intellectual property matters(cid:14)
employee recruiting and retention(cid:14)
interpretations of contractual arrangements; and
17
RESIDEO TECHNOLOGIES, INC.
•
business combinations involving our Company.
We may not be able to resolve any potential conflicts, and, even if we do so, the resolution may be less
favorable to us than if we were dealing with a party other than our former parent company.
The agreements that we entered into with Honeywell in connection with the Spin-Off may impose
significant restrictions on us and our subsidiaries and limit our ability to engage in actions that may be in our long-
term best interests. As described in more detail in Note 19. Commitments and Contingencies of Notes to
Consolidated and Combined Financial Statements, the Reimbursement Agreement imposes material restrictions on
our business and operations, including limitations or impediments on our ability to separate or otherwise divest
businesses and modify or waive the terms of certain agreements in a manner that would adversely affect the rights of
Honeywell under the Reimbursement Agreement. In addition, the Trademark Agreement is terminable by
Honeywell under certain circumstances, including if we fail to comply with all material obligations, including the
payment obligations, set forth in the Reimbursement Agreement. The Trademark Agreement also automatically
terminates upon the occurrence of a change of control of Resideo that is not approved by Honeywell, and
automatically terminates as to any subsidiary of Resideo upon it ceasing to be a wholly-owned subsidiary of Resideo.
Any termination of the Trademark Agreement could have a material adverse effect on our business, financial
condition, cash flows, and reputation. In addition, the provisions of the Trademark Agreement in respect of a change
of control of Resideo or the sale of any interests in any subsidiary of Resideo may impact our ability to enter into
transactions that are otherwise in the best interests of our stockholders.
We and Honeywell also have had and may in the future have disputes under the agreements and related
exhibits entered into in connection with the Spin-Off. In addition, because of their former positions with Honeywell,
certain of our executive officers and directors, including the chairman of the Board, own equity interests in
Honeywell. Continuing ownership of Honeywell shares and equity awards could appear to create, potential conflicts
of interest if our Company and Honeywell face decisions that could have implications for both our Company and
Honeywell.
The terms of our debt documents may impose restrictions on our business and our operations require substantial
capital and we may not be able to obtain additional capital that we need in the future on favorable terms or at all.
The terms of our varied indebtedness include a number of restrictive covenants that impose significant
operating and financial restrictions on us and limit our ability to engage in actions that may be in our long-term best
interests, including actions such as incurring additional indebtedness, paying dividends, making investments or
acquisitions, selling or transferring certain assets and other corporate actions. If market changes, economic
downturns, or other negative events occur, our ability to comply with these covenants may be impaired and waivers
from our lenders may not be provided. A breach of any of these covenants could result in an event of default under
the terms of our indebtedness giving lenders the right to accelerate the repayment of such debt, which could
adversely affect our business, financial condition, results of operations, and cash flows. Additionally, we might not
have, or be able to obtain, sufficient funds to make these accelerated payments, and lenders could then proceed
against any collateral. Any subsequent replacement of the agreements governing such indebtedness, or any new
indebtedness could have similar or greater restrictions. As a result of these restrictions, we may be limited in how we
conduct our business and pursue our strategy, unable to raise additional debt financing to operate during general
economic or business downturns or unable to compete effectively or to take advantage of new business
opportunities.
Notwithstanding that we recently completed a follow-on equity offering and a refinance of certain of our
debt obligations, we may require additional capital in the future to finance our growth and development, upgrade
and improve our manufacturing capabilities, implement further marketing and sales activities, fund ongoing research
and development activities, satisfy regulatory and environmental compliance obligations and national approvals
requirements, satisfy obligations under the Reimbursement Agreement, fund acquisitions and meet general working
capital needs. If our access to capital were to become constrained significantly, or if costs of capital increased
significantly, due to lowered credit ratings, increased interest rates, prevailing business conditions, financial
leverage, the volatility of the capital markets, decreased investor interest or other factors, our business, financial
condition, results of operations and cash flows could be adversely affected and our ability to fund future
development and acquisition activities could be impacted.
18
RESIDEO TECHNOLOGIES, INC.
We believe that we have adequate capital resources to meet our projected operating needs, capital
expenditures and other cash requirements, including payments to Honeywell under the Reimbursement Agreement.
However, we may need additional capital resources in the future and if we are unable to obtain sufficient resources
for our operating needs, capital expenditures and other cash requirements for any reason, our business, financial
condition and results of operations could be adversely affected.
Risks Relating to Our Common Stock and the Securities Market
Our stock price has been volatile; stockholder’s percentage ownership in our Company may be diluted in the
future.
Our stock price may be volatile. The market price of our common stock has been volatile in the past and
may be volatile in the future. The market price of our common stock may be significantly affected by the following
factors: actual or anticipated fluctuations in our operating results; changes in financial estimates by securities
analysts or our failure to perform in line with such estimates; announcements by us or our competitors of significant
technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; the loss of, or
decrease in sales to, one or more key customers; and departures of key personnel.
A stockholder’s percentage ownership in our Company may be diluted in the future because of common
stock-based equity awards that we have granted and expect to grant in the future in accordance with our 2018 Stock
Incentive Plan for the benefit of certain employees and other service providers, as well as our equity plan for our
non-employee directors. In addition, we may issue additional equity as necessary to finance our ongoing operations.
In addition, our Amended and Restated Certificate of Incorporation (our “Certificate”) authorizes us to
issue, without the approval of our stockholders, one or more classes or series of preferred stock, which may have
preferences over our common stock with respect to dividends and distributions, as our Board may determine. The
terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our
common stock. Similarly, the repurchase or redemption rights or liquidation preferences that we could assign to
holders of preferred stock could affect the residual value of our common stock. In addition, we may pursue
acquisition opportunities for which the consideration thereof may consist partially or entirely of newly issued shares
of our common stock and such transactions would dilute the voting power and/or reduce the value of our common
stock.
Certain provisions in our governing documents may discourage takeovers.
Several provisions of our Charter Documents and Delaware law may discourage, delay or prevent a merger
or acquisition. These include, among others, our staggered board that remains in effect until our 2022 annual
meeting of stockholders; our stockholders are not permitted to act by written consent; we have established advance
notice requirements for stockholder nominations and proposals; we limit the persons who may call special meetings
of stockholders and we have limitations on our ability to enter into business combinations transactions.
These and other provisions of our Charter Documents and Delaware law may discourage, delay or prevent
certain types of transactions involving an actual or a threatened acquisition or change in control of our Company,
including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to
sell their shares of our common stock at a price above the prevailing market price.
We may be required to make significant cash contributions to our defined benefit pension plans.
We sponsor defined benefit pension plans under which certain eligible Company employees will earn
pension benefits. We have plans in several countries including the U.S., the terms of which require that such
qualified defined benefit pension plans maintain certain capitalization levels. Changes in discount rates and actual
asset returns different than our anticipated asset returns can result in significant non-cash actuarial gains or losses.
With regard to cash pension contributions, funding requirements for our pension plans are largely dependent upon
interest rates, actual investment returns on pension assets and the impact of legislative or regulatory changes related
to pension funding obligations. Our pension plan contributions may be material and could adversely impact our
19
RESIDEO TECHNOLOGIES, INC.
financial condition, cash flow, and results of operations. We may need to make pension plan contributions in future
periods sufficient to satisfy funding requirements.
General Risk Factors
We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such
personnel could adversely affect our business, financial condition, results of operations, and cash flows.
Due to the complex nature of our business, our future performance is highly dependent upon the continued
services of our employees and management who have significant industry expertise, including our engineering and
design personnel and trained sales force. Our performance is also dependent on the development of additional
personnel and the hiring of new qualified engineering, design, manufacturing, marketing, sales and management
personnel for our operations. Competition for qualified personnel in our markets is intense, and we may not be
successful in attracting or retaining qualified personnel. The loss of key employees, our inability to attract new
qualified employees or adequately train employees, or the delay in hiring key personnel could negatively affect our
business, financial condition, results of operations and cash flows.
Our effective tax rate will be affected by factors including changes in tax rules, and in the interpretation and
application of those rules, in the countries in which we operate.
Our future results of operations could be adversely affected by changes in the effective tax rate as a result
of a change in the mix of earnings in countries with differing statutory tax rates, changes in tax laws, including any
changes that may be enacted by the Biden administration to laws or regulations (such as changes to US tax reform
regulations enacted during the Trump administration), regulations and judicial rulings (or changes in the
interpretation thereof), changes in generally accepted accounting principles, changes in the valuation of deferred tax
assets and liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and
examinations of previously filed tax returns and continuing assessments of our tax exposures, and various other
governmental enforcement initiatives. Our tax expense includes estimates of tax reserves and reflects other estimates
and assumptions, including assessments of our future earnings which could impact the valuation of our deferred tax
assets. Changes in tax laws or regulations, including multi-jurisdictional changes enacted in response to the
guidelines provided by the Organization for Economic Co-operation and Development to address base erosion and
profit shifting will increase tax uncertainty and may adversely impact our provision for income taxes.
If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial
statements could be impaired and investors’ views of us could be harmed.
The Sarbanes-Oxley Act requires that we maintain effective internal control over financial reporting and
disclosure controls and procedures. If we are not able to comply with the requirements of Section 404 in a timely
manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control
over financial reporting that are deemed to be material weaknesses, the market price of shares of common stock
could decline and we could be subject to sanctions or investigations by SEC or other regulatory authorities, which
would require additional financial and management resources.
Even if we were to conclude, and our auditors were to concur, that our internal controls over financial
reporting provided reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP, because of its inherent limitations, internal
control over financial reporting might not prevent or detect fraud or misstatements. This, in turn, could have an
adverse impact on trading prices for our shares of common stock, and could adversely affect our ability to access the
capital markets.
Item 1B. Unresolved Staff Comments
None.
20
RESIDEO TECHNOLOGIES, INC.
Item 2.
Properties
Our corporate headquarters is located in Austin, Texas.
The Products & Solutions segment owns or leases 16 manufacturing sites. ADI Global Distribution owns or
leases 195 stocking locations. There are also 5 warehouses shared by both segments and 55 other sites owned or
leased, including offices shared by both segments and engineering and lab sites used by the Products & Solutions
segment. The following table shows the regional distribution of these sites:
Sites......................................................................................
145
Americas
Asia
Pacific
EMEA
104
6
India
16
We also sublease 1 lab site and 6 other sites that include office and engineering space from Honeywell. 29
warehouses are operated by third parties. In addition, Honeywell leases or subleases 3 manufacturing sites and 6
other sites, with office and warehouse space, from us.
We believe our properties are adequate and suitable for our business as presently conducted and are
adequately maintained.
Item 3.
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, government contracts, product liability, prior acquisitions and
divestitures, employee matters, intellectual property, and environmental, health and safety matters. We recognize a
liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the
likelihood of adverse judgments 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. We do not currently believe that such matters are material to
our results of operations.
For further information on our legal proceedings see Note 19. Commitments and Contingencies of Notes to
Consolidated and Combined Financial Statements.
Item 4. Mine Safety Disclosures
Not applicable.
21
RESIDEO TECHNOLOGIES, INC.
PART II.
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our common stock is traded on the New York Stock Exchange under the symbol “REZI”. On February 19,
2021, there were 37,987 holders of record of our common stock and the closing price of our common stock on the
New York Stock Exchange was $27.89 per share. As of February 19, 2021, 143,139,475 shares of our Common
Stock and 0 shares of our preferred stock were outstanding.
As described in Item 1. Business of this Form 10-K, on October 29, 2018, Honeywell completed the
separation of Resideo Technologies, Inc. Following the Spin-Off, our authorized capital stock consisted of
700,000,000 shares of common stock, par value $0.001 per share, and 100,000,000 shares of preferred stock, par
value $0.001 per share. The Spin-Off is further described in Note 1. Organization, Operations and Basis of
Presentation of Notes to the Consolidated and Combined Financial Statements included in Item 8. Financial
Statements and Supplementary Data of this Form 10-K.
Dividends
We have never declared or paid any cash dividends on our common stock and we currently do not intend to
pay cash dividends. We currently expect to retain any future earnings to fund the operation and expansion of our
business and pay back debt obligations. The Board’s decision regarding any future payment of dividends will
depend on the consideration of many factors, including our financial condition, earnings, sufficiency of distributable
reserves, opportunities to retain future earnings for use in the operation of our business and to fund future growth,
capital requirements, debt service obligations, obligations under the Reimbursement Agreement, legal requirements,
regulatory constraints, and other factors that the Board deems relevant. Additionally, the terms of the indebtedness
we incurred in connection with the Spin-Off, obligations under the Reimbursement Agreement and other amounts
owed to Honeywell under the Tax Matters, Trademark License and Patent Cross-License Agreements, will limit our
ability to pay cash dividends.
Stock Performance
Information relating to cumulative total returns of our common stock will be included in our Proxy
Statement to be filed pursuant to Regulation 14A within 120 days after our year ended December 31, 2020 in
connection with our 2021 Annual Meeting of Stockholders, or the 2021 Proxy Statement, and is incorporated by
reference.
22
RESIDEO TECHNOLOGIES, INC.
Item 6.
Selected Financial Data
Selected Historical Consolidated and Combined Financial Data
The following tables present certain selected historical consolidated and combined financial information as
of and for each of the years in the five-year period ended December 31, 2020. For periods prior to 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 periods subsequent to
October 29, 2018 are presented on a consolidated basis (collectively, the historical financial data for all periods
presented are referred to as “Consolidated and Combined Financial Data”).
The selected historical Consolidated and Combined Financial Data presented below should be read in
conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
and our historical Consolidated and Combined Financial Statements and the accompanying notes thereto included
elsewhere in this Annual Report on Form 10-K. In addition, for periods prior to our Spin-Off, our historical
consolidated and combined financial information does not reflect changes that we have experienced as a result of
our separation from Honeywell, including changes in the financing, operations, cost structure and personnel needs of
our business. The financial information included herein may not necessarily reflect our financial position, results of
operations and cash flows in the future or what our financial position, results of operations and cash flows would
have been had we been an independent, publicly traded company during the periods presented. Further, the historical
consolidated and combined financial information includes allocations of certain Honeywell corporate expenses, as
described in Note 5. Related Party Transactions with Honeywell of Notes to Consolidated and Combined Financial
Statements. We believe the assumptions and methodologies underlying the allocation of these expenses are
reasonable. However, such expenses may not be indicative of the actual level of expenses that we would have
incurred if we had operated as an independent, publicly traded company or of the costs expected to be incurred in
the future.
2020
Years Ended December 31,
2017
2018
2019
(In millions except share and per share data)
2016
Selected Statements of Operations Information:
Net revenue................................................................ $
Operating profit .........................................................
Net income (loss) (1) .............................................
Selected Balance Sheets Information at Year-
End:
Total assets ................................................................ $
Long-term obligations ...............................................
Total liabilities...........................................................
Total equity................................................................
Earnings (Loss) Per Common Share: (1)
Basic .......................................................................... $
Diluted .......................................................................
Weighted Average Common Shares (in thousands):
(2)
5,071 $
311
37
4,988 $
258
36
4,827
493
405
5,610 $
2,079
3,617
1,993
5,128 $
2,032
3,526
1,602
4,972
1,950
3,439
1,533
$
$
$
4,519
445
(394)
4,455
495
177
$
4,473
723
1,870
2,603
4,294
338
1,420
2,874
0.30 $
0.29
0.29 $
0.29
$
3.31
3.30
(3.22) $
(3.22)
1.44
1.44
Basic .......................................................................... 125,348 122,722 122,499
Diluted ....................................................................... 126,324 122,238 122,624
122,499
122,499
122,499
122,499
1) Net income (loss) attributable to Resideo and Earnings (Loss) Per Common Share for 2018 and 2017 were impacted by U.S. Tax
Reform. See Note 9. Income Taxes of Notes to Consolidated and Combined Financial Statements for further details regarding the
2018 impact. In 2017, the Company reasonably estimated certain effects of the U.S. Tax Reform and, therefore, recorded provisional
amounts, including the deemed repatriation transition tax and withholding taxes on undistributed earnings.
2) On October 29, 2018, the date of consummation of the Spin-Off, 122,499 shares of our Common Stock were distributed to Honeywell
stockholders of record as of October 16, 2018. Basic and Diluted Earnings (Loss) Per Common Share for all periods prior to the Spin-Off
reflect the number of distributed shares, or 122,499 shares. For the 2018, 2017 and 2016 year to date calculations, these shares are treated as
issued and outstanding from January 1, 2016 for purposes of calculating historical basic earnings per share. No dividends have been paid
from October 29, 2018 through December 31, 2020.
23
RESIDEO TECHNOLOGIES, INC.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(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 years ended December
31, 2020 and should be read in conjunction with the Consolidated and Combined Financial Statements and the notes
thereto contained elsewhere in this Form 10-K.
Overview and Business Trends
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 and security markets. We have a global footprint
serving commercial and residential end-markets. We manage our business operations through two segments,
Products & Solutions and ADI Global Distribution. Our Products & Solutions segment consists of comfort, security,
residential thermal (“RTS”) products and solutions. Our offerings include temperature and humidity control, thermal
and combustion solutions, water and air 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
security products including intrusion, access control and video products and participates significantly in the broader
related markets of smart home, fire, power, audio, ProAV, networking, communications, wire and cable, enterprise
connectivity, and structured wiring products. The Products & Solutions segment, consistent with our industry, has a
higher gross and operating profit margin profile in comparison to the ADI Global Distribution segment.
During the fourth quarter of 2020, we made a change to our reportable segments. Previously we allocated
corporate costs to the Products & Solutions segment as well as the ADI Global Distribution segment. We now report
corporate costs separately, as Corporate, from the two operating segments. In addition, during the fourth quarter of
2020, our Chief Operating Decision Maker moved towards making financial decisions and allocating resources
based on Operating profit, rather than Segment Adjusted EBITDA. These changes were designed to better align
accountability and authority, give a clearer view into the operational performance of the two segments and increase
accountability for management of corporate spending.
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. The global outbreak
of a novel coronavirus disease (“COVID-19”) created economic disruption. Starting at the end of the first quarter
and throughout the second quarter, we experienced constrained supply and slowed customer demand, as well as
temporary closures of several of our ADI Global Distribution branches, that adversely impacted business, results of
operations, and overall financial performance. Although there remains uncertainty as to the continuing implications
of COVID-19, during the second half of the year customer demand improved and ongoing cost actions and
transformation efforts contributed to the improvements in the Company’s operations and overall financial
performance.
During 2020, the Products & Solutions segment revenue declined 2% compared to 2019, driven by softness
in Comfort and RTS product lines offset by strength in the Security business. Operating profit was positively
impacted by cost savings from transformation programs, sourcing productivity, lower charges related to obsolete
and surplus inventory, and other cost reduction efforts, offset by lower revenue volumes, unfavorable sales mix,
investments to support new product launches, and labor and material inflation.
Our ADI Global Distribution business revenue increased 5% compared to 2019. Throughout 2020, the
business continued its strong performance, achieving solid growth in US, including the impact from the 2020
Herman ProAV acquisition, as well as EMEA, and expansion in top product lines. ADI Global Distribution
accelerated the adoption of digital tools, which is reflected in strong e-commerce growth. Operating profit was
negatively impacted by unfavorable sales mix, commercial investments, acquisition related costs, and other cost
inflation of $34 million, partially offset by transformation program cost savings, other expense productivity and cost
reduction programs totaling $18 million.
24
RESIDEO TECHNOLOGIES, INC.
Current Period Highlights
Net revenues increased $83 million in 2020 compared to 2019, primarily due to increased pricing on certain
products and acquisitions, partially offset by volume. Gross profit as a percent of net revenues was consistent at
26%. The primary drivers to the flat gross profit percentage were a 100 basis point (“bps”) negative impact from
unfavorable sales mix changes offset by 100 bps positive impact from transformation program cost savings. Net
income for 2020 was $37 million compared to $36 million for 2019.
Selling, general and administrative expenses decreased by $17 million in 2020 compared to 2019. The
decrease was driven by transformation program cost savings, decrease in Spin-Off related expenses, and other cost
reductions totaling $150 million. These decreases were partially offset by transformation program expenses and
related restructuring expenses, labor and other cost inflation, commercial investments, investments to support new
product launches, the expense impact of acquisitions, and labor and other expense inflation totaling $133 million.
We ended 2020 with $517 million in cash and cash equivalents. Net cash provided by operating activities
was $244 million for the year. At December 31, 2020, accounts receivable were $863 million and inventories were
$672 million.
Recent Developments
COVID-19 Pandemic
The World Health Organization (“WHO”) declared COVID-19 a pandemic in March 2020. The broader
implications of COVID-19 on our results of operations and overall financial performance remain uncertain. Starting
at the end of the first quarter of 2020 and throughout the second quarter, we experienced constrained supply and
slowed customer demand, as well as temporary closures of several of our ADI Global Distribution branches, that
adversely impacted business, results of operations and overall financial performance. During the second half of 2020
customer demand improved and on-going cost actions and transformation efforts contributed to improvements in the
Company’s results of operations and overall financial performance. As there remains uncertainty around the impacts
of the COVID-19 pandemic, the Company addresses and evaluates the impacts frequently. See “Item 1A. Risk
Factors” of this Form 10-K for further discussion of the possible impact of the COVID-19 pandemic on our
business.
lockdown mandates or recommendations, under which we have
U.S. and international government responses to the COVID-19 outbreak have included “shelter in
place,” “stay at home” and similar types of orders. These orders exempt certain products and services needed to
maintain continuity of operations of critical infrastructure sectors as determined by the U.S. federal government and
certain other countries globally. Although certain of the Company’s operations are currently considered essential
and exempt in the United States, Canada and certain other countries globally, there remain certain
jurisdictions where there have been and may continue to be restrictions on manufacturing or operations or other
temporarily closed certain
government
manufacturing and sales facilities, and restricted operations in others, including manufacturing in Mexico and
restricted operations in certain ADI sales branches, although these facilities have since reopened or remained opened
with restricted sales activities. If any of the applicable exemptions are curtailed or revoked in the future, that could
adversely impact our business, operating results and financial condition. Furthermore, to the extent these exemptions
do not extend to our key suppliers and customers, this could also adversely impact our business, operating results
and financial condition. We have also implemented work-from-home policies for a significant percentage of our
employees, which could negatively impact productivity, disrupt conduct of our business in the ordinary course and
delay our production timelines. Due to the significant remote workforce populations, we may also face informational
technology infrastructure and connectivity issues from the vendors that we rely on for certain information
technologies to administer, store and support the Company’s multiple business activities. Finally, we are incurring
increased costs associated with cleaning and other employee safety measures.
Our visibility toward future performance is more limited than is typical due to the uncertainty
surrounding the duration and ultimate impact of COVID-19 and the mitigation measures that are implemented by
governmental authorities. We also expect business conditions to remain challenging. In response to these challenges,
we will continue to focus on those factors that we can control: closely managing and controlling our expenses;
25
RESIDEO TECHNOLOGIES, INC.
aligning our production schedules with demand in a proactive manner as there are changes in market conditions to
minimize our cash operating costs; and pursuing further improvements in the productivity and effectiveness of our
manufacturing, selling and administrative activities.
2020 Public Offering of Common Stock
On November 17, 2020, we entered into an underwriting agreement (the “Underwriting Agreement”) which
provided for the offer and sale of 17,000,000 shares of common stock at the public offering price of $15.00 per share
(the “Offering”). The Offering closed on November 20, 2020. On December 14, 2020 the closing of the exercise of
the underwriters’ option to purchase an additional 2,550,000 shares of common stock of the Offering price of $15.00
per share as allowed in the Underwriting Agreement. Net proceeds received were approximately $279 million.
Amended and Restated Credit Facilities
On February 12, 2021, we entered into an amended and restated credit agreement (the “A&R Credit
Agreement”). The A&R Credit Agreement provides for (i) a seven-year senior secured term B loan facility in an
aggregate principal amount of $950 million (the “A&R Term B Facility”) and (ii) a five-year senior secured
revolving credit facility in an aggregate principal amount of $500 million (the “A&R Revolving Credit Facility”
and, together with the Term Loan Facilities, the “A&R Senior Credit Facilities”).
Basis of Presentation
Prior to becoming an independent publicly traded company (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 International Inc. (“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 Financial Statements”).
The Consolidated and Combined Financial Statements have been prepared in accordance with 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 experienced 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 combined 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.
Since the completion of the Spin-Off, we have incurred 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.
Prior to Spin-Off, our environmental expenses for specified Honeywell properties contaminated through
historical business operations (“Honeywell Sites”), now subject to the Reimbursement Agreement, were reported
within other expense, net in our Consolidated and Combined Statements of Operations, which reflect an estimated
liability for resolution of pending and future environmental-related liabilities. Prior to the Spin-Off, this estimated
26
RESIDEO TECHNOLOGIES, INC.
liability was calculated as if we were responsible for 100% of the environmental-liability payments associated with
certain sites. See Environmental Matters and Reimbursement Agreement sections of Note 19. Commitments and
Contingencies of Notes to Consolidated and Combined Financial Statements for additional information.
Reclassification
On January 1, 2020, we changed our classification of research and development expenses from Cost of
goods sold to Selling, general and administrative expenses, such that research and development expenses are
excluded from the calculation of Gross profit. This change had no impact on Net income (loss) and earnings (loss)
per share or the Consolidated Balance Sheet, Consolidated and Combined Statements of Cash Flow or Equity. The
Company determined the impact on previously issued consolidated and combined annual and interim financial
statements was not material. The impact for the years ended December 31, 2019 and 2018, was a decrease in Cost of
goods sold and an increase in Gross profit and in Selling, general and administrative expenses of $87 million and
$59 million, respectively. The impact of the reclassification for the year ended December 31, 2019 is also reflected
in Note 7. Restructuring Charges of Notes to Consolidated and Combined Financial Statements.
In addition, the prior year segment information was recast to present Corporate separately as well as present
Operating profit which replaces Segment Adjusted EBITDA. See Note 21. Segment Financial Data of Notes to
Consolidated and Combined Financial Statements for additional information. Certain reclassifications have been
made to prior period financial statements to conform to the classification adopted in the current period.
Components of Operating Results
Net Revenue
We manage our global business operations through two reportable segments, Products & Solutions and
ADI Global Distribution:
Products & Solutions: We generate the majority of our Products & Solutions 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 HVAC, plumbing, security, and
electrical distributors including our ADI Global Distribution business, OEMs, and service providers such as HVAC
contractors, security dealers and plumbers. 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, as well as smart home, fire, power, audio and ProAV, networking, communications, wire and
cable, enterprise connectivity, and structured wiring 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 Global Distribution distributes products from industry-leading manufacturers, and also
carries a line of private label products. We sell these products to contractors that service non-residential and
residential end-users. 14% of ADI Global Distribution’s net revenue is supplied by our Products & Solutions
Segment. Management estimates that in 2020 approximately two-thirds of ADI Global Distribution’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, non-research and development engineering
costs, and costs of certain intangible assets.
ADI Global Distribution: Cost of goods sold consists primarily of inventory-related costs and includes
labor and personnel-related expenses.
27
RESIDEO TECHNOLOGIES, INC.
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, personnel-related expenses,
including stock compensation expense and pension benefits, and research and development expenses. 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 Reimbursement Agreement expenses (gains) 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
historical business operations. Prior to the Spin-Off, other expense, net included the environmental expenses related
to these same sites. For further information see Note 19. Commitments and Contingencies of Notes to Consolidated
and Combined Financial Statements for discussion of environmental and the Reimbursement Agreement. Other
expense, net also includes foreign exchange gains and losses.
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 deferred financing costs.
Tax Expense (Benefit)
Provision for income taxes includes both domestic and foreign income taxes at the applicable statutory tax
rates adjusted for U.S. taxation of foreign earnings, non-deductible expenses and other permanent differences.
28
RESIDEO TECHNOLOGIES, INC.
Results of Operations for the Years Ended December 31, 2020, 2019 and 2018
The following table sets forth our Consolidated and Combined Statements of Operations for the periods
presented:
Consolidated and Combined Statements of Operations
(In millions except share and per share data)
Years Ended December 31,
2019
2018
2020
Net revenue....................................................................................... $
Cost of goods sold ............................................................................
Gross profit .......................................................................................
Selling, general and administrative expenses ...................................
Operating profit ................................................................................
Other expense, net ............................................................................
Interest expense ................................................................................
Income before taxes..........................................................................
Tax expense (benefit) .......................................................................
Net income........................................................................................ $
Weighted Average Number of Common Shares Outstanding
(in thousands)
Basic .................................................................................................
Diluted ..............................................................................................
Earnings Per Share
Basic ................................................................................................. $
Diluted .............................................................................................. $
Net Revenue
5,071 $
3,758
1,313
1,002
311
147
63
101
64
37
$
4,988 $
3,711
1,277
1,019
258
118
69
71
35
36
$
4,827
3,402
1,425
932
493
369
20
104
(301)
405
125,348
126,324
122,722
123,238
122,499
122,624
0.30
$
0.29 $
0.29
$
0.29 $
3.31
3.30
Years Ended December 31,
2019
2018
2020
Net revenue ....................................................................................... $
% change compared with prior period ..............................................
5,071
$
2%
4,988
$
3%
4,827
Net revenue increased 2% in 2020 compared to 2019, primarily due to increase in pricing on certain
products and acquisitions, partially offset by reduced volume. Net revenue increased 3% in 2019 compared to 2018,
primarily due to an increase in volume and pricing on certain products, partially offset by foreign exchange
translation.
Further 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.
Cost of Goods Sold
Years Ended December 31,
2019
2018
2020
Cost of goods sold ............................................................................ $
% change compared with prior period..............................................
Gross profit percentage.....................................................................
3,758
$
1%
26%
3,711
$
9%
26%
3,402
30%
29
RESIDEO TECHNOLOGIES, INC.
2020 compared with 2019
Cost of goods sold for 2020 was $3,758 million, an increase of $47 million, or 1%, from $3,711 million in
2019. This $47 million increase in cost of goods sold was primarily driven by impact of product expenses related to
revenue that was attributable to the operations of the 2020 Herman ProAV acquisition, unfavorable changes in sales
mix, and material and labor inflation totaling $137 million. The increased costs were partially offset by the favorable
impact of sourcing productivity, transformation programs cost savings, lower charges related to obsolete and surplus
inventory, lower spin-related costs, and other cost reductions totaling $90 million.
The primary drivers of flat gross profit percentage were a 100 bps negative impact from changes in sales
mix, offset by 100 bps favorable impact of transformation programs cost savings.
2019 compared with 2018
Cost of goods sold for 2019 was $3,711 million, an increase of $309 million, or 9%, from $3,402 million in
2018. This $309 million increase in cost of goods sold was primarily driven by higher revenue in the ADI Global
Distribution segment, material and labor inflation and increased production costs including charges related to
obsolete and surplus inventory, changes in sales mix, increased headquarter allocations in the period prior to the
Spin-Off, expenses related to transformation programs and related restructuring costs, and Spin-Off related costs
totaling $435 million. The increased costs were partially offset by sourcing productivity, foreign currency translation,
lower environmental expense, and savings in other miscellaneous costs of goods sold totaling $126 million.
The primary drivers to the decrease in gross profit percentage were a 200 bps impact from changes in sales
mix, 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 period prior to the
Spin-Off.
Selling, General and Administrative Expense
Years Ended December 31,
2019
2018
2020
Selling, general and administrative expense..................................... $
% of revenue .....................................................................................
1,002
$
20%
1,019
$
20%
932
19%
2020 compared with 2019
Selling, general and administrative expense for 2020 was $1,002 million, a decrease of $17 million, from
$1,019 million in 2019. The decrease was driven by transformation programs cost savings, decrease in Spin-Off
related expenses, and other cost reductions totaling $150 million. These decreases were partially offset by
transformation program expenses and related restructuring costs, commercial investments, investments to support
new product launches, and the expense impact of acquisitions totaling $133 million.
2019 compared with 2018
Selling, general and administrative expense for 2019 was $1,019 million, an increase of $87 million from
$932 million in 2018. The increase was driven by greater Spin-Off related costs, increased research and
development spend, increased royalty fees associated with the Trademark License Agreement, transformation
program expenses and related restructuring costs, higher legal expenses, the expense impact of acquisitions, and
labor and other expense inflation totaling $175 million. These increases were partially offset by reduced headquarter
cost allocations, transformation programs cost savings, foreign currency translation, and miscellaneous cost
reductions totaling $88 million.
30
RESIDEO TECHNOLOGIES, INC.
Other Expense, Net
Years Ended December 31,
2019
2018
2020
Other expense, net ............................................................................. $
147 $
118 $
369
2020 compared with 2019
Other expense, net for 2020 was $147 million, an increase of $29 million from $118 million in 2019. The
increase is mainly due to a $38 million increase in expense from the Reimbursement Agreement, and $4 million of
increased expense relating to foreign exchange. These increases were offset by $13 million decrease in non-
operating pension related expense.
2019 compared with 2018
Other expense, net for 2019 was $118 million, a decrease of $251 million from $369 million in 2018. The
decrease is mainly due to lower environmental remediation expense, now subject to and presented as
Reimbursement Agreement expense subsequent to the Spin-Off.
Tax Expense (Benefit)
Tax expense (benefit)........................................................................ $
Effective tax rate ...............................................................................
64
$
64%
$
35
49%
(301)
(289)%
Years Ended December 31,
2019
2018
2020
2020 compared with 2019
The effective tax rate increase in 2020 compared to 2019 was primarily attributable to the mix of earnings
across the jurisdictions in which we operate, changes in estimates related to prior years, and non-deductible
expenses. A significant driver of the high tax rate in both 2020 and 2019 is that the Reimbursement Agreement is
generally non-deductible for U.S. federal income tax purposes.
2019 compared with 2018
The effective tax rate increase in 2019 compared to 2018 was primarily attributable to tax benefits
generated in 2018 related to the internal restructuring of Resideo’s business in advance of the Spin-Off, currency
impacts on withholding taxes on undistributed foreign earnings, and adjustments to the provisional tax amount
related to U.S. Tax Reform, partially offset by decreases in tax expense related to Global Intangible Low Taxed
Income (“GILTI”) and non-deductible expenses. A significant driver of the high tax rate in 2019 is that the
Reimbursement Agreement is generally non-deductible for U.S. federal income tax purposes.
Review of Business Segments
Products & Solutions
Total revenue ............................................................. $
Less: Intersegment revenue .......................................
External revenue........................................................
Operating profit ......................................................... $
2,488 $
367
2,121
407 $
2,487
312
2,175
327
$
(2)%
24% $
2,474
305
2,169
591
0%
(45)%
2020
2019
%
Change
2018
% Change
31
RESIDEO TECHNOLOGIES, INC.
2020 compared with 2019
Products & Solutions revenue declined 2% in 2020 compared to 2019, driven by softness in Comfort and
RTS product lines offset by strength in the Security business. Operating profit increased from $327 million in 2019
to $407 million in 2020, or 24%. Operating profit was positively impacted by cost savings from transformation
programs, sourcing productivity, lower charges related to obsolete and surplus inventory and other cost reduction
efforts totaling $210 million. These cost reductions offset lower revenue volumes, unfavorable sales mix,
investments to support new product launches, and labor and material inflation totaling $130 million.
2019 compared with 2018
Products & Solutions revenue remained flat in 2019 compared to 2018, driven primarily by strength in the
Security business, offset by softness in Comfort and RTS product lines. Operating profit declined from $591 million
in 2018 to $327 million in 2019, or 45%. Operating profit was negatively impacted by unfavorable sales mix,
increased costs related to transformation program expenses and related restructuring expenses and Spin-Off,
increased functional expenses previously captured in corporate costs prior to Spin-Off, increased charges related to
obsolete and surplus inventory, increased royalty fee paid to Honeywell associated with the Trademark License
Agreement, investments to support new product launches, and labor and material inflation totaling $356 million.
Negative impacts were partially offset by increased selling prices, sourcing productivity, lower environmental
expense, savings from transformation programs, and miscellaneous cost reductions totaling $92 million.
ADI Global Distribution
External revenue........................................................ $
Operating profit ......................................................... $
2,950 $
194 $
2,813
210
5% $
(8)% $
2,658
205
6%
2%
2020
2019
% Change
2018
% Change
2020 compared with 2019
ADI Global Distribution revenue increased 5% in 2020 compared to 2019, highlighted by strong growth in
the U.S., including the impact from the 2020 Herman ProAV acquisition, as well as EMEA. Operating profit
decreased from $210 million in 2019 to $194 million in 2020, or 8%. Operating profit was negatively impacted by
commercial investments, unfavorable sales mix, acquisition related costs, and other cost inflation totaling $34
million. Negative impacts were partially offset by transformation program cost savings, other expense productivity
and cost reduction programs totaling $18 million.
2019 compared with 2018
ADI Global Distribution revenue increased 6% in 2019 compared to 2018, driven by increased sales
volume growth across all regions. Operating profit increased from $205 million in 2018 to $210 million in 2019, or
2%. Operating profit was positively impacted by increased volume, transformation program cost savings, and other
expense productivity and cost reduction programs totaling $38 million. Positive impacts were partially offset by
increased functional expenses previously captured in corporate costs prior to Spin-Off, commercial investments,
increased expenses related to transformation programs, unfavorable changes in foreign exchange rates, and other
cost inflation totaling $33 million.
Corporate
Corporate costs ......................................................... $
(290) $
(279)
4% $
(303)
(8)%
2020
2019
% Change
2018
% Change
2020 compared with 2019
Corporate costs for 2020 were $290 million, an increase of $11 million, from $279 million in 2019, or 4%,
and were negatively impacted by costs related to transformation programs and related restructuring expenses,
32
RESIDEO TECHNOLOGIES, INC.
increased bonus payouts from improved performance of the business, increase in service cost related to pension, and
labor and other inflation totaling $59 million. Negative impacts were partially offset by transformation program cost
savings, reduced Spin-Off related costs, other expense productivity and cost reduction programs totaling $48 million.
2019 compared with 2018
Corporate costs for 2019 were $279 million, a decrease of $24 million, from $303 million in 2018, or 8%,
and were positively impacted by reduced functional expenses previously captured in corporate costs prior to Spin-
Off, transformation program cost savings, decreased bonus payouts related to business performance, and other
expense productivity and cost reduction programs totaling $74 million. Positive impacts were partially offset by
increased Spin-Off related costs, higher legal expenses, increased costs related to transformation programs and
related restructuring expenses, increase in service cost related to pension, and labor and other inflation totaling $50
million.
Restructuring Charges
During 2019, we retained industry-recognized experts in supply chain optimization and organizational
excellence to assist in a comprehensive financial and operational review which was focused on product cost and
gross margin improvement, and general and administrative expenses simplification. Certain restructuring actions
have been implemented under this program as well as previous programs. These restructuring actions generated
incremental (net) pre-tax savings of $53 million in 2020. Cash spending related to our restructuring actions was $35
million for the year ended December 31, 2020 and was funded through operating cash flows.
Net restructuring and related expenses were $40 million, $37 million and $5 million for December 31, 2020,
2019 and 2018, respectively, primarily related to severance.
For further discussion of restructuring activities, refer to Note 7. Restructuring Charges of Notes to
Consolidated and Combined 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. The following is a summary of our liquidity position:
• As of December 31, 2020, total cash and cash equivalents were $517 million, of which 22% were held by
foreign subsidiaries. At December 31, 2020, there were no borrowings and no letters of credit issued under
our $350 million Revolving Credit Facility.
• Historically, we have delivered positive cash flows from operations. Operating cash flows from continuing
operations were $244 million, $23 million and $462 million for the three years ended December 31, 2020,
2019 and 2018, respectively.
Liquidity
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 and availability under our credit facilities are sufficient to meet our capital requirements through at
least the next 12 months, although we could be required, or could elect, to seek additional funding prior to that time.
We may enter into acquisitions or strategic arrangements in the future which also could require us to seek additional
equity or debt financing.
Credit Agreement
On October 25, 2018, we entered into a credit agreement (the “Credit Agreement”), which was
subsequently amended on November 26, 2019 (the “Credit Agreement First Amendment”) and on November 16,
2020 (the “Credit Agreement Second Amendment”). The Credit Agreement provides for (i) a seven-year senior
33
RESIDEO TECHNOLOGIES, INC.
secured first-lien term B loan facility in an aggregate principal amount of $475 million (the “Term B Facility”)(cid:14) (ii) a
five-year senior secured first-lien term A loan facility in an aggregate principal amount of $350 million (the “Term
A Facility” and, together with the Term B Facility, the “Term Loans or “Term Loan Facilities”)(cid:14) and (iii) a five-year
senior secured first-lien revolving credit facility in an aggregate principal amount of $350 million (the “Revolving
Credit Facility” and, together with the Term Loan Facilities, the “Senior Credit Facilities”). As of December 31,
2020, there were no borrowings and no Letters of Credit outstanding under the Revolving Credit Facility.
The Senior Credit Facilities were subject to an interest rate and interest period which we will elect. As
amended, the margin was 2.25% per annum (for LIBOR loans) and 1.25% per annum (for alternate base rate “ABR”
loans) in respect of the Term B Loan Facility, and based on our leverage ratio, from 2.25% per annum to 1.75% per
annum (for LIBOR loans) and 1.25% to 0.75% per annum (for ABR loans) for the Term A Loan Facility and the
Revolving Credit Facility.
The Credit Agreement contains certain affirmative and negative covenants customary for financings of this
type that, among other things, limit our and our subsidiaries’ ability to incur additional indebtedness or liens, to
dispose of assets, to make certain fundamental changes, enter into restrictive agreements, to make certain
investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends, to
make other distributions or redemptions/repurchases, in respect of our and our subsidiaries’ equity interests, to
engage in transactions with affiliates or amend certain material documents. In addition, the Credit Agreement also
contains financial maintenance and coverage covenants. The Credit Agreement contains customary events of default,
including with respect to a failure to make payments under the Senior Credit Facilities, cross-default, certain
bankruptcy and insolvency events and customary change of control events.
All obligations under the Senior Credit Facilities are or will be unconditionally guaranteed jointly and
severally, by: (a) our Company and (b) substantially all of the direct and indirect wholly owned subsidiaries of our
Company that are organized under the laws of the United States, any state thereof or the District of Columbia
(collectively, the “Guarantors”). Subject to certain limitations, the Senior Credit Facilities are or will be secured on a
first priority basis by: (x) a perfected security interest in the equity interests of each direct subsidiary of the
Company and each Guarantor under the Senior Credit Facilities (subject to certain customary exceptions) and (y)
perfected, security interests in, and mortgages on, substantially all tangible and intangible personal property and
material real property of the Company and each of the Guarantors under the Senior Credit Facilities, subject, in each
case, to certain exceptions.
On February 12, 2021, we entered into an amended and restated credit agreement (the “A&R Credit
Agreement”) which replaced the Senior Secured Credit Facilities and refinanced all amounts that were outstanding
under these facilities.
Amended and Restated Credit Agreement
On February 12, 2021, we entered into an amended and restated credit agreement (the “A&R Credit
Agreement”). The A&R Credit Agreement provides for (i) a seven-year senior secured term B loan facility in an
aggregate principal amount of $950 million (the “A&R Term B Facility”) and (ii) a five-year senior secured
revolving credit facility in an aggregate principal amount of $500 million (the “A&R Revolving Credit Facility”
and, together with the Term Loan Facilities, the “A&R Senior Credit Facilities”).
We are obligated to make quarterly principal payments of approximately $2.4 million throughout the term
of the A&R Term B Facility according to the amortization provisions in the A&R Credit Agreement. In addition to
paying interest on outstanding borrowings under the A&R Revolving Credit Facility, we are required to pay a
quarterly commitment fee based on the unused portion of the A&R Revolving Credit Facility. Borrowings under
the A&R Credit Agreement can be prepaid at our option without premium or penalty other than a 1.00% prepayment
premium that may be payable in connection with certain repricing transactions within a certain period of time after
the closing date. Up to $75 million may be utilized under the A&R Revolving Credit Facility for the issuance of
letters of credit to the Company or any of our subsidiaries. Letters of credit are available for issuance under
the A&R Credit Agreement on terms and conditions customary for financings of this kind, which issuances will
reduce the available funds under the A&R Revolving Credit Facility.
34
RESIDEO TECHNOLOGIES, INC.
The A&R Senior Credit Facilities are subject to an interest rate and interest period which we will elect. If
we choose to make a base rate borrowing on an overnight basis, the interest rate will be based on the highest of (1)
the rate of interest last quoted by The Wall Street Journal as the “prime rate” in the United States, (2) the greater of
the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (3) the one month adjusted
LIBOR rate, plus 1.00% per annum. For the A&R Term Loan B, the applicable LIBOR rate will not be less than
0.50% per annum. The applicable margin for the A&R Term B Facility is 2.25% per annum (for LIBOR loans) and
1.25% per annum (for base rate loans). The applicable margin for the A&R Revolving Credit Facility varies from
2.25% per annum to 1.75% per annum (for LIBOR loans) and 1.25% to 0.75% per annum (for base rate loans) based
on our leverage ratio. Accordingly, the interest rates for the A&R Senior Credit Facilities will fluctuate during the
term of the A&R Credit Agreement based on changes in the base rate, LIBOR rate or future changes in our leverage
ratio. Interest payments with respect to the borrowings are required either on a quarterly basis (for base rate loans) or
at the end of each interest period (for LIBOR loans) or, if the duration of the applicable interest period exceeds three
months, then every three months.
The A&R Credit Agreement contains certain affirmative and negative covenants customary for financings
of this type that, among other things, limit our and our subsidiaries’ ability to incur additional indebtedness or liens,
to dispose of assets, to make certain fundamental changes, enter into restrictive agreements, to make certain
investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends, to
make other distributions or redemptions/repurchases, in respect of our and our subsidiaries’ equity interests, to
engage in transactions with affiliates or amend certain material documents. In addition, the A&R Revolving Credit
Facility also contains certain financial maintenance covenants. The A&R Credit Agreement contains customary
events of default, including with respect to a failure to make payments under the A&R Senior Credit Facilities,
cross-default, certain bankruptcy and insolvency events and customary change of control events.
All obligations under the A&R Senior Credit Facilities are or will be unconditionally guaranteed jointly and
severally, by: (a) our Company and (b) substantially all of the direct and indirect wholly owned subsidiaries of our
Company that are organized under the laws of the United States, any state thereof or the District of Columbia
(collectively, the “Guarantors”). The Guarantors entered into a guarantee under the A&R Credit Agreement
concurrently with the effectiveness of the A&R Credit Agreement. Subject to certain limitations, the A&R Senior
Credit Facilities are or will be secured on a first priority basis by: (x) a perfected security interest in the equity
interests of each direct subsidiary of the Company and each Guarantor under the A&R Senior Credit Facilities
(subject to certain customary exceptions) and (y) perfected, security interests in, and mortgages on, substantially all
tangible and intangible personal property and material real property of the Company and each of the Guarantors
under the A&R Senior Credit Facilities, subject, in each case, to certain exceptions. The Company and the
Guarantors entered into security documents concurrently with effectiveness of the A&R Credit Agreement.
Senior Notes
In October of 2018, we issued $400 million in principal amount of 6.125% senior unsecured notes due in
2026 (the “Senior Notes”). The Senior Notes guarantees are unsecured senior debt obligations of the Senior Notes
guarantors. The net proceeds from the borrowings under the Senior Credit Facilities and the offering of the Senior
Notes were used as part of financing the Spin-Off.
Interest expense presented in the Statements of Operations is from the Senior Notes and Senior Credit
Facilities, which includes the amortization of debt issuance cost and debt discounts.
On February 16, 2021 we redeemed $140 million in principal amount of the Senior Notes at a redemption
price of 106.125% of par plus accrued interest.
Reimbursement Agreement
In connection with the Spin-Off, we entered into the Reimbursement Agreement, pursuant to which we
have an obligation to make cash payments to Honeywell in amounts equal to 90% of payments for certain
Honeywell environmental-liability payments, which include amounts billed, 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
35
RESIDEO TECHNOLOGIES, INC.
cap of $140 million. During 2020, we entered into three amendments with Honeywell. See Note 19. Commitments
and Contingencies of Notes to Consolidated and Combined Financial Statements of this Form 10-K for a further
discussion of the Reimbursement Agreement and amendments. The amount paid during the year ended December
31, 2020 was $140 million.
On February 12, 2021, we entered into a fourth amendment with Honeywell. See Note 24. Subsequent
events of Notes to Consolidated and Combined Financial Statements of this Form 10-K for a further discussion of
this amendment.
In addition to the sites under the Reimbursement Agreement, we have environmental expense related to
sites owned and operated by Resideo (“Resideo Sites”). Prior to the Spin-Off, both of these expenses were combined
and were presented as environmental expense. Expenses for environmental matters deemed probable and reasonably
estimable were $323 million for the period from January 1, 2018 through October 29, 2018.
Subsequent to the Spin-Off, environmental expense was $1 million for 2020, $2 million for 2019, and $17
million for the period October 30, 2018 through December 31, 2018 and Reimbursement Agreement expense was
$108 million for 2019 and $49 million for the period October 30, 2018 through December 31, 2018.
See Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial
Statements for further discussion.
Cash Flow Summary for the Years Ended December 31, 2020, 2019 and 2018
Our cash flows from operating, investing and financing activities for the years ended December 31, 2020,
2019 and 2018, as reflected in the audited Consolidated and Combined Financial Statements are summarized as
follows:
Years Ended December 31,
2019
2018
2020
Cash provided by (used for):
Operating activities ...................................................................... $
Investing activities .......................................................................
Financing activities ......................................................................
Effect of exchange rate changes on cash .....................................
Net increase (decrease) in cash and cash equivalents ....................... $
244 $
(103)
253
1
395 $
23 $
(112)
(53)
(1)
(143) $
462
(74)
(167)
(12)
209
2020 compared with 2019
Cash provided by operating activities for 2020 increased by $221 million, due to higher operating profit
and lower cash taxes paid.
Cash used for investing activities for 2020 decreased by $9 million, primarily due to a decrease of $25
million cash paid for capital expenditures, partially offset by an increase of $18 million cash paid for acquisitions
and miscellaneous other items.
Cash provided by financing activities for 2020 increased by $306 million. The increase was primarily due
to $279 million of net proceeds from the issuance of common stock, a decrease in cash used of $22 million from
non-operating obligations with Honeywell and other miscellaneous items.
A detailed discussion of the prior year 2019 to 2018 year-over-year changes are not included herein and can
be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in
the 2019 Annual Report on Form 10-K filed February 27, 2020.
36
RESIDEO TECHNOLOGIES, INC.
Contractual Obligations and Probable Liability Payments
Following is a summary of our significant contractual obligations and probable liability payments at
December 31, 2020:
Total (1)
Long-term debt (2) ................................................. $
Interest payments on long-term debt (3)....................
Reimbursement Agreement payments (4) .................
Estimated environmental liability payments (5).........
Minimum operating lease payments ..........................
Purchase obligations (6)..........................................
$
1,180 $
221
591
22
165
254
2,433 $
2021
Payments by Period
2022-
2023
(In millions)
289 $
83
280
3
65
26
746 $
40 $
44
140
2
40
225
491 $
2024-
2025
Thereafter
451 $
70
171
3
30
3
728 $
400
24
-
14
30
-
468
1) The table excludes tax liability payments, including those for unrecognized tax benefits. See Note 9. Income
Taxes of Notes to Consolidated and Combined Financial Statements.
3)
4)
2) Assumes all long-term debt is outstanding until scheduled maturity. Subsequent to December 31, 2020, the
Company entered into the A&R Credit Agreement which modified the contractual obligations related to the
Company’s long-term debt as described the Amended and Restated Credit Agreement section of this
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Interest payments are estimated based on the interest rate applicable as of December 31, 2020.
In connection with the Spin-Off, we entered into the Reimbursement Agreement with Honeywell. As of
December 31, 2020, $591 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. For further
discussion on the Reimbursement Agreement refer to Note 19. Commitments and Contingencies of Notes to
Consolidated and Combined Financial Statements.
5) Represents estimated environmental liability payments deemed probable and reasonably estimable for sites
which we own and are directly responsible for.
6) Purchase obligations are entered into with various vendors in the normal course of business and are consistent
with our expected requirements.
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.
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.
37
RESIDEO TECHNOLOGIES, INC.
Critical Accounting Policies
The preparation of our Consolidated and Combined Financial Statements in accordance with accounting
principles generally accepted in the United States of America 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 below to be critical to the understanding of our
Consolidated and Combined Financial Statements. Actual results could differ from our estimates and assumptions,
and any such differences could be material to our Consolidated and Combined Financial Statements. As there
remains uncertainty around the impacts of the COVID-19 pandemic, we intend to address and evaluate the impacts
frequently. See Note 2. Summary of Significant Accounting Policies of Notes to Consolidated and Combined
Financial Statements of this Form 10-K for a discussion of the accounting policies most likely affected by the
COVID-19 pandemic.
Revenue — Product and service revenues are recognized when or as the Company transfers control of the
promised products or services to the customer, in an amount the Company expects to receive in exchange for
transferring goods or providing services. Each distinct performance obligation within a contract is identified, and a
contract’s transaction price is then allocated to each distinct performance obligation and recognized as revenue when,
or as, the performance obligation is satisfied.
In the sale of products, the terms of a contract or the historical business practice can give rise to variable
consideration due to, but not limited to, discounts, rebates, and the right of return. The Company estimates variable
consideration at the most likely amount that will be received from customers and reduces revenues recognized
accordingly. The Company includes estimated amounts in the transaction price to the extent it is probable that a
significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the
variable consideration is resolved. The estimates of variable consideration and determination of whether to include
estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all
information (historical, current and forecasted) that is reasonably available to the Company.
Reimbursement Agreement — In connection with the Spin-Off, we entered into the Reimbursement
Agreement further described in the Capital Resources and Liquidity section.
Through the Reimbursement Agreement, we are subject to a number of environmental claims, remediation
and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims. We continually assess the
likelihood of any adverse judgments or outcomes related to the Reimbursement Agreement, as well as potential
amounts or ranges of probable losses, and recognize a liability, if any, for these contingencies based on a thorough
analysis of each matter with the assistance of outside legal counsel and Honeywell, and, if applicable, other experts.
Such analysis includes making judgments concerning matters such as the costs associated with environmental
matters, the outcome of negotiations, the number and cost of pending and future claims related to the sites covered
by the Reimbursement Agreement, and the impact of evidentiary requirements. Because most contingencies are
resolved over long periods of time, we do not currently possess sufficient information to reasonably estimate the
amounts of the Reimbursement Agreement liabilities to be recorded upon future completion of studies, litigations or
settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can
be determined. Expenses related to the indemnification are presented within Other expense, net in the Consolidated
and Combined Statements of Operations. See Note 19. Commitments and Contingencies of Notes to Consolidated
and Combined Financial Statements for a discussion of management’s judgment applied in the recognition and
measurement of our environmental liabilities.
Goodwill — We perform goodwill impairment testing annually on the first day of the fourth quarter of each
year or more frequently if indicators of potential impairment exist. The goodwill impairment test is performed at the
reporting unit level. We have two reporting units, Products & Solutions and ADI Global Distribution. In determining
if goodwill is impaired, we compare the fair value of a reporting unit with its carrying amount and recognize an
impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value provided the
loss recognized does not exceed the total amount of goodwill allocated to that reporting unit.
For the 2020 annual impairment test, we determined the fair value of each reporting unit using a weighting
of fair values derived from the income approach and the market approach. Under the income approach, we calculate
the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are
based on management’s estimates of operating results, taking into consideration industry and market conditions. The
38
RESIDEO TECHNOLOGIES, INC.
discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with
business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected cash
flows. The terminal value is estimated using a constant growth method which requires an assumption about the
expected long-term growth rate. The estimates are based on historical data and experience, industry projections,
economic conditions, and management’s expectations. Under the market approach, we estimate the fair value based
on market multiples of cash flow and earnings derived from comparable publicly traded companies with similar
operating and investment characteristics as the reporting unit and considering a reasonable control premium. Due to
the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.
We believe the estimates and assumptions used in the calculations are reasonable. In addition, the extent to
which COVID-19 may adversely impact our business depends on future developments, which are uncertain and
unpredictable, depending upon the severity and duration of the outbreak, and the effectiveness of actions taken
globally to contain or mitigate its effects. Any resulting financial impact cannot be reasonably estimated at this time
but may adversely affect our business and financial results. It is likely that into 2021, macroeconomic conditions
may have unexpected impacts on our business. If there was an adverse change in facts and circumstances, then an
impairment charge may be necessary in the future. Should the fair value of the Company’s reporting units fall below
its carrying amount because of reduced operating performance, market declines, changes in the discount rate, or
other conditions, charges for impairment may be necessary. The Company monitors its reporting units to determine
if there is an indicator of potential impairment.
Income Taxes — Our provision for income tax expense is based on our income, the statutory tax rates and
other provisions of the tax laws applicable to us in each of the various jurisdictions in which we conduct business.
These laws are complex, and their application to our facts is at times open to interpretation. The process of
determining our consolidated and combined income tax expense includes significant judgments and estimates,
including judgments regarding the interpretation of those laws. Our provision for income taxes and our deferred tax
assets and liabilities incorporate those judgments and estimates and reflect management’s best estimate of current
and future income taxes to be paid.
Deferred tax assets and liabilities relate to temporary differences between the financial reporting and
income tax bases of our assets and liabilities, as well as the impact of tax loss carryforwards or carrybacks. Deferred
income tax expense or benefit represents the expected increase or decrease to future tax payments as these
temporary differences reverse over time. Deferred tax assets are specific to the jurisdiction in which they arise and
are recognized subject to management’s judgment that realization of those assets is “more likely than not.” In
making decisions regarding our ability to realize tax assets, we evaluate all positive and negative evidence, including
projected future taxable income, taxable income in carryback periods, expected reversal of deferred tax liabilities,
and the implementation of available tax planning strategies.
Significant judgment is required in evaluating tax positions. We establish additional reserves for income
taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet
the minimum recognition threshold. The approach for evaluating certain and uncertain tax positions is defined by the
authoritative guidance which determines when a tax position is more likely than not to be sustained upon
examination by the applicable taxing authority. In the normal course of business, we are examined by various
federal, state and foreign tax authorities. We regularly assess the potential outcomes of these examinations and any
future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We
continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the
current tax liability and deferred taxes in the period in which the facts that give rise to a change in estimate become
known.
39
RESIDEO TECHNOLOGIES, INC.
Pension — We have defined benefit plans covering certain employees. The benefits are accrued over the
employees’ service periods. We use actuarial methods and assumptions in the valuation of defined benefit
obligations and the determination of net periodic pension income or expense. Differences between actual and
expected results or changes in the value of defined benefit obligations and plan assets, if any, are not recognized in
earnings as they occur but rather systematically over subsequent periods when net actuarial gains or losses are in
excess of 10% of the greater of the fair value of plan assets or the plan’s projected benefit obligation.
A 25 basis point increase in the discount rate would result in a decrease of approximately $5.8 million to
the net periodic benefit cost for 2020, while a 25 basis point decrease in the discount rate would result in an increase
of approximately $12.7 million. The resulting impact on the pension benefit obligation would be a decrease of $21.6
million and an increase of $23.9 million, respectively.
Other Matters
Litigation, Environmental Matters and the Reimbursement Agreement
See Note 19. Commitments and Contingencies of Notes to Consolidated and Combined Financial
Statements for a discussion of environmental and other litigation matters.
Recent Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies of Notes to Consolidated and Combined Financial
Statements for a discussion of recent accounting pronouncements.
Cautionary Statement Concerning Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate
strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and
projections about our industries and our business and financial results. Forward-looking statements often include
words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,”
“believes,” “may,” “will,” “goals” and words and terms of similar substance in connection with discussions of future
operating or financial performance. 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-K are based on reasonable assumptions, you should be aware that many factors could
affect our actual financial results or results of operations and could cause actual results to differ materially from
those in such forward-looking statements, including but not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
competition from other companies in our markets and segments, as well as in new markets and emerging
markets;
our ability to successfully develop new technologies and products and develop and protect the intellectual
property related to the same and to defend against IP threats of others;
our inability to maintain intellectual property agreements necessary to our business;
our ability to recruit and retain qualified personnel(cid:14)
our ability to retain or expand relationships with significant customers;
changes in prevailing global and regional economic conditions(cid:14)
the impact of pandemics, epidemics, natural disasters and other public health emergencies, such as COVID-
19;
fluctuation in financial results due to the seasonal nature of portions of our business;
failure to achieve and maintain a high level of product and service quality(cid:14)
inability to obtain necessary product components, production equipment or replacement parts;
dependence upon information technology infrastructure having adequate cyber-security functionality(cid:14)
labor disputes, work stoppages, other disruptions, or the need to relocate any of our facilities(cid:14)
40
RESIDEO TECHNOLOGIES, INC.
•
•
•
•
•
•
•
•
•
•
•
•
•
economic, political, regulatory, foreign exchange and other risks of international operations, including the
impact of tariffs;
changes in legislation or government regulations or policies(cid:14)
the significant failure or inability to comply with the specifications and manufacturing requirements of our
original equipment manufacturers (“OEMs”) customers;
the failure to increase productivity through sustainable operational improvements(cid:14)
the operational constraints and financial distress of third parties(cid:14)
our ability to borrow funds and access capital markets(cid:14)
the amount of our obligations and nature of our contractual restrictions pursuant to, and disputes that have
or may hereafter arise under, the Reimbursement Agreement and the other agreements we entered into with
Honeywell in connection with the Spin-Off;
our reliance on Honeywell for the Honeywell Home trademark;
potential material environmental liabilities(cid:14)
potential material costs as a result of warranty claims, including product recalls, and product liability
actions that may be brought against us(cid:14)
potential material litigation matters; including the shareholder litigation described in this Form 10-K(cid:14)
unforeseen U.S. federal income tax and foreign tax liabilities(cid:14) and
certain factors discussed elsewhere in this Form 10-K.
Any forward-looking statements made by us in this Form 10-K 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.
41
RESIDEO TECHNOLOGIES, INC.
Item 7A. 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 December 31, 2020, $780 million of our total debt of $1,180 million carried variable interest rates,
including the effect of pay variable interest rate swaps, if any. The fair market values of our fixed-rate financial
instruments are sensitive to changes in interest rates. At December 31, 2020, an increase or decrease of 100 basis
points on our Term Loans would have approximately an $10 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,
Indian Rupee, Canadian Dollar and Mexican Peso. 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 December 31, 2020, 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.
Item 8.
Financial Statements and Supplementary Data
42
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Resideo Technologies, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Resideo Technologies, Inc. and subsidiaries (the
“Company”) as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December
31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated and combined financial statements as of and for the year ended December 31,
2020, of the Company and our report dated February 25, 2021, expressed an unqualified opinion on those
consolidated and combined financial statements and included explanatory paragraphs relating to expense allocations
for certain corporate functions historically provided by Honeywell International, Inc. and the Company’s adoption
of Accounting Standards Update No. 2016-02, Leases (Topic 842).
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Deloitte & Touche LLP
Dallas, Texas
February 25, 2021
43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Resideo Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Resideo Technologies, Inc. (the “Company”) as
of December 31, 2020 and 2019, the related consolidated and combined statements of operations, comprehensive
income, cash flow, and equity, for each of the three years in the period ended December 31, 2020, and the related
notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with
accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 25, 2021, expressed an unqualified
opinion on the Company’s internal control over financial reporting.
Emphasis of Matter
As described in Note 1 to the financial statements, prior to the Spin-Off, the accompanying financial statements
were derived from the separate records maintained by Honeywell International, Inc. (“Honeywell”). The financial
statements also include expense allocations for certain corporate functions historically provided by Honeywell.
These allocations may not be reflective of the actual expense that would have been incurred had the Company
operated as a separate entity apart from Honeywell. A summary of transactions with related parties is included in
Note 5 to the financial statements.
Change in Accounting Principle
As discussed in Note 2 to the financial statements, the Company adopted Accounting Standard Update No. 2016-02,
Leases (Topic 842), effective January 1, 2019, and applied the changes prospectively as of the adoption date.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
44
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Honeywell Reimbursement Agreement—Refer to Note 19 to the financial statements
Critical Audit Matter Description
In connection with the Spin-Off, the Company entered into the Honeywell Reimbursement Agreement (the
“Reimbursement Agreement”), pursuant to which the Company has an obligation to make cash payments to
Honeywell with respect to certain environmental claims associated with specified properties contaminated through
historical business operations. The Company’s obligation is equal to 90% of payments for certain Honeywell
environmental liability payments, less 90% of Honeywell’s net insurance receipts, plus certain other recoveries
relating to such liabilities, as defined by the Reimbursement Agreement. The amount payable by the Company under
this agreement is subject to an annual limit of $140 million.
The Company records its obligation under the Reimbursement Agreement based on the underlying environmental
remediation liabilities of Honeywell which are recorded when a remediation liability is determined to be probable
and the related costs can be reasonably estimated. The determination of the amount of future costs associated with
environmental remediation requires judgments and estimates by management. Furthermore, information the
Company uses to evaluate the estimates is obtained from Honeywell under the terms of the Reimbursement
Agreement.
Given the subjectivity in estimating the remediation costs for environmental matters and judgments made by
management related to those estimates, performing audit procedures to evaluate the reasonableness of
management’s estimates and assumptions requires a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s obligation under the Reimbursement Agreement and evaluation of
the Company’s evidence supporting its estimates included the following, among others:
• We tested the effectiveness of controls related to remediation costs for environmental matters, including
management’s controls over the recording of and changes to the liability for the Company’s obligations under
the Reimbursement Agreement.
• We read the Reimbursement Agreement and evaluated the Company’s compliance with it to the extent it has the
potential to affect the Company’s related liability.
• We performed searches of third-party sources to identify potential liabilities related to the specified sites that
may not have been included in the estimates.
• We tested the completeness and accuracy of the recognition of the Company’s liability for obligations under the
Reimbursement Agreement through the following procedures:
– For a selection of incremental charges to the Honeywell Environmental liability (increases), obtained
supporting documentation related to the valuation of the liability from management, including, but not
limited to, regulatory records of decision, feasibility studies, and third-party engineering estimates.
– For a selection of payments related to the Honeywell Environmental liability (decreases), obtained
supporting documentation related to the original invoice and proof of payment.
– Made inquiries of internal and external legal counsel regarding environmental matters.
– Performed searches of public domain sources to identify new remediation sites attributable to the Company
or any additional remediation activities required by federal, state, or international authorities that may not
have been included in the estimates.
/s/ Deloitte & Touche LLP
Dallas, Texas
February 25, 2021
We have served as the Company’s auditor since 2018.
45
RESIDEO TECHNOLOGIES, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(In millions except share and per share data)
Years Ended December 31,
2019
2018
2020
Net revenue ....................................................................................... $
Cost of goods sold.............................................................................
Gross profit .......................................................................................
Selling, general and administrative expenses ...................................
Operating profit.................................................................................
Other expense, net.............................................................................
Interest expense.................................................................................
Income before taxes ..........................................................................
Tax expense (benefit)........................................................................
Net income ........................................................................................ $
Weighted Average Number of Common Shares Outstanding
(in thousands)
Basic..................................................................................................
Diluted...............................................................................................
Earnings Per Share
Basic.................................................................................................. $
Diluted............................................................................................... $
5,071 $
3,758
1,313
1,002
311
147
63
101
64
37 $
4,988 $
3,711
1,277
1,019
258
118
69
71
35
36 $
4,827
3,402
1,425
932
493
369
20
104
(301)
405
125,348
126,324
122,722
123,238
122,499
122,624
0.30 $
0.29 $
0.29 $
0.29 $
3.31
3.30
The Notes to Consolidated and Combined Financial Statements are an integral part of these statements.
46
RESIDEO TECHNOLOGIES, INC.
CONSOLIDATED AND COMBINED
STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Years Ended December 31,
2019
2018
2020
Net income ........................................................................................ $
Other comprehensive income (loss), net of tax
Foreign exchange translation adjustment ....................................
Pension actuarial loss...................................................................
Total other comprehensive income (loss), net of tax...................
Comprehensive income..................................................................... $
37 $
63
(15)
48
85 $
36
$
(2)
(3)
(5)
$
31
405
(77)
(7)
(84)
321
The Notes to Consolidated and Combined Financial Statements are an integral part of these statements.
47
RESIDEO TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands and par value)
December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents......................................................................... $
Accounts receivable – net .........................................................................
Inventories – net ........................................................................................
Other current assets ...................................................................................
Total current assets ..............................................................................
Property, plant and equipment – net ...............................................................
Goodwill .........................................................................................................
Other assets.....................................................................................................
Total assets........................................................................................... $
LIABILITIES
Current liabilities:
Accounts payable ...................................................................................... $
Current maturities of debt .........................................................................
Accrued liabilities .....................................................................................
Total current liabilities.........................................................................
Long-term debt ...............................................................................................
Obligations payable under Indemnification Agreements ...............................
Other liabilities ...............................................................................................
COMMITMENTS AND CONTINGENCIES (Note 19)
EQUITY
Common stock, $0.001 par value, 700,000 shares authorized, 143,959 and
143,059 shares issued and outstanding as of December 31, 2020, 123,488
and 122,873 shares issued and outstanding as of December 31, 2019,
respectively .....................................................................................................
Additional paid-in capital ...............................................................................
Treasury stock, at cost ....................................................................................
Retained earnings............................................................................................
Accumulated other comprehensive loss .........................................................
Total equity ..........................................................................................
Total liabilities and equity ................................................................... $
517 $
863
672
173
2,225
318
2,691
376
5,610 $
936 $
7
595
1,538
1,155
590
334
-
2,070
(6)
75
(146)
1,993
5,610 $
122
817
671
175
1,785
316
2,642
385
5,128
920
22
552
1,494
1,158
594
280
-
1,761
(3)
38
(194)
1,602
5,128
The Notes to Consolidated and Combined Financial Statements are an integral part of these statements.
48
RESIDEO TECHNOLOGIES, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOW
(In millions)
Cash flows provided by (used for) operating activities:
Net income ........................................................................... $
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization .......................................
Stock compensation expense..........................................
Deferred income taxes....................................................
Other...............................................................................
Changes in assets and liabilities, net of acquired
companies:
Accounts receivable .......................................................
Inventories – net .............................................................
Other current assets ........................................................
Other assets ....................................................................
Accounts payable ...........................................................
Accrued liabilities ..........................................................
Obligations payable under Indemnification
Agreements ....................................................................
Other liabilities...............................................................
Net cash provided by operating activities ..................................
Cash flows (used for) provided by for investing activities:
Expenditures for property, plant, equipment and other
intangibles ............................................................................
Cash paid for acquisitions, net of cash acquired ..................
Other.....................................................................................
Net cash used for investing activities .........................................
Cash flows provided by (used for) financing activities:
Issuance of common stock through public offering, net of
issuance cost.........................................................................
Proceeds from long-term debt ..............................................
Payment of debt facility issuance and modification costs....
Repayment of long-term debt...............................................
Distribution to Honeywell in connection with Spin-Off......
Net increase in invested equity.............................................
Non-operating obligations from Honeywell, net..................
Other.....................................................................................
Net cash provided by (used for) financing activities..................
Effect of foreign exchange rate changes on cash and cash
equivalents..................................................................................
Net increase (decrease) in cash and cash equivalents ................
Cash and cash equivalents at beginning of period .....................
Cash and cash equivalents at end of period................................ $
Supplemental Cash Flow Information:
Interest paid ................................................................................ $
Income taxes paid (net of refunds) ............................................. $
2020
Years Ended December 31,
2019
2018
37 $
36
$
405
86
29
22
21
(27)
19
5
-
(1)
31
(4)
26
244
(70)
(35)
2
(103)
279
-
-
(22)
-
-
(2)
(2)
253
80
25
(25)
18
7
(44)
(53)
(15)
(38)
28
(35)
39
23
(95)
(17)
-
(112)
-
-
(4)
(22)
-
-
(24)
(3)
(53)
1
395
122
517 $
57 $
32 $
(1)
(143)
265
122
72
86
$
$
$
66
20
(323)
22
(62)
(172)
(27)
(4)
231
61
24
221
462
(81)
-
7
(74)
-
1,225
(29)
-
(1,415)
39
26
(13)
(167)
(12)
209
56
265
-
28
The Notes to Consolidated and Combined Financial Statements are an integral part of these statements.
49
d
e
t
s
e
v
n
I
y
t
i
u
q
E
d
e
n
i
a
t
e
R
s
g
n
i
n
r
a
E
l
a
n
o
i
t
i
d
d
A
-
d
i
a
P
l
a
t
i
p
a
C
n
I
y
r
u
s
a
e
r
T
k
c
o
t
S
n
o
m
m
o
C
k
c
o
t
S
y
r
u
s
a
e
r
T
s
e
r
a
h
S
n
o
m
m
o
C
s
e
r
a
h
S
.
C
N
I
,
S
E
I
G
O
L
O
N
H
C
E
T
O
E
D
I
S
E
R
Y
T
I
U
Q
E
F
O
S
T
N
E
M
E
T
A
T
S
D
E
N
I
B
M
O
C
D
N
A
D
E
T
A
D
I
L
O
S
N
O
C
)
s
d
n
a
s
u
o
h
t
n
i
s
e
r
a
h
s
,
s
n
o
i
l
l
i
m
n
I
(
l
a
t
o
T
y
t
i
u
q
E
d
e
t
a
l
u
m
u
c
c
A
r
e
h
t
O
e
v
i
s
n
e
h
e
r
p
m
o
C
s
s
o
L
3
0
6
,
2
$
)
0
0
1
(
$
)
4
8
(
5
0
4
)
8
9
3
,
1
(
-
4
3
3
3
5
,
1
)
5
(
6
3
)
3
(
5
2
6
1
7
3
8
4
2
0
6
,
1
)
2
(
9
2
9
7
2
3
9
9
,
1
-
)
4
8
(
-
)
5
(
-
-
-
)
5
(
)
9
8
1
(
-
-
-
)
4
9
1
(
-
8
4
-
-
-
$
)
6
4
1
(
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
5
7
$
$
)
6
(
$
.
s
t
n
e
m
e
t
a
t
s
e
s
e
h
t
f
o
t
r
a
p
l
a
r
g
e
t
n
i
n
a
e
r
a
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
d
e
n
i
b
m
o
C
d
n
a
d
e
t
a
d
i
l
o
s
n
o
C
o
t
s
e
t
o
N
e
h
T
-
3
0
4
3
0
7
,
2
)
8
9
3
,
1
(
)
8
0
7
,
1
(
$
$
-
-
-
-
$
-
2
-
-
-
-
-
2
6
3
-
-
-
-
8
3
7
3
-
-
-
-
4
3
3
1
7
,
1
0
2
7
,
1
-
-
-
5
2
6
1
1
6
7
,
1
-
-
1
9
2
9
7
2
0
7
0
,
2
-
-
-
-
-
-
-
-
-
-
)
3
(
-
-
)
3
(
-
-
)
3
(
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
8
6
4
8
6
4
-
-
-
-
7
4
1
5
1
6
-
-
5
8
2
-
-
$
0
0
9
-
-
-
-
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
e
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
x
a
t
f
o
t
e
n
,
)
s
s
o
l
(
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
y
t
i
u
q
e
d
e
t
s
e
v
n
i
n
i
e
g
n
a
h
C
f
o
n
o
i
t
a
c
i
f
i
s
s
a
l
c
e
r
d
n
a
k
c
o
t
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
8
1
0
2
,
1
y
r
a
u
n
a
J
t
a
e
c
n
a
l
a
B
9
9
4
,
2
2
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
y
t
i
u
q
e
d
e
t
s
e
v
n
i
-
-
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
r
e
h
t
O
9
9
4
,
2
2
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
8
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
-
-
-
-
4
7
3
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
e
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
x
a
t
f
o
t
e
n
,
)
s
s
o
l
(
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
x
a
t
e
e
y
o
l
p
m
e
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
f
f
O
-
n
i
p
S
o
t
e
u
d
s
t
n
e
m
t
s
u
j
d
A
r
o
f
d
l
e
h
h
t
i
w
s
e
r
a
h
s
f
o
t
e
n
,
s
n
a
l
p
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
s
r
e
d
n
u
k
c
o
t
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
3
7
8
,
2
2
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
-
-
-
6
3
6
0
5
5
,
9
1
9
5
0
,
3
4
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
e
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
x
a
t
f
o
t
e
n
,
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
x
a
t
e
e
y
o
l
p
m
e
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
s
o
c
e
c
n
a
u
s
s
i
f
o
t
e
n
,
g
n
i
r
e
f
f
o
c
i
l
b
u
p
h
g
u
o
r
h
t
k
c
o
t
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
r
o
f
d
l
e
h
h
t
i
w
s
e
r
a
h
s
f
o
t
e
n
,
s
n
a
l
p
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
s
r
e
d
n
u
k
c
o
t
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
50
RESIDEO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(In millions, unless otherwise noted)
Note 1. Organization, Operations and Basis of Presentation
Business Description
Resideo Technologies, Inc. (“Resideo” or “the Company”), is a leading manufacturer and distributor of
technology-driven products that provide critical comfort, residential thermal and security solutions to homes
globally. The Company is also the leading wholesale distributor of low-voltage security products including intrusion,
access control and video products and participates significantly in the broader related markets of smart home, fire,
power, audio, ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring
products. The Company has a global footprint serving commercial and residential end markets.
Separation from Honeywell
The Company was incorporated in Delaware on April 24, 2018. On October 29, 2018, the Company
separated from Honeywell International Inc. (“Honeywell”) 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”). 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 Reimbursement Agreement (as
defined in Note 2. Summary of Significant Accounting Policies), 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 provided by Honeywell to Resideo
and by Resideo to Honeywell.
Basis of Presentation
Prior to the Spin-Off, 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 Financial Statements”).
The Consolidated and Combined Financial Statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”).
All intracompany transactions have been eliminated for all periods presented. As described in Note 5.
Related Party Transactions with Honeywell, all significant transactions between the Company and Honeywell
occurring prior to the Spin-Off have been included in these Consolidated and Combined Financial Statements.
51
RESIDEO TECHNOLOGIES, INC.
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.
The combined financial statements prior to the Spin-Off include certain assets and liabilities that have
historically been held at 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. Honeywell third-party debt and the related interest expense were
not allocated as Honeywell’s borrowings were not directly attributable to the company. In periods subsequent to the
Spin-Off, the Company made adjustments to balances transferred at the Spin-Off, including adjustments to the
classification of assets or liabilities transferred. Any such adjustments are recorded directly to equity in Adjustments
due to the Spin-Off and are considered immaterial.
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 Consolidated and Combined 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 Service Agreement with Honeywell,
which the Company expenses as incurred based on the contractual pricing terms.
The Company reports financial information on a fiscal quarter basis using a “modified” 4-4-5 calendar
(modified in that the fiscal year always begins on January 1 and ends on December 31) that requires its businesses to
close their first, second and third quarter books on a Saturday 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.
52
RESIDEO TECHNOLOGIES, INC.
Reclassification
On January 1, 2020, the Company changed its classification of research and development expenses in the
Consolidated and Combined Statements of Operations from Cost of goods sold to Selling, general and
administrative expenses, such that research and development expenses are excluded from the calculation of Gross
profit. This change had no impact on Net income and earnings per share or the Consolidated Balance Sheet,
Consolidated and Combined Statements of Cash Flow or Equity. The Company determined the impact on previously
issued consolidated and combined annual and interim financial statements was not material. The impact for the years
ended December 31, 2019 and 2018 was a decrease in Cost of goods sold, an increase in Gross profit and in Selling,
general and administrative expenses of $87 million and $59 million, respectively. The impact of the reclassification
for the year ended December 31, 2019 is also reflected in Note 7. Restructuring Charges and Note 23. Unaudited
Quarterly Financial Information.
In addition, the prior year segment information was recast to present Corporate separately. See Note 21.
Segment Financial Data for additional information. Certain reclassifications have been made to the prior period
financial statements to conform to the classification adopted in the current period.
Issuance of Common Stock through Public Offering
On November 17, 2020, the Company entered into an underwriting agreement (the “Underwriting
Agreement”) which provided for the offer and sale by the Company of 17,000,000 shares of common stock of the
Company at the public offering price of $15.00 per share (the “Offering”). The Offering closed on November 20,
2020. On December 14, 2020, the Company completed the closing of the exercise of the underwriters’ option to
purchase an additional 2,550,000 shares of common stock of the Offering price of $15.00 per share as allowed in the
Underwriting Agreement. The Company received net proceeds of approximately $279 million, after deducting
underwriting discounts of $13 million and offering expenses payable by the Company of $1 million.
Note 2. Summary of Significant Accounting Policies
The World Health Organization (“WHO”) declared the novel coronavirus disease ("COVID-19") a
pandemic in March 2020. Starting at the end of the first quarter and throughout the second quarter, the Company
experienced constrained supply and slowed customer demand that adversely impacted the Company’s business,
results of operations and overall financial performance. Although there remains uncertainty as to the continuing
implications of COVID-19, during the second half of 2020 customer demand improved and on-going cost actions
and transformation efforts contributed to improvements in the Company’s results of operations and overall financial
performance. As there remains uncertainty around the impacts of the COVID-19 pandemic, the Company addresses
and evaluates the impacts frequently. At December 31, 2020, the Company believes that the accounting policies
most likely affected by the COVID-19 pandemic are the use of estimates and goodwill policies.
Accounting Principles—The financial statements and accompanying notes are prepared in accordance with
U.S. GAAP. The following is a description of Resideo’s significant accounting policies.
Principles of Consolidation—The Consolidated and Combined Financial Statements include the accounts
of Resideo Technologies, Inc. and all of its subsidiaries in which a controlling interest is maintained. All
intercompany transactions and balances are eliminated in consolidation.
Cash and Cash Equivalents—Cash and cash equivalents include cash on hand and highly liquid
investments having an original maturity of three months or less.
Accounts Receivables and Allowance for Doubtful Accounts—Trade accounts receivable are recorded at
the invoiced amount as a result of transactions with customers. The Company maintains allowances for doubtful
accounts for estimated losses as a result of customers’ inability to make required payments. The Company estimates
anticipated losses from doubtful accounts based on days past due as measured from the contractual due date and
historical collection history. The Company also takes into consideration changes in economic conditions that may
not be reflected in historical trends, for example customers in bankruptcy, liquidation or reorganization. Receivables
are written-off against the allowance for doubtful accounts when they are determined to be uncollectible. Such
determination includes analysis and consideration of the particular conditions of the account, including time
53
RESIDEO TECHNOLOGIES, INC.
intervals since last collection, customer performance against agreed upon payment plans, solvency of customer and
any bankruptcy proceedings.
Inventories—Inventories in the Products & Solutions business are stated at the lower of cost or net
realizable value, determined on a first-in, first-out basis, including direct material costs and direct and indirect
manufacturing costs, or net realizable value. Inventories in the ADI Global Distribution business are stated at
average cost. Reserves are maintained for obsolete and surplus items.
Property, Plant and Equipment—Property, plant and equipment are recorded at cost, less accumulated
depreciation. For financial reporting, the straight-line method of depreciation is used over the estimated useful lives
of 10 to 50 years for buildings and improvements, 3 to 16 years for machinery and equipment and 3 to 10 years for
tooling equipment.
Goodwill—The Company performs goodwill impairment testing annually, on the first day of the fourth
quarter each year or more frequently if indicators of potential impairment exist. The goodwill impairment test is
performed at the reporting unit level. The Company has two reporting units, Products & Solutions and ADI Global
Distribution. The Company performs its goodwill impairment test by comparing the fair value of a reporting unit
with its carrying amount and will recognize an impairment charge for the amount by which the carrying amount
exceeds the reporting unit’s fair value provided the loss recognized does not exceed the total amount of goodwill
allocated to that reporting unit.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. For
the 2020 annual impairment test, the Company used a weighting of fair values derived from the income approach
and market approach. Under the income approach, the Company calculates the fair value of a reporting unit based
on the present value of estimated future cash flows. The income approach requires the exercise of significant
judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value,
and appropriate discount rates. Under the market approach, the Company utilizes the public company guideline
method.
The Company believes the estimates and assumptions used in the calculations are reasonable. In addition,
the extent to which COVID-19 may adversely impact the Company’s business depends on future developments,
which are uncertain and unpredictable, depending upon severity and duration of the outbreak, and the effectiveness
of actions taken globally to contain or mitigate its effects. Any resulting financial impact cannot be estimated
reasonably at this time but may adversely affect the Company’s business and financial results. It is likely that into
2021, macroeconomic conditions may have unexpected impacts on the Company’s business. If there were an
adverse change in facts and circumstances, then an impairment charge may be necessary in the future. Should the
fair value of the Company’s reporting units fall below its carrying amount because of reduced operating
performance, market declines, changes in the discount rate, or other conditions, charges for impairment may be
necessary. The Company monitors its reporting units to determine if there is an indicator of potential impairment.
Other Intangible Assets and Long-lived Assets—Other intangible assets with determinable lives consist of
customer lists, technology, patents and trademarks and software intangibles and are amortized over their estimated
useful lives, ranging from 3 to 15 years. They are reviewed for impairment whenever events or circumstances
indicate that the carrying amount of the assets may not be recoverable. Recoverability of long-lived assets are
measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is
expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the
difference between the carrying value and the fair value of the impaired asset.
Warranties and Guarantees—Expected warranty costs for products sold are recognized based on an
estimate of the amount that eventually will be required to settle such obligations. These accruals are based on factors
such as past experience, length of the warranty and various other considerations. Costs of product recalls, which
may include the cost of the product being replaced as well as the customer’s cost of the recall, including labor to
remove and replace the recalled part, are accrued as part of the warranty accrual at the time an obligation becomes
probable and can be reasonably estimated. These estimates are adjusted from time to time based on facts and
circumstances that impact the status of existing claims.
54
RESIDEO TECHNOLOGIES, INC.
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.
Revenue Recognition—Product and service revenues are recognized when or as the Company transfers
control of the promised products or services to the customer. Revenue is measured as the amount of consideration
the Company expects to receive in exchange for transferring goods or providing services.
In the sale of products, the terms of a contract or the historical business practice can give rise to variable
consideration due to, but not limited to, discounts and rebates. The Company estimates variable consideration at the
most likely amount that will be received from customers and reduces revenues recognized accordingly. The
Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of
cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is
resolved. The estimates of variable consideration and determination of whether to include estimated amounts in the
transaction price are based largely on an assessment of the Company’s anticipated performance and all information
(historical, current and forecasted) that is reasonably available to the Company.
Sales, use and value added taxes collected by the Company and remitted to various government authorities
were not recognized as revenues and are reported on a net basis.
Shipping and handling fees billed to customers were included in Cost of goods sold.
Royalty—In connection with the Spin-Off, the Company and Honeywell entered into a 40-year Trademark
License Agreement (“the Trademark Agreement”) that authorizes the Company’s use of certain licensed trademarks
in the operation of Resideo’s business for the advertising, sale and distribution of certain licensed products. In
exchange, the Company pays a royalty fee of 1.5% of net revenue of the licensed products to Honeywell which is
recorded in Selling, general and administrative expense on the Consolidated and Combined Statements of
Operations.
the Spin-Off
the Company entered
Reimbursement Agreement—In connection with
into an
Indemnification and Reimbursement Agreement with Honeywell (the “Reimbursement Agreement”) on October 14,
2018, pursuant to which it has an obligation to make cash 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
(the “liabilities”) in respect of specified Honeywell properties contaminated through historical business operations
prior to the Spin-Off (“Honeywell Sites”), 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. The amount payable in
respect of such liabilities arising in any given year is subject to a cap of $140 million. Reimbursement Agreement
expenses are presented within Other expense, net in the Consolidated and Combined Statements of Operations and
within Accrued liabilities and Obligations payable under Indemnification Agreements in the Consolidated Balance
Sheets. For additional information, see Note 19. Commitments and Contingencies.
55
RESIDEO TECHNOLOGIES, INC.
Environmental—The Company 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
costs for the Company’s owned sites are presented within Cost of goods sold for operating sites. Prior to the Spin-
off, sites now under the Reimbursement Agreement were presented within Other expense, net in the Consolidated
and Combined Statements of Operations. For additional information, see Note 19. Commitments and Contingencies.
Tax Indemnification Agreement—The Tax Matters Agreement provides that Resideo is required to
indemnify Honeywell for any taxes (and reasonable expenses) resulting from the failure of the Spin-Off and related
internal transactions to qualify for their intended tax treatment under U.S. federal, state and local income tax law, as
well as foreign tax law, where such taxes result from (a) breaches of covenants and representations the Company
makes and agrees to in connection with the Spin-Off, (b) the application of certain provisions of U.S. federal income
tax law to these transactions or (c) any other action taken or omission made (other than actions expressly required or
permitted by the Separation and Distribution Agreement, the Tax Matters Agreement or other ancillary agreements)
after the consummation of the Spin-Off that gives rise to these taxes. As of December 31, 2020 and 2019, the
Company had an indemnity outstanding to Honeywell of $139 million and $149 million, respectively. See Note 19.
Commitments and Contingencies.
Research and Development—The Company conducts research and development activities, which consist
primarily of the development of new products as well as enhancements and improvements to existing products that
substantially change the product. Research and development costs primarily relate to employee compensation and
consulting fees which are charged to expense as incurred. Such costs are included in Selling, general and
administrative expenses and amount to $77 million, $87 million and $59 million for the years ended December 31,
2020, 2019 and 2018, respectively.
Advertising Costs—The Company expenses advertising costs as incurred. Advertising costs totaled $25
million and $46 million for the years ended December 31, 2020 and 2019, respectively. Prior to the Spin-Off,
advertising costs were allocated from Honeywell as described in Note 5. Related Party Transactions with Honeywell.
Advertising costs are included within Selling, general and administrative expense.
Defined Contribution Plans—The Company sponsors various defined contribution plans with varying
terms depending on the country of employment. The Company recognized compensation expense of $18 million for
both years ended December 31, 2020 and 2019 related to employer contributions to these plans. Prior to the Spin-
Off, costs were allocated from Honeywell as described in Note 5. Related Party Transactions with Honeywell.
Stock-Based Compensation Plans—The principal awards
issued under Resideo’s stock-based
compensation plans, which are described in Note 18. Stock-Based Compensation Plans, are restricted stock units.
The cost for such awards is measured at the grant date based on the fair value of the award. Some awards are issued
with a market condition which are valued on the grant date utilizing a Monte Carlo simulation model. Stock options
are also issued under Resideo’s stock-based compensation plans and are valued on the grant date using the Black-
Scholes option pricing model.
The Black-Scholes option pricing model and the Monte Carlo simulation model require estimates of future
stock price volatility, expected term, risk-free interest rate and forfeitures.
For all stock-based compensation, the fair value of the portion of the award that is ultimately expected to
vest is recognized as expense over the requisite service periods (generally the vesting period of the equity award)
and is included in Selling, general and administrative expenses in the Consolidated and Combined Statements of
Operations. Forfeitures are estimated at the time of grant to recognize expense for those awards that are expected to
vest and are based on historical forfeiture rates.
Pension—The Company disaggregates the service cost component of net benefit costs and reports those
costs in the same line item or items in the Consolidated and Combined Statements of Operations as other
compensation costs arising from services rendered by the pertinent employees during the period. The other non-
service components of net benefit costs are required to be presented separately from the service cost component and
outside of income from operations.
56
RESIDEO TECHNOLOGIES, INC.
The Company has recorded the service cost component of pension expense in Costs of goods sold and
Selling, general and administrative expenses based on the classification of the employees it relates to. The remaining
components of net benefit costs within pension expense, primarily interest costs and expected return on plan assets,
are recorded in Other expense, net. The Company recognizes net actuarial gains or losses in excess of 10% of the
greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor) annually in the fourth
quarter each year. This adjustment known as the mark to market adjustment is reported in Other expense, net.
Foreign Currency Translation—Assets and liabilities of operations outside the United States with a
functional currency other than U.S. Dollars are translated into U.S. Dollars using year-end exchange rates. Revenue,
costs and expenses are translated at the average exchange rates in effect during the year. Foreign currency
translation gains and losses are included as a component of Accumulated other comprehensive loss.
Income Taxes—Significant judgment is required in evaluating tax positions. The Company establishes
additional reserves for income taxes when, despite the belief that tax positions are fully supportable, there remain
certain positions that do not meet the minimum recognition threshold. The approach for evaluating certain and
uncertain tax positions is defined by the authoritative guidance which determines when a tax position is more likely
than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, the
Company and its subsidiaries are examined by various federal, state and foreign tax authorities. The Company
regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior
years in determining the adequacy of its provision for income taxes. The Company continually assesses the
likelihood and amount of potential adjustments and adjusts the income tax provision, the current tax liability and
deferred taxes in the period in which the facts that give rise to a change in estimate become known.
Earnings Per Share—Basic earnings per share is based on the weighted average number of common
shares outstanding. Diluted earnings per share is based on the weighted average number of common shares
outstanding and all dilutive potential common shares outstanding. For additional information, see Note 3. Earnings
Per Share.
Use of Estimates—The preparation of the Company’s Consolidated and Combined Financial Statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported
amounts in the Consolidated and Combined Financial Statements and related disclosures in the accompanying notes.
Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed, and the
effects of changes are reflected in the Consolidated and Combined Financial Statements in the period they are
determined to be necessary. Estimates are used when accounting for stock-based compensation, pension benefits,
indemnification liabilities, goodwill and intangible assets, and valuation allowances for accounts receivable,
inventory, deferred tax assets, and the amounts of revenue and expenses reported during the period. The Company
has used information available to identify potential impacts cause by the COVID-19 pandemic at December 31,
2020 in these estimates.
Recent Accounting Pronouncements—The Company considers the applicability and impact of all recent
accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not
listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact
on the Company’s consolidated and combined financial position or results of operations.
The Company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, and applied the
changes prospectively 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
Consolidated and Combined Statements of Operations or Cash Flows.
In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income, which allows for an entity to elect to reclassify, to retained earnings, the
57
RESIDEO TECHNOLOGIES, INC.
one-time income tax effects stranded in accumulated other comprehensive income (AOCI) resulting from the U.S.
Tax Cuts and Jobs Act (“U.S. Tax Reform”). An entity that elects to make this reclassification must consider all
items in AOCI that have tax effects stranded as a result of the tax rate change and must disclose the reclassification
of these tax effects as well as the entity’s policy for releasing income tax effects from AOCI. The ASU may be
applied either retrospectively or as of the beginning of the period of adoption. The Company adopted the standard on
January 1, 2019 using the aggregate portfolio accounting policy for recognizing the disproportionate income tax
effects in AOCI and has elected not to reclassify the stranded income tax effects of U.S. Tax Reform from AOCI to
retained earnings.
In August 2018, the FASB issued ASU No. 2018-14, Compensation — Retirement Benefits — Defined
Benefit Plans — General (Topic 715-20): Disclosure Framework — Changes to the Disclosure Requirements for
Defined Benefit Plans, which 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. The Company adopted the standard effective January 1, 2020 and the adoption did not have a material
financial statement impact.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes
(Topic 740). This ASU simplifies the accounting for income taxes by, among other things, eliminating certain
existing exceptions related to the general approach in ASC 740 relating to franchise taxes, reducing complexity in
the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting
for transactions outside of business combinations that result in a step-up in the tax basis of goodwill. The Company
early adopted the provisions of this guidance on January 1, 2020. Adoption of this guidance did not have a material
financial statement impact.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of
the Effects of Reference Rate Reform on Financial Reporting, which is optional guidance related to reference rate
reform that provides practical expedients for contract modifications and certain hedging relationships associated
with the transition from reference rates that are expected to be discontinued. This guidance is applicable for the
Company’s Term Loans and Revolving Credit Facility, which use LIBOR as a reference rate, and is effective
immediately, but is only available through December 31, 2022. Refer to Note 15. Long-term Debt and Credit
Agreement for further details on the Company’s Term Loans and Revolving Credit Facility. The Company is
currently evaluating the potential impact of this standard on its consolidated financial statements.
Note 3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in millions except
shares in thousands and per share data):
Years Ended December 31,
2019
2018
2020
Net income ........................................................................................ $
37
$
36
$
405
Shares used in computing basic earnings per share ..........................
125,348
122,722
122,499
Effect of dilutive securities:
Dilutive effect of common stock equivalents ...................................
Shares used in computing diluted earnings per share .......................
976
126,324
516
123,238
125
122,624
Earnings per share:
Basic.................................................................................................. $
Diluted............................................................................................... $
0.30
0.29
$
$
0.29
0.29
$
$
3.31
3.30
58
RESIDEO TECHNOLOGIES, INC.
On October 29, 2018, the date of consummation of the Spin-Off, 122,499 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. 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 December 31, 2020 and 2019,
this calculation excludes 900 and 615 treasury shares, respectively.
Diluted Earnings Per Share is computed based upon the weighted average number of common shares
outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and
the average market price of the Company’s common stock for the period. For the year ended December 31, 2018,
the average market price of the Company’s common stock was calculated from the Spin-Off date to December 31,
2018. 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 year ended December 31, 2020, average options and other
rights to purchase approximately 2.5 million shares of common stock were outstanding, all of which were anti-
dilutive during the year ended December 31, 2020, and therefore excluded from the computation of diluted earnings
per common share. Additionally, an average of approximately 0.5 million shares of performance-based unit awards
are excluded from the computation of diluted earnings per common share for the year ended December 31, 2020 as
the contingency has not been satisfied at December 31, 2020. For the year ended December 31, 2019, average option
and other rights to purchase approximately 2.8 million shares of common stock were outstanding, all of which were
anti-dilutive during the year ended December 31, 2019, and therefore excluded from the computation of diluted
earnings per common share. Additionally, an average of approximately 0.2 million shares of performance-based unit
awards are excluded from the computation of diluted earnings per common share for the year ended December 31,
2019 as the contingency has not been satisfied at December 31, 2019.
Note 4. Acquisitions
During the year ended December 31, 2020, the Company completed one acquisition which has been
integrated into the ADI Global Distribution segment. On February 10, 2020, the Company completed the acquisition
of privately held Herman ProAV, a leading provider and distributer of professional audio-visual products,
procurement services and labor resources to systems integrators in the commercial audio-visual industry. The
purchase price paid for this acquisition was approximately $36 million. In connection with this acquisition, the
Company recognized goodwill and intangible assets of $4 million and $18 million, respectively. This acquisition
was integrated into and builds upon ADI Global Distribution’s product portfolio and expands its presence in the pro-
AV market. The Herman ProAV acquisition agreements include deferred payments for certain individuals that are
contingent upon employment as well as financial performance. The Company determined that these deferred
payments are accounted for as compensation expense over the requisite service period.
During the year ended December 31, 2019, the Company completed three acquisitions which have been
integrated into the Products & Solutions segment. On March 28, 2019, the Company acquired all of the capital stock
of Buoy Labs primarily to obtain the technology assets. Buoy 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. On May 21,
2019, the Company acquired certain assets relating to innovative energy efficiency from Whisker Labs. 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. On June
27, 2019, the Company acquired all of the membership interests of LifeWhere. 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 catastrophic failure. The aggregate
purchase price paid for these acquisitions was $17 million. In connection with these acquisitions, the Company
recognized goodwill and intangible assets of $10 million and $7 million, respectively.
These acquisitions have an immaterial financial statement impact on both an individual basis and when
considered in the aggregate. Pro-forma disclosures are not provided as the acquisitions have an immaterial financial
statement impact.
59
RESIDEO TECHNOLOGIES, INC.
Note 5. Related Party Transactions with Honeywell
Prior to the Spin-Off, the Consolidated and Combined Financial Statements were derived from the
unaudited Consolidated Financial Statements and accounting records of Honeywell.
Prior to the Spin-Off, Honeywell was 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 period from January 1, 2018 until October 29, 2018, the Company was allocated $228 million
of general corporate expenses incurred by Honeywell and such amounts are included within Selling, general and
administrative expenses in the Consolidated and Combined Statements of Operations. As certain expenses reflected
in the Consolidated and Combined 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 Consolidated and Combined Financial Statements. During the period from January 1, 2018 until October 29,
2018, sales to Honeywell, Cost of goods sold to Honeywell, and purchases from Honeywell were $24 million, $19
million, and $212 million, respectively. The total net effect of the settlement of these intercompany transactions is
reflected in the Consolidated and Combined Statements of Cash Flows as a financing activity.
Prior to the consummation of the Spin-Off, Honeywell managed the Company’s hedging activity which
included centrally hedging its exposure to changes in foreign exchange rates principally with forward contracts.
Certain contracts were specifically designated to and entered on behalf of the Company with Honeywell as a
counterparty and were used to hedge known or probable anticipated foreign currency sales and purchases. The
Company designated these hedges as cash flow hedges and the impact to the financial statements for 2018 was not
material.
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. Net transfers to and from
Honeywell are included within Invested equity on the Consolidated and Combined Statements of Equity. The
components of the net transfers to and from Honeywell as of December 31, 2018 are as follows:
General financing activities ......................................................................................................... $
Distribution to Honeywell in connection with Spin-Off..............................................................
Net contribution of assets and liabilities upon Spin-Off..............................................................
Unbilled corporate allocations .....................................................................................................
Purchases from Honeywell ..........................................................................................................
Mandatory transition tax ..............................................................................................................
Other ............................................................................................................................................
Net decrease in invested equity.................................................................................................... $
December 31,
2018
(383)
(1,415)
81
228
161
(85)
15
(1,398)
Subsequent to the Spin-Off on October 29, 2018, transactions with Honeywell were not considered related
party transactions.
60
RESIDEO TECHNOLOGIES, INC.
Note 6. Revenue Recognition
Disaggregated Revenue
Revenues by channel are as follows for the years ended December 31:
Comfort ................................................................................................ $
Security.................................................................................................
Residential Thermal Solutions .............................................................
Products & Solutions ......................................................................
U.S. and Canada ...................................................................................
EMEA (1) .....................................................................................
APAC (2) .....................................................................................
ADI Global Distribution .................................................................
Net revenue .......................................................................................... $
(1) EMEA represents Europe, the Middle East and Africa.
(2) APAC represents Asia and Pacific countries.
Years Ended December 31,
2020
2019
2018
1,079
538
504
2,121
2,427
480
43
2,950
5,071
$
$
1,103
520
552
2,175
2,294
459
60
2,813
4,988
$
$
1,114
479
576
2,169
2,147
456
55
2,658
4,827
A contract’s transaction price is allocated to each distinct performance obligation and recognized as
revenue when, or as, the performance obligation is satisfied. For product sales, typically each product sold to a
customer represents a distinct performance obligation. The Company recognizes the majority of its revenue from
performance obligations outlined in contracts with its customers that are satisfied at a point in time. Approximately
3% of the Company’s revenue is satisfied over time. As of December 31, 2020 and December 31, 2019, contract
assets and liabilities were not material.
The timing of satisfaction of the Company’s performance obligations does not significantly vary from the
typical timing of payment. For some contracts, the Company may be entitled to receive an advance payment.
The Company has applied the practical expedient to not disclose the value of remaining performance
obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which it
recognizes revenue in proportion to the amount it has the right to invoice for services performed.
Note 7. Restructuring Charges
During 2019, the Company retained industry-recognized experts in supply chain optimization and
organizational excellence to assist in a comprehensive financial and operational review which was focused on
product cost and gross margin improvement, and general and administrative expenses simplification. Certain
restructuring actions have been implemented under this program as well as previous programs. Product & Solutions
segment restructuring expenses for the years ended December 31, 2020, 2019, and 2018 were $19 million, $26
million, and $5 million, respectively. ADI Global Distribution segment restructuring expenses for the years ended
December 31, 2020, 2019, and 2018 were $6 million, $4 million, and $0 million, respectively. Corporate
restructuring expenses for the years ended December 31, 2020, 2019 and 2018 were $15 million, $7 million, and $0
million, respectively. Restructuring expenses for all periods are primarily related to severance.
The Company’s restructuring expenses for the years ended December 31, 2020, 2019 and 2018 are as
follows:
Years Ended December 31,
2019
2018
2020
Cost of goods sold............................................................................. $
Selling, general and administrative expenses ...................................
$
9 $
31
40 $
13 $
24
37 $
4
1
5
61
RESIDEO TECHNOLOGIES, INC.
The following table summarizes the status of total restructuring reserves related to severance cost included
in Accrued liabilities in the Consolidated Balance Sheets:
Years Ended December 31,
2019
2018
2020
Beginning of year.............................................................................. $
Charges ........................................................................................
Usage ...........................................................................................
Other ............................................................................................
End of year ........................................................................................ $
19 $
40
(35)
-
24 $
13 $
38
(31)
(1)
19 $
Note 8. Other Expense, Net
Environmental expense ..................................................................... $
Reimbursement Agreement expense.................................................
Other, net...........................................................................................
$
- $
146
1
147 $
- $
108
10
118 $
Years Ended December 31,
2019
2018
2020
22
5
(9)
(5)
13
323
49
(3)
369
Refer to Note 19. Commitments and Contingencies for further details on environmental and
Reimbursement Agreement expense.
Note 9. Income Taxes
Prior to the consummation of the Spin-Off, Resideo’s operating results were included in Honeywell’s
various consolidated U.S. federal and state income tax returns, as well as non-U.S. filings. For the purposes of the
Company’s Consolidated and Combined Financial Statements for periods prior to the Spin-Off, Income tax expense
and deferred tax balances have been recorded as if the Company filed tax returns on a standalone basis separate from
Honeywell. The Separate Return Method applies the accounting guidance for income taxes to the standalone
financial statements as if the Company was a separate taxpayer and a standalone enterprise prior to the separation
from Honeywell.
Income before taxes
U.S. ................................................................................................ $
Non-U.S.........................................................................................
$
(93)
194
101
$
$
(83)
154
71
$
$
(169)
273
104
Years Ended December 31,
2019
2018
2020
62
RESIDEO TECHNOLOGIES, INC.
Income tax expense (benefit)
Tax expense (benefit) consists of:
Current:
U.S............................................................................................ $
Non-U.S. ..................................................................................
$
Deferred:
U.S............................................................................................ $
Non-U.S. ..................................................................................
$
The U.S. federal statutory income tax rate is reconciled to the
Company’s effective income tax rate as follows:
U.S. federal statutory income tax rate....................................
Impact of foreign operations ..................................................
U.S. state income taxes ..........................................................
U.S. Tax Reform and related items........................................
Non-deductible indemnification costs ...................................
Executive compensation over $1 million...............................
Other non-deductible expenses ..............................................
U.S. taxation of foreign earnings ...........................................
Tax credits..............................................................................
Change in tax rates.................................................................
All other items – net...............................................................
Years Ended December 31,
2019
2018
2020
21
21
42
11
11
22
64
$
$
$
$
23
37
60
(11)
(14)
(25)
35
$
$
$
$
(26)
48
22
(15)
(308)
(323)
(301)
Years Ended December 31,
2019
2018
2020
21.0 %
(5.4)
6.4
-
29.0
2.5
3.7
3.5
(0.2)
1.3
1.8
63.6 %
21.0 %
(10.2)
6.6
-
28.0
0.6
2.9
5.3
(2.6)
1.7
(4.7)
48.6 %
21.0 %
(11.6)
6.4
(385.1)
75.4
-
-
6.0
(2.1)
-
0.6
(289.4) %
63
RESIDEO TECHNOLOGIES, INC.
Deferred tax assets (liabilities)
The tax effects of temporary differences and tax carryforwards which give rise to future income tax
benefits and payables are as follows:
Deferred tax assets:
Pension........................................................................................................ $
Other asset basis differences.......................................................................
Operating lease liabilities............................................................................
Accruals and reserves .................................................................................
Net operating and capital losses..................................................................
Other ...........................................................................................................
Gross deferred tax assets ..................................................................................
Valuation allowance .........................................................................................
Total deferred tax assets ................................................................................... $
Deferred tax liabilities:
Other intangible assets ................................................................................ $
Property, plant and equipment ....................................................................
Operating lease assets .................................................................................
Other ...........................................................................................................
Total deferred tax liabilities .............................................................................
Net deferred tax asset ...................................................................................... $
Deferred tax assets:
Years Ended December 31,
2020
2019
37
70
34
61
47
-
249
(60)
189
(44)
(25)
(32)
(13)
(114)
75
$
$
$
$
27
70
33
61
32
6
229
(32)
197
(42)
(22)
(32)
(12)
(108)
89
The Company maintains a valuation allowance of $60 million against a portion of the non-U.S. gross
deferred tax assets. Valuation allowances principally relate to foreign net operating loss carryforwards where the
future potential benefits do not meet the more-likely-than-not realization test. Changes in valuation allowance
positions related to historic losses resulted in increases of $20 million and $3 million to tax expense in 2020 and
2019, respectively. The remaining changes in valuation allowances relate primarily to current year net operating
losses on entities from which the company already maintains valuation allowances and does not expect to receive
tax benefits. In the event the Company determines that it will not be able to realize its net deferred tax assets in the
future, it will reduce such amounts through an increase to tax expense in the period such determination is made.
Conversely, if the Company determines that it will be able to realize net deferred tax assets in excess of the carrying
amounts, it will decrease the recorded valuation allowance through a reduction to tax expense in the period that such
determination is made.
The Company has not provided deferred taxes on unremitted earnings of its foreign affiliates that exist at
December 31, 2020 as the earnings are considered permanently reinvested. Accordingly, no deferred taxes have
been provided for withholding taxes or other taxes that would result upon repatriation of the Company’s
approximately $1.6 billion of undistributed earnings from foreign subsidiaries to the United States. It is
impracticable to calculate the tax cost of repatriating the Company’s unremitted earnings which are considered
indefinitely reinvested.
As of December 31, 2020, the Company has federal tax credit carryforwards of $1 million, federal net
operating loss carryforwards of $2 million, and foreign net operating loss carryforwards of $196 million. The federal
tax credit carryforwards expire in 2029. The federal net operating loss carryforwards expire in 2027. $178 million of
foreign net operating losses can be carried forward indefinitely with the remainder expiring between 2021 and 2030.
Many jurisdictions impose limitations on the timing and utilization of net operating loss carryforwards. In
those instances where the net operating loss or tax credit carryforward will not be utilized in the carryforward period
due to the limitation, the deferred tax asset and amount of the carryforward have been reduced.
64
RESIDEO TECHNOLOGIES, INC.
As of December 31, 2020, 2019, and 2018 there were $10 million, $6 million, and $2 million of
unrecognized tax benefits, respectively, that if recognized would be recorded as a component of Income tax expense.
The change in unrecognized tax benefits resulted in increases (decreases) of $4 million, $4 million, and ($18)
million to tax expense in 2020, 2019, and 2018, respectively. The decrease in 2018 was primarily driven by the
reclassification of unrecognized tax benefits attributable to periods prior to the consummation of the Spin-Off to the
indemnity payable to Honeywell under the terms of the Tax Matters Agreement.
As of December 31, 2020, 2019 and 2018 there were no unrecognized tax benefits related to examinations
in progress. An immaterial amount of estimated interest and penalties related to the underpayment of income taxes is
included in the liability for unrecognized tax benefits, both of which are included as a component of Income tax
expense in the Consolidated and Combined Statements of Operations. The Company does not anticipate significant
changes in total unrecognized tax benefits during the next twelve months.
The Company files income tax returns in the United States federal jurisdiction, all states, and various local
and foreign jurisdictions. The Company’s US federal returns are no longer subject to income tax examinations for
taxable years before 2016. With limited exception, state, local, and foreign income tax returns for taxable years
before 2015 are no longer subject to examination.
On December 22, 2017, the U.S. government enacted U.S. Tax Reform, which included changes to the
taxation of foreign earnings by implementing a dividend exemption system, expansion of the current anti-deferral
rules, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion. The U.S. Tax Reform
also included a permanent reduction in the corporate tax rate, repeal of the corporate alternative minimum tax,
expensing of capital investment, and limitation of the deduction for interest expense. Furthermore, as part of the
transition to the new tax system, a one-time transition tax was imposed on a U.S. shareholder’s historical
undistributed earnings of foreign affiliates.
As described in the Combined Financial Statements for the year ended December 31, 2017, the Company
reasonably estimated certain effects of U.S. Tax Reform and, therefore, recorded provisional amounts, including the
deemed repatriation transition tax and withholding taxes on undistributed earnings. For the year ended December 31,
2018, the Company recorded an adjustment to the provisional tax amount related to the deemed repatriation
transition tax and taxes on undistributed earnings of $(85.4) million and $(234.7) million, respectively. This
adjustment resulted in a decrease to the effective tax rate for the year ended December 31, 2018 of 307.8%. The
adjustment reflects the revised determination of the fair value of assets and liabilities of legal entities included in the
Company’s business. The accounting for the income tax effects of the U.S. Tax Reform was complete as of
December 31, 2018.
Note 10. Accounts Receivable — Net
December 31,
2020
2019
Accounts receivable ............................................................................................ $
Allowance for doubtful accounts ........................................................................
$
875 $
(12)
863 $
Note 11. Inventories — Net
Raw materials...................................................................................................... $
Work in process ..................................................................................................
Finished products ................................................................................................
$
127 $
19
526
672 $
December 31,
2020
2019
834
(17)
817
121
17
533
671
The expense related to inventory was $31 million, $56 million and $10 million for the years ended
December 31, 2020, 2019 and 2018, respectively.
65
RESIDEO TECHNOLOGIES, INC.
Note 12. Property, Plant and Equipment — Net
Machinery and equipment................................................................................... $
Buildings and improvements ..............................................................................
Construction in progress .....................................................................................
Others ..................................................................................................................
Accumulated depreciation...................................................................................
$
December 31,
2020
2019
598 $
289
46
14
947
(629)
318 $
562
260
57
16
895
(579)
316
Depreciation expense was $56 million, $50 million and $45 million in 2020, 2019 and 2018, respectively.
Note 13. Goodwill and Other Intangible Assets — Net
Goodwill as of December 31, 2020 and 2019 for Products & Solutions was $2,037 million and $2,004
million, respectively. The increase relates to foreign currency translation adjustments. Goodwill as of December 31,
2020 and 2019 for ADI Global Distribution was $654 million and $639 million, respectively. The carrying value of
goodwill increased by $4 million due to an acquisition during the year. The remainder of the increase relates to
foreign currency translation adjustments.
Other intangible assets with finite lives are comprised of:
December 31, 2020
December 31, 2019
Patents and technology................ $
Customer relationships................
Trademarks..................................
Software ......................................
$
Gross
Carrying
Amount
37 $
192
15
146
390 $
Accumulated
Amortization
(23) $
(122)
(8)
(102)
(255) $
Net
Carrying
Amount
14 $
70
7
44
135 $
Gross
Carrying
Amount
35 $
170
9
139
353 $
Accumulated
Amortization
(19) $
(106)
(7)
(94)
(226) $
Net
Carrying
Amount
16
64
2
45
127
Other intangible assets amortization expense was $31 million, $30 million and $21 million in 2020, 2019
and 2018, respectively. Estimated intangible asset amortization expense for each of the next five years approximates
$28 million in 2021, $22 million in 2022, $19 million in 2023, $17 million in 2024 and $16 million in 2025.
Note 14. Accrued Liabilities
December 31,
2020
2019
Obligations payable under Indemnification Agreements.................................... $
Taxes payable......................................................................................................
Compensation, benefit and other employee-related............................................
Customer rebate reserve......................................................................................
Other....................................................................................................................
$
140 $
62
105
91
197
595 $
140
66
66
78
202
552
Refer to Note 19. Commitments and Contingencies for further details on Obligations payable under
Indemnification Agreements.
66
RESIDEO TECHNOLOGIES, INC.
Note 15. Long-term Debt and Credit Agreement
The Company’s debt at December 31, 2020 and December 31, 2019 consisted of the following:
December 31,
2020
2019
6.125% notes due 2026 ....................................................................................... $
Five-year variable rate term loan A due 2023.....................................................
Seven-year variable rate term loan B due 2025 ..................................................
Unamortized deferred financing costs ................................................................
Total outstanding indebtedness ...........................................................................
Less: Amounts expected to be paid within one year...........................................
Total long-term debt due after one year.............................................................. $
400
315
465
(18)
1,162
7
1,155
$
$
400
333
470
(23)
1,180
22
1,158
Scheduled principal repayments under the Senior Credit Facilities (defined below) and Senior Notes
(defined below) subsequent to December 31, 2020 are as follows:
2021.............................................................................................................................................. $
2022..............................................................................................................................................
2023..............................................................................................................................................
2024..............................................................................................................................................
2025..............................................................................................................................................
Thereafter.....................................................................................................................................
Amounts expected to be paid within one year .............................................................................
$
December 31,
2020
40
57
232
5
446
400
1,180
7
1,173
Subsequent to December 31, 2020, the Company entered into a refinancing agreement which modified the
scheduled principal repayments related to the Company’s long-term debt as described in Note 24. Subsequent
Events. Among other changes, the refinancing agreement resulted in a reduction of principal repayments to be made
in 2021 to $7 million which represents the Current maturities of debt in the Consolidated Balance Sheet as of
December 31, 2020.
At December 31, 2020 and 2019, the interest rate for the Term Loans (defined below) was 2.51% and
4.36%, respectively. At December 31, 2020, there were no borrowings and no letters of credit issued under the $350
million Revolving Credit Facility (defined below). Interest expense presented in the Statements of Operations is
from the Senior Notes and Senior Credit Facilities, which includes the amortization of debt issuance cost and debt
discounts.
Senior Notes
In October of 2018, the Company issued $400 million in principal amount of 6.125% senior unsecured
notes due in 2026 (the "Senior Notes"). The Senior Notes are senior unsecured and unsubordinated obligations of
Resideo and rank equally with all of Resideo’s existing and future senior unsecured debt and senior to all of
Resideo’s subordinated debt.
Resideo may, at its option, redeem the Senior Notes in whole or part prior to November 1, 2021, at a
redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus accrued and unpaid
interest, if any, plus a “make-whole” premium. On or after November 1, 2021 Resideo may, at its option, redeem the
Senior Notes in whole or in part plus accrued and unpaid interest, plus a fixed redemption percentage on the
principal amount of the Senior Notes redeemed of (i) 104.594% if redeemed during the twelve-month period
beginning on November 1, 2021 (ii) 103.063% if redeemed during the twelve-month period beginning on November
67
RESIDEO TECHNOLOGIES, INC.
1, 2022, (iii) 101.531% if redeemed during the twelve-month period beginning on November 1, 2023, or (iv) 100%
if redeemed on or after November 1, 2024.
Credit Agreement
On October 25, 2018, in connection with the consummation of the Spin-Off, the Company as the borrower,
entered into a credit agreement with JP Morgan Chase Bank N.A. as administrative agent (the “Credit Agreement”),
which was subsequently amended on November 26, 2019 (the “Credit Agreement First Amendment”) and on
November 16, 2020 (the “Credit Agreement Second Amendment”).
The Credit Agreement provides for a seven-year LIBOR plus 2.25% senior secured first-lien term B loan
facility in an aggregate principal amount of $475 million (the "Term B Facility") and a five-year LIBOR plus 2.25%
senior secured first-lien term A loan facility in an aggregate principal amount of $350 (the "Term A Facility" and,
together with the Term B Facility, the “Term Loans” or "Term Loan Facilities”). The Company is obligated to make
quarterly principal payments throughout the term of the Term Loan Facilities according to the amortization
provisions in the Credit Agreement. Borrowings under the Credit Agreement are able to be prepaid at the
Company’s option without premium or penalty other than a 1.00% prepayment premium that may be payable in
connection with certain repricing transactions within a certain period of time after the closing date. Amounts repaid
or prepaid in respect of Term Loan Facilities may not be re-borrowed.
The Credit Agreement also established a five-year senior secured first-lien revolving credit facility to be
used for the Company’s working capital and other cash needs from time to time in an aggregate principal amount of
$350 million (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit
Facilities"). 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 0.75% and (iii) the
one month adjusted LIBOR rate, plus 1.25% per annum. If the Company chooses to make a LIBOR borrowing on a
one, two, three or six-month basis, the interest rate will be based on an adjusted LIBOR rate (which shall not be less
than zero) based on the interest period for the borrowing. The applicable margin for the Term B Facility is (i) on or
prior to the Credit Agreement First Amendment 2.00% per annum (for Libor loans) and 1.00% per annum (for base
rate loans) and (ii) after the Credit Agreement First Amendment 2.25% per annum (for LIBOR loans) and 1.25% per
annum (for base rate loans). The applicable margin for each of the Term A Facility and the Revolving Credit
Facility varies (i) on or prior to the Credit Agreement First Amendment from 2.00% per annum to 1.50% per annum
(for Libor loans) and 1.00% to 0.50% per annum (for base rate loans) and (ii) after the credit Agreement First
Amendment from 2.25% per annum to 1.75% per annum (for LIBOR loans) and 1.25% to 0.75% per annum (for
base rate loans) based on the Company’s leverage ratio. Accordingly, the interest rates for the Senior Credit
Facilities will fluctuate during the term of the Credit Agreement based on changes in the base rate, LIBOR or future
changes in the Company’s leverage ratio. Interest payments with respect to the borrowings are required either on a
quarterly basis (for base rate loans) or at the end of each interest period (for LIBOR loans) or, if the duration of the
applicable interest period exceeds three months, then every three months. The Revolving Credit Facility has a
quarterly commitment fee based on the unused portion, which is determined by the Company’s leverage ratio and
ranges from 0.25% to 0.35% per annum.
The net proceeds from the borrowings under the Credit Agreement and the offering of the Senior Notes
were used as part of the financing for the Spin-Off. For the year ended December 31, 2018, the Company incurred
approximately $16 million in debt issuance costs related to the Term Loans, $5 million in costs related to the
Revolving Credit Facility and $8 million in costs related to the Senior Notes. The debt issuance costs associated with
the Term Loans and Senior Notes were recorded as a reduction of the principal balance of the debt, and the
Revolving Credit Facility costs were capitalized in Other assets. The issuance costs are being amortized through
Interest expense for the duration of each respective debt facility.
68
RESIDEO TECHNOLOGIES, INC.
The Credit Agreement and Senior Notes contain customary covenants limiting the ability of the Company
and its subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock of the
Company, enter into transactions with affiliates, make investments, make capital expenditures, merge or consolidate
with others or dispose of assets.
The Credit Agreement First Amendment amended the Credit Agreement to: (i) increase the levels of the
maximum consolidated total leverage ratio under the Credit Agreement, to not greater than 5.25 to 1.00 for the
quarter ended December 31, 2019, with step-downs to 4.75 to 1.00 starting in the quarter ending December 31, 2020,
4.25 to 1.00 starting in the quarter ending December 31, 2021, and 3.75 to 1.00 starting in the quarter ending
December 31, 2022; (ii) increase each applicable interest rate margin on loans outstanding after the first amendment
effective date by 25 basis points per annum, 2.25% per annum (for LIBOR loans) and 1.25% per annum (for ABR
loans) in respect of the Term B Loan Facility, and based on the Company’s leverage ratio, from 2.25% per annum to
1.75% per annum (for LIBOR loans) and 1.25% to 0.75% per annum (for ABR loans) for the Term A Loan Facility
and the Revolving Credit Facility; and (iii) modify the defined terms “Consolidated EBITDA” and “Pro Forma
Basis” set forth in the Credit Agreement. In connection with the Credit Agreement First Amendment, the Company
incurred costs of approximately $4 million. The Term Loan costs were recorded as a reduction of the principal
balance of the debt and the Revolving Credit Facility costs were capitalized in Other assets.
The Credit Agreement Second Amendment amended the Credit agreement to permit the sale and leaseback
transactions in an aggregate amount not to exceed $150 million for all such sale and leaseback transactions,
provided that (x) each sale and leaseback transactions is undertaken on arm’s length commercial terms and (y) no
Event of Default (as defined in the Credit Agreement) has occurred and is continuing or would result therefrom.
As of December 31, 2020, the Company was in compliance with all covenants related to the Credit
Agreement and Senior Notes.
Note 16. 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 years ended December 31, 2020 and 2019 consisted of the
following:
Years Ended December 31,
2020
2019
Selling, general and administrative expenses ................................................. $
Cost of goods sold ..........................................................................................
Total operating lease costs.............................................................................. $
44 $
17
61 $
37
16
53
Total operating lease costs include variable lease costs of $16 million and $11 million for the years ended
December 31, 2020 and 2019, respectively. Total operating lease costs also include offsetting sub-lease income
which is immaterial for the years ended December 31, 2020 and 2019.
69
RESIDEO TECHNOLOGIES, INC.
The Company recognized the following related to its operating leases:
Financial
Statement
Line Item
Operating right-of-use assets........................................................ Other assets
Operating lease liabilities - current .............................................. Accrued liabilities
Operating lease liabilities - non-current ....................................... Other liabilities
At December 31,
2020
At December 31,
2019
$133
$33
$107
$137
$31
$111
Maturities of the Company’s operating lease liabilities were as follows:
At December 31,
2020
2021.......................................................................................................................................... $
2022..........................................................................................................................................
2023..........................................................................................................................................
2024..........................................................................................................................................
2025..........................................................................................................................................
Thereafter .................................................................................................................................
Total lease payments ................................................................................................................
Less: Imputed interest ..............................................................................................................
Present value of operating lease liabilities ............................................................................... $
Weighted-average remaining lease term (years) ......................................................................
Weighted-average incremental borrowing rate ........................................................................
40
36
29
18
12
30
165
25
140
5.43
5.88%
Supplemental cash flow information related to the Company’s operating leases was as follows:
Years Ended December 31,
2020
2019
Operating cash outflows ................................................................................ $
Operating right-of-use assets obtained in exchange for operating lease
liabilities ........................................................................................................ $
30
26
$
$
35
60
As of December 31, 2020, the Company has additional operating leases that have not yet commenced.
Obligations under these leases are not material. Additionally, as a lessor, the Company leases all or a portion of
certain owned properties. Rental income for the years ended December 31, 2020 and 2019 was not material.
Note 17. Financial Instruments and Fair Value Measures
Credit and Market Risk—The Company continually monitors the creditworthiness of its customers to
which it grants credit terms in the normal course of business. The terms and conditions of credit sales are designed
to mitigate or eliminate concentrations of credit risk with any single customer.
Foreign Currency Risk Management—The Company conducts its business on a multinational basis in a
wide variety of foreign currencies. It is exposed to market risks from changes in currency exchange rates. These
exposures may impact future earnings and/or operating cash flows. The 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. The
Company relies primarily on natural offsets to address the exposures and may supplement this approach from time
to time by entering into forward and option hedging contracts. As of December 31, 2020 and 2019, the Company
had no forward or hedging contracts.
70
RESIDEO TECHNOLOGIES, INC.
Senior Notes and Credit Agreement—As of December 31, 2020, the Company assessed the amount
recorded under the Term Loans, the Senior Notes, and the Revolving Credit Facility. The Term A Loan Facility,
Term B Loan Facility and the Senior Notes’ fair values are approximately $305 million, $461 million and $422
million, respectively. The Company determined that the Revolving Credit Facility approximated fair value. The fair
values of the debt are based on the quoted inactive prices and are therefore classified as Level 2 within the valuation
hierarchy.
The carrying value of cash and cash equivalents, accounts receivables - net, and accounts payables
contained in the Consolidated Balance Sheets approximates fair value.
Fair Value of Financial Instruments—The FASB’s accounting guidance defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). The FASB’s guidance classifies the inputs used to measure fair
value into the following hierarchy:
Level 1 Quoted prices in active markets for identical assets or liabilities;
Level 2 Observable inputs other than the quoted prices in active markets for identical assets and liabilities; and
Level 3 Unobservable inputs for which there is little or no market data, which require the Company to develop
assumptions of what market participants would use in pricing the asset or liability.
Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement.
Note 18. Stock-Based Compensation Plans
On October 29, 2018, the Board adopted, and Honeywell, as the Company’s sole shareholder, approved,
the 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates and the 2018 Stock Incentive Plan for
Non-Employee Directors of Resideo Technologies, Inc. as may be amended from time to time (together, the “Stock
Incentive Plan”). On or about December 21, 2018, the Board adopted the Amended and Restated 2018 Stock
Incentive Plan of Resideo Technologies, Inc. and its Affiliates. The Stock Incentive Plan provides for the grant of
stock options, stock appreciation rights, restricted stock units, restricted stock, other stock-based awards and cash-
based awards. The maximum aggregate number of shares of the Company’s common stock that may be issued under
awards granted under the Stock Incentive Plan is 16 million. As of December 31, 2020, 7,664,452 shares of the
Company’s common stock were available to be granted under the Stock Incentive Plan.
Summary of Restricted Stock Unit Activity
Restricted stock unit (“RSU”) awards entitle the holder to receive one share of common stock for each unit
when the units vest. RSUs are issued to certain key employees and to non-employee directors. RSUs typically
become fully vested over periods ranging from one to seven years and are payable in Resideo common stock upon
vesting.
Since the Spin-Off on October 29, 2018 through December 31, 2018, the Company granted the following
awards:
•
1,809,644 RSUs were granted to employees of Resideo with four-year vesting periods in accordance with
the Stock Incentive Plan
• Honeywell stock options, RSUs, and performance-based awards held by certain of the key employees who
would otherwise forfeit prior Honeywell awards as a result of the Spin-Off were issued replacement grants
in the amount of 1,411,395 RSUs with substantially the same vesting schedule as the forfeited awards.
Compensation expense for these awards will continue to be recognized ratably over the remaining term of
the unvested awards, which ranged from one to four years as of the date of the Spin-Off.
117,145 RSUs were granted to members of the Board of Directors for annual director compensation with
one to four-year vesting periods in accordance with the Stock Incentive Plan
•
71
RESIDEO TECHNOLOGIES, INC.
The following table summarizes RSU activity related to the Stock Incentive Plan during the years ended
December 31, 2020 and 2019:
RSUs
Weighted
Average Grant
Date Fair Value
Per Share
Number of
Restricted
Stock Units
Non-vested as of January 1, 2019...........................................................
Granted ..............................................................................................
Vested................................................................................................
Forfeited ............................................................................................
Non-vested as of December 31, 2019.....................................................
Granted ..............................................................................................
Vested................................................................................................
Forfeited ............................................................................................
Non-vested as of December 31, 2020.....................................................
3,338,184 $
1,607,204
(509,366)
(641,491)
3,794,531
3,057,775
(921,060)
(731,482)
5,199,764
$
24.05
21.83
23.78
24.07
23.14
9.45
21.07
18.57
16.10
As of December 31, 2020, there was approximately $22 million of total unrecognized compensation cost
related to non-vested RSUs granted under the Stock Incentive Plan, which is expected to be recognized over a
weighted-average period of 1.6 years. The fair value of RSUs that vested during the year ended December 31, 2020
is $9 million. Included in the outstanding RSUs are 867,732 performance-based RSU's as of December 31, 2020 and
the related expense was $2 million during the year ended December 31, 2020.
Summary of Stock Option Activity
Stock option awards entitle the holder to purchase shares of common stock at a specific price when the
options vest. Stock options typically vest over three years from the date of grant and expire seven years from the
grant date.
The fair value of stock options was calculated using the following assumptions in the Black-Scholes model:
Expected stock price volatility................................................................
Expected term of options ........................................................................
Expected dividend yield .........................................................................
Risk-free interest rate..............................................................................
December 31,
2020
31% - 37%
4.5 years
—
0.25% - 1.41%
2019
30% - 32%
4.5 years
—
2.22% - 2.47%
The aggregate intrinsic value disclosed below represents the total intrinsic value (the difference between
the fair market value of the Company’s common stock as of December 31, 2020, and the exercise price, multiplied
by the number of in-the-money service-based stock options) that would have been received by the option holders
had all option holders exercised their options on December 31, 2020. This amount is subject to change based on
changes to the fair market value of the Company’s common stock.
72
RESIDEO TECHNOLOGIES, INC.
The following table summarizes stock option activity related to the Stock Incentive Plan during the year
ended December 31, 2020:
Stock Options
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Life (years)
Aggregate
Intrinsic
Value
Number of
Stock
Options
Stock Options outstanding as of January 1, 2019 ....
Granted................................................................
Forfeited..............................................................
- $
1,155,566
(165,312)
Stock Options outstanding as of December 31,
2019..........................................................................
Granted................................................................
Forfeited..............................................................
Stock Options outstanding as of December 31,
2020..........................................................................
Vested and expected to vest at December 31,
2020..........................................................................
Exercisable at December 31, 2020 ...........................
-
24.37
24.39
24.36
9.17
18.39
- $
6.0
990,254
1,083,665
(348,696)
1,725,223
15.98
4.9
1,446,606
442,013 $
16.97
23.13
4.7
2.3 $
-
-
12
9
-
Stock options granted during the year ended December 31, 2020 had a weighted average grant date fair
value per share of $2.61. As of December 31, 2020, there was approximately $1 million of total unrecognized
compensation cost related to non-vested stock options granted under the Stock Incentive Plan, which is expected to
be recognized over a weighted-average period of 1.5 years. No stock options were exercised during the year ended
December 31, 2020.
Summary of Stock-Based Compensation
The following table summarizes stock-based compensation expense and the related tax benefits under the
Company’s plans:
Years Ended December 31,
2019
2020
2018
Stock-based compensation expense before income taxes .... $
Less: Income tax expense (benefit) ......................................
Stock-based compensation expense, net of income taxes .... $
29 $
1
30 $
25 $
(1)
24 $
20
(5)
15
Certain share-based compensation expense relates to stock-based awards awarded to key employees of the
Company as part of Honeywell’s incentive compensation plans prior to the Spin-Off. Such share-based
compensation expense was $16 million for the period from January 1, 2018 until October 29, 2018.
Note 19. 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. It believes that, as a general matter, its policies, practices and procedures are properly
designed to prevent unreasonable risk of environmental damage and personal injury and that its handling,
manufacture, use and disposal of hazardous substances are in accordance with environmental and safety laws and
regulations. The Company has incurred remedial response and voluntary cleanup costs for site contamination and is
a party to claims associated with environmental and safety matters, including products containing hazardous
substances. Additional claims and costs involving environmental matters are likely to continue to arise in the future.
73
RESIDEO TECHNOLOGIES, INC.
With respect to environmental matters involving site contamination, the Company continually conducts
studies, individually or jointly with other potentially responsible parties, to determine the feasibility of various
remedial techniques. It is its policy to record appropriate liabilities for environmental matters when remedial efforts
or damage claim payments are probable and the costs can be reasonably estimated. Such liabilities are based on the
best estimate of the undiscounted future costs required to complete the remedial work. The recorded liabilities are
adjusted periodically as remediation efforts progress or as additional technical, regulatory or legal information
becomes available. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the
impact of other potentially responsible parties, technology and information related to individual sites, the Company
does not believe it is possible to develop an estimate of the range of reasonably possible environmental loss in
excess of the Company’s recorded liabilities. The Company expects to fund expenditures for these matters from
operating cash flow. The timing of cash expenditures depends on a number of factors, including the timing of
remedial investigations and feasibility studies, the timing of litigation and settlements of remediation liability,
personal injury and property damage claims, regulatory approval of cleanup projects, remedial techniques to be
utilized, and agreements with other parties.
The Company accrues costs related to environmental matters when it is probable that it has incurred a
liability related to a contaminated site and the amount can be reasonably estimated. Environmental-related expenses
for sites owned and operated by Resideo are presented within Cost of goods sold in the Consolidated and Combined
Statements of Operations. Prior to the Spin-Off, expenses related to Honeywell Sites now under the Reimbursement
Agreement were presented within Other expense, net in the Consolidated and Combined Statements of Operations.
The following table summarizes information concerning the recorded liabilities for environmental costs for
the year ended December 31, 2020, 2019 and 2018. On October 29, 2018, upon the consummation of the Spin-Off,
certain environmental liabilities became subject to the Reimbursement Agreement and were reclassified to
Obligations payable under Indemnification Agreements. For additional information, see Reimbursement Agreement
below.
Years Ended December 31,
2019
2018
2020
Beginning balance.............................................................................
Accruals for environmental matters deemed probable and
reasonably estimable .........................................................................
Less: Environmental liability payments............................................
Less: Change due to the Reimbursement Agreement payments.......
Less: Liabilities subject to the Reimbursement Agreement
payments ...........................................................................................
Ending balance ..................................................................................
$
22
$
20
$
1
(1)
-
-
22
$
2
-
-
-
22
$
$
537
340
(179)
(86)
(592)
20
The $86 million change for the year ended December 31, 2018 due to the Reimbursement Agreement
represents a reduction in the estimated liability driven by the terms of Reimbursement Agreement at October 29,
2018. Pursuant to the Reimbursement Agreement, the Company is responsible to indemnify Honeywell in amounts
equal to 90% of the environmental-liability payments of certain sites, 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. Prior to the Spin-Off, the Company’s estimated liability for resolution of the same pending
and future environmental-related liabilities was calculated as if it was responsible for 100% of the environmental-
liability payments. In addition, prior to the Spin-Off, these costs were calculated on the gross basis, excluding any
insurance receipts or proceeds received by Honeywell.
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 the Company’s consolidated and combined results of operations and operating cash flows in the
periods recognized or paid.
74
RESIDEO TECHNOLOGIES, INC.
Obligations Payable Under Indemnification Agreements
In connection with the Spin-Off, the Company entered into a Reimbursement Agreement and a tax matters
agreement (the “Tax Matters Agreement”) (collectively, the “Indemnification Agreements”) which are further
described below.
Reimbursement Agreement
On October 29, 2018, in connection with the Spin-Off, the Company entered into the Reimbursement
Agreement pursuant to which the Company has an obligation to make cash payments to Honeywell in amounts
equal to 90% of payments for certain Honeywell environmental-liability payments, which include amounts billed
(“payments”), less 90% of Honeywell’s net insurance receipts relating to such liabilities, and less 90% of the net
proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii)
contributions by other parties relating to such liabilities and (iii) certain property sales (the “recoveries”). The
amount payable by the Company in respect of such liabilities arising in respect of any given year is subject to a cap
of $140 million.
Payments in respect of the liabilities arising in a given year will be made quarterly throughout such year on
the basis of an estimate of the liabilities and recoveries provided by Honeywell. Following the end of any such year,
Honeywell will provide the Company with a calculation of the amount of payments and the recoveries actually
received.
Payment amounts under the Reimbursement Agreement will be deferred to the extent that a specified event
of default has occurred and is continuing under certain indebtedness, including under the Credit Agreement, or the
payment thereof causes the Company to not be compliant with certain financial covenants in certain indebtedness,
including the Company’s Credit Agreement on a pro forma basis, including the maximum total leverage ratio (ratio
of consolidated debt to consolidated EBITDA, which excludes any amounts owed to Honeywell under the
Reimbursement Agreement), and the minimum interest coverage ratio.
The obligations under the Reimbursement Agreement will continue until the earlier of: (1) December 31,
2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation
(including in respect of deferred payment amounts) has been less than $25 million.
During the year, the Company and Honeywell entered into several amendments to the Reimbursement
Agreement. These amendments included modifications of certain covenants in Exhibit G to conform to the amended
covenants included in the Credit Agreement First Amendment, deferment of certain payments under the
Reimbursement Agreement to later in the year, and amendment of Exhibit G to, among other things, permit sale and
leaseback transaction. An aggregate amount of up to $150 million would be permitted thereunder so long as the
same conditions that are applicable under the Credit Agreement are satisfied.
On February 12, 2021, the Company entered into another amendment with Honeywell. See Note 24.
Subsequent Events for a further discussion of this amendment.
The following table summarizes information concerning the Company’s Reimbursement Agreement
liabilities:
Years Ended December 31,
2019
2018
2020
Beginning balance.............................................................................
Liabilities subject to the Reimbursement Agreement payments.......
Accruals for indemnification liabilities deemed probable and
reasonably estimable .........................................................................
Reduction (1) .............................................................................
Indemnification payment ..................................................................
Ending balance(2).......................................................................
$
$
585 $
-
146
-
(140)
591 $
616 $
-
179
(71)
(139)
585 $
-
592
49
-
(25)
616
75
RESIDEO TECHNOLOGIES, INC.
(1) Reduction in indemnification liabilities relates to a provision in the Reimbursement Agreement that reduces the
obligation due to Honeywell for any proceeds received by Honeywell from a property sale of a site under the
agreement.
(2) Reimbursement Agreement liabilities deemed probable and reasonably estimable, however, it is possible the
Company could pay $140 million per year (exclusive of any late payment fees up to 5% per annum) until the
earlier of (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual
reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million.
Reimbursement Agreement liabilities are included in the following balance sheet accounts:
Accrued liabilities ...............................................................................................
Obligations payable under Indemnification Agreements....................................
Years Ended December 31,
2020
2019
$
$
140 $
451
591 $
140
445
585
The Company does not currently possess sufficient information to reasonably estimate the amounts of
indemnification liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the
timing nor the amount of the ultimate costs associated with environmental matters can be determined although they
could be material to the Company’s consolidated and combined results of operations and operating cash flows in the
periods recognized or paid.
Independent of the Company’s payments under the Reimbursement Agreement, the Company will have
ongoing liability for certain environmental claims which are part of the Company’s going forward business.
Tax Matters Agreement
In connection with the Spin-Off, the Company entered into the Tax Matters Agreement with Honeywell
pursuant to which it is responsible and will indemnify Honeywell for all taxes, including income taxes, sales taxes,
VAT and payroll taxes, relating to the business for all periods, including periods prior to the consummation of the
Spin-Off. In addition, the Tax Matters Agreement addresses the allocation of liability for taxes that are incurred as a
result of restructuring activities undertaken to effectuate the Spin-Off.
In addition, the Tax Matters Agreement provides that the Company is required to indemnify Honeywell for
any taxes (and reasonable expenses) resulting from the failure of the Spin-Off and related internal transactions to
qualify for their intended tax treatment under U.S. federal, state and local income tax law, as well as foreign tax law,
where such taxes result from (a) breaches of covenants and representations it makes and agrees to in connection with
the Spin-Off, (b) the application of certain provisions of U.S. federal income tax law to these transactions or (c) any
other action or omission (other than actions expressly required or permitted by the Separation and Distribution
Agreement, the Tax Matters Agreement or other ancillary agreements) the Company takes after the consummation
of the Spin-Off that gives rise to these taxes.
As of December 31, 2020, and 2019, the Company had an indemnity outstanding to Honeywell for future
tax payments of $139 million and $149 million, which is included in Obligations payable under Indemnification
Agreements.
Trademark Agreement
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 Consolidated and Combined Statements of Operations. For the years
ended December 31, 2020, 2019, and 2018, royalty fees were $26 million, $27 million, and $4 million, net of a one-
time credit of $2 million received in December 31, 2018 for inventory on hand as of the Spin-Off, respectively.
76
RESIDEO TECHNOLOGIES, INC.
Other Matters
The Company is subject to lawsuits, investigations and disputes arising out of the conduct of its business,
including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and
divestitures, employee matters, intellectual property, and environmental, health and safety matters. The Company
recognizes a liability for any contingency that is probable of occurrence and reasonably estimable. The Company
continually assesses the likelihood of adverse judgments for outcomes in these matters, as well as potential ranges of
possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with
the assistance of outside legal counsel and, if applicable, other experts. No such matters are material to the
Company’s unaudited financial statements.
The Company, the Company’s former CEO Michael Nefkens, the Company’s former CFO Joseph Ragan,
and the Company’s former CIO Niccolo de Masi are named defendants of a class action securities suit in the U.S.
District Court for the District of Minnesota styled In re Resideo Technologies, Inc. Securities Litigation, 19-cv-
02863 (the “Securities Litigation”). The Securities Litigation is a class action securities suit with the class defined as
all persons or entities who purchased or otherwise acquired common stock of Resideo during the class period of
October 29, 2018 to November 6, 2019. The complaint asserts claims under Section 10(b) and Section 20(a) of the
Securities Exchange Act of 1934, broadly alleging, among other things, that the defendants (or some of them) made
false and misleading statements regarding, among other things, Resideo’s business, performance, the efficiency of
its supply chain, operational and administrative issues resulting from the spin-off from Honeywell, certain business
initiatives, and financial guidance in 2019. The defendants filed a motion to dismiss the complaint on July 10, 2020.
The motion to dismiss has been fully briefed and a hearing was held on the motion on December 1, 2020. The court
has not yet issued its decision regarding the motion to dismiss. The Company and the plaintiffs are scheduled to
participate in a mediation on February 25, 2021, in an effort to settle the Securities Litigation. There can be no
assurance that a settlement will be reached. If a settlement cannot be reached, the Company intends to vigorously
defend against the allegations in the Securities Litigation. However, there can be no assurance that the defense will
be successful.
On July 7, 2020, Jawad A. Ayaz as Trustee of the Shiv Venkatasetty 2016 Trust (“Derivative Plaintiff”)
filed a shareholder derivative complaint (the “Derivative Complaint”) against certain current or former directors and
officers of the Company (“Derivative Defendants”) in the District Court for the District of Delaware, captioned
Ayaz v. Nefkens, 20-cv-00915. Derivative Plaintiff alleges generally that Derivative Defendants breached fiduciary
duties owed to the Company by allegedly causing or allowing the Company to make materially false and misleading
statements to the public regarding the Company’s business operations and financial prospects. Derivative Plaintiff
also alleges that the Company’s 2019 proxy statement was materially false and misleading, in violation of Section
14(a) of the Securities Exchange Act of 1934, and asserts claims of corporate waste and unjust enrichment, among
other allegations, and relies on a similar set of facts as alleged in the Securities Litigation. The Derivative Complaint
seeks declaratory relief and unspecified money damages on behalf of the Company. On July 28, 2020, certain of the
Derivative Defendants filed a stipulation to stay the proceedings pending the resolution of the motion to dismiss in
the Securities Litigation. An additional shareholder derivative complaint was filed on August 12, 2020, by Plaintiff
Daniel Sanclemente (the “Sanclemente Action”) on behalf of the Company in the District Court for the District of
Delaware, captioned Sanclemente v. Nefkens, 20-cv-1062, alleging substantially the same facts and making
substantially the same claims against the same defendants as in the Derivative Complaint. The District Court has
consolidated the Derivative Complaint and the Sanclemente Action. The consolidated action is styled In re Resideo
Technologies, Inc. Derivative Litigation, 20-cv-00915 (the “Derivative Action”), and lead counsel has been
appointed. Additionally, the court has granted a stipulation to stay the consolidated action pending the resolution of
the motion to dismiss in the Securities Litigation. On August 28, 2020, Riviera Beach Police Pension Fund (“Riviera
Beach”) filed a motion to intervene in the Derivative Action. On September 18, 2020, Riviera Beach and the
existing plaintiffs reached an agreement regarding the leadership structure of the Derivative Action in the event that
Riviera Beach files its own complaint in the future, and in connection therewith, Riviera Beach withdrew its motion
to intervene. The Company intends to defend this action vigorously, but there can be no assurance that the defense
will be successful.
77
RESIDEO TECHNOLOGIES, INC.
Warranties and Guarantees
In the normal course of business, the Company issues product warranties and product performance
guarantees. It accrues for the estimated cost of product warranties and product performance guarantees based on
contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and
guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product
performance guarantees are included in Accrued liabilities. The following table summarizes information concerning
recorded obligations for product warranties and product performance guarantees.
Years Ended December 31,
2019
2018
2020
Beginning balance.............................................................................
Accruals for warranties/guarantees issued during the year .........
Adjustment of pre-existing warranties/guarantees ......................
Settlement of warranty/guarantee claims ..........................................
Ending balance ..................................................................................
$
$
$
25
21
(7)
(17)
$
22
$
26
15
-
(16)
$
25
17
17
(1)
(7)
26
Purchase Commitments
The Company’s unconditional purchase obligations include purchase commitments with suppliers and
other obligations entered in to during the normal course of business regarding the purchase of goods and services.
As of December 31, 2020, the Company’s estimated minimum obligations associated with unconditional purchase
obligations, which are not recognized in the Company’s Consolidated Balance Sheet, were $16 million in 2021, $17
million in 2022, $9 million in 2023 and $3 million in 2024. For the years ended December 31, 2020 and 2019,
purchases related to these obligations were $15 million and $26 million, respectively. Purchases under these
obligations were not material for the year ended December 31, 2018.
Note 20. 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 if the
Shared Plans were 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 Consolidated and Combined
Statements of Operations. The pension expense related to participation in the Shared Plans for the period from
January 1, 2018 until October 29, 2018 and the year ended December 31, 2018 was $11 million and $16 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, France, India, Switzerland, and the
Netherlands.
78
RESIDEO TECHNOLOGIES, INC.
The following tables summarize the balance sheet impact, including the benefit obligations, assets and
funded status associated with the pension plans.
U.S. Plans
Non-U.S. Plans
2020 2019 2018 2020 2019 2018
Change in benefit obligation:
Benefit obligation at beginning of
year (1) ................................................... $
Service cost...........................................
Interest cost...........................................
Actuarial losses (gains) ........................
Net benefits paid...................................
Settlements ...........................................
Other .....................................................
Exchange rate adjustments ...................
Benefit obligation at end of year ..........
Change in plan assets:
Fair value of plan assets at beginning
of year (1)...............................................
Actual return (loss) on plan assets........
Contributions ........................................
Net benefits paid...................................
Settlements ...........................................
Other .....................................................
Exchange rate adjustments ...................
Fair value of plan assets at end of
year .......................................................
Funded status of plans (non-current) ......... $
344 $
7
11
38
(4)
(22)
-
-
374
331
35
1
(4)
(22)
(1)
-
$
286
5
13
51
(13)
-
2
-
344
274
70
-
(13)
-
-
-
$
279
1
2
5
(1)
-
-
-
286
279
(4)
-
(1)
-
-
-
137 $
7
1
6
-
(6)
2
14
161
27
-
2
-
(6)
3
2
$
93
5
2
27
-
(3)
13
-
137
20
2
2
1
(3)
5
-
95
1
-
(3)
-
-
-
-
93
20
-
-
-
-
-
-
340
(34) $
331
(13) $
274
(12) $
28
(133) $
27
(110) $
20
(73)
(1) 2018 "Beginning of year" is the Spin-Off date, October 29, 2018.
The benefit obligation generated a global net actuarial loss of $44 million for the year ended December 31,
2020. A global decrease in discount rates over the course of the year was the main driver, generating a total loss of
$50 million across all plans, partially offset by gains on inflation related assumptions of approximately $5 million
(driven primarily by inflation/pension increase assumption in the Germany, which resulted in a gain of $5 million),
and by gains on demographic assumptions of approximately $2 million (driven primarily by change in mortality
assumption in the U.S., which resulted in a gain of $2 million). Experience losses added $1 million of net actuarial
loss globally, while losses from other assumption changes were not significant.
Actual return on plan assets for the year ended December 31, 2020 was higher than expected due to equity
and bonds performance being above expectations leading to an additional asset gain of $17 million globally, for a
total asset return of $35 million globally.
Amounts recognized in Accumulated other comprehensive (loss) associated with pension plans at
December 31, 2020 and 2019 are as follows:
Prior service credit........................................................... $
Net actuarial loss .............................................................
Net amount recognized.................................................... $
(2) $
30
28 $
(3) $
12
9
$
- $
14
14 $
-
13
13
U.S. Plans
2020
2019
Non-U.S. Plans
2020
2019
79
RESIDEO TECHNOLOGIES, INC.
The components of net periodic benefit cost and other amounts recognized in Comprehensive income for
pension plans include the following components:
U.S. Plans
2020
2019 2018 (1)
2020
Non-U.S. Plans
2019 2018 (1)
Net Periodic Benefit Cost
Service cost ................................................... $
Interest cost ...................................................
Expected return on plan assets ......................
Amortization of prior service credit..............
Mark to market adjustment ...........................
Other..............................................................
Net periodic benefit cost ............................... $
$
7
11
(17)
(1)
-
3
3
$
5 $
13
(16)
(1)
1
-
2 $
1 $
2
(3)
-
-
-
- $
$
7
1
(1)
-
6
-
13
$
5 $
2
(1)
-
16
2
24 $
1
-
-
-
-
-
1
(1) 2018 begins at the Spin-Off date, October 29, 2018. Activity before the Spin-Off date was recognized under the
Shared Plans.
The components of net periodic benefit cost other than the service cost are included in Other expense, net
in the Consolidated and Combined Statements of Operations for the years ended December 31, 2020, 2019 and 2018.
U.S. Plans
2020
2019 2018 (1)
2020
Non-U.S. Plans
2019 2018 (1)
Other Changes in Plan Assets and
Benefits Obligations Recognized in
Other Comprehensive Loss (Income)
Actuarial losses (gains) .............................. $
Excess return on plan assets(2)....................
Actuarial gains recognized during the
year.............................................................
Other ..........................................................
Total recognized in other comprehensive
loss (income).............................................. $
Total recognized in net periodic benefit
cost and other comprehensive loss
(income) ..................................................... $
38
$
(17)
51 $
(54)
12 $
-
(2)
-
-
-
-
-
$
6
-
(6)
1
26 $
(1)
(17)
-
(3)
-
-
-
19 $
(3) $
12 $
1 $
8 $
(3)
22 $
(1) $
12 $
14 $
32 $
(2)
(1) 2018 begins at the Spin-Off date, October 29, 2018. Activity before the Spin-Off date was recognized
under the Shared Plans.
(2) Represents actual return on plan assets in excess of the expected return.
80
RESIDEO TECHNOLOGIES, INC.
Significant actuarial assumptions used in determining the benefit obligations and net periodic benefit
(income) cost for benefit plans are presented in the following table as weighted averages.
2020
U.S. Plans
2019
2018
2020
Non-U.S. Plans
2019
2018
Actuarial assumptions used to determine
benefit obligations as of December 31:
Discount rate ........................................
Interest crediting rate ...........................
Expected annual rate of compensation
increase.................................................
Actuarial assumptions used to determine
net periodic benefit cost for the twelve
months ended December 31:
Discount rate - benefit obligation.........
Interest crediting rate ...........................
Expected rate of return on plan
assets ....................................................
Expected annual rate of compensation
increase.................................................
2.7%
6.0%
3.3%
6.0%
4.5%
6.0%
0.7%
1.5%
1.1%
1.5%
1.9%
1.5%
3.5%
3.4%
3.4%
2.4%
2.4%
2.3%
3.3%
6.0%
5.4%
3.4%
4.5%
6.0%
5.7%
3.4%
4.5%
6.0%
5.7%
3.4%
1.1%
1.5%
2.7%
2.4%
2.0%
1.5%
2.8%
2.4%
1.9%
1.5%
3.3%
2.3%
The discount rate for the U.S. pension plans reflects the current rate at which the associated liabilities could
be settled at the measurement date of December 31. To determine discount rates for the U.S. pension plans, the
Company uses a modeling process that involves matching the expected cash outflows of its benefit plans to a yield
curve constructed from a portfolio of high-quality, fixed income debt instruments. The Company uses the single
weighted-average yield of this hypothetical portfolio as a discount rate benchmark.
The expected rate of return on U.S. plan assets of 5.4% is a long-term rate based on historical plan asset
returns over varying long-term periods combined with current market conditions and broad asset mix considerations.
The Company reviews the expected rate of return on an annual basis and revises it as appropriate.
For non-U.S. benefit plans, actuarial assumptions reflect economic and market factors relevant to each
country.
The following amounts relate to pension plans with accumulated benefit obligations exceeding the fair
value of plan assets.
December 31,
U.S. Plans
2020
2019
Non-U.S. Plans
2020
2019
Projected benefit obligation ................................................. $
Accumulated benefit obligation........................................... $
Fair value of plan assets....................................................... $
374 $
358 $
340 $
344 $
$
332
$
331
161 $
139 $
28 $
137
116
27
The Company utilized a third-party investment management firm to serve as its Outsourced Chief
Investment Officer; however, the Company has appointed an internal fiduciary committee that monitors adherence
to the investment guidelines the firm will follow.
The Company employs an investment approach whereby a mix of equities and fixed income investments
are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established
through careful consideration of plan liabilities and plan funded status. The investment portfolio contains a
diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across
U.S. and non-U.S. stocks, as well as growth, value and small and large capitalizations. Other assets such as real
estate and hedge funds may be used to improve portfolio diversification.
81
RESIDEO TECHNOLOGIES, INC.
The non-U.S. investment policies are different for each country as local regulations, funding requirements,
and financial and tax considerations are part of the funding and investment allocation process in each country.
A majority of the U.S. pension plan assets as of December 31, 2020 do not have published pricing and are
valued using Net Asset Value (“NAV”) which approximates fair value. NAV by asset category and fair value by
asset category are as follows for December 31, 2020 and 2019:
U.S. Plans
December 31, 2020
Level
1
Level
2
Level
3
December 31, 2019
Level
1
Level
2
Level
3
Total
Cash................................................ $
6
Equity.............................................
105
Investment funds............................
14
U.S. treasury obligations................
16
Government bonds .........................
41
Corporate bonds .............................
126
Real estate / property .....................
32
Total assets at fair value................. $ 340
NAV
1
$
105
14
16
41
126
32
$ 335
$
$
5
-
-
-
-
-
-
5
$
$
-
-
-
-
-
-
-
-
$
$
$
Total
4
-
100
-
15
-
132
-
32
-
16
-
32
-
$ 331
-
NAV
-
$
100
15
132
32
16
32
$ 327
$
$
4
-
-
-
-
-
-
4
$
$
-
-
-
-
-
-
-
-
$
$
-
-
-
-
-
-
-
-
The fair values of the non-U.S. pension plan assets as by asset category are as follows:
Non-U.S. Plans
Equity....................................................... $
Government bonds...................................
Corporate bonds.......................................
Insurance contracts ..................................
Other ........................................................
Total assets at fair value........................... $
5
Total
Level 1
December 31, 2020
Level 2
-
1
-
-
-
1
1 $
-
-
-
-
1 $
1 $
1
-
10
16
28 $
$
Level 3 Total
-
$
-
-
10
16
26
$
$
1 $
1
1
8
16
27 $
Level 1
December 31, 2019
Level 2
-
1
1
-
-
2
1 $
-
-
-
-
1 $
Level 3
-
$
-
-
8
16
24
$
The following table summarizes changes in the fair value of Level 3 assets for Non-U.S. plans:
Balance at October 29, 2018 ....................................................................................................
Return on plan assets................................................................................................................
Purchases, sales and settlements, net .......................................................................................
Balance at December 31, 2018.................................................................................................
Return on plan assets................................................................................................................
Purchases, sales and settlements, net .......................................................................................
Other.........................................................................................................................................
Balance at December 31, 2019.................................................................................................
Return on plan assets................................................................................................................
Purchases, sales and settlements, net .......................................................................................
Other.........................................................................................................................................
Balance at December 31, 2020.................................................................................................
$
$
Non-U.S. Plans
5
1
-
6
2
15
1
24
-
(1)
3
26
82
RESIDEO TECHNOLOGIES, INC.
Corporate Bonds and Government Bonds held as of December 31, 2020 and 2019 are valued either by
using pricing models, bids provided by brokers or dealers, quoted prices of securities with similar characteristics or
discounted cash flows and as such include adjustments for certain risks that may not be observable such as credit
and liquidity risks. Other investments as of December 31, 2020 and 2019 and Insurance Contracts are classified as
Level 3 as there are neither quoted prices nor other observable inputs for pricing. Insurance Contracts are issued by
insurance companies and are valued at cash surrender value, which approximates the contract fair value. Other
investments consist of a collective pension foundation that is valued and allocated by the plan administrator.
The Company utilizes the services of retirement and investment consultants to actively manage the assets
of the Company’s pension plans. The Company has established asset allocation targets and investment guidelines
based on the guidance of the consultants. The Company’s target allocations are 51% fixed income investments, 29%
global equity investments, 10% global real estate investments and 10% cash and other investments.
The Company’s general funding policy for qualified defined benefit pension plans is to contribute amounts
at least sufficient to satisfy regulatory funding standards. In 2020, it was not required to make contributions to the
U.S. pension plans, however $1 million of contributions were made. There is no requirement to make any
contributions to the U.S. pension plans in 2021. In 2020, contributions of $2 million were made to the non-U.S.
pension plans to satisfy regulatory funding requirements. In 2021, the Company expects to make contributions of
cash and/or marketable securities of approximately $2 million to the non-U.S. pension plans to satisfy regulatory
funding standards. Contributions for both the U.S. and non-U.S. pension plans do not reflect benefits paid directly
from Company assets.
Benefit payments, including amounts to be paid from Company assets, and reflecting expected future
service, as appropriate, are expected to be paid as follows:
2021.............................................................................................................. $
2022.............................................................................................................. $
2023.............................................................................................................. $
2024.............................................................................................................. $
2025.............................................................................................................. $
2026-2030..................................................................................................... $
Note 21. Segment Financial Data
U.S. Plans
Non-U.S. Plans
2
2
2
3
3
21
19 $
20 $
21 $
23 $
23 $
114 $
In May 2020, the Board appointed Jay Geldmacher as President and CEO of the Company. As part of this
transition, during the fourth quarter of 2020, the format of the Chief Operating Decision Maker's reporting package
was modified which resulted in changes to how business operations are presented.
The Company continues to monitor its business operations through two operating segments, Products &
Solutions and ADI Global Distribution. The Company now reports Corporate separately from the two operating
segments. The reporting package also includes segment Operating profit, which replaces Segment Adjusted
EBITDA as a performance metric.
These changes were designed to better align accountability and authority, give a clearer view into the
operational performance of the two segments and increase accountability for management of corporate spending. As
a result, the Company recast prior periods to conform with the new fourth quarter 2020 presentation.
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 the leading wholesale distributor of
low-voltage security products including intrusion, access control and video products and participates significantly in
83
RESIDEO TECHNOLOGIES, INC.
the broader related markets of smart home, fire, access control, power, audio, ProAV, networking, communications,
wire and cable, enterprise connectivity, and structured wiring products.
Corporate—Corporate includes headquarter type expenses associated with legal, finance, information
technology, human resources, strategy and communications related to the Corporate office as well as supporting the
operating segments, but do not relate directly to revenue-generating activities.
Segment information is consistent with how management reviews the businesses, makes investing and
resource allocation decisions and assesses operating performance.
Years Ended December 31,
2019
2018
2020
Revenue
Total Products & Solutions revenue............................................ $
Less: Intersegment revenue .........................................................
External Products & Solutions revenue .................................
External ADI Global Distribution revenue ............................
Total revenue .................................................................... $
2,488
367
2,121
2,950
5,071
$
$
2,487
312
2,175
2,813
4,988
$
$
2,474
305
2,169
2,658
4,827
Years Ended December 31,
2019
2018
2020
Operating profit
Products & Solutions ................................................................... $
ADI Global Distribution..............................................................
Corporate .....................................................................................
Total ....................................................................................... $
$
407
194
(290)
$
311
$
327
210
(279)
$
258
591
205
(303)
493
Years Ended December 31,
2019
2018
2020
Depreciation and amortization
Products & Solutions ................................................................... $
ADI Global Distribution..............................................................
Corporate .....................................................................................
Total ....................................................................................... $
63
12
11
86
$
$
62
10
8
80
$
$
Capital expenditures
Products & Solutions ................................................................... $
ADI Global Distribution..............................................................
Corporate .....................................................................................
Total ....................................................................................... $
41
15
14
70
$
$
71
5
19
95
$
$
Years Ended December 31,
2019
2018
2020
48
10
8
66
61
5
15
81
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.
84
RESIDEO TECHNOLOGIES, INC.
Note 22. Geographic Areas—Financial Data
Net Revenue (1)
Years Ended December 31,
2020
2019 2018 2020
Long-lived Assets (2)
December 31,
United States ..................................................... $ 3,543 $ 3,423
1,117
Europe ...............................................................
448
Other International ............................................
$ 5,071 $ 4,988
1,121
407
$ 3,289
1,138
400
$ 4,827
$
$
260 $
144
47
451 $
2019 2018
184
$
91
25
300
272
136
45
453
$
(1) Revenue between geographic areas approximate market and is not significant. Net revenue is classified
according to their country of origin. Included in United States net revenue are export sales of $21 million, $27
million and $31 million in 2020, 2019 and 2018, respectively.
(2) Long-lived assets are comprised of Property, plant and equipment – net and lease right-of-use assets. The
Company has restated long-lived assets as of December 31, 2019 to include lease right-of-use assets, resulting
in an increase in long-lived assets of $86 million in the United states, $33 million in Europe and $18 million in
Other International.
Note 23. Unaudited Quarterly Financial Information
The following tables show selected unaudited quarterly results of operations for 2020 and 2019. The
quarterly data have been prepared on the same basis as the audited annual financial statements and include all
adjustments, which include only normal recurring adjustments, necessary for the fair statement of the results of
operations for these periods.
Q1
Q2
2020
Q3
Q4
Net revenue............................................ $
Gross profit............................................
Net (loss) income...................................
Earnings (loss) per share -basic.............
Earnings (loss) per share - diluted .........
1,179 $
284
(21)
(0.17)
(0.17)
1,029 $
236
(76)
(0.62)
(0.62)
1,362 $
370
75
0.61
0.60
Q1
Q2
2019
Q3
Q4
Net revenue............................................ $
Gross profit............................................
Net income (loss)...................................
Earnings (loss) per share - basic............
Earnings (loss) per share - diluted .........
1,216 $
332
48
0.39
0.39
1,242 $
323
(11)
(0.09)
(0.09)
1,226 $
309
8
0.07
0.06
Note 24. Subsequent Events
Amended and Restated Credit Agreement
Year Ended
December 31,
5,071
1,313
37
0.30
0.29
1,501 $
423
59
0.45
0.44
Year Ended
December 31,
4,988
1,277
36
0.29
0.29
1,304 $
313
(9)
(0.07)
(0.07)
On February 12, 2021, the Company entered into an amended and restated credit agreement (the
“A&R Credit Agreement”). The A&R Credit Agreement provides for (i) a seven-year senior secured term B loan
facility in an aggregate principal amount of $950 million (the “A&R Term B Facility”) and (ii) a five-year senior
secured revolving credit facility in an aggregate principal amount of $500 million (the “A&R Revolving Credit
Facility” and, together with the Term Loan Facilities, the “A&R Senior Credit Facilities”).
The Company is obligated to make quarterly principal payments of approximately $2.4 million throughout
the term of the A&R Term B Facility according to the amortization provisions in the A&R Credit Agreement. In
addition to paying interest on outstanding borrowings under the A&R Revolving Credit Facility, the Company is
85
RESIDEO TECHNOLOGIES, INC.
required to pay a quarterly commitment fee based on the unused portion of the A&R Revolving Credit Facility.
Borrowings under the A&R Credit Agreement can be prepaid at the Company’s option without premium or penalty
other than a 1.00% prepayment premium that may be payable in connection with certain repricing transactions
within a certain period of time after the closing date. Up to $75 million may be utilized under the A&R Revolving
Credit Facility for the issuance of letters of credit to the Company or any of the Company’s subsidiaries. Letters of
credit are available for issuance under the A&R Credit Agreement on terms and conditions customary for financings
of this kind, which issuances will reduce the available funds under the A&R Revolving Credit Facility.
The A&R Senior Credit Facilities are subject to an interest rate and interest period which the Company will
elect. If the Company chooses to make a base rate borrowing on an overnight basis, the interest rate will be based on
the highest of (1) the rate of interest last quoted by The Wall Street Journal as the “prime rate” in the United States,
(2) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (3) the one
month adjusted LIBOR rate, plus 1.00% per annum. For the A&R Term Loan B, the applicable LIBOR rate will not
be less than 0.50% per annum. The applicable margin for the A&R Term B Facility is 2.25% per annum (for LIBOR
loans) and 1.25% per annum (for base rate loans). The applicable margin for the A&R Revolving Credit Facility
varies from 2.25% per annum to 1.75% per annum (for LIBOR loans) and 1.25% to 0.75% per annum (for base rate
loans) based on the Company’s leverage ratio. Accordingly, the interest rates for A&R the Senior Credit Facilities
will fluctuate during the term of the A&R Credit Agreement based on changes in the base rate, LIBOR rate or future
changes in the Company’s leverage ratio. Interest payments with respect to the borrowings are required either on a
quarterly basis (for base rate loans) or at the end of each interest period (for LIBOR loans) or, if the duration of the
applicable interest period exceeds three months, then every three months.
The A&R Credit Agreement contains certain affirmative and negative covenants customary for financings
of this type that, among other things, limit the Company and the Company’s subsidiaries’ ability to incur additional
indebtedness or liens, to dispose of assets, to make certain fundamental changes, enter into restrictive agreements, to
make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay
dividends, to make other distributions or redemptions/repurchases, in respect of the Company and the Company’s
subsidiaries’ equity interests, to engage in transactions with affiliates or amend certain material documents. In
addition,
financial maintenance
covenants. The A&R Credit Agreement contains customary events of default, including with respect to a failure to
make payments under the A&R Senior Credit Facilities, cross-default, certain bankruptcy and insolvency events and
customary change of control events.
the A&R Revolving Credit
contains
Facility
certain
also
All obligations under the A&R Senior Credit Facilities are or will be unconditionally guaranteed jointly and
severally, by: (a) the Company and (b) substantially all of the direct and indirect wholly owned subsidiaries of the
Company that are organized under the laws of the United States, any state thereof or the District of Columbia
(collectively, the “Guarantors”). The Guarantors entered into a guarantee under the A&R Credit Agreement
concurrently with the effectiveness of the A&R Credit Agreement. Subject to certain limitations, the A&R Senior
Credit Facilities are or will be secured on a first priority basis by: (x) a perfected security interest in the equity
interests of each direct subsidiary of the Company and each Guarantor under the A&R Senior Credit Facilities
(subject to certain customary exceptions) and (y) perfected, security interests in, and mortgages on, substantially all
tangible and intangible personal property and material real property of the Company and each of the Guarantors
under the A&R Senior Credit Facilities, subject, in each case, to certain exceptions. The Company and the
Guarantors entered into security documents concurrently with effectiveness of the A&R Credit Agreement.
Senior Notes
On February 16, 2021 the Company redeemed $140 million in principal amount of the Senior Notes at a
redemption price of 106.125% of par plus accrued interest.
Amendment to Reimbursement Agreement
On February 12, 2021, in connection with entering into the A&R Credit Agreement, the Company entered
into a Fourth Amendment to the Reimbursement Agreement. The covenants in Exhibit G of the Reimbursement
Agreement were amended and restated in their entirety to substantially conform to the affirmative and negative
covenants contained in the A&R Credit Agreement.
86
RESIDEO TECHNOLOGIES, INC.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not Applicable.
Item 9A. 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 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 Annual Report on Form 10-K. 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 Annual Report on
Form 10-K.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting
is a process designed to provide reasonable assurance to our management and board of directors regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).
Based on this assessment, management determined that the Company maintained effective internal control
over financial reporting as of December 31, 2020.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has
been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report
which is included in Item 8. Financial Statements and Supplementary Data of this Form 10-K.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended
December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
87
RESIDEO TECHNOLOGIES, INC.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III.
The information required by this item will be included in our Proxy Statement to be filed pursuant to
Regulation 14A within 120 days after our year ended December 31, 2020 in connection with our 2021 Annual
Meeting of Stockholders, or the 2021 Proxy Statement, and is incorporated herein by reference.
Item 11.
Executive Compensation
Information relating to executive compensation is contained in the 2021 Proxy Statement referred to above
in Item 10. Directors, Executive Officers and Corporate Governance, and such information is incorporated herein by
reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Information relating to certain beneficial ownership of certain stockholders and management, as well as
certain other information required by this Item 12, will be contained in the 2021 Proxy Statement referred to above
in Item 10. Directors, Executive Officers and Corporate Governance, and such information is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information relating to certain relationships and related transactions, as required by this Item 13, will be
contained in the 2021 Proxy Statement referred to above in Item 10. Directors, Executive Officers and Corporate
Governance, and such information is incorporated herein by reference.
Item 14.
Principal Accounting Fees and Services
Information relating to fees paid to and services performed by Deloitte & Touche LLP and our Audit
Committee’s pre-approval policies and procedures with respect to non-audit services are contained in the 2021
Proxy Statement referred to above in Item 10. Directors, Executive Officers and Corporate Governance, and such
information is incorporated herein by reference.
88
RESIDEO TECHNOLOGIES, INC.
PART IV.
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
The Consolidated and Combined Financial Statements and related notes, together with the report of
Deloitte & Touche LLP, Independent Registered Public Accounting Firm, appear in Part II Item 8. Financial
Statements and Supplementary Data of this Form 10-K.
(a)(2) Financial Statements Schedules
All schedules have been omitted because they are not required or because the required information is given
in the Consolidated and Combined Financial Statements or Notes thereto.
(a)(3) Exhibits
The Exhibits listed below on the Exhibit Index are filed or incorporated by reference as part of this Form
10-K.
Exhibit
Number
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
EXHIBIT INDEX
Exhibit Description
Indemnification and Reimbursement Agreement, dated October 14, 2018, between New HAPI Inc.
and Honeywell International Inc. (this Agreement has been updated to include exhibits thereto) (filed
herewith)
Separation and Distribution Agreement, dated October 19, 2018, between Honeywell International
Inc. and Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.1 to Resideo’s Form 8-K
filed on October 19, 2018, File No. 001-38635)
Transition Services Agreement, dated October 19, 2018, between Honeywell International Inc. and
Ademco Inc., a subsidiary of Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.2 to
Resideo’s Form 8-K filed on October 19, 2018, File No. 001-38635)
Tax Matters Agreement, dated October 19, 2018, between Honeywell International Inc. and Resideo
Technologies, Inc.* (incorporated by reference to Exhibit 2.3 to Resideo’s Form 8-K filed on October
19, 2018, File No. 001-38635)
Employee Matters Agreement, dated October 19, 2018, between Honeywell International Inc. and
Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.4 to Resideo’s Form 8-K filed on
October 19, 2018, File No. 001-38635)
Patent Cross-License Agreement, dated October 19, 2018, between Honeywell International Inc. and
Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.5 to Resideo’s Form 8-K filed on
October 19, 2018, File No. 001-38635)
Trademark License Agreement, dated October 19, 2018, between Honeywell International Inc. and
Resideo Technologies, Inc.* (incorporated by reference to Exhibit 2.6 to Resideo’s Form 8-K filed on
October 19, 2018, File No. 001-38635)
First Amendment to Indemnification and Reimbursement Agreement, dated as of April 21, 2020,
between Resideo Intermediate Holding Inc. and Honeywell International Inc. (incorporated by
reference to Exhibit 2.1 to Resideo’s Form 8-K filed on April 23, 2020, File No. 001-38635)
89
RESIDEO TECHNOLOGIES, INC.
Exhibit
Number
2.9
2.10
2.11
2.12
3.1
3.2
4.1
4.2
First Amendment to Trademark License Agreement, dated as of April 21, 2020, between Resideo
Technologies, Inc. and Honeywell International Inc. (incorporated by reference to Exhibit 2.7 to
Resideo’s Form 8-K filed on April 23, 2020, File No. 001-38635)
Exhibit Description
Second Amendment to Indemnification and Reimbursement Agreement, dated as of July 28, 2020,
between Resideo Intermediate Holding Inc. and Honeywell International Inc. (incorporated by
reference to Exhibit 2.1 to Resideo’s Form 8-K filed on July 31, 2020, File No. 001-38635)
Second Amendment to Trademark License Agreement, dated as of September 23, 2020, between
Resideo Technologies, Inc. and Honeywell International Inc. (filed herewith)
Third Amendment to Indemnification and Reimbursement Agreement, dated as of November 16,
2020, between Resideo Intermediate Holding Inc. and Honeywell International Inc.* (incorporated by
reference to Exhibit 2.1 to Resideo’s Form 8-K filed on November 20, 2020, File No. 001-38635)
Amended and Restated Certificate of Incorporation of Resideo Technologies, Inc. (incorporated by
reference to Exhibit 3.1 to Resideo’s Form 8-K filed on October 29, 2018, File No. 001-38635)
Amended and Restated By-laws of Resideo Technologies, Inc. (incorporated by reference to Exhibit
3.1 to Resideo’s Form 8-K filed on February 19, 2021, File No. 001-38635)
Description of Securities of Registrant (filed herewith)
Indenture, dated as of October 19, 2018, among Resideo Funding Inc., Resideo Technologies, Inc., the
other guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee.
(incorporated by reference to Exhibit 4.1 to Resideo’s Form 8-K filed on October 19, 2018, File No.
001-38635)
4.3
Form of Resideo Technologies, Inc.’s 6.125% Notes due 2026 (included in Exhibit 4.2)
10.01
10.02
10.03
10.04
10.05
10.06
Offer Letter of Michael G. Nefkens ‡ (incorporated by reference to Exhibit 10.01 to Resideo’s Form
10 filed on August 23, 2018, File No. 001-38635)
Form of Internal Hire Offer Letter ‡ (incorporated by reference to Exhibit 10.03 to Resideo’s Form 10
filed on August 23, 2018, File No. 001-38635)
Resideo Technologies Supplemental Savings Plan ‡ (incorporated by reference to Exhibit 10.05 to
Resideo’s Form 10-K filed on March 18, 2019, File No. 001-38635)
Resideo Technologies, Inc. Severance Plan For Designated Officers as amended on November 15,
2018 ‡ (incorporated by reference to Exhibit 10.07 to Resideo’s Form 10-K filed on March 18, 2019,
File No. 001-38635)
Credit Agreement, dated as of October 25, 2018, by and among Resideo Technologies, Inc. Resideo
Holding Inc., Resideo Intermediate Holding Inc., Resideo Funding Inc., the Lenders and Issuing
Banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by
reference to Exhibit 10.1 to Resideo’s Form 8-K/A filed on October 29, 2018, File No. 001-38635)
First Amendment to Credit Agreement dated as of November 26, 2019, by and among the Company
Resideo Holding Inc., a Delaware corporation, Resideo Intermediate Holding Inc., a Delaware
corporation, Resideo Funding Inc., a Delaware corporation, the lenders and issuing banks party
thereto, and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by reference to
Exhibit 10.1 to Resideo’s Form 8-K filed on November 27, 2019. File No. 001-38635)
10.07
Resideo Amended and Restated 2018 Stock Incentive Plan ‡ (incorporated by reference to Exhibit
10.1 to Resideo’s Form 10-Q filed on August 7, 2019, File No. 001-38635)
90
RESIDEO TECHNOLOGIES, INC.
Exhibit
Number
10.08
10.09
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. ‡ (incorporated by
reference to Exhibit 4.4 to Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687)
Exhibit Description
2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Stock Option
Award Agreement. ‡ (incorporated by reference to Exhibit 4.5 to Resideo’s Form S-8 filed on
December 6, 2018, File No. 333-228687)
2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Restricted Stock
Unit Agreement. ‡ (incorporated by reference to Exhibit 4.6 to Resideo’s Form S-8 filed on December
6, 2018, File No. 333-228687)
2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Restricted Stock
Unit Agreement (for replacement awards). ‡ (incorporated by reference to Exhibit 4.7 to Resideo’s
Form S-8 filed on December 6, 2018, File No. 333-228687)
2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Performance Stock
Unit Agreement. ‡ (incorporated by reference to Exhibit 4.8 to Resideo’s Form S-8 filed on December
6, 2018, File No. 333-228687)
2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates Form of Performance Unit
Agreement. ‡ (incorporated by reference to Exhibit 4.9 to Resideo’s Form S-8 filed on December 6,
2018, File No. 333-228687)
2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. Form of Stock Option
Award Agreement. ‡ (incorporated by reference to Exhibit 4.10 to Resideo’s Form S-8 filed on
December 6, 2018, File No. 333-228687)
2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. Form of Restricted Stock
Unit Agreement. ‡ (incorporated by reference to Exhibit 4.11 to Resideo’s Form S-8 filed on
December 6, 2018, File No. 333-228687)
Resideo Technologies UK Sharebuilder Plan. ‡ (incorporated by reference to Exhibit 4.12 to
Resideo’s Form S-8 filed on December 6, 2018, File No. 333-228687)
Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates
Form of Stock Option Award Agreement. ‡ (incorporated by reference to Exhibit 10.20 to Resideo’s
Form 10-K filed on March 18, 2019, File No. 001-38635)
Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates
Form of Restricted Stock Unit Agreement. ‡ (incorporated by reference to Exhibit 10.21 to Resideo’s
Form 10-K filed on March 18, 2019, File No. 001-38635)
Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates
Form of Performance Stock Unit Agreement. ‡ (incorporated by reference to Exhibit 10.22 to
Resideo’s Form 10-K filed on March 18, 2019, File No. 001-38635)
Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates
Form of Performance Unit Agreement. ‡ (incorporated by reference to Exhibit 10.23 to Resideo’s
Form 10-K filed on March 18, 2019, File No. 001-38635)
Resideo Supplemental Pension Plan ‡ (incorporated by reference to Exhibit 10.24 to Resideo’s Form
10-K filed on March 18, 2019, File No. 001-38635)
Bonus Plan of Resideo Technologies, Inc. ‡ (incorporated by reference to Exhibit 10.1 to Resideo’s
Form 8-K filed on February 14, 2019, File No. 001-38635)
91
RESIDEO TECHNOLOGIES, INC.
Exhibit
Number
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
21.1
23.1
24.1
31.1
31.2
32.1
32.2
Employment Separation Agreement and Release with Mike Nefkens dated January 22, 2020 ‡
(incorporated by reference to Exhibit 10.29 to Resideo’s Form 10-K filed on February 27, 2020, File
No. 001-38635)
Exhibit Description
Employment Offer letter agreement with Michael Flink executed January 17, 2020‡ (incorporated by
reference to Exhibit 10.4 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635)
Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates
Form of Stock Option Award Agreement (adopted 2020). ‡ (incorporated by reference to Exhibit 10.5
to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635)
Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates
Form of Restricted Stock Unit Agreement (adopted 2020). ‡ (incorporated by reference to Exhibit
10.6 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635)
Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates
Form of Performance Stock Unit Agreement (adopted 2020). ‡ (incorporated by reference to Exhibit
10.7 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635)
Restricted Stock Unit Agreement with Michael Nefkens dated February 20, 2020. ‡ (incorporated by
reference to Exhibit 10.8 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635)
Restricted Stock Unit Agreement with Andrew Teich dated December 2, 2019. ‡ (incorporated by
reference to Exhibit 10.9 to Resideo’s Form 10-Q filed on May 7, 2020, File No. 001-38635)
Employment Agreement Letter with Jay Geldmacher dated May 18, 2020. ‡ (incorporated by
reference to Exhibit 10.1 to Resideo’s Form 8-K filed on May 19, 2020, File No. 001-38635)
Offer Letter of Anthony L. Trunzo. ‡ (incorporated by reference to Exhibit 10.1 to Resideo’s Form 8-
K filed on May 29, 2020, File No. 001-38635)
Second Amendment to Credit Agreement dated as of November 16, 2020, by and among the
Company, Resideo Holding Inc., a Delaware corporation, Resideo Intermediate Holding Inc., a
Delaware corporation, Resideo Funding Inc., a Delaware corporation, the lenders and issuing banks
party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by reference to
Exhibit 10.1 to Resideo’s Form 8-K filed on November 20, 2020. File No. 001-38635)
List of subsidiaries of the registrant (filed herewith)
Consent of Deloitte & Touche LLP, independent registered public accounting firm (filed herewith)
Powers of Attorney ‡ (filed herewith)
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)
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)
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)
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
Inline XBRL Instance Document (filed herewith)
101.SCH
Inline XBRL Taxonomy Extension Schema (filed herewith)
92
RESIDEO TECHNOLOGIES, INC.
Exhibit
Number
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
Exhibit Description
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* 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.
‡
Item 16. Form 10-K Summary
The Company has elected not to include a Form 10-K summary under this Item 16.
93
RESIDEO TECHNOLOGIES, INC.
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.
Date: February 25, 2021
Resideo Technologies, Inc.
By:/s/ Anthony L. Trunzo
Anthony L. Trunzo
Executive Vice President and Chief Financial Officer
(on behalf of the Registrant and as the
Registrant’s Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:
Name
/s/ Jay Geldmacher
Jay Geldmacher
/s/ AnnMarie Geddes
AnnMarie Geddes
*
Roger B. Fradin
*
Paul F. Deninger
*
Cynthia Hostetler
*
Brian G. Kushner
*
Jack R. Lazar
*
Nina L. Richardson
*
Andrew C. Teich
*
Sharon Wienbar
Title
President, Chief Executive Officer
and Director
(Principal Executive Officer)
Date
February 25, 2021
Vice President, Controller and Chief
Accounting Officer
(Principal Accounting Officer)
February 25, 2021
Chairman of the Board
February 25, 2021
Director
Director
Director
Director
Director
Director
Director
February 25, 2021
February 25, 2021
February 25, 2021
February 25, 2021
February 25, 2021
February 25, 2021
February 25, 2021
*By:
/s/ Jeannine J. Lane
(Jeannine J. Lane, Attorney-in-Fact)
February 25, 2021
94
April 23, 2021
Dear Resideo Shareholders:
It is my pleasure to invite you to attend the 2021 Annual Meeting of Shareholders of Resideo Technologies, Inc. (“Resideo” or
the “Company”), which will be held via a live virtual meeting on Wednesday, June 9, 2021, at 1:00 p.m. Eastern Daylight Time.
As it did for all companies, the COVID-19 pandemic had a profound impact on Resideo and our employees in 2020. Wherever
the pandemic emerged, we immediately responded with aggressive actions to ensure the safety of our employees. Where
feasible, we have had employees globally working from home since early in the pandemic. When functions required people to
be physically on-site, we implemented strict safety protocols, including social distancing, protective equipment, and enhanced
cleaning regimens. We will continue these protocols until we are certain the work environment is safe for our employees.
Our Company’s financial and business performance was also affected by COVID-19. Our manufacturing and branch
operations were deemed essential in most cases, but we saw a significant reduction in demand in the second quarter as
lockdowns and shutdowns impacted the markets we serve and certain parts of our operations. However, as we entered the
summer, we experienced a steady increase in sales as people adapted to new ways of operating and investment in the home
increased. Improving demand trends and the focused efforts of the entire Resideo organization led to a second half of 2020
that was our strongest performance since our spinoff in late 2018.
I made the decision to join Resideo in the midst of these unprecedented times, because I strongly believe in this Company, its
purpose and in the opportunity that exists to strengthen and grow our powerful franchise for the benefit of our employees,
customers, shareholders, and all of the stakeholders we serve. We made significant progress on several fronts in 2020 and
continuing into 2021, including:
• Rebuilt, strengthened and deepened our leadership team with the addition of several highly experienced executives.
These new leaders have brought operational focus, discipline and a track record of driving growth through innovation to
Resideo.
• Reorganized the business to break down internal silos, improve efficiency and build a more innovative, agile organization.
• Created an executive level innovation team and reorganized global engineering and product management to elevate our
focus on new technology development and new product introduction performance.
• Reduced our cost base and instituted transformational change as a fundamental aspect of our operations. This will allow
us to pursue growth, while focusing on scalable efficient business processes.
•
Improved our financial position through a significant improvement in operating cash flow, the issuance of common stock
for net proceeds of approximately $279 million and restructuring of our debt to enhance our financial flexibility.
On behalf of the Board, I also welcome Kareem Yusuf who joined the Board in March 2021. Kareem brings to the Board deep
experience with critical technologies and more than 17 years of leadership experience across a variety of disciplines, including
product management, software development, mergers and acquisitions and technical sales and customer support.
I want to thank our more than 14,000 employees for their unwavering dedication and commitment to Resideo in the face of
many changes and challenges in 2020. It is a privilege to work with you all, and I believe that for Resideo, the best is yet to
come.
Thank you for your investment in Resideo, and for the confidence you place in us as we work to ensure that Resideo achieves
its full potential.
Sincerely,
Jay Geldmacher
President and Chief Executive Officer
901 E. 6th Street, Austin, TX 78702
2021 PROXY STATEMENT
Notice of 2021 Annual Meeting of Shareholders
DATE
Wednesday,
June 9, 2021
TIME
PLACE
1:00 p.m.
Eastern Daylight Time
Via the internet at
www.virtualshareholdermeeting.com/
REZI2021
Our 2021 annual meeting will be a live virtual meeting. There will be no physical location for the annual meeting. You will be able to participate
in the annual meeting, vote your shares electronically and submit your questions during the live virtual meeting by visiting
www.virtualshareholdermeeting.com/REZI2021 and entering the 16-digit control number provided in your proxy materials. You may also
submit questions in advance of the meeting by visiting www.proxyvote.com. For more information on accessing the virtual annual meeting, see
Question 5 in the section entitled “Questions and Answers About the Annual Meeting and Voting” on page 80.
Agenda:
Election of Class III Directors
Advisory vote to approve executive compensation
Ratification of the appointment of independent registered public accounting firm
Act on a shareholder proposal described in this Proxy Statement, if properly presented
Transact such other business as may properly come before the meeting
How to Vote: Your vote is important to us. Unless you vote live at the virtual annual meeting, the deadline for receiving your vote is 11:59 p.m.
Eastern Daylight Time, on June 8, 2021.
VIA INTERNET
BY PHONE
BY MAIL
VIA VIRTUAL MEETING
Visit www.proxyvote.com
to vote your shares via the
internet. You will need the
16-digit control number
provided in your proxy
materials when you access
the web page.
If your shares are held in
the name of a bank,
brokerage firm or similar
organization, follow the
telephone voting
instructions, if any,
provided on your voting
instruction card. If your
shares are registered in
your name, call
1-800-690-6903. You will
need the 16-digit control
number provided in your
proxy materials when you
call.
Complete and sign the
proxy card or voting
instruction form and return
it in the enclosed postage
pre-paid envelope.
You may vote your shares live at the
virtual annual meeting by visiting
www.virtualshareholdermeeting.com/
REZI2021. You will need to enter
the 16-digit control number provided in
your proxy materials to vote your shares at
the virtual annual meeting.
This Notice of 2021 Annual Meeting of Shareholders and related proxy materials are being distributed or made available to shareholders
beginning on April 23, 2021.
On behalf of Resideo’s Board of Directors,
JEANNINE LANE
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL, CORPORATE SECRETARY AND CHIEF COMPLIANCE OFFICER
Important Notice Regarding the Availability of Proxy Materials for the 2021 Annual Meeting of Shareholders to be held on
Wednesday, June 9, 2021: our Proxy Statement and 2020 Annual Report are available free of charge on our Investor Relations
website at investor.resideo.com.
2021 PROXY STATEMENT
Table of Contents
Proxy Statement Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal 1: Election of Class III Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Majority Voting For Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Qualifications and Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
6
6
6
7
9
Our Governance Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Our Board and Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Corporate Governance Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Board Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Committees of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Board’s Role in Risk Oversight
Enterprise Risk Management Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Nominating Board Candidates – Procedures and Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Board Meetings and Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Board and Committee Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Non-Employee Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Other Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Our Planet, Our People, Our Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Certain Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Review, Approval and Ratification of Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Beneficial Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Delinquent Section 16(a) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Stock Ownership of Certain Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Stock Ownership of Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Proposal 2: Advisory Vote to Approve Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Compensation and Human Capital Management Committee Report
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Grants of Plan-Based Awards – Fiscal Year 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Outstanding Equity Awards at 2020 Fiscal Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Option Exercises and Stock Vested – Fiscal Year 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Pension Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Nonqualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Compensatory Arrangements with NEOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Potential Payments Upon Termination or Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
CEO Pay Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Equity Compensation Plan Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . 73
Report of the Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Proposal 4: Shareholder Proposal Requesting Shareholders’ Right to Act by Written Consent . . . . . . . . . . . . . . . . . . 76
Stock Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Questions and Answers About the Annual Meeting and Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
2021 PROXY STATEMENT
Proxy Statement Summary
Below are highlights of certain information in this Proxy Statement. As it is only a summary, it may not
contain all of the information that is important to you. For more complete information, please refer to the
complete Proxy Statement and Resideo’s 2020 Annual Report before you vote. References to “Resideo,”
the “Company,” “we,” “us” or “our” refer to Resideo Technologies, Inc.
2021 Annual Meeting of Shareholders
Date and Time:
June 9, 2021, 1:00 p.m. EDT
Place:
Via the internet at www.virtualshareholdermeeting.com/
REZI2021
Record Date:
April 14, 2021
Voting:
Admission:
Shareholders as of the record date are entitled to vote. Each
share of common stock is entitled to one vote for each director
nominee and one vote for each of the other proposals to be
voted on.
To enter Resideo’s virtual annual meeting via
www.virtualshareholdermeeting.com/REZI2021, you will need
the 16-digit control number provided in your proxy materials.
How to Cast Your Vote
Your vote is important! Please cast your vote and play a part in the future of Resideo.
Shareholders of record on the Record Date can vote through any of the following ways:
INTERNET
PHONE
MAIL
VIRTUAL MEETING
Visit
www.proxyvote.com
Call 1-800-690-6903
toll-free from the
U.S. or Canada
Return the signed
proxy card
Vote your
shares live at the
virtual annual meeting
2021 PROXY STATEMENT | 1
The deadline for voting via the internet or by telephone is 11:59 p.m. EDT on June 8, 2021. If you vote by
mail, your proxy card must be received before the virtual annual meeting.
Beneficial owners who own shares through a bank, brokerage firm or similar organization can vote by
returning the voting instruction form, or by following the instructions for voting via the internet or by
telephone, as provided by the bank, brokerage firm or similar organization. If you own shares in different
accounts or in more than one name, you may receive different voting instructions for each type of
ownership. Please vote all of your shares.
If you are a shareholder of record or a beneficial owner, you may choose to vote at the virtual annual
meeting. Even if you plan to attend our virtual annual meeting, please cast your vote as soon as
possible. For more information on voting your shares, please see “Questions and Answers About the
Annual Meeting and Voting” beginning on page 80.
About Resideo and the Spin-Off
Resideo is a leading global manufacturer and developer of technology-driven products and solutions that
provide comfort, security, energy efficiency and control to over 150 million homes globally. We are also the
leading wholesale distributor of low-voltage security products with a global footprint serving commercial and
residential end markets. Our primary focus is on the professional channel where we are a trusted partner to
over 110,000 professional installers. Our global scale, breadth of product offerings, innovation heritage, and
differentiated service and support has enabled our trusted relationship with professional installers and has
been a key driver of our success. Leveraging our underlying strengths, we are transforming our business
with a strategy that includes operational improvements, product innovation, and investments to drive future
growth and value creation.
We were 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”).
Voting Matters and Board Recommendations
VOTING MATTERS
BOARD
RECOMMENDATIONS
PAGE REFERENCE
(FOR MORE DETAIL)
Proposal 1.
Election of Class III Directors
FOR Each Nominee
Proposal 2.
Advisory Vote to Approve
Executive Compensation
Proposal 3.
Ratification of the Appointment of
Independent Registered Public
Accounting Firm
Proposal 4.
Shareholder Proposal Regarding
Shareholder Right to Act by Written
Consent
FOR
FOR
AGAINST
6
39
73
76
2 | 2021 PROXY STATEMENT
Director Dashboard
Director Independence
Board Diversity
(Gender, Race/Ethnicity)
Tenure (Year Elected)
Age
2
80%
8
Independent
Not
Independent
40%
6
3
3
1
Gender diverse
Racially/
ethnically diverse
Not diverse
1
2
1
6
2021
2020
2019
2018
(Spin-Off)
1
Avg.
60
3
6
40’s
50’s
60’s
Our Board of Directors
Name
Roger Fradin
(Chairman)
Jay Geldmacher
(President & CEO)
Paul Deninger
Cynthia Hostetler
Brian Kushner
Jack Lazar
Nina Richardson
Andrew Teich
(Lead Independent Director)
Sharon Wienbar
Kareem Yusuf
Age Independent
Board Committee
Memberships
67
65
62
58
62
55
62
60
59
49
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Finance
Innovation and Technology
None
Audit
Finance (Chair)
Innovation and Technology
Finance
Nominating and Corporate Governance
Audit
Finance
Innovation and Technology
Audit (Chair)
Innovation and Technology
Compensation and Human Capital
Management
Nominating and Governance (Chair)
Compensation and Human Capital
Management
Innovation and Technology (Chair)
Nominating and Governance
Compensation and Human Capital
Management (Chair)
Nominating and Governance
Innovation and Technology
Other Public Company Board Service
Juniper Industrial Holdings, Inc.
L3Harris Technologies, Inc.
Vertiv Holdings Co
Seagate Technology plc
Epiphany Technology
Acquisition Corp.
EverQuote
Iron Mountain Inc.
Vulcan Materials Company
Cumulus Media Inc.
Mudrick Capital Acquisition
Corporation II
Box, Inc.
Casper Sleep Inc.
Silicon Laboratories, Inc.
ThredUp Inc.
Silicon Laboratories, Inc.
Cohu, Inc.
Eargo, Inc.
Sensata Technologies Holding PLC
Colfax Corporation
Covetrus, Inc
Corporate Governance Highlights
We are committed to strong corporate governance practices and policies, as described below, that support
effective Board leadership and prudent management practices.
Annual election of all directors commencing next year in 2022, following an initial three-year phase-out
of our classified board
Majority voting for directors in uncontested elections
Lead Independent Director with specified duties and responsibilities
Robust risk oversight by full Board and Committees
Annual review of Committee charters and Corporate Governance Guidelines
Independent Audit, Compensation and Human Capital Management and Nominating and Governance
Committees
2021 PROXY STATEMENT | 3
Finance Committee that reviews and oversees Resideo’s capital structure and opportunities for
maximizing shareholder value
Innovation and Technology Committee that oversees Resideo’s overall strategic direction and
investment in technology initiatives
Rigorous risk oversight of
Technology Committees
“product” cybersecurity programs by the Audit and Innovation and
Annual Board and Committee evaluations
Proposed annual advisory vote to approve executive compensation
Meaningful stock ownership guidelines for directors and executives
Adoption of proxy access
Limits on memberships on other boards
A Board that is actively engaged in recruiting qualified, diverse director candidates
Commitment to health, safety and environmental sustainability
Oversight of human capital management, including diversity, equity and inclusion, by Compensation
and Human Capital Management Committee
Oversight of our code of business conduct and our role as a responsible corporate citizen, including our
environmental, social and governance (ESG) programs, by the Nominating and Governance Committee
Policies prohibiting short sales, hedging, margin accounts and pledging
Executive Compensation Preview
The Compensation Discussion and Analysis section of this Proxy Statement provides a focused discussion
of our executive compensation philosophy and the pay programs applicable to our named executive officers.
Our compensation program design directly links compensation to the performance of our business and
rewards fiscal year results through our annual incentive plan and long-term performance with equity awards.
Our Named Executive Officers
As described in more detail elsewhere in this Proxy Statement, during fiscal 2020, the Board appointed a
new CEO and effected other executive leadership transitions. Accordingly, our leadership team during fiscal
2020 included the following Named Executive Officers (“NEOs”):
NAME
POSITION
Jay Geldmacher
Anthony L. Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Michael Nefkens
Robert Ryder
Michael Flink
Sachin Sankpal
President and Chief Executive Officer
Executive Vice President, Chief Financial Officer
President, ADI Global Distribution
Executive Vice President, Chief Human Resources Officer
Executive Vice President, General Counsel, Corporate Secretary and Chief
Compliance Officer
Former President and Chief Executive Officer
Former Interim Chief Financial Officer
Former Executive Vice President, Transformation
Former President, Products & Solutions
4 | 2021 PROXY STATEMENT
Forward-Looking Statements
This Proxy Statement and the cover letter contain “forward-looking statements” regarding expectations
about future business and financial results, which speak only as of the date of this Proxy Statement.
Although we believe that the forward-looking statements contained in this Proxy Statement are based upon
reasonable assumptions, such statements involve known and unknown risks, uncertainties, and other
factors, which may cause the actual results or performance of the Company to be materially different from
any future results or performance expressed or implied by such forward-looking statements. Such risks and
uncertainties include, but are not
those described under the headings “Risk Factors” and
“Cautionary Statement Concerning Forward-Looking Statements” in our Annual Reports on Form 10-K for
the year ended December 31, 2020. You are cautioned not to place undue reliance on these forward-looking
statements, which are not guarantees of future performance, and actual results, developments and business
decisions may differ from those envisaged by our forward-looking statements. Except as required by law, we
undertake no obligation to update such statements to reflect events or circumstances arising after the date
of this presentation, and we caution investors not to place undue reliance on any such forward-looking
statements.
limited to,
2021 PROXY STATEMENT | 5
Proposal 1: Election of Class III Directors
Our Board currently consists of ten directors, and the Board has set the size of the Board as of this year’s Annual
Meeting at ten. Our Board is divided into three classes with each class consisting, as nearly as may be possible,
of one-third of the total number of directors. The directors designated as Class III directors have terms expiring at
this year’s Annual Meeting of Shareholders. After this year, all directors will stand for election each year for
annual terms, and our Board will therefore no longer be divided into three classes. Our Board has nominated the
Class III director nominees for re-election to the Board. We do not know of any reason why any nominee would be
unable to serve as a director. If any nominee should become unavailable to serve prior to the Annual Meeting, the
shares represented by proxy will be voted for the election of such other person as may be designated by the
Board. The Board may also determine to leave the vacancy temporarily unfilled or reduce the authorized number
of directors in accordance with the By-Laws. Resideo’s By-Laws provide that in any uncontested election of
directors (an election in which the number of nominees does not exceed the number of directors to be elected),
any nominee who receives a greater number of votes cast “FOR” his or her election than votes cast “AGAINST”
his or her election will be elected to the Board.
Majority Voting for Directors
Resideo’s By-Laws provide a majority voting standard for election of directors in uncontested elections. Each
director will be elected by the affirmative vote of a majority of the votes cast, meaning that the number of votes
cast “FOR” a director nominee exceeds fifty percent (50%) of the number of votes cast with respect to that
director’s election.
No incumbent director nominee shall qualify for service as a director unless he or she agrees to submit upon
re-nomination to the Board an irrevocable resignation effective upon such director nominee’s failure to receive a
majority of the votes cast in an uncontested election. The Nominating and Governance Committee (excluding the
nominee, if applicable) will make a recommendation to the Board as to whether to accept or reject the resignation,
or whether other action should be taken. The Board, excluding the nominee, will act on the resignation and
publicly disclose its decision in accordance with the By-Laws.
An election of directors is considered to be contested if there are more nominees for election than positions on the
Board to be filled by election at the meeting of shareholders. In a contested election, the required vote would be a
plurality of votes cast.
Director Nominees
The Board has affirmatively determined that each of the nominees qualifies for election under the Company’s
criteria for evaluation of directors. See “Nominating Board Candidates – Procedures and Qualifications” on
page 23 for more information on qualifications for director nominees. The Nominating and Governance Committee
is responsible for nominating a slate of director nominees who collectively have the complementary experience,
qualifications, skills and attributes to guide the Company and function effectively as a Board. The committee
believes that each of the nominees has key personal attributes that are important to an effective board, including
integrity, industry background, contribution to the composition, diversity and culture of the Board, educational
background, the ability and willingness to constructively challenge management and the ability and commitment to
devote sufficient time to Board duties. Set forth below is biographical information about the director nominees and
their specific experience, qualifications and skills that have led the Board and the Nominating and Governance
Committee to conclude that they should continue to serve as directors of Resideo. In addition, the Board has
determined that each non-employee director nominee qualifies as an independent director under NYSE corporate
governance listing standards and the Company’s director independence standards as further described under
“Director Independence” on page 18. In addition, the biographical information about the other members of the
Board and their specific experience, qualifications and skills are included.
6 | 2021 PROXY STATEMENT
The Board has established a director retirement policy whereby, unless the Board otherwise determines, non-employee
directors shall serve only until the Annual Meeting of Shareholders immediately following their 75th birthday.
Director Qualifications and Skills
Our directors have a broad range of experience that spans different industries and encompasses the relevant
business and technology sectors. Directors bring a variety of qualifications, skills and viewpoints to our Board that
both strengthen their ability to carry out their oversight responsibilities on behalf of our shareholders and bring
richness to Board deliberations. As described above and in the director biographies, our directors have key
experiences, qualifications and skills that are relevant and important in light of our business, structure and growth
strategy and include the following:
DIRECTOR QUALIFICATIONS AND SKILLS CRITERIA
Senior Leadership Experience
Experience serving as CEO or a senior executive that provides a practical understanding of how complex
organizations function and ability to support our commercial strategy, growth and performance
Consumer Products
Experience with the retail consumer industry, e-commerce, customer service and consumer dynamics that
aligns with our business strategies and opportunities
Manufacturing
Experience with the operations of manufacturing facilities that provide critical perspectives in understanding
and evaluating operational planning, management and risk mitigation of our business
Technology
Experience developing and adopting new technologies as well as leading innovation initiatives that support the
execution of our vision in the smart home market
Global Relations
International business strategy, operations and substantive expertise in international matters relevant to our
global business
Finance
Experience with finance and financial reporting processes, including monitoring and assessing a company’s
operating performance to ensure accurate financial reporting and robust controls
Public Company Board Service
Service on the boards and board committees of public companies that provides an understanding of corporate
governance practices and risk management oversight as well as insights into board management and relations
between the board, the CEO and senior management that will support our commitment to maintain a strong
governance framework as an independent public company
Marketing
Expertise in brand development, marketing and sales in local markets on a global scale relevant to our global
business
Operations
Managing the operations of a business and possessing a deep understanding of the end-markets we serve
Strategy
Practical understanding of the development and implementation of strategic priorities and of the risks and
opportunities that can impact a company’s operations and strategies which will serve to drive our long-term
growth
Mergers & Acquisitions
Experience in business development and mergers and acquisitions to support our initiatives to identify and
execute on tuck-in acquisitions and investments
2021 PROXY STATEMENT | 7
The table below is a summary of the range of qualifications and skills that each director brings to the Board. The
table does not include all of the qualifications that each director offers, and the fact that a particular experience,
skill, or qualification is not checked for a specific director does not mean that the director does not possess it.
I
I
E
C
N
E
R
E
P
X
E
P
H
S
R
E
D
A
E
L
R
O
N
E
S
I
S
T
C
U
D
O
R
P
R
E
M
U
S
N
O
C
I
G
N
R
U
T
C
A
F
U
N
A
M
Y
G
O
L
O
N
H
C
E
T
I
S
N
O
T
A
L
E
R
L
A
B
O
L
G
Y
N
A
P
M
O
C
C
I
L
B
U
P
E
C
N
A
N
F
I
I
G
N
T
E
K
R
A
M
I
S
N
O
T
A
R
E
P
O
Y
G
E
T
A
R
T
S
A
&
M
NAME
Roger Fradin
(Chairman)
Jay Geldmacher
(President & CEO)
Paul Deninger
Cynthia Hostetler
Brian Kushner
Jack Lazar
Nina Richardson
Andrew Teich
(Lead Independent Director)
Sharon Wienbar
Kareem Yusuf
8 | 2021 PROXY STATEMENT
Director Biographies
The Board of Directors unanimously recommends a vote “FOR” Proposal 1 to elect
each of the following Class III director nominees.
Nominees for Election (Class III Directors)
Included in each biography are the key qualifications that led to the conclusion that such directors
should serve on our Board.
ROGER FRADIN, Age 67
Key Qualifications:
• Extensive experience as an executive at Honeywell
• In-depth knowledge of the fire and security solutions and automation and control solutions
industries
• Significant operational and product development experience
• Financial expertise and experience in capital markets
• Broad experience in marketing, including international markets
Non-Executive
Chairman of the Board
Director since 2018
Other Current Public Company Directorships:
• Juniper Industrial Holdings, Inc.
• L3Harris Technologies, Inc. (formerly Harris Corporation)
• Vertiv Holdings Co (formerly GS Acquisition Holdings)
Committee
Memberships:
• Finance
• Innovation and
Technology
Background
Mr. Fradin joined Honeywell in 2000 when Honeywell acquired Pittway Corporation, where he
served as president and chief executive officer of the Security and Fire Solutions segment.
Mr. Fradin served as president and chief executive officer of Honeywell’s Automation and
Control Solutions business from January 2004 to April 2014 and served as vice chairman of
Honeywell from April 2014 to February 2017. Mr. Fradin served as an independent contractor
to Honeywell from March 2018 to September 2018. Mr. Fradin currently serves as executive
chairman of Victory Innovation, a Carlyle company. He has also served an advisor to Seal
Rock Partners since 2014 and as a consultant of The Carlyle Group, which he served as an
operating executive from 2016 to 2019. Mr. Fradin received his M.B.A. and B.S. degrees from
The Wharton School at
the University of Pennsylvania. While a student at Wharton,
Mr. Fradin also served as a member of its faculty. He previously served as a director of MSC
Industrial Direct (1998-2019) and currently serves as an advisor to the board of MSC
Industrial Direct, and previously served as a director of Goldman Sachs Acquisition Holdings
(2018-2020) and Pitney Bowes (2012-2019). Mr. Fradin also currently serves as a director of
Juniper II Corp., a special purpose acquisition company that has filed a registration statement
with the SEC to become a public company.
2021 PROXY STATEMENT | 9
NINA RICHARDSON, Age 62
Key Qualifications:
• Extensive global operational and leadership experience in the technology sector
• Experience ranging from start-up environmental to multi-billion dollar corporations
• In-depth knowledge of human resources
Other Current Public Company Directorships:
• Silicon Laboratories, Inc.
• Cohu, Inc.
• Eargo, Inc.
Background
Ms. Richardson served as chief operating officer of GoPro, Inc. from February 2013 to
February 2015. Prior to that, she held several executive positions of increasing responsibility
at Flextronics, Inc., a global electronics and manufacturing service provider. Currently, she
serves as managing director of Three Rivers Energy, Inc., a company she co-founded in
2004, and she has been an independent consultant since March 2015. Ms. Richardson
received her B.S. degree in industrial engineering from Purdue University and an executive
M.B.A. from Pepperdine University. She previously served as a director at Zayo Group
Holdings,
(2017-2018) and Silicon Graphics
Inc.
International Corp. (2016).
(2015-2018), Callidus Software,
Inc.
ANDREW TEICH, Age 60
Key Qualifications:
• Seasoned executive with experience in acquisitions and operational integration
• Extensive product/technology and sales/marketing skills
• Expertise in artificial intelligence technology
Other Current Public Company Directorships:
• Sensata Technologies Holding PLC
Background
Mr. Teich has been a private technology consultant since June 2017. From May 2013 until
June 2017, he served as the chief executive officer and president of FLIR Systems, Inc., a
public multinational imaging and sensing company, and a director from July 2013 to June
2017. Mr. Teich joined FLIR Systems, Inc. in 1999 and held various positions of increasing
the Commercial Systems,
responsibility within the company including president of
Commercial Vision Systems and Thermography divisions throughout his tenure. Mr. Teich
received his B.S. degree in marketing from Arizona State University and is an alumnus of the
Harvard Business School Advanced Management Program. Mr. Teich has also agreed to
serve as a director of Juniper II Corp., a special purpose acquisition company that has filed a
registration statement with the SEC to become a public company.
Independent Director
Director since 2018
Committee
Memberships:
• Compensation and
Human Capital
Management
• Nominating and
Governance (Chair)
Lead Independent
Director
Director since 2018
Committee
Memberships:
• Compensation and
Human Capital
Management
• Innovation and
Technology (Chair)
• Nominating and
Governance
10 | 2021 PROXY STATEMENT
KAREEM YUSUF, Age 49
Key Qualifications:
• Extensive experience with critical
technologies,
including artificial
intelligence,
the
internet-of-things, hybrid cloud and blockchain
• Leadership of management and growth of market-leading brands and applications
• Extensive experience managing large, cross-functional organizations and providing
strategic direction
Other Current Public Company Directorships:
Independent Director
Director since 2021
• None
Background
Committee
Memberships:
• Innovation and
Technology
Dr. Yusuf is a general manager, AI Applications & Blockchain, of International Business
Machines Corporation (IBM), a provider of integrated technology solutions and products, a
position he has held since 2018. Prior to his current position, Dr. Yusuf was the chief product
officer and chief technology officer for product direction and technology infrastructure of a
business unit of IBM from 2016 to 2018. Dr. Yusuf joined IBM in 1998 and has held positions
of increasing responsibility in technical sales and support, product management, mergers and
acquisitions strategy and software development. Dr. Yusuf received his bachelor’s degree in
civil engineering from the University of Berlin, his master’s of science degree in structural
engineering from the University of Manchester and his Ph.D. in civil engineering from the
University of Leeds.
Continuing Directors
Class I Directors (with terms expiring at the 2022 Annual Meeting of Shareholders)
PAUL DENINGER, Age 62
Key Qualifications:
• Extensive senior management experience in operations and strategy
• Extensive experience in banking, capital markets and merger and acquisition strategies
• Deep knowledge of the technology sector
Other Current Public Company Directorships:
• Epiphany Technology Acquisition Corp.
• EverQuote
• Iron Mountain Inc.
Background
Mr. Deninger is a senior managing director of Davis Partners Group, a c-suite advisory firm.
He is also vice chairman of the board of Epiphany Technology Acquisition Corp., having
previously served as a senior advisor to Evercore Inc., a publicly held investment banking
advisory firm, from June 2016 to February 2020. Mr. Deninger served as a senior managing
director with Evercore from February 2011 to June 2016. From December 2003 until October
2010, Mr. Deninger served as a vice chairman at Jefferies Group LLC, a wholly-owned
subsidiary of Jefferies Financial Group Inc., a diversified financial services company. Prior to
that, he served as chairman and chief executive officer of Broadview International LLC, a
mergers and acquisitions advisory firm focused on the technology industry. Mr. Deninger
received his B.S. from Boston College and his M.B.A. from Harvard Business School.
Independent Director
Director since 2018
Committee
Memberships:
• Audit
• Finance (Chair)
• Innovation and
Technology
2021 PROXY STATEMENT | 11
JAY GELDMACHER, Age 65
Key Qualifications:
• Extensive experience leading a complex industrial and technology spinout
• Expert on both public and private equity backed companies
• Extensive background in the technology sector
Other Current Public Company Directorships:
• Seagate Technology plc
Background
Prior to joining Resideo, Mr. Geldmacher served as president and CEO of Electro Rent, a
leader in testing and technology solutions and a Platinum Equity portfolio company since
September 2019. From November 2013 to August 2019, Mr. Geldmacher served as
president and CEO of Artesyn Embedded Technologies, a joint venture between Emerson
Electric Company and Platinum Equity. Between 2007 and 2013, Mr. Geldmacher served as
Executive Vice President of Emerson Electric Company and President of Emerson Network
Power’s Embedded Computing & Power Group, which designed, manufactured and
distributed embedded computing and power products, systems and solutions. From 1996 to
2007, he served in a variety of roles of progressive responsibility at Emerson Electric.
Mr. Geldmacher received his bachelor’s degree in marketing from the University of Arizona
and an executive MBA degree from the University of Chicago. Mr. Geldmacher previously
served on the board of directors of Verra Mobility Corporation (2018-2020) and Owens-
Illinois, Inc. (2008-2015).
SHARON WIENBAR, Age 59
Key Qualifications:
• Extensive experience as an operating executive and strategist
in the software and
technology sectors
• Leadership in technology investments and partnerships
• Expertise in start-up operations and venture capital investing
Other Current Public Company Directorships:
• Colfax Corporation
• Covetrus, Inc.
Background
Ms. Wienbar was chief executive officer of Hackbright Academy, a technology training firm,
from 2015 to 2016. From 2001 to 2015, she served as a partner at Scale Venture Partners
(known as BA Venture Partners prior to 2007), a technology and healthcare venture capital
firm. Prior to her venture capital career, Ms. Wienbar was an executive in several software
companies, including Adobe Systems, and a consultant at Bain & Company. Ms. Wienbar
received her S.B. and S.M. degrees in engineering from Harvard University and her M.B.A.
from Stanford University. She previously served on Microsoft
Inc.’s venture advisory
committee and as a director at Everyday Health, Inc. (2014-2016) and Glu Mobile, Inc. (2007-
2008).
President, Chief
Executive Officer and
Director
Director since 2020
Committee
Memberships:
• None
Independent Director
Director since 2018
Committee
Memberships:
• Compensation and
Human Capital
Management (Chair)
• Nominating and
Governance
12 | 2021 PROXY STATEMENT
Class II Directors (with terms expiring at the 2022 Annual Meeting of Shareholders)
Independent Director
Director since 2020
Committee
Memberships:
• Finance
• Nominating and
Governance
Independent Director
Director since 2019
Committee
Memberships:
• Audit
• Finance
• Innovation and
Technology
CYNTHIA HOSTETLER, Age 58
Key Qualifications:
• Broad investment, financial and risk management skills
• Experienced public and investment company board member
• Significant experience with investment management, including ESG and investor relations
issues
Other Current Public Company Directorships:
• Vulcan Materials Company
Background
Ms. Hostetler is a professional director of public companies and investment funds in the United
States, and serves on several mutual fund boards, including as Trustee of Invesco Funds,
Atlanta, Georgia (global mutual funds) since 2017; Director of TriLinc Global Impact Fund,
LLC, Los Angeles, California (international
investment fund) since 2013; Board member of
Investment Company Institute since 2018; Trustee of Aberdeen International Funds, New
York, New York (global mutual funds) from 2013 to 2017; Director of Artio Global Funds, New
York, New York (global mutual funds) from 2010 to 2013; Director of Genesee & Wyoming,
Inc. (short line railroads) from 2018 to 2019; and Director of Edgen Group Inc., Baton Rouge,
Louisiana (energy infrastructure) from 2013 to 2014. Ms. Hostetler served as the Head of
Private Equity and Investment Funds of Overseas Private Investment Corporation from 2001
to 2009 and as a board member and President of First Manhattan Bancorporation from 1991
to 2006. Ms. Hostetler began her career as a corporate lawyer with Simpson Thacher &
Bartlett in New York. Ms. Hostetler earned her bachelor’s degree from Southern Methodist
University and holds a Juris Doctor from the University of Virginia School of Law.
BRIAN KUSHNER, Age 62
Key Qualifications:
• Decades of experience leading corporate transformation efforts
• Proven expertise in corporate performance, including financial expertise
• Served in roles that
include chairman, director, chief executive officer and chief
restructuring officer at more than 30 public and private companies
Other Current Public Company Directorships:
• Cumulus Media Inc.
• Mudrick Capital Acquisition Corporation II
Background
Mr. Kushner has served as a senior managing director at FTI Consulting, Inc., a global
business advisory firm, since 2009, where he serves as leader of the Private Capital Advisory
Services practice and as the co-leader of the Technology practice, the Aerospace, Defense
and Government Contracting practice and the Activism and M&A Solutions practice. Prior to
joining FTI, Mr. Kushner was the co-founder of CXO, L.L.C., a boutique interim and turnaround
management consulting firm that was acquired by FTI at the end of 2008. Over the past three
decades, Mr. Kushner has served as a director, chief executive officer (“CEO”) or chief
restructuring officer (“CRO”) of over 30 public and private technology, manufacturing, telecom
and defense companies, during which time he worked on the acquisition or disposition of more
than 20 companies. Mr. Kushner has also periodically served as the CEO, interim CEO, or the
CRO of companies that elected to utilize bankruptcy proceedings as part of their financial
restructuring process and, as such, he served as an executive officer of various companies
that filed bankruptcy petitions under federal law, including, most recently, Relativity Media LLC
and its affiliates in 2015. Mr. Kushner received his B.S. degree in Applied and Engineering
Physics from Cornell University, his M.S. degree in Applied and Engineering Physics from
Cornell University and a Ph.D. in Applied Physics with a minor in Electrical Engineering, also
from Cornell University. He previously served as a director at Thryv, Inc. (2016-2020), Hycroft
Mining Corp. (formerly Mudrick Capital Acquisition Corporation) (2018-2020), Luxfer Holdings
PLC (2016-2018) and EveryWare Global, Inc. (2015-2016).
2021 PROXY STATEMENT | 13
Independent Director
Director since 2018
Committee
Memberships:
• Audit (Chair)
• Innovation and
Technology
JACK LAZAR, Age 55
Key Qualifications:
• Strong financial, technological and operational expertise
• Experienced technology company executive and consultant
• Expertise in best practices for a public company on a global scale
Other Current Public Company Directorships:
• Box, Inc.
• Casper Sleep Inc.
• Silicon Laboratories Inc.
• ThredUp Inc.
Background
Mr. Lazar has been an independent business consultant since March 2016. From January
2014 to March 2016, he served as the chief financial officer of GoPro, Inc., a provider of
wearable and mountable capture devices. From January 2013 to January 2014, he was an
independent business consultant. From May 2011 to January 2013, Mr. Lazar served as
senior vice president, corporate development and general manager of Qualcomm Atheros,
Inc., a developer of communications semiconductor solutions. From September 2004 to May
2011, Mr. Lazar served in a variety of roles at Atheros Communications, most recently as
Atheros’ chief financial officer and senior vice president of corporate development. Mr. Lazar
is a certified public accountant (inactive) and received his B.S. degree in commerce with an
emphasis in accounting from Santa Clara University. He previously served as a director at
Mellanox Technologies, Ltd (2018-2020), Quantenna Communications (2016-2019) and
TubeMogul, Inc. (2013-2016).
14 | 2021 PROXY STATEMENT
Our Governance Framework
Our corporate governance framework is a set of principles, guidelines and practices that support strong
performance and long-term value creation for our shareholders. Our commitment to good corporate governance is
integral to our business and reflects not only regulatory requirements, NYSE listing standards and broadly
recognized governance practices, but also effective leadership by our senior management team and oversight by
our Board.
Our Board is committed to maintaining the highest standards of corporate governance. Our Board is guided by
our Corporate Governance Guidelines, which address director responsibilities, director skills and characteristics,
memberships on other boards, director access to management and other employees, director orientation and
continuing education, director retirement and the annual performance evaluations of the Board and Committees.
Because corporate governance practices evolve over time, our Board will review and approve our Corporate
Governance Guidelines, Committee charters and other governance policies at least once a year and update them
as necessary and appropriate.
Our Board and Culture
Our Board is deeply engaged, provides informed and meaningful guidance and feedback, and maintains an open
dialogue with management based on a clear understanding of our strategic plans. At each Board meeting, we
review components of our long-term strategy with our directors and engage in constructive dialogue which our
leadership team embraces. Our directors have full and free access to our officers and employees to address
questions, comments or concerns. Additionally, the Board and Committees have the power to hire independent
legal, financial or other advisors without approval from, or consultation with, Resideo management.
Our Board also takes an active role in ensuring we embrace “best practices” in corporate governance. The partnership
and oversight of a strong and multi-faceted Board with diverse perspectives rooted in deep experience in global
business, finance, technology and strategy are essential to creating long-term shareholder value.
Corporate Governance Overview
Presented below are some highlights of our corporate governance program. You can find details about these and
other corporate governance policies and practices within this Proxy Statement.
KEY GOVERNANCE PRACTICES
CORPORATE GOVERNANCE
GUIDELINES
• Our Corporate Governance Guidelines have been designed to assist the Board in the
exercise of its duties and responsibilities to our Company. They reflect the Board’s
commitment
the Board and
management levels with a view to achieving our strategic objectives.
the effectiveness of decision-making at
to monitor
• The guidelines are reviewed annually and subject to modification by the Board at any
time.
INDEPENDENT
BOARD
• 8 of our 10 directors are independent as defined by the listing standards of the NYSE.
• Mr. Fradin is a former employee of Honeywell. Mr. Geldmacher is a management director.
BOARD
COMPOSITION
• Currently, the Board has fixed the number of directors at 10.
• The Board will regularly assess its performance and can adjust the number of directors
according to the needs of the Board and the Company.
• As shown under “Director Qualifications and Skills” beginning on page 7 and in the
biographies of the directors beginning on page 8, our Board has a diverse mix of skills,
experience and backgrounds that support our growth and commercial strategy.
2021 PROXY STATEMENT | 15
KEY GOVERNANCE PRACTICES
LEAD INDEPENDENT
DIRECTOR
• The Board has appointed Mr. Teich as Lead Independent Director. Mr. Teich
possesses the attributes that the Board believes will ensure independent oversight of
management. See “Board Leadership Structure” on page 16 for additional information.
• The Board consists of five standing committees:
• Audit,
• Compensation and Human Capital Management,
• Nominating and Governance,
• Finance, and
• Innovation and Technology.
BOARD
COMMITTEES
MEMBERSHIPS ON
OTHER BOARDS
the Board formed a special committee,
the Strategic & Operational
• In late 2019,
Committee,
including our operational and
financial review and the CEO transition. Effective December 3, 2020, the committee
was dissolved following completion of its work.
transformation efforts,
to oversee our
• Each of the Audit, Compensation and Human Capital Management, and Nominating
and Governance Committees is composed entirely of independent directors.
• Each Board Committee has a written charter that will be reviewed and re-assessed annually.
• Each Committee charter is posted and available on our Investor Relations website at
investor.resideo.com.
• Under our Corporate Governance Guidelines, directors who serve as chief executive
officers of public companies should not serve on more than three public company
boards (including their own); provided, however,
to the
Company’s CEO, such CEO may not sit on more than two public company boards
(including service on the Company’s Board).
that solely with respect
• Other directors should not serve on more than five public company boards (including
service on our Board).
BOARD DIVERSITY
• Three of our 10 Board members are women and one of our Board members is racially/
ethnically diverse. The Nominating and Governance Committee actively considers
diversity when evaluating new candidates.
ROBUST RISK OVERSIGHT
• Our full Board is responsible for risk oversight, and has designated committees to have
particular oversight of certain key risks. Our Board oversees management as it fulfills its
responsibilities for the assessment and mitigation of risks and for taking appropriate risks.
BOARD AND COMMITTEE
SELF-EVALUATION
• The Board conducts an annual self-evaluation led by the Nominating and Governance
Committee to determine whether it and its committees are functioning effectively and to
solicit feedback from directors as to whether the Board is continuing to evolve and be
refreshed in a manner that serves the needs of the Company.
MAJORITY VOTING OF
DIRECTORS
• Our By-Laws provide for majority voting in uncontested elections of directors. Any
directors standing for re-nomination to the Board shall agree to submit an irrevocable
resignation effective upon that director’s failure to receive a majority vote and the
acceptance of the resignation by the Board.
INTEGRITY & COMPLIANCE
PROGRAM
• The Audit Committee regularly reviews the Company’s integrity and compliance
program and scorecard, and the Nominating & Governance Committee provides
oversight of the Company’s policies related to its Code of Conduct.
• The Company provides several mechanisms for employees and third parties to report
concerns (including anonymously), enforces a strict non-retaliation policy, and ensures
prompt, thorough and objective investigations.
• All employees are required to complete integrity and compliance training, and the
Company provides comprehensive training on additional key compliance topics,
available in over 15 languages.
• Regional
integrity & compliance councils meet quarterly to discuss key compliance
topics and to provide feedback to the integrity & compliance program.
16 | 2021 PROXY STATEMENT
OVERSIGHT OF ESG AND
HUMAN CAPITAL
MANAGEMENT
BOARD OVERSIGHT OF
POLITICAL
CONTRIBUTIONS
PROXY ACCESS
KEY GOVERNANCE PRACTICES
• Our Nominating and Governance Committee oversees our role as a responsible
corporate citizen, including key aspects of our ESG programs.
• Our Compensation and Human Capital Management Committee oversees our human
capital management, including diversity, equity and inclusion. Management regularly
reports to the committee regarding diversity, equity and inclusion initiatives and our total
rewards philosophy, and going forward the committee will further oversee our plans,
policies and programs related to hiring, development and retention.
• The Nominating and Governance Committee oversees our policies and practices
relating to political contributions.
• Subject to certain terms and conditions, our By-Laws provide that shareholders who
have maintained continuous qualifying ownership of at least 3% of our outstanding
common stock for at least three years may use our annual meeting proxy statement to
nominate a number of director candidates not to exceed the greater of two candidates
or 20% of the number of directors then in office.
SUCCESSION
PLANNING
• Our Board oversees and annually reviews leadership development and assessment
initiatives, as well as short- and long-term succession plans for the CEO and other
senior management.
HEDGING AND
PLEDGING
PROHIBITIONS
• All of our directors, officers and employees are prohibited from engaging in short sales
of Resideo securities and selling or purchasing puts or calls or otherwise trading in or
writing options on Resideo securities and using certain financial instruments (including
forward sale contracts, equity swaps, collars and exchange funds), holding securities in
margin accounts or pledging Resideo securities as collateral, in each case, that are
designed to hedge or offset any decrease in the market value of Resideo securities.
STOCK OWNERSHIP
GUIDELINES
• We have meaningful stock ownership guidelines:
• CEO: 6x base salary
• Other Executive Officers: 3x base salary
• Non-employee directors: 5x annual cash retainer
• Five-year period from appointment or election to meet the ownership requirement
Our Certificate of Incorporation, By-Laws, Committee Charters, Corporate Governance Guidelines and Code of Business
Conduct are available on our Investor Relations website at investor.resideo.com. Paper copies of these documents can be
obtained by writing to Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary.
Board Leadership Structure
The Company’s current Board leadership structure consists of a non-executive Chairman of the Board, and,
because the Chairman is not independent due to his prior employment with Honeywell, a Lead Independent
Director who was appointed by the independent directors of the Board. The Board believes the current structure
of separating the roles of Chairman and CEO, as well as having a Lead Independent Director, allows for
alignment of corporate governance with the interests of shareholders. The Board believes that this structure
allows our CEO to focus on operating and managing the Company, leverages our Chairman’s experience in
guidance and oversight, and ensures overall
independence of the Board through clearly defined roles and
responsibilities of the Lead Independent Director. While the Board believes that this structure currently is in the
best interests of Resideo and its shareholders, it does not have a policy with respect to separating the roles of
Chairman and CEO and appointing a Lead Independent Director if the Chairman is independent and could adjust
the structure in the future as it deems appropriate.
2021 PROXY STATEMENT | 17
Lead Independent Director
The Board has determined that Mr. Fradin, a former employee of Honeywell, may not currently be independent
and has appointed Mr. Teich as the Lead Independent Director in accordance with our Corporate Governance
Guidelines. In electing Mr. Teich, the independent directors of the Board considered Mr. Teich in light of the
following selection criteria:
• Qualifies as independent, in accordance with relevant listing standards;
• Able to commit the time and level of engagement required to fulfill the substantial responsibilities of the role; and
• Possesses effective communication skills to facilitate discussions among members of the Board, including
among the independent directors, Mr. Geldmacher and Mr. Fradin, and engage with key stakeholders.
As the Lead Independent Director, Mr. Teich has the following duties and responsibilities:
• Review Board meeting agendas and Board meeting schedules to ensure there is sufficient
time for
discussion of all agenda items;
• Provide input regarding presentation materials and other written information provided to directors for Board meetings;
• Preside at all meetings at which the Chairperson is not present
including executive sessions of
the
independent directors;
• Be available for consultation and direct communications with the Company’s shareholders; and
• Perform such other duties as the Board may determine from time to time.
Director Independence
Providing objective, independent judgment is at the core of the Board’s oversight function. The Nominating and
Governance Committee conducts an annual review of the independence of the directors and reports its findings to
the full Board. The Board has affirmatively determined that all non-employee directors, other than Mr. Fradin who
is a former employee of Honeywell, satisfy the independence criteria in the applicable NYSE listing standards and
SEC rules (including the enhanced criteria with respect
the Audit Committee and the
Compensation and Human Capital Management Committee). Regarding Mr. Fradin, the Board considered that
more than three years have elapsed since Mr. Fradin was employed by Honeywell, but acknowledges that other
relationships described in this Proxy Statement currently suggest that Mr. Fradin may not be fully independent.
to members of
For a director to be considered independent, the Board must determine that the director does not have any material
relationships with Resideo, either directly or as a partner, shareholder or officer of an organization that has a
relationship with Resideo, other than as a director and shareholder. Material relationships can include vendor, supplier,
consulting, legal, banking, accounting, charitable and family relationships, among others. In addition to Mr. Fradin,
Mr. Geldmacher as an employee of Resideo, does not satisfy the independence criteria described below.
Criteria for Director Independence
The Board considered all relevant facts and circumstances in making its determination that all of our directors are
independent other than Mr. Fradin and Mr. Geldmacher, including the following:
• No such director or nominee receives any direct compensation from Resideo other than under the
non-employee director compensation program described beginning on page 25.
• No immediate family member (within the meaning of the NYSE listing standards) of any such director or
nominee is an employee of Resideo or otherwise receives direct compensation from Resideo.
• No such director or nominee is affiliated with Resideo or any of its subsidiaries or affiliates.
• No such director or nominee is an employee of Resideo’s independent accountants and no such director or
nominee (or any of their respective immediate family members) is a current partner of Resideo’s independent
accountants, or was within the last three years, a partner or employee of Resideo’s independent accountants
and personally worked on Resideo’s audit.
18 | 2021 PROXY STATEMENT
• No such director or nominee is a member, partner or principal of any law firm, accounting firm or investment
banking firm that receives any consulting, advisory or other fees from Resideo.
• No Resideo executive officer is on the compensation committee of the board of directors of a company that
their respective immediate family
employs any of our non-employee directors or nominees (or any of
members) as an executive officer.
• No such director or nominee (or any of their respective immediate family members) is indebted to Resideo, nor is
Resideo indebted to any such director or nominee (or any of their respective immediate family members).
• No such director or nominee serves as an executive officer of a charitable or other tax-exempt organization
that received contributions from Resideo.
• While a non-employee director’s or nominee’s service as an outside director of another company with which
Resideo does business would generally not be expected to raise independence issues, the Board also
considered those relationships and confirmed the absence of any material commercial relationships with any
such company. Specifically, those commercial relationships were in the ordinary course of business for
Resideo and the other companies involved and were on terms and conditions available to similarly situated
customers and suppliers.
The above information was derived from Resideo’s books and records and responses to questionnaires
completed by the directors and officers in connection with the preparation of this Proxy Statement.
In assessing Dr. Yusuf’s independence, the Board considered that, in the ordinary course of business, the
Company purchases products and services from IBM, Dr. Yusuf’s employer. These transactions were entered into
before Dr. Yusuf joined the Board, and he has no personal involvement in them, nor does he derive any material
benefit from them. The amounts involved are immaterial to both the Company and IBM.
Committees of the Board
Our Board consists of
five standing Committees: Audit, Compensation and Human Capital Management,
Nominating and Governance, Finance and Innovation and Technology. As noted above, a special committee, the
Strategic & Operational Committee, was dissolved effective December 3, 2020, upon completion of its work
overseeing our transformation review and CEO transition. The Strategic & Operational Committee met 21 times
during 2020. The Board has adopted written charters for each Committee, which are available on our Investor
Relations website at
investor.resideo.com. All Board members are invited to attend the meetings of each
Committee, except as restricted by independence standards.
The following table sets forth the Board Committees and the current members of each of the Committees.
Roger Fradin
Jay Geldmacher
Paul Deninger
Cynthia Hostetler
Brian Kushner
Jack Lazar
Nina Richardson
Andrew Teich
Sharon Wienbar
Kareem Yusuf
2020 Meetings
Independent
Audit
Compensation
and Human
Capital
Management
Nominating
and
Governance
Innovation
and
Technology
Finance
Member
Member
Member
Member
Chair
Chair
Member
Member
Member
Member
Member
Member
Member
Chair
Chair
Member
Member
Member
Chair
Member
5
7
6
32
3
2021 PROXY STATEMENT | 19
Each of the Audit, Compensation and Human Capital Management and Nominating and Governance Committees
consists solely of directors who have been determined by the Board to be independent in accordance with SEC
independence standards (including the
regulations, NYSE listing standards and the Company’s director
heightened independence standards and considerations for members of the Audit and Compensation and Human
Capital Management Committees).
COMMITTEE
AUDIT COMMITTEE
Jack Lazar, Chair
Paul Deninger
Brian Kushner
RESPONSIBILITIES
• Appoint and recommend to the shareholders for approval the firm to be engaged as the Company’s
independent auditor and be directly responsible for the compensation, retention and oversight of the
independent auditor,
including the resolution of disagreements between management and the
independent auditor regarding financial reporting;
• Review the results of each external audit and other matters related to the conduct of the audit and
advise the Board on whether it recommends that the audited financial statements be included in the
Annual Report on Form 10-K;
• Review with management and the independent auditors, prior to filing, the interim financial results to
be included in quarterly reports on Form 10-Q;
• Evaluate the independent auditor’s performance at least annually;
• Approve all non-audit engagements with the independent auditor;
• Review reports of the independent auditor and the chief internal auditor related to the adequacy of
the Company’s internal accounting controls, disclosure processes and its procedures designed to
ensure compliance with laws and regulations;
• Consider and review, in consultation with the independent auditor and the chief internal auditor, the
scope and plan for forthcoming external and internal audits;
• Review annually the performance of the internal audit group;
• Review management’s assessment of the effectiveness of the Company’s internal control over
financial reporting;
• Review, approve and establish procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls, auditing matters and
for the confidential, anonymous submission by employees of concerns regarding questionable
accounting or auditing matters or other legal, ethical, reputational or regulatory concerns;
• Produce the annual Report of the Audit Committee included in the Proxy Statement; and
• Oversee major financial risks and enterprise exposures and risk assessment and risk management
policies.
Each member of the Audit Committee is an independent director under applicable SEC rules and NYSE listing standards and is “financially
literate” under NYSE listing standards. The Board has determined that Messrs. Lazar, Deninger and Kushner each qualify as an “audit
committee financial expert” under applicable SEC rules. In addition to Resideo, Mr. Lazar serves on the audit committee of three other
public reporting companies. The Board has determined that Mr. Lazar’s simultaneous service on these other boards does not impair his
ability to serve effectively on the Company’s Audit Committee.
COMPENSATION AND
HUMAN CAPITAL
MANAGEMENT
COMMITTEE
Sharon Wienbar, Chair
Nina Richardson
Andrew Teich
• Review and approve the corporate goals and objectives relevant to the compensation of the CEO,
evaluate the CEO’s performance relative to these goals and objectives and determine and approve
the CEO’s compensation level;
• Review and approve the individual goals and objectives of the other executive officers and set the
annual salary and other remuneration of the executive officers;
• Periodically review the operation and structure of the Company’s compensation programs;
• Review proposals for and determine total share usage under the Company’s equity compensation
programs;
• Oversee the Company’s plans, policies and programs related to hiring, development and retention of
talent;
• Review or take such action in connection with the bonus, stock, retirement and other benefit plans of
the Company and its subsidiaries;
• Establish and review annual stock ownership guidelines applicable to directors and senior
management;
• Review and discuss with management
the Compensation Discussion and Analysis and other
executive compensation disclosure included in the Proxy Statement;
• Assist the Board in oversight of the Company’s policies and strategies relating to human capital
management, including diversity, equity and inclusion;
• Produce the annual Compensation and Human Capital Management Committee Report included in
the Proxy Statement; and
• Exercise sole authority to retain and terminate a compensation consultant, as well as to approve the
consultant’s fees and other terms of engagement. See “Oversight of Compensation Consultant” on
page 20 regarding the Compensation and Human Capital Management Committee’s engagement of
a compensation consultant.
The Compensation and Human Capital Management Committee may form and delegate its authority to subcommittees and management,
when appropriate, including delegation to the CEO to determine and approve annual
incentive and long-term incentive awards for
non-executive employees of the Company as prescribed by the Compensation and Human Capital Management Committee. For more
information on the responsibilities and activities of the Compensation and Human Capital Management Committee, including its processes
for determining executive compensation, see “Compensation Discussion and Analysis” beginning on page 39.
20 | 2021 PROXY STATEMENT
COMMITTEE
NOMINATING AND
GOVERNANCE
COMMITTEE
Nina Richardson, Chair
Cynthia Hostetler
Andrew Teich
Sharon Wienbar
FINANCE COMMITTEE
Paul Deninger, Chair
Roger Fradin
Cynthia Hostetler
Brian Kushner
INNOVATION AND
TECHNOLOGY
COMMITTEE
Andrew Teich, Chair
Paul Deninger
Roger Fradin
Brian Kushner
Jack Lazar
Kareem Yusuf
RESPONSIBILITIES
• Make recommendations to the Board concerning size, composition and organization of the Board,
qualifications and criteria for election to the Board, nominees to be proposed by the Company for
election to the Board, retirement from the Board, whether to accept any resignation tendered by a
director and Board Committee assignments;
• Actively seek individuals qualified to become Board members and recommend them to the full Board
including those suggested or
including evaluating all potential candidates,
for consideration,
nominated by third parties;
• Consider director candidates holistically to ensure a diversity of perspectives,
taking into
consideration factors such as skills, experience, gender, ethnicity, race, nationality and age;
• Make recommendations to the Board on whether to include disclosures in the Proxy Statement on
director independence, governance and director nomination matters;
• Oversee the Company’s new director orientation program and continuing education program for
incumbent directors;
• Review and reassess the adequacy of the Company’s Corporate Governance Guidelines;
• Oversee and report to the Board on the Company’s compliance with its programs relating to the
Code of Business Conduct, and the Company’s role as a responsible corporate citizen, including its
ESG programs; and
• Oversee the annual performance review of the Board and its Committees.
• Review matters related to the Company’s capital structure and allocation,
financial condition,
leverage and financial strategies, interest rate risk, expense management, strategic investments and
dispositions such as significant mergers, acquisitions, divestitures,
joint ventures, real estate
purchases and other debt and equity investments;
• Consider, review and recommend to the Board any Company dividend and share repurchase
policies and programs;
• Approve the Company’s derivatives and hedging policies and strategies for managing interest rate
and foreign exchange rate exposure;
• Review the Company’s investment policies and practices, credit ratings and ratings strategy;
• Review the Company’s investor relations strategy; and
• Review the types of information to be disclosed in connection with earnings releases and earnings
guidance provided to analysts and rating agencies.
• Facilitate the Board’s oversight, review, discussion and understanding of the Company’s major
technology and innovation strategies and plans in the following key areas:
– investments in technology and software;
– development and execution of technology strategies;
– overall strategy, effectiveness and risk profile of its product technology and software cybersecurity
program;
– technology trends with significant impacts on our business; and
– research and development operations.
Compensation and Human Capital Management Committee Matters
Compensation and Human Capital Management Committee Interlocks and Insider Participation
No current member of the Compensation and Human Capital Management Committee has served as one of our
officers or employees at any time. None of our executive officers serves as a member of the compensation
committee of any other company that has an executive officer serving as a member of our Compensation and
Human Capital Management Committee or Board.
Oversight of Compensation Consultant
The Compensation and Human Capital Management Committee has sole authority to retain a compensation
consultant to assist the Compensation and Human Capital Management Committee in the evaluation of director, CEO
or senior management compensation, but only after considering all factors relevant to the consultant’s independence
from management. In addition, the Compensation and Human Capital Management Committee is directly responsible
for approving the consultant’s compensation, evaluating its performance and terminating its engagement.
The Compensation and Human Capital Management Committee has retained Frederic W. Cook & Co. (“FW
Cook”) as its independent compensation consultant to assist the Compensation and Human Capital Management
Committee with the design of our executive compensation programs as well as to provide objective advice on
compensation practices and the competitive landscape for the compensation of Resideo’s executive officers. FW
2021 PROXY STATEMENT | 21
Cook reports to the Compensation and Human Capital Management Committee, has direct access to
Compensation and Human Capital Management Committee members, interacts with Resideo management when
necessary and appropriate and attends Compensation and Human Capital Management Committee meetings
either in person or by telephone. FW Cook provides services only to the Compensation and Human Capital
Management Committee as an independent consultant and does not have any other consulting engagements
with, or provide any other services to, Resideo. The independence of FW Cook has been assessed according to
factors stipulated by the SEC and the Compensation and Human Capital Management Committee concluded that
no conflict of interest exists that would prevent FW Cook from independently advising the Compensation and
Human Capital Management Committee.
FW Cook compiles information and provides advice regarding the components and mix (short-term/long-term;
fixed/variable; cash/equity) of the executive compensation programs of Resideo and its peer group (see page 42
for further details regarding the compensation peer group) and analyzes the relative performance of Resideo and
the compensation peer group with respect to the financial metrics generally used in the programs. FW Cook also
provides information regarding emerging trends and best practices in executive compensation. The
Compensation and Human Capital Management Committee also received general advice from FW Cook in 2020
and 2021 regarding the terms of the severance and transition agreements entered into with Resideo’s executive
officers.
Compensation Input from Senior Management
The Compensation and Human Capital Management Committee considers input from senior management in making
determinations regarding the overall executive compensation program and the individual compensation of
the
executive officers. As part of Resideo’s annual planning process, the CEO, CFO, and Chief Human Resources Officer
develop targets for Resideo’s incentive compensation programs and present them to the Compensation and Human
Capital Management Committee. These targets are reviewed by the Compensation and Human Capital Management
Committee to ensure alignment with our strategic and annual operating plans, taking into account the targeted year-
over-year and multi-year improvements as well as identified opportunities and risks. The CEO does not provide
recommendations on his own compensation. Unless otherwise set by negotiated offer terms, the CEO recommends
base salary adjustments and cash and equity incentive award levels for Resideo’s other executive officers. The
recommendations of the CEO are based on performance appraisals (including an assessment of the achievement of
pre-established financial and non-financial management objectives)
together with a review of supplemental
performance measures and prior compensation levels relative to performance. The CEO presents to the
Compensation and Human Capital Management Committee and the full Board his evaluation of each executive
officer’s contribution and performance over the past year, strengths and development needs and actions and presents
to the full Board succession plans for each of the executive officers.
The Board’s Role in Risk Oversight
The Board is actively engaged in overseeing and reviewing the Company’s strategic direction and objectives,
taking into account (among other considerations) Resideo’s risk profile and exposures. It is management’s
responsibility to manage risk as overseen and assessed by the Board. The Board receives regular updates on
risk exposures and there is open communication between management and the directors. The Company has
established processes to report and monitor for material risks applicable to the Company. The Board oversees
these reporting processes and will review annually Resideo’s enterprise risk management programs.
The Board as a whole has responsibility for risk oversight, including succession planning relating to the CEO and
risks relating to the competitive landscape, strategy, business conditions and capital requirements of
the
Company. The Committees of the Board also oversee Resideo’s risk profile and exposures relating to matters
within the scope of their authority. The Board regularly receives detailed reports from the Committees regarding
risk oversight in their areas of responsibility.
The Audit Committee discusses the Company’s risk profile, risk management, and exposure (and Resideo’s policies
relating to the same) with management, the internal auditors and the independent auditors. Such discussions include
the Company’s major financial risk exposures and the steps management has taken to monitor and control these
exposures. The Audit Committee is also charged with oversight of Resideo’s Integrity & Compliance program and risks
relating to enterprise-wide cybersecurity, including review of the state of the Company’s cybersecurity program,
emerging cybersecurity developments and threats and the Company’s strategy to mitigate cybersecurity risks.
22 | 2021 PROXY STATEMENT
The Compensation and Human Capital Management Committee considers risks related to the attraction and
retention of talent and the design of compensation programs and incentive arrangements. The Compensation and
Human Capital Management Committee periodically undertakes a review of Resideo’s incentive structure to avoid
encouraging material risk taking through financial incentives.
The Nominating and Governance Committee considers risks related to the Company’s reputation,
environmental and sustainability matters, health and safety issues, equal employment opportunity, anti-
harassment matters and community/government relations. The Nominating and Governance Committee also
oversees succession planning for the Board and the appropriate assignment of directors to the Board Committees
for risk oversight and other areas of responsibilities.
The Finance Committee considers risks related to the Company’s capital structure, capital allocation decisions,
financial condition,
interest rate risk, expense management and strategic
investments and dispositions.
leverage and financial strategies,
The Innovation and Technology Committee considers risks related to the Company’s overall technology and
innovation strategies and its product technology and software cybersecurity program.
While it was in effect during 2020, the Strategic & Operational Committee considered risks related to the
Company’s product and market strategy and oversight related to the CEO transition period and the Company’s
management of the COVID-19 pandemic related health and safety and business continuity matters.
Enterprise Risk Management Program
As a part of its overall risk management strategy, the Company, with advice from the Audit Committee, has
adopted an Enterprise Risk Management (“ERM”) framework consisting of enhancements to our ability to manage
uncertainty and mitigate risk as we drive shareholder value creation. The ERM framework is being deployed to
create a robust risk management program that is aligned with the Company’s strategic and business objectives
based on an enterprise-wide “top down” and “bottom up” view of commercial, strategic, legal, compliance,
cybersecurity and reputational risks. The ERM program is overseen and governed by the Audit Committee and
managed by members of senior management. Working with the ERM program management team, the Board and
the Audit Committee regularly assess the overall risks applicable to the Company, its businesses and functions as
well as management action plans to mitigate or minimize the risks identified, providing the Audit Committee and
the full Board with visibility into the risks that impact us and the plans to mitigate them.
Nominating Board Candidates – Procedures and Qualifications
Minimum Qualifications for Director Nominees and Board Member Attributes
Board Composition, Characteristics and Skills
Collectively,
the Board must be capable of effectively overseeing risk management, capital allocation and
leadership succession. In addition, the composition of the Board, as well as the perspective and skills of its
individual members, needs to align with the Company’s growth and commercial strategy. Board composition and
the members’ perspectives and skills should evolve at an appropriate pace to meet the challenges of the
Company’s changing commercial and strategic goals. The identification and evaluation of director candidates is
an essential part of this process.
The Nominating and Governance Committee has primary responsibility for reviewing with the Board, on an annual
basis, the requisite skills and characteristics of Board members, as well as the composition of the Board as a
whole. This assessment
independence, procedures for shareholder
suggestion or nomination of candidates for the Board and any requirements of applicable law or listing rules.
includes a consideration of director
While the Company’s Corporate Governance Guidelines do not prescribe diversity standards, as a matter of
practice, the Nominating and Governance Committee considers diversity in the context of the Board as a whole
the skills, experience, gender, ethnicity, race, nationality and age of current and
and takes into account
prospective directors to facilitate Board deliberations that reflect a broad range of perspectives. The Board
believes that increased heterogeneity leads to better governance. The Nominating and Governance Committee is
dedicated to actively seeking to recruit director candidates with diverse characteristics and attributes who satisfy
the Board’s nomination criteria and will contribute to the collaborative culture of the Board.
2021 PROXY STATEMENT | 23
Identifying and Recruiting New Members of the Board
The Nominating and Governance Committee shall actively seek individuals qualified to become directors.
Through discussions with the Chairman, Lead Independent Director, CEO and other Board members, specific skill
sets, experience and knowledge important for new Board members will be identified and prioritized in accordance
with the procedures set forth in the Nominating and Governance Committee Charter, the Company’s Corporate
Governance Guidelines, organizational documents and applicable law. Potential candidates meeting these criteria
then will be identified either by professional
reputation or existing Board members.
Candidates are interviewed by the Chairman, CEO, Chair of the Nominating and Governance Committee, and
other members of the Board, as appropriate, to ensure that candidates not only possess the requisite skills and
characteristics but also the personality, leadership traits, work ethic and independence to effectively contribute as
a member of the Board. On successful completion of this process, the Nominating and Governance Committee
will recommend the proposed candidate to the Board and the Board may nominate the successful candidate for
election to the Board at
the annual meeting of shareholders or such other time as the Board determines
appropriate.
recruiting agencies,
The Nominating and Governance Committee has the sole authority to retain and terminate any search firm to be
used to identify director candidates and has sole authority to approve the search firm’s fees and other retention
terms. Search firms retained by the Nominating and Governance Committee shall be provided guidance as to the
the Board is then seeking. The Nominating and
particular experience, skills or other characteristics that
Governance Committee has retained third-party search firms to identify potential director candidates and directed
the firms to ensure that the pool of candidates included women and other diverse candidates. The Nominating
and Governance Committee may also retain other external advisors, including for the purposes of performing
background reviews of potential candidates.
Resideo’s current Board members were either identified through a nationally-recognized search firm or were
recommended by an existing member of the Board. Dr. Yusuf joined the Board in 2021. Dr. Yusuf was identified
as a potential director candidate by a search firm retained by the Nominating and Governance Committee to
identify and assess potential director candidates.
General Criteria
In addition to the specific criteria and priorities developed collectively, director candidates are considered by the
Nominating and Governance Committee in light of a range of more general criteria:
• Exemplification of the highest standards of personal and professional integrity
• Experience and industry background that align with the Company’s strategic and business objectives
• Potential contribution to the composition, diversity and culture of the Board
• Age, educational background and relative skills and characteristics
• Ability and willingness to constructively challenge management through active participation in Board and
Committee meetings and to otherwise devote sufficient time to Board duties
Shareholder Recommendations for Director Nominees
Any shareholder wishing to recommend a candidate for director should submit the recommendation in writing to
Resideo Technologies, Inc., Nominating and Governance Committee, 901 E. 6th Street, Austin, TX 78702,
Attention: Corporate Secretary. The written submission should comply with all requirements set forth in the
Company’s Certificate of Incorporation and By-Laws. The Nominating and Governance Committee will consider
all candidates recommended by shareholders who comply with the foregoing procedures and satisfy the minimum
qualifications for director nominees and Board member attributes.
Advance Notice Director Nominations
Resideo’s By-Laws provide that any shareholder entitled to vote at an annual meeting of shareholders may
nominate one or more director candidates for election at that annual meeting by following certain prescribed
procedures. To be timely, the shareholder must provide written notice of the shareholder’s intent to make such a
nomination or nominations to Resideo’s Corporate Secretary not less than 90 days nor more than 120 days prior
to the first anniversary date of the immediately preceding annual meeting, except as otherwise provided in our
24 | 2021 PROXY STATEMENT
By-Laws. The notice must contain all of the information required in our By-Laws. Any such notice must be sent to
Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. For the 2022
annual meeting of shareholders, such notice must be delivered to the Corporate Secretary no earlier than
February 9, 2022 and no later than March 11, 2022.
Proxy Access Director Nominations
In addition to advance notice procedures, our By-Laws also include provisions permitting, subject to certain terms
and conditions set forth therein, shareholders who have maintained continuous qualifying ownership of at least
3% of our outstanding common stock for at least three years to nominate a number of director candidates not to
exceed the greater of two candidates or 20% of the number of directors then in office who will be included in our
annual meeting proxy statement. Shareholders who wish to nominate a proxy access candidate must follow the
procedures described in our By-Laws. Proxy access candidates and the shareholder nominators meeting the
qualifications and requirements set forth in our By-Laws will be included in the Company’s proxy statement and
ballot. To be timely, a shareholder’s proxy access notice must be delivered to our principal executive offices,
Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary, no less than 120
days and no more than 150 days prior to the first anniversary date that we commenced mailing of our definitive
proxy statement (as stated in such proxy statement) for the immediately preceding annual meeting, except as
otherwise provided in the By-Laws. For the 2022 annual meeting, such notice must be delivered to our principal
executive offices no earlier than November 24, 2021 and no later than December 24, 2021.
Director Onboarding and Continuing Education
Under our Corporate Governance Guidelines, all new directors participate in an orientation program upon joining
the Board. Orientation includes presentations by senior management
to familiarize our new directors with
Resideo’s strategic plans, financial statements and key issues, policies and practices and materials pertaining to
its Committees, corporate governance policies and practices and the Company’s businesses,
the Board,
functions,
the Company’s expense, seminars,
conferences and other continuing education programs designed for directors of public companies.
initiatives and processes. Board members may attend, at
Board Meetings and Attendance
The Board met nine times in 2020. Each director attended at least 89% of the meetings of the Board and
Committees on which the director served. Though we have no specific policy regarding director attendance at
annual meetings of shareholders, our directors are expected to attend. All of the then-serving directors attended
our 2020 annual meeting of shareholders.
Board and Committee Evaluations
As part of the Board’s commitment to good governance, the Board conducts an annual process to assess the
effectiveness of the full Board and the operations of its Committees. The Nominating and Governance Committee
will oversee the evaluation of the Board as a whole and its Committees and solicit feedback from directors as to
whether the Board is continuing to evolve and to be refreshed in a manner that serves our business and strategic
needs. After distribution of the self-evaluation materials to directors, the Nominating and Governance Committee
will receive comments from all directors and report to the Board, identifying areas for improvement in the
performance of the Board and its Committees. The Nominating and Governance Committee intends to retain an
external third-party to facilitate the evaluation process at least once every three years.
The Nominating and Governance Committee will annually review the scope and content of the self-evaluation to
ensure it is contemporary, appropriate for the needs of the Company and that actionable feedback is solicited on
the operation and effectiveness of the Board and its Committees.
Before recommending the re-nomination of a slate of incumbent directors for an additional term, the Nominating
and Governance Committee will evaluate whether
incumbent directors possess the requisite skills and
perspective, both individually and collectively, to continue to serve our business and strategic needs. This
assessment will
include members’ qualification as independent, strength of character, judgment and ability to
devote sufficient time to attendance at, and preparation for, Board meetings.
2021 PROXY STATEMENT | 25
Non-Employee Director Compensation
Director Compensation
Our Compensation and Human Capital Management Committee, with assistance from the independent
compensation consultant, periodically reviews and makes recommendations to our Board regarding the form and
amount of compensation for non-employee directors. Directors who are also our employees receive no
compensation for service on our Board.
As described in more detail below, the non-employee directors elected to forego their annual cash retainers
payable for service on the Board for the first quarter of 2020 in support of the Company’s cost cutting initiatives in
response to the COVID-19 pandemic. Near the end of fiscal 2020, the Compensation and Human Capital
Management Committee reviewed the Company’s financial condition and paid a special year-end bonus to
current employees who were previously impacted by COVID-19 salary reductions and furloughs in recognition of
their significant hard work during a challenging year. At the same time, the Compensation and Human Capital
Management Committee approved comparable restorative payments to Board members in an amount equal to
the amount by which the cash retainer payments had been reduced in 2020. Additionally, after completion of its
work, the Strategic & Operational Committee was dissolved, effective December 3, 2020.
We believe that annual compensation for non-employee directors should consist of both a cash component,
designed to compensate members for their service on the Board and its Committees, and an equity component,
designed to align the interests of directors and shareholders. Our non-employee directors generally receive
pro-rated equity grants when they first join the Board.
The table below outlines the current annual compensation program for our non-employee directors.
Board of Directors Annual Cash Compensation
Annual Retainer ($)
Member of the Board of Directors
Chairman of Board—Additional Cash Retainer
Lead Director—Additional Cash Retainer
Board Committee Membership—Additional Cash Retainers:
Audit Committee
Compensation and Human Capital Management Committee
Finance Committee
Nominating and Governance Committee
Innovation and Technology Committee
Chair*
25,000
15,000
10,000
10,000
10,000
Strategic & Operational Committee (dissolved)
360,000**
90,000
175,000
25,000
Member
10,000
7,500
5,000
5,000
5,000
10,000
Committee Chair retainers include the member retainer fees.
*
** Reflects significant time commitment related to oversight of the Company’s comprehensive operational and financial review and CEO transition.
Board of Directors Annual Equity Compensation
Annual Restricted Stock Units (“RSUs”)
Annual Retainer ($)
120,000
Cash elements are paid in quarterly installments in arrears and pro-rated if necessary, including for changes in
Committee service or for partial years of service. The RSUs are granted on the date of each Annual Meeting of
Shareholders and generally vest on the earliest of the first anniversary of the date of grant, the director’s death or
disability, or removal from the Board coincident with the occurrence of a change in control. Directors who join the
Board between Annual Meetings generally receive a pro-rated RSU grant. We do not separately compensate our
directors for attending Board or Committee meetings.
In March 2021, the Compensation and Human Capital Management Committee reviewed market data on director
compensation among the Company’s peer group, recognizing that the Company’s annual director compensation
levels have remained flat since the Spin-Off. Based on its review and conclusion that total director compensation
was below the peer median, the committee recommended, and the Board approved, three changes to director
compensation. The Board approved an increase to the annual equity compensation from $120,000 to $130,000
26 | 2021 PROXY STATEMENT
effective with the awards to be made in connection with the 2021 Annual Meeting of Shareholders, an increase in
the annual cash retainer for the Chair of the Nominating and Governance Committee from $10,000 to $15,000
effective April 1, 2021, and an increase in the annual cash retainer for the Chair of the Compensation & Human
Capital Management Committee from $15,000 to $20,000 effective April 1, 2021.
Director Deferred Compensation Plan
In September 2019, the Compensation and Human Capital Management Committee approved the adoption of the
Resideo Deferred Compensation Plan for Non-Employee Directors (the “Director Deferred Compensation Plan”).
This plan encourages our directors to hold a portion of their compensation in the form of equity or deferred cash,
which can only be monetized at the end of their tenure on the Board or in other limited circumstances. At the
the Compensation and Human Capital Management Committee also permitted non-employee
same time,
directors to defer
their annual equity award in accordance with the terms of our 2018 Stock Plan for
Non-Employee Directors of Resideo Technologies, Inc. (the “Director Stock Plan”).
Prior to the first day of each calendar year beginning on or after January 1, 2020, each non-employee director
may (i) elect to convert all of his or her annual cash retainer fees as well as any annual committee and chair fees
other than reimbursements otherwise payable to him or her by the Company into deferred stock units or deferred
cash pursuant to the Director Deferred Compensation Plan, and (ii) elect to defer payment of his or her annual
equity grant of restricted stock units once the award has vested in accordance with its terms and conditions. Each
deferred stock unit under the Director Deferred Compensation Plan and each vested restricted stock unit that a
non-employee director has elected to defer under the terms of the Director Stock Plan represents the right to
receive one share of our common stock generally on the first day of the seventh calendar month following the
date the non-employee director incurs a separation of service from us.
Other Benefits: Non-employee directors are also provided with $350,000 in business travel accident insurance.
Director Compensation for 2020
In 2020, each non-employee director received his or her annual cash retainer amount in addition to the annual
equity retainer award of RSUs with a grant date fair value of approximately $120,000. Annual equity retainers
generally vest with respect to 100% of the RSUs awarded on the first anniversary of the grant date, subject to
continued service on the Board. Beginning in 2020, each of our non-employee directors has the ability to elect to
defer all of his or her annual cash retainer as well as his or her annual equity retainer award pursuant to the terms
of our Director Deferred Compensation Plan and Director Stock Plan, respectively, as discussed above. The table
below reflects the 2020 compensation paid to our non-employee directors. Dr. Yusuf was not a director for any
portion of 2020 and therefore is not listed in the tables below.
Director Name
Roger Fradin
Paul Deninger
Cynthia Hostetler(2)
Brian Kushner
Jack Lazar
Nina Richardson
Andrew Teich(3)
Sharon Wienbar
Fees Earned or
Paid in Cash
($)
Stock Awards
(1)($)
$275,000
$115,000
$ 51,055
$ 94,126
$128,322
$115,822
$440,537
$116,896
$119,992
$119,992
$148,188
$119,992
$119,992
$119,992
$119,992
$119,992
Total
($)
$394,992
$234,992
$199,243
$214,118
$248,314
$235,814
$560,529
$236,888
(1) The stock award values set forth in the above 2020 Director Compensation Table represent the aggregate grant date fair value of stock
awards computed in accordance with FASB ASC Topic 718. Annual equity retainer awards in the form of RSUs totaling 12,172 shares
were made to non-employee directors on June 8, 2020 with a fair value of $9.858 per share.
(2) Ms. Hostetler received an RSU award for 6,143 shares with a fair value of $4.59 per share upon joining the Resideo Board on March 19,
2020. This award vested in full on June 12, 2020.
(3) Mr. Teich’s fees earned include the retainer payments he received for his service as Chair of the special Strategic & Operational
Committee that was formed in late 2019 and completed its work in December 2020.
2021 PROXY STATEMENT | 27
A more detailed discussion of the assumptions used in the valuation of stock awards made in fiscal year 2020
may be found in Note 18 of the Notes to the Financial Statements in the Company’s Form 10-K for the year ended
December 31, 2020.
Director Name
Roger Fradin
Paul Deninger
Cynthia Hostetler
Brian Kushner
Jack Lazar
Nina Richardson
Andrew Teich
Sharon Wienbar
Outstanding
Equity Awards
as of 12/31/2020
(#)
23,329
23,329
12,172
12,172
23,329
23,329
23,329
23,329
Stock Ownership Guideline for Non-Employee Directors
To further align the interests of directors with the long-term interests of our shareholders, non-employee directors
are required to own, until their separation from service from the Board, at least five times the value of their annual
cash retainer, or $450,000, in our common stock by the fifth anniversary of their appointment to the Board. For
purposes of the guidelines, share ownership includes shares of Resideo common stock, restricted stock units and
deferred stock units. Accordingly, the guidelines align our directors’ economic interests in the performance of the
Company with those of our shareholders.
As of December 31, 2020, all directors, except Ms. Hostetler who joined the Board in 2020 and Dr. Yusuf who
joined the Board in 2021, have met the minimum stock ownership required under our stock ownership guidelines.
Compensatory Arrangement with Former Director and Executive Officer
On January 5, 2020, the Company entered into a letter agreement with Niccolo de Masi, who was a director and
executive officer of the Company until January 6, 2020 and remained an employee until March 13, 2020. In
addition to severance benefits under our Severance Plan for Designated Executive Employees, with enhanced
salary continuation payments of 18 months, Mr. de Masi was also eligible for continued vesting of his
November 18, 2018 restricted stock unit award that he received upon his election as a director and before he
became an executive officer and he was eligible to receive a payment equal to his 2020 target annual incentive
award, pro-rated for the portion of 2020 during which he remained employed, which amount would only
include one-half of the amount tied to the individual performance component. All the severance benefits were
subject to the conditions in the Executive Severance Plan, and the additional benefits were subject to Mr. de
Masi’s compliance with other covenants governing his separation, including a one-year non-competition and
two-year non-solicitation restriction.
28 | 2021 PROXY STATEMENT
Other Executive Officers
In addition to Mr. Geldmacher, whose biographical
information is included above, the following is a list of
individuals serving as executive officers of Resideo as of the date of this Proxy Statement. All of Resideo’s
executive officers have been appointed by the Board and serve at the discretion of the Board and CEO. There are
no family relationships among any of our executive officers.
NAME, AGE,
YEAR FIRST APPOINTED
AN EXECUTIVE OFFICER
Robert Aarnes, 51, 2018
President, ADI
Global Distribution
POSITION
BUSINESS EXPERIENCE
Stephen Kelly, 53, 2018
Executive Vice
President and
Chief Human
Resources Officer
Jeannine Lane, 60, 2018
Executive Vice
President,
General Counsel,
Corporate
Secretary and
Chief Compliance
Officer
Prior to joining the Company, Mr. Aarnes served as president of
Honeywell’s ADI Global Distribution business since January 2017.
Mr. Aarnes served as vice president and general manager of
Honeywell’s ADI North America business from November 2014 to
January 2017. Mr. Aarnes served as vice president of operations of
Honeywell’s ADI North America business from January 2013 to
November 2014. Prior to joining Honeywell, Mr. Aarnes served as
president and chief executive officer of GUNNAR Optiks, LLC, a
company that specializes in developing and manufacturing digital
eyewear,
from September 2008 to November 2012. Mr. Aarnes
received his bachelor’s degree in political science from the United
States Naval Academy and his MBA in management from San Diego
State University.
Prior to joining the Company, Mr. Kelly served as vice president of
Human Resources and Communications for Honeywell’s aerospace
business from 2014 to 2018. Mr. Kelly was the vice president of
Corporate Human Resources, Organizational Development &
Learning at Honeywell from 2013 to 2014. Mr. Kelly joined Honeywell
in 2008 and has served in various human resources leadership
positions for Honeywell’s aerospace business. He was vice president
for Honeywell’s aerospace business’s
of Human Resources
in 2013. Previously, Mr. Kelly was vice
commercial segment
president of Human Resources
for Honeywell’s Aerospace
Defense & Space unit from 2011 to 2013. He was vice president of
Human Resources for Honeywell’s aerospace Engineering &
Marketing unit
to joining Honeywell,
Mr. Kelly was vice president of Human Resources for the Dental
business at Danaher Corporation, a global science and technology
innovator, from 2007 to 2008. Mr. Kelly was Vice President of the
EMEA region and global head of staffing and talent management of
the Industrial Technologies business at Danaher from 2005 to 2007.
to joining Danaher, Mr. Kelly was the head of Human
Prior
Resources for BHA Group,
Inc., a leading global supplier of
replacement parts and services for industrial air pollution control
systems. Mr. Kelly received his bachelor’s degree in personnel
administration from the University of Kansas and a master’s degree
in organizational development from Ottawa University.
from 2008 to 2011. Prior
Prior to joining the Company, Ms. Lane was the Vice President and
General Counsel of Honeywell Homes since January 2018. She was
the Vice President and General Counsel of Honeywell Security and
Fire from 2015 to 2017, Honeywell Fire Business and Honeywell
Safety Business from 2014 to 2015, Honeywell Life Safety Business
from 2013 to 2014 and Honeywell Security from 2004 to 2013.
Ms. Lane holds a bachelor’s degree in political science from SUNY
University at Albany and a Doctorate of Law from Albany Law School.
2021 PROXY STATEMENT | 29
POSITION
BUSINESS EXPERIENCE
Inc., an industrial
Prior to joining the Company, Mr. Merrill served as president of the
Commercial Business Unit and chief marketing officer at FLIR
technology company focused on
Systems,
intelligent sensing solutions, from 2014 until 2020. He was employed
by Samsung Electronics from 2006 until 2014 where he most recently
served as vice president of Samsung’s U.S.
tablet business.
Mr. Merrill began his career in the telecommunications industry with
posts at CenturyLink and Covad Communications. Mr. Merrill
received his bachelor’s degree in English at Wabash College,
master’s of science degree in telecommunications from the University
of Colorado and an MBA from the Harvard Business School.
Ironhawk
Mr. Theodore is the founder and managing director of
Advisory Group, a boutique investment advisory service firm, and has
served in these positions since May 2008, and continues to serve as
managing director. Prior to joining the Company, Mr. Theodore
served as interim chief executive officer of the Consumer Division of
Artesyn Embedded Technologies, a power supply company, from
2019 to 2020. From 2017 to 2019, Mr. Theodore was chief financial
officer and acting chief operating officer of Artesyn’s Asia Pacific
operations. From 2015 to 2017, Mr. Theodore was general manager
of the healthcare services division of Transworld Systems, Inc., a
provider of ARM financial services to the government, education,
healthcare and commercial business segments. Prior
to joining
Transworld Systems, Mr. Theodore held various executive financial
and operational
leadership roles at global manufacturing and
distribution companies. Mr. Theodore received his bachelor’s degree
in accounting from Saint John Fisher College and an MBA from
Owen Graduate School of Management at Vanderbilt University.
Mr. Trunzo most recently served as managing director at Gryphon
Investors, a private equity firm, since October 2019, and he was an
independent consultant advising private equity firms from January
2017 to October 2019. From April 2015 to November 2016,
Mr. Trunzo was executive vice president and CFO of FEI Company, a
microscope technology company, before it was acquired by
ThermoFisher Scientific in September 2016. Prior to that, he served
in leadership roles at FLIR Systems, Inc., an industrial technology
company focused on intelligent sensing solutions, including as senior
vice president and CFO from 2010 to 2015, and as senior vice
president, Corporate Strategy and Development from 2003 to 2010.
Earlier in his career, Mr. Trunzo worked in various capacities at Bank
of America Securities and PNC Bank. Mr. Trunzo received his
bachelor’s degree in economics from the Catholic University of
America and an MBA from the University of Pittsburg. Mr. Trunzo has
also completed Harvard Business School’s Advanced Management
Program.
NAME, AGE,
YEAR FIRST APPOINTED
AN EXECUTIVE OFFICER
Travis Merrill, 45, 2020
Executive Vice
President, Chief
Strategy &
Commercial
Officer
Phillip Theodore, 53, 2020
President,
Products &
Solutions
Anthony L. Trunzo, 58, 2020
Executive Vice
President, Chief
Financial Officer
30 | 2021 PROXY STATEMENT
Our Planet, Our People, Our Purpose
Our Board of Directors and the Company’s committees play a key role in oversight of
the Company’s
Environmental, Social and Governance (ESG) efforts. We believe that as a publicly traded company, the impact
of our global business operations on Our Planet, how we care for and manage Our People, and what we stand
for in Our Purpose, are critical to the Company’s success. In 2020, we established an ESG Council comprised of
various functional and business leaders to ensure continued focus on these important initiatives, and to report out
regularly to the Board and its Committees.
Our Planet
We understand that the earth’s resources are limited, and we need to be a good steward of them to make Our
Planet a better place for future generations. A focused approach to sustainability is a priority for us and our
leadership is accountable for our sustainability efforts to ensure that enough resources are deployed to manage
our commitments and maintain appropriate controls. This commitment
is documented in our Sustainability
Opportunity policy endorsed by our CEO and publicly available on our website.
We communicate with internal and external stakeholders to promote awareness of their responsibilities and how
they can contribute to improving sustainability efforts. In our initial year as Resideo, we used calendar year 2019
as a baseline to measure our environmental impact and to establish sustainability targets for the organization,
with a core objective of reducing our carbon impact both in terms of our operational footprint and in the product
offerings to our customers and the public at large. Our stated goals in 2020 were to reduce our energy usage,
water consumption and greenhouse gas emissions by 20% by 2025. We also stated our goal to reduce both
hazardous waste and non-hazardous waste by the same 20% target over the same period.
We have made progress and see continuing opportunities to reduce our carbon footprint and minimize
greenhouse gas emissions (GHG) in two main areas:
• Sustainability in our Operations — how we’re optimizing our supply chains, our facilities and reducing
non-renewable resources wherever possible;
• Sustainability Through our Products — many of the products we manufacture help consumers achieve
comfort while also reducing their energy use and ensuring their homes are protected from damage;
Sustainability in our Operations
Aligned to Resideo’s commitment to design, build and supply products that help keep our customers comfortable,
safe and secure and also support environmental responsibility, we also focus on the environmental impact of our
operations. In 2020, all core environmental metrics showed improvement versus our baseline year of 2019 for our
manufacturing footprint (figures are normalized by annual revenue):
Measurement
Units
2020 Levels
Energy Consumption
Equivalent Greenhouse Gas Emissions
Water Consumption
Hazardous Waste Generation
Non-Hazardous Waste Generation
BBTU
MT CO2 e
m3
Million kg
Million kg
570
60,000
680,000
0.5
8.2
YOY Savings
(normalized by
revenue)
9.4%
12.2%
8.1%
28.4%
5.2%
Sustainability Through our Products
Resideo’s greatest strength in sustainability is built on a foundation of air, energy, water and security product lines
designed to enable our customers to save energy, water, and carbon, with a presence in over 150 million homes
worldwide.
2021 PROXY STATEMENT | 31
AIR
Our roots extend over a century to the very first thermostat built with a programmable setpoint schedule to reduce
energy use resulting in lower heating and cooling costs for the homeowner. Since then, the features of our
Connected and Non-Connected Thermostat lines have evolved to drive better savings without sacrificing
comfort by leveraging geofencing, setpoint optimization and other intelligence. For our Connected Thermostats
installed in homes and businesses, we estimate that more than 1.2 TWh of electricity and 97M Therms of natural
gas were saved last year. In addition to energy savings, our thermostats are involved in most major residential
utility Demand Response programs in North America. Resideo’s Energy Management division also controls a
fleet of flexible Distributed Energy Resources (DERs) serving at the forefront of the smart electricity grid. These
DERs are enabling the proliferation of renewable generation sources lowering both costs and emissions across
the country, and as a leader in the industry, Resideo’s contribution will be key to a sustainable future.
ENERGY
HVAC monitoring is also a growing part of our product portfolio, with energy and cost savings for buildings and
the professional contractors who service them:
• Our Remote Appliance Monitoring products connect data from our Connected Thermostats and
additional sensors to professional contractors trained in spotting problems in HVAC equipment before they
develop into issues. The contractor is often able to consult with the homeowner to remedy the situation
without an unnecessary site visit, saving time and transportation energy;
• Our new LifeWhere product takes remote monitoring to the next level by injecting machine learning into the
equation to detect signs of issues and inefficiencies before a costly failure occurs.
Resideo produces many products that are key components in systems people use every day. Our Atmospheric
and Powered Gas Water Heater Valves are found in four million water heater tanks produced each year.
Efficiency standards and innovation have recently driven water heater efficiency up by 6% for atmospheric and
3% for tanks with powered valves. Based on the installed base of these water heaters over the last decade, we
believe our valves in these more efficient systems contributed to a reduction of an estimated 1T Therms of natural
gas savings last year.
In summary, our leading air and energy products contributed to the following direct savings in our customer
homes in 2020:
Measurement
Units
2020 Savings
Electricity Consumption
Billion kWh
Natural Gas Consumption
Million Therms
Equivalent Greenhouse Gas
Emissions
Million MT CO2 e
1.2
140
1.6
WATER
Our Connected and Non-Connected Water Valves & Preventers help enable more efficient management of
building hot water. These allow lower temperatures to be used in water systems, saving energy by reducing how
32 | 2021 PROXY STATEMENT
much heat is required and improving safety by limiting scalding. Resideo Water Leak and Freeze Detectors
(WLDs) are one of our premier connected products that pays dividends for our customers and insurance
companies by detecting leaks and freeze-related water breaks in water heater tanks, washers, and sinks before
they become catastrophic failures. A recent pilot program concluded that 11% of catastrophic failures were
avoided thanks to these innovative products. When extrapolating to all these devices in use this would have
saved $1.6M in claims and 2.7M gallons of water in 2020 alone.
Our People
Our human capital management is a critical component of our overall Company strategy. We are committed to
creating a diverse, equitable and inclusive workplace, where employees can bring their authentic selves to work
each day. We sponsor employee resource groups for Women, LGBTQIA+, Black, Latino, Veterans, and people
with Differing Abilities, and strive to attract diverse talent. Ensuring “pay for performance” and aligning our total
rewards program with shareholder interests, including the 2020 rollout of an employee stock purchase plan, are
key to our vision. Engaging and developing our talent is vital to our business and operating results. This year we
launched an improved Employee Voice Survey and created action plans to respond to employee feedback,
developed a people manager certification training program, enhanced our global mentor program, and revamped
our annual performance planning process to empower managers to provide quarterly feedback to our employees
through quarterly “pulse” conversations versus having annual end-of-year development conversations. These
initiatives have spawned “continual personnel
improvement” where we’re challenging our employees, gauging
their satisfaction with Resideo and developing our future leaders.
Additional information regarding our employee programs, including health and safety data, can be found in the
Human Capital section of the Company’s recent annual report on Form 10-K, available on our website.
COVID-19 Health and Safety Measures
As with most companies, the COVID-19 pandemic had a substantial
impact in 2020 on our workplaces and our
employees. Our commitment to providing a safe and healthy workplace for all employees was heightened by the
challenges of the pandemic, and we responded aggressively to the constantly changing global landscape of learnings,
guidance and directives. In response to the pandemic, we took numerous actions to protect the health and safety of our
employees, visitors and customers. These actions included formation of a response team, contact tracing and tracking
of exposure and positive cases, enhanced cleaning protocols, moving to work from home where possible, suspension
of most business travel and in-person meetings, the purchase of face coverings, gloves, hand sanitizer, and hand held
thermometers, installation of thermal scanners at our manufacturing sites, installation of floor demarcations and plastic
shields in our ADI branches and on manufacturing lines, weekly internal audits, external audits of select sites, leasing
of additional vans to permit distancing where we provide transportation to employees, daily symptom self-assessments,
curbside and contactless pickup in many locations, enhanced employee benefits, COVID-19 testing, and policies
requiring face coverings and physical distancing.
Some additional specific actions we took to protect our employees, customers and visitors included:
• Global COVID-19 Response Team: As the pandemic’s scope became clear in February 2020, we created a
global coronavirus response team including representatives from key functions and business units. The team
tracked developing guidance from the World Health Organization (WHO), the Centers for Disease Control
and Prevention (CDC), and similar agencies, and identified various actions for protecting the health and
safety of our employees, while also ensuring we could continue to meet the needs of our customers.
• Work from Home Implemented Where Feasible: On March 16, 2020, we moved globally to a work from
home model for all positions where feasible, intended to not only protect remote workers but to decrease
traffic onsite to protect our essential frontline workers.
• Restrictions on Business Travel, Conferences and Site Visitors: Beginning in March 2020, we
significantly limited business travel, eventually cancelling all business travel for a period and pivoting instead
to quality electronic platforms for meetings.
• Health and Welfare Benefits: When our Mexico manufacturing associates found it difficult
to obtain
COVID-19 testing and treatment, we offered special COVID-19 health coverage and separately engaged a
2021 PROXY STATEMENT | 33
vendor to provide rapid, priority testing. We took advantage of changes in U.S.
law to permit 401(k)
distributions and increased options for use of flexible spending accounts. In addition, where feasible we
enhanced benefit coverage to include COVID-19 related illness.
• Hotline for Employee COVID-19 Concerns: We utilized our existing Integrity & Compliance hotline as an
avenue for employees to report a COVID-19 safety concern, and specifically noted that the Company
prohibits retaliation against employees who report unsafe or unhealthy working conditions regarding the
pandemic. We continue to stay abreast of the changing COVID-19 landscape and monitor our workplaces to
provide a safe and healthy working environment for our employees.
Our Purpose
Resideo is working to address some of the fundamental global challenges we as citizens face today. We imagine
a world where homes and buildings are good for the planet, where technology works to simplify everyday life. In
that world, people are healthy, happy and secure. To help create this future, we work every day to simplify the
connected world so that people have peace of mind and can focus on what matters most. We are starting at
home – with our neighborhoods and communities – and committing to making a difference for our customers and
the industries we serve.
As a company, we provide people with products and technologies to manage their homes to help keep them more
comfortable, efficient, and secure. We believe that for the communities where we do business and our employees
live, the basic needs of safety, security, housing and freedom from hunger must first be met, before people are
able to fully thrive and improve the quality of their lives.
We provide support to these local communities through various, global corporate-wide and localized grassroots
philanthropic efforts.
Safety and Security
Resideo has been a strong supporter of Mission500, a security industry non-profit that serves the needs of
children and communities in crisis in the U.S. Resideo is a financial supporter of the organization and also has
employee representation on Mission500’s Advisory Board, participating in monthly board calls to shape the
strategy and direction for the organization. Resideo employees have raised funds and been given time to
participate in humanitarian trips, most recently to Matlapa, Mexico, to build ecological
latrines in the Eastern
Mexico rain forest, and on multiple previous trips to Ponce, Puerto Rico, to help rebuild homes and infrastructure
following Tropical Storm Karen and Hurricane Maria that left much of the island community destroyed.
Housing
Resideo has recently embarked on a program with Habitat for Humanity, a global nonprofit housing organization
working in local communities across all 50 states in the U.S. and in approximately 70 countries. Resideo has
identified approximately 25 communities where we have a sizable employee population and will
identify work
projects and cause marketing that will benefit the elderly, veterans and communities in need. Resideo will also
thermostats and other smart home controls to help Habitat
make product donations of security systems,
homebuyers be safe and comfortable in their new homes. This partnership will have a strong employee
engagement and give our employees an opportunity to address local housing issues and better serve the
communities in which they live.
34 | 2021 PROXY STATEMENT
Hunger
Our localized, grass-roots philanthropic employee efforts have been focused on engagement with local hunger
relief organizations including Feeding America, a U.S.-based non-profit with a nationwide network of more than
200 food banks that feed more than 46 million people through food pantries, soup kitchens, shelters and other
community-based agencies. Employees in our Golden Valley, Minnesota, Melville, New York, and several other
smaller locations have coordinated food drives and fundraising efforts that supported the local Feeding America
organizations.
COVID-19 Response
Resideo has implemented an ongoing Social Outreach program in our Mexico-based manufacturing facilities
(Tijuana, Chihuahua and Juarez) to donate food baskets and cleaning supplies to local civil associations each
month.
We have also provided manufacturing employees with personal protective equipment (PPE) including facemasks
and hand sanitizer to share with their family members. Resideo has also partnered with the Maquiladora
Association (INDEX) to provide PPE supplies to first responders and local COVID-19 designated hospitals.
In our Golden Valley, Minnesota, facility, Resideo donated to North Memorial Hospital and Regions Hospital
approximately 700 N95 protective masks and we contributed 1,500 N95 masks to hospitals on Long Island,
New York.
2021 PROXY STATEMENT | 35
Related Party Transactions
Certain Transactions with Related Parties
Our ADI Global Distribution business (“ADI”) leases its administrative office building in Melville, New York at a
current rent of approximately $1,100,000 per year and reimburses the landlord for certain real estate taxes and
insurance premiums paid on the property, the future value of which cannot be readily determined. ADI has
exercised its right to terminate the lease in February 2022 for a termination fee of $150,000. After ADI entered
into this lease, the property was acquired by a partnership known as “New Island Holdings.” Other than the recent
exercise of the right to terminate early, there have been no material amendments to the lease since the property
was acquired by New Island Holdings. Mr. Fradin, the Chairman of our Board, is a limited partner in New Island
Holdings, holding a 12% ownership interest. The value of the aggregate payments allocable to Mr. Fradin’s share
of New Island Holdings from January 1, 2017 through the expiration of
the lease in February 2022 is
approximately $720,000. The limited partners of New Island Holdings receive distributions based on total lease
payments generated from the portfolio of buildings that the partnership owns, less applicable mortgage and other
expenses.
In 2020, the Company entered into a master agreement and related statements of work (SOWs) for consulting
services with Box and One Consulting with aggregate fees totaling $200,560. Travis Merrill, who was appointed
as Executive Vice President, Chief Strategy & Commercial Officer effective December 21, 2020, was the sole
employee of Box and One Consulting, but has terminated all prior arrangements with Box and One Consulting
after joining the Company. The consulting services provided by Box and One Consulting concluded prior to
Mr. Merrill’s appointment as an officer of the Company and no further consulting services were provided by Box
and One Consulting since such appointment.
Review, Approval and Ratification of Transactions with Related Parties
The Company has a written Policy Concerning Related Party Transactions (the “Policy”) regarding the review,
approval and ratification of transactions between the Company and related parties. The Policy applies to any
transaction in which Resideo or its subsidiary is a participant, the amount involved exceeds $120,000 and a
related party has a direct or indirect material interest. A related party means any director or executive officer of the
Company, any nominee for director, any shareholder known to the Company to be the beneficial owner of more
than 5% of any class of the Company’s voting securities and any immediate family member of any such persons.
Under the Policy, reviews are conducted by management to determine which transactions or relationships should
be referred to the Audit Committee for consideration. The Audit Committee then reviews the material facts and
circumstances regarding a transaction and determines whether or not the transaction is fair and reasonable and
consistent with the Policy and whether the transaction should be ratified or approved. The Policy is in addition to
the provisions addressing conflicts of interest in our Code of Business Conduct and any similar policies regarding
conflicts of interest adopted by the Board. Our directors, executive officers and all other employees are expected
to comply with the terms of the Code of Business Conduct.
36 | 2021 PROXY STATEMENT
Beneficial Ownership
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who
beneficially own more than 10% of a registered class of the Company’s equity securities, to file initial reports of
ownership and reports of changes in ownership of the Company’s common stock and other equity securities with
the SEC within specified periods. Due to the complexity of the reporting rules, the Company undertakes to file
such reports on behalf of its directors and executive officers and has instituted procedures to assist them with
these obligations. Based solely on a review of
filings with the SEC and written representations from the
Company’s directors and executive officers, the Company believes that in 2020 all of its directors and executive
officers filed the required reports on a timely basis with respect to Resideo’s equity securities under Section 16(a),
except that a Form 4 for Mr. Nefkens was inadvertently filed late on April 8, 2020 in connection to a disposition of
shares that occurred on March 20, 2020.
Stock Ownership of Certain Beneficial Owners
The following shareholders reported to the SEC that they beneficially owned more than 5% of Resideo common
stock as of December 31, 2020.
Name and Address of Beneficial Owner
BlackRock, Inc.
55 East 52nd Street,
New York, NY 10055
The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355
Praesidium Investment Management Company, LLC
1411 Broadway – 29th Floor
New York, NY 10018
Title of
Class
Amount and Nature of
Beneficial Ownership
(#)
Percent of
Class (1)
Common Stock
22,110,497(2)
15.26%
Common Stock
14,407,911(3)
9.94%
Common Stock
7,781,233(4)
5.37%
(1) Percentage ownership based on the Schedule 13G/A filings of The Vanguard Group and BlackRock, Inc. as further described below.
(2) According to Schedule 13G/A filed with the SEC on January 25, 2021, BlackRock, Inc. is the beneficial owner of 22,110,497 shares (with
sole voting power with respect to 21,833,292 shares and sole dispositive power with respect to 22,110,497 shares).
(3) According to Schedule 13G/A filed with the SEC on February 10, 2021, The Vanguard Group is the beneficial owner of 14,407,911 shares
(with sole voting power with respect to 0 shares, shared voting power with respect to 141,714 shares, sole dispositive power with respect
to 14,158,541 shares and shared dispositive power with respect to 249,370 shares).
(4) According to a Schedule 13D filed with the SEC on December 13, 2019, Praesidium Investment Management Company, LLC
(“Praesidium”), in its capacity as investment manager to certain managed accounts and investment fund vehicles on behalf of investment
advisory clients, is the beneficial owner of 7,781,233 shares (with sole voting power with respect to 7,331,691 shares and sole dispositive
power with respect to 7,781,233 shares). As the managing members of Praesidium, Peter Uddo and Kevin Oram may be deemed to
beneficially own such shares.
2021 PROXY STATEMENT | 37
Stock Ownership of Directors and Executive Officers
The following table shows the ownership of Resideo common stock, as of April 14, 2021, by each director, each
of the NEOs, and all directors and executive officers as a group. The address of each director and executive
officer shown in the table below is c/o Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702. Executive
officers and directors are subject to stock ownership guidelines. Please see the “Compensation Discussion and
Analysis” for a discussion of executive stock ownership guidelines and the “Stock Ownership Guideline for
Non-Employee Directors” for a discussion of non-employee stock ownership guidelines.
Name
Non-Employee Directors
Roger Fradin
Paul Deninger
Cynthia Hostetler
Brian Kushner
Jack Lazar
Nina Richardson
Andrew Teich
Sharon Wienbar
Kareem Yusuf
Named Executive Officers
Jay Geldmacher(1)
Anthony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Michael Nefkens (former CEO)
Robert Ryder (former Interim CFO)
Michael Flink (former EVP, Transformation)
Sachin Sankpal (former President, Products & Solutions)
All Current Directors and Executive Officers as a Group
(16 individuals)
Shares of
Common Stock (2)
Rights to Acquire
Shares of
Common Stock(3)
Total(4)
Percentage
of Class
Beneficially
Owned
180,565
16,502
6,143
17,404
43,052
19,630
135,308
16,277
0
0
0
36,418
69,464
26,157
45,161
5,687
54,442
59,967
12,172
12,172
12,172
12,172
12,172
12,172
12,172
12,172
940
192,737
28,674
18,315
29,576
55,224
31,802
147,480
28,449
940
0
0
45,134
45,134
107,549
143,967
52,641
48,968
0
0
45,704
40,134
122,105
75,125
45,161
5,687
100,146
100,101
568,723
386,679
955,402
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Indicates that the percentage of beneficial ownership does not exceed 1%, based on 144,896,552 shares of Company common stock
outstanding as of April 14, 2020.
(1) Mr. Geldmacher is also a director of Resideo.
(2) This column includes shares held of record, shares held by a bank, broker or nominee for the person’s account, shares held through
family trust arrangements and shares held jointly with the named individuals’ spouses. For Mr. Fradin, this column includes 8 shares held
by a limited liability company owned by Mr. Fradin.
(3) This column includes shares of Company common stock that may be acquired under employee stock options that are exercisable as of
April 14, 2021 or will become exercisable within 60 days thereafter and shares subject to restricted stock units that will vest within 60 days
of April 14, 2021. No non-employee directors have Company stock options.
(4) This table does not include performance-based restricted share units or time-based stock options and restricted stock units that will not be
earned and/or paid within 60 days of April 14, 2021.
38 | 2021 PROXY STATEMENT
Executive Compensation
Proposal 2: Advisory Vote to Approve Executive Compensation
We seek an annual non-binding advisory vote from our shareholders to approve the compensation of our Named
Executive Officers as described in the “Compensation Discussion and Analysis” section below and the
accompanying compensation tables. This vote is commonly known as “Say-on-Pay”.
We encourage you to read the “Compensation Discussion and Analysis” and accompanying compensation tables
to learn more about our executive compensation programs and policies. Our Board believes that its 2020
compensation-related pay decisions and our executive compensation programs align the interests of shareholders
and executives by emphasizing variable compensation tied to achieving measurable goals that drive value.
This vote is not intended to address a specific item of compensation, but rather our overall compensation policies
and procedures related to the Named Executive Officers. Because the Say-on-Pay vote is advisory, it will not be
binding upon our Board. However, our Board will take into account the outcome of the vote and discussions with
investors when considering future executive compensation arrangements.
Our Board recommends that shareholders vote in favor of the following resolution:
“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named
Executive Officers, as disclosed in the Company’s Proxy Statement for the 2021 Annual Meeting of Shareholders
pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, including
the Compensation Discussion and Analysis, the 2020 Summary Compensation Table and the other related tables
and disclosure.”
The Board of Directors unanimously recommends a vote “FOR” Proposal 2, to approve,
on an advisory basis, the compensation of the Company’s Named Executive Officers,
as stated in the above resolution.
2021 PROXY STATEMENT | 39
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Our Named Executive Officers
This Compensation Discussion and Analysis (“CD&A”) describes the basic objectives, principles, decisions and
rationale underlying our executive compensation policies and decisions made by the Compensation and Human
Capital Committee of the Board (referred to as the “Committee” throughout the Executive Compensation section).
The CD&A describes the material elements of the compensation of our executive officers identified below (the
“Named Executive Officers” or “NEOs”) for fiscal 2020:
NAMED EXECUTIVE
POSITION(S)
DATES POSITION(S) HELD
(2020 – PRESENT)
Continuing Executives
Jay Geldmacher
Anthony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Former Executive Officers
President and Chief Executive Officer
May 28, 2020 – present
Executive Vice President, Chief Financial
Officer
June 8, 2020 – present
President, ADI Global Distribution
January 1, 2020 – present
Executive Vice President, Chief Human
Resources Officer
Executive Vice President, General Counsel,
Corporate Secretary and Chief Compliance
Officer
January 1, 2020 – present
January 1, 2020 – present
Michael Nefkens
President and Chief Executive Officer
January 1, 2020 – May 27, 2020
Robert Ryder
Michael Flink
Interim Chief Financial Officer
January 1, 2020 – June 7, 2020
Executive Vice President, Transformation
Senior Vice President, Executive Advisor
(non-executive)
January 1, 2020 – May 31, 2020
June 1, 2020 – March 31, 2021
Sachin Sankpal
President, Products and Solutions
January 7, 2020 – October 12, 2020
Key executive team developments during fiscal 2020 that are relevant to this year’s executive compensation
outcomes are:
• Mr. Nefkens, our former President and CEO, left the Company on May 27, 2020.
• The Board appointed Mr. Geldmacher President and CEO of the Company effective May 28, 2020, replacing
Mr. Nefkens.
• From November 7, 2019 to June 14, 2020, Mr. Ryder served as Interim Chief Financial Officer pursuant to an
engagement letter between the Company and Horsepower Advisors LLC (“Horsepower”). As a consultant,
incentive or equity compensation and is excluded from the
Mr. Ryder was not eligible for our annual
discussions in this CD&A of how the Committee sets executive compensation for our executive officers. The
fees paid by the Company to Horsepower for Mr. Ryder’s services are represented in the Summary
Compensation Table under “All Other Compensation.”
• The Board appointed Mr. Trunzo Executive Vice President and Chief Financial Officer, effective June 8,
2020.
• From January 17, 2020 to May 31, 2020, Mr. Flink served as Executive Vice President, Transformation, after
which he transitioned to Senior Vice President, Executive Advisor, which was not an executive officer
position, until his employment terminated on March 31, 2021.
• Mr. Sankpal left the Company on October 14, 2020.
40 | 2021 PROXY STATEMENT
As a result of these executive leadership changes during fiscal 2020, the compensation of several NEOs for fiscal
2020 was determined based on our compensation policies and practices and negotiations with the NEOs in
connection with their hire as the Board sought to build an executive team with the skills and experience to
continue the transformation of our business. To effect these leadership transitions and ensure a smooth transition
of responsibilities and leadership, the Committee approved transition and severance agreements with departing
NEOs.
Our Business and Leadership Transformation in 2020
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 and security markets. We have a global
footprint serving commercial and residential end-markets.
In late 2019, we commenced a comprehensive operational and financial review of our business, focused on
growing revenue, improving gross margins, optimizing our organizational footprint and improving efficiency and
working capital management. During fiscal 2020, we executed on these transformation initiatives, including
rightsizing our cost structure and building a product innovation engine. Going into 2021, we plan to accelerate
targeted investments to ensure we are well positioned for long-term growth and profitability expansion.
Notwithstanding the global headwinds in 2020, the actions our Board and leadership team took in 2019 and 2020
resulted in a stronger balance sheet, business growth and improved financial performance. These actions
included, among others:
• Formation of a special committee of the Board, the Strategic & Operational Committee, in late 2019 to
oversee the comprehensive operational and financial review, provide guidance to management particularly
during the CEO transition period and oversee the CEO transition. This committee completed its work in
December 2020;
• Execution on our multi-year, multi-phase operational and financial review to grow revenue and gross margin,
optimize SG&A, and improve efficiency and working capital management;
• Appointment of Mr. Geldmacher as CEO in May 2020 following a robust executive search and effecting other
executive leadership transitions; and
• Completion of an equity offering that raised approximately $279 million of net proceeds and refinancing of our senior
secured term loan to deleverage our balance sheet and provide financial flexibility to pursue strategic investments.
Our Response to the COVID-19 Pandemic
As the COVID-19 pandemic began to affect our business, our leadership team focused on protecting our
employees and customers, stabilizing our operations, and taking actions to protect our financial condition. The
actions that impacted our human capital, including compensation and benefits, included:
•
Instituted extensive and comprehensive health and safety protocols to protect employees and customers at
all facilities that remained opened;
• Ensured our employees in the U.S. had medical coverage for testing and related costs due to testing and
treatment for COVID-19;
•
Implemented cost reductions in the form of salary reductions, furloughs, and reduced hours for certain
employees, including reduced salaries for certain senior executives;
• Eliminated Board service fees for the first quarter of 2020;
•
Implemented special COVID-19 medical insurance protection for employees working in our Mexico facilities;
• Extended permission for employees with a flexible spending account to reduce coverage mid-year and
adopted plan provision to use 2020 unused funds for services in 2021; and
• Adopted the COVID-19 provision in the Resideo 401(k) Plan to allow for distributions of up to $100,000 under
the CARES Act.
2021 PROXY STATEMENT | 41
Where employee agreement was necessary, an overwhelming majority of employees joined their worldwide
colleagues in supporting this effort to help us preserve our business continuity. In addition to cost savings, our
employees all stepped up and faced the challenges of operating during a pandemic head on. Our employees
found creative ways to keep moving forward safely, which allowed us to continue our essential work of protecting
public health and keeping people safe through our water heater, furnace and potable water controls, as well as
our security products and services.
Following a review of our financial condition near the end of fiscal 2020 and in recognition of our employees’
significant hard work during a challenging year, we paid a special year-end bonus to current employees who were
previously impacted by COVID-19 salary reductions and furloughs. The amount was generally comparable to the
financial impact of the pay reductions earlier in the year.
Our Executive Compensation Philosophy and Approach
We operate in a highly competitive and rapidly evolving market. Our ability to compete and succeed in this
environment depends on our ability to recruit, incentivize and retain talented individuals.
We believe we have created a compensation program for our employees, including our executives, that provides
a compelling and engaging opportunity. The program offers rewards for performance and engages our
participants by requiring them to focus on driving the business to generate long-term value for our shareholders.
We believe this approach is building a performance-driven leadership culture. Utilizing this philosophy, our
executive compensation program has been designed to:
• Be market competitive, targeting median pay levels for total annual compensation, as defined by our peer
group;
• Create sustained increases in shareholder value through incentives designed to drive high performance;
• Reward achievement of near- and long-term business performance targets;
• Make pay decisions based on an executive’s skills and responsibilities, individual performance, experience,
importance to the organization, retention, affordability and internal pay equity;
• Encourage employees to think like owners and align the interests of our leaders at all levels with those of our
shareholders by granting equity awards to mid-level and senior leaders; and
• Deliver compensation in accordance with good governance practices that do not encourage undue risk-taking
by our employees.
Our executive compensation program for 2020 utilized revenue growth, adjusted EBITDA, gross margin and
operating cash flow as components of our annual incentive plan. A substantial portion of our long-term incentive
awards is linked to relative total shareholder return that reinforces our belief that the interests of our executive
team must be intricately linked to that of our shareholders. We remain committed to best practices in
compensation governance for public companies, as described in more detail below, and will regularly review our
executive compensation strategy to maintain alignment with our objectives.
Our Commitment to Compensation Best Practices
As part of our executive compensation program,
the Committee is committed to regularly reviewing and
considering best practices in governance in executive compensation. Following our spin-off from Honeywell, we
implemented and maintain the following policies and practices that guide our ongoing, annual executive
compensation program.
As described above,
the compensation for several of our NEOs who were hired or whose employment
transitioned during fiscal 2020 was determined by negotiations with those executives and therefore may not have
reflected the practices below for compensation in the NEO’s first year of employment or year of transition;
however, the Committee remains committed to these best practices over the long term.
42 | 2021 PROXY STATEMENT
WHAT WE DO
WHAT WE DON’T DO
✖ Allow hedging or pledging of our securities by our
directors and employees, including our NEOs
✖ Backdate or spring-load equity awards
✖ Reprice stock options or stock appreciation rights
without shareholder approval
✖ Offer any compensation programs or policies which
reward excessive risk-taking
✖ Provide multi-year guaranteed payments to
executive officers
✖ Offer tax reimbursement payments or gross-ups on
any severance or change in control payments
✖ Provide any significant perquisites
Maintain robust stock ownership guidelines requiring
our officers and directors to hold a significant
ownership position in the Company
Provide compensation packages heavily weighted
toward equity compensation
Tie our incentive compensation programs directly to
the creation of shareholder value
Link our annual bonus plan goals directly to our
annual operating plan to drive our growth plan
Use multiple performance metrics for our 2020 annual
incentive plan and include a maximum cap on all our
incentive award payouts
Ensure a significant portion of our NEOs’ compensation
is variable and based on company performance
Retain an independent compensation consultant,
selected by the Committee, to advise on competitive
compensation practices
Provide for severance benefits to our NEOs in
connection with a change in control of the Company
that requires a double trigger
Require our NEOs, where permitted by law, to sign
non-competition and intellectual property agreements
Set the annual goals for our CEO with consultation
and regular performance evaluations by our
independent directors
Maintain a compensation recoupment (“clawback”) policy
triggered by a material restatement of the Company’s
financial statements which is applicable to all our NEOs
Evaluate and manage risk in our compensation programs
Peer Group and Market Data
With the assistance of our independent compensation consultant, FW Cook, the Committee selected the companies
below to include in our peer group based on similar size revenue and market capitalization as well as alignment with
our current profile, targeting industrial and distribution companies and internet and technology companies and focusing
on the connected home. This peer group was used to support 2020 compensation decisions.
• A.O. Smith Corp.
• Acuity Brands, Inc.
• ADT Inc.
• Alarm.com Holdings, Inc.
• Allegion plc
• Anixter International, Inc.
• Arlo Technologies Inc.
• BlackBerry Limited
• Fortune Brands Home & Sec.
• Itron, Inc.
• Juniper Networks, Inc.
• Lennox International Inc.
• NCR Corporation
• NETGEAR, Inc.
• Nuance Communications
• Owens Corning
• Pentair plc
• Watsco, Inc.
While the Committee considers peer group information provided by its independent consultant as part of its
benchmarking analysis, it may also refer to other available resources including published compensation data from
surveys to fully understand competitive compensation practices in the external marketplace for executive talent.
2021 PROXY STATEMENT | 43
Although the Committee uses median benchmark data to guide its compensation decisions, actual compensation
levels may vary based on the Committee’s consideration of other factors described below.
Elements of Compensation
Overview
Our Committee has the primary authority to determine and approve the compensation of our NEOs. The
Committee is charged with reviewing our executive compensation policies and practices annually to ensure that
the total compensation paid to our NEOs is fair, reasonable, competitive to our peers and commensurate with the
level of expertise and experience of our NEOs.
Our Committee reviews and approves the total amount of compensation for our NEOs and the allocation of total
compensation among each of
in the case of negotiated arrangements for new and
transitioning executives that may involve consideration of other factors as described below, the Committee’s decisions
related to NEO compensation levels and mix for fiscal 2020 were determined principally on the following factors:
the components. Except
•
Individual and Company performance;
• Each executive’s scope of responsibility and experience;
• The judgment and general
industry knowledge obtained through years of service with comparably-sized
companies in our industry and other similar industries; and
•
Input about competitive market practices from our independent compensation consultant.
Our management
team and human resources leadership worked closely with the Committee to analyze
competitive market practices and effectively design and implement our executive compensation program. Our
CEO regularly participates in Committee meetings and develops and provides recommendations to the
Committee regarding the compensation for our NEOs (excluding himself) and the design of our incentive
compensation programs. Our CEO and other NEOs are not present when their own compensation arrangements
are discussed by the Committee.
Resideo’s 2020 Executive Compensation Program
We have designed both near- and long-term incentive (LTI) compensation packages that we believe are
competitive and support the compensation objectives described above. The key elements of our compensation
program for NEOs, other than NEOs who were hired or were transitioning in fiscal 2020 are set forth below.
BASE SALARY
• Salaries are competitive with median market practice for the individual’s role, taking
into consideration individual performance, experience, scope of role relative to market
benchmarks and other factors
ANNUAL INCENTIVE PLAN
LONG-TERM INCENTIVES
• Our 2020 annual
incentives were tied to achieving growth and profitability targets
approved by the Board.
• Financial metrics for 2020 were revenue, adjusted EBITDA, gross margin and
operating cash flow, which represented 80% of the target incentive opportunity
• The individual performance component of each executive’s annual
incentive was
linked to an assessment of their individual business initiatives, which represented
20% of the target incentive opportunity
• Target long-term incentive values were granted to our NEOs through three equity
instruments:
• Stock options representing thirty percent (30%) of
the total LTI value vesting
annually over three years in equal, one-third installments
• RSUs representing twenty percent (20%) of the total LTI value, vesting annually
over three years in equal, one-third installments
• Performance share units (“PSUs”) representing fifty percent (50%) of the total LTI
value, with potential payout determined based on our total shareholder return
measured against the total shareholder return of the companies in the S&P 400
Industrials Index (rTSR)
The Committee approved a 2020 executive compensation program which reflects our business strategy and a
strong pay-for-performance culture. The Committee views stock options as an equity instrument that strongly
aligns the compensation realized by our NEOs with the long-term returns generated for our shareholders, as no
compensation is earned unless the Company’s stock price increases from the level at which the option is granted.
44 | 2021 PROXY STATEMENT
In addition, our rTSR-based PSUs will be earned based on our shareholder returns performance against that of
the companies in the S&P 400 Industrial Index over a three-year performance period. Our RSU awards further
align the interests of our NEOs with our shareholders and provide a meaningful retention vehicle.
Fiscal 2020 Compensation Program for Mr. Geldmacher, Our New CEO
As described above, our former CEO left the Company in fiscal 2020 and the Board conducted a search and appointed
Mr. Geldmacher as CEO in May 2020. The terms of Mr. Geldmacher’s compensation for fiscal 2020 and other terms of
his offer letter reflect negotiations between the Committee and Mr. Geldmacher,
taking into consideration the
Committee’s desire to attract Mr. Geldmacher to leave his prior employment to join Resideo, to do so during the
restrictions and uncertainty presented by the COVID-19 pandemic and to join the Company while we were in midst of
transforming the business. The summary below describes the key terms of Mr. Geldmacher’s offer letter and
compensation program for fiscal 2020 and factors considered by the Committee in designing the program:
Compensation Element
Fiscal 2020
Factors Considered
Base Salary
$900,000
Annual Incentive Target
150% of base (pro-rated and guaranteed
for fiscal 2020)
Long-Term Incentive
Sign-on Bonus
Make-Whole Bonus
Severance Benefits
Perquisites
Relocation and Legal Fees
Market competitive base salary reflective
of Mr. Geldmacher’s experience
Incentive for Mr. Geldmacher to leave
his prior employment and join Resideo
mid-year with an expectation of
delivering on a previously determined
operating and financial plan over which
he had no input, and joining at a time
when the impacts of the pandemic and
the Company’s transformation were
uncertain; 150% of base target reflects a
market competitive level
Create long-term incentives with three-
year cliff vesting to attract and retain
Mr. Geldmacher during the Company’s
ongoing transformation and in light of the
uncertainty presented by the pandemic
based on market competitive incentive
values
Incentive for Mr. Geldmacher to leave
his prior employment
Ensure that Mr. Geldmacher is made
whole for compensation he may have
earned but would not receive from his
prior employment to incentivize him to
join Resideo mid-year
LTI award valued at $3.097 million
(reflecting a pro-rated amount of
$5.2 million annual LTI value), delivered
10% in RSUs, 15% in stock options and
25% as PSUs, all vesting on the third
anniversary of the grant date, and 50%
in cash if Mr. Geldmacher remains
employed for three years
$2,000,000 subject to ratable repayment
if he resigns other than for good reason
or is terminated for cause within two
years
$90,000 for forfeited quarterly bonus
opportunity with his prior employment
Same as other NEOs, but also provided
if he terminates employment for good
reason
Provide Mr. Geldmacher additional
protection to incentivize him to leave his
prior employment
Same as other NEOs, but also includes
an annual executive physical valued at
up to $5,000 and the right to use a
private jet for business and commuting
purposes, including a full tax gross-up
for such use
Ensure Mr. Geldmacher’s health and
safety, particularly in light of the
COVID-19 pandemic and
Mr. Geldmacher’s need to effectively
lead the Company; during fiscal 2020,
Mr. Geldmacher only used a private jet
for limited business travel
Same relocation assistance as for any
officer plus reimbursement of temporary
housing for up to 12 months and up to
$75,000; reimbursement of legal fees
related to negotiation and documentation
of his employment agreement up to
$37,500
Additional benefits to facilitate
Mr. Geldmacher’s relocation, which is not
expected to occur until the COVID-19
pandemic subsides, and to cover his
reasonable legal expenses negotiating his
offer terms; the relocation expenses were
not incurred in fiscal 2020
2021 PROXY STATEMENT | 45
Fiscal 2020 compensation decisions for our other NEOs were determined in accordance with the general
philosophy and compensation practices described above and included the compensation elements described
below.
2020 Base Salary
Our base salaries provide a competitive level of fixed compensation for our NEOs that is aligned with their role
and accounts for additional factors such as their level of experience and individual performance. The Committee
considers competitive fixed cash compensation to be an important foundation of a competitive total compensation
program that will both retain and motivate our executives. At
the Committee reviews the
competitiveness of base salaries relative to external benchmarks and considers changes, as appropriate, taking
including key elements of our
into consideration market data as well as factors specific to our Company,
compensation philosophy described above. For 2020, base salaries for NEOs were generally increased 3% to
reflect market-based increases; however, base salaries for Mr. Aarnes and Ms. Lane were increased by a greater
amount to reflect their positions and levels of responsibility within the Company. Mr. Geldmacher and Mr. Trunzo
joined the company during fiscal 2020 and their base salaries were determined by reference to their experience
levels and negotiation of the offer letter terms. Fiscal 2020 annual base salaries for the NEOs, including any
change from the prior year, are reflected below:
least annually,
Name
Title
Jay Geldmacher
President and Chief Executive Officer
Anthony Trunzo
Executive Vice President, Chief Financial Officer
Robert Aarnes
President, ADI Global Distribution
Stephen Kelly
EVP, Chief Human Resources Officer
Jeannine Lane
EVP, General Counsel, Corporate Secretary and Chief
Compliance Officer
2019 base
salary
2020 base
salary
Percent
increase
N/A
N/A
$900,000
$585,000
$450,000
$500,000*
$430,000
$442,900
$400,000
$450,000
N/A
N/A
11%
3%
13%
N/A
3%
N/A
Michael Nefkens
Former President and Chief Executive Officer
$900,000
$900,000
Michael Flink
Former EVP, Transformation
Sachin Sankpal
Former President, Products & Solutions
$469,000
$483,070
N/A
$500,000
* Mr. Aarnes’ annual salary was further increased to $575,000 effective December 14, 2020 to reflect the significance of Mr. Aarnes’
contributions and leadership within the Company and the ADI business.
As discussed, above, as part of the Company’s actions to reduce costs when the COVID-19 pandemic began to
impact the Company’s business, the Company implemented pay reductions, including a 15% reduction in annual
base salary payments for NEOs from April 20 to July 26, 2020. In December 2020, the Committee approved a
special bonus payment to each current NEO whose salary had been reduced at the same time the Company
then-current employees in an amount approximating the base salary
made similar bonus payments to all
reduction during the year.
2020 Annual Incentive Plan
The fiscal 2020 annual incentive plan provided NEOs the opportunity to earn a payout with a target set as a
percent of the NEO’s base salary. The Committee set financial metrics that represented 80% of the target
incentive opportunity and individual performance objectives that represented 20% of
incentive
opportunity. Under the 2020 annual incentive plan, our NEOs were eligible to receive a payout ranging from a
threshold payment of 30% to a maximum of 200% of the target award allocated to the achievement of each
financial metric. For each of
the
Committee set each NEO’s target equal to 100% of the NEO’s base salary, except for Mr. Kelly and Ms. Lane
whose targets were equal to 80%, and Mr. Flink whose target was 90%, of base salary.
the NEOs who participated in the annual
incentive plan for fiscal 2020,
the target
As a result of the transformation initiatives underway at the Company in late 2019 and early 2020, the Board did
not finalize the operating budget for fiscal 2020 until April 2020, at which time the Committee set the metrics for
the 2020 annual incentive plan. The levels of financial performance set for each metric at target and maximum
were substantially similar to the levels discussed by the Committee earlier in February 2020; however, in light of
46 | 2021 PROXY STATEMENT
the uncertainty presented by the pandemic, the threshold levels were set below the levels previously discussed,
with an intent of requiring a comparable level of effort to achieve those threshold levels in light of the more
challenging operating conditions that existed in April. In determining the financial metrics used to set performance
targets for our 2020 annual
incentive compensation awards, our leadership team and Committee considered,
among other factors, feedback from our Board that gross margin represents an important measurement of the
long-term financial health of the business. To that end, gross margin was added as a component of the financial
metrics of the Resideo annual incentive plan, along with revenue, adjusted EBITDA, and operating cash flow. The
relative weighting of each financial metric and a definition of the metric is set forth below:
Financial Metric
Weighting
Definition*
Revenue
Adjusted EBITDA
Gross margin
Operating cash flow
35%
25%
25%
15%
Total value of the products and services sold to our customers net of
discounts and returns from continuing operations
Earnings before interest, taxes, depreciation, and amortization, excluding
Honeywell reimbursement agreement payments, stock compensation
expense, restructuring charges and certain other expenses related to our
transformation initiatives and the Spin-Off (all as reported in our earnings
release for the full year ended December 31, 2020)
Ratio of gross profit, or revenue less fixed and variable cost of goods sold,
to revenue
Adjusted EBITDA plus changes in working capital less adjusted capital
expenditures during the year
*
The Committee determined that each financial metric would be determined excluding fluctuations in foreign currency.
The annual incentive award financial metrics for our NEOs, other than Mr. Aarnes and Mr. Sankpal, were based
on consolidated Resideo results. The financial metrics for Mr. Aarnes’ annual incentive award were weighted 50%
on the results of the ADI business, and 50% based on Resideo’s consolidated results. The financial metrics for
Mr. Sankpal’s annual incentive award were weighted 50% on the results of the Products & Solutions business,
and 50% on Resideo’s consolidated results. However, following the end of the year, when the Committee
evaluated the Company’s performance to certify the results for annual
the Committee
determined to approve payouts for all NEOs, including Mr. Aarnes and Mr. Sankpal, based solely on consolidated
results. The Committee made this determination for two reasons: (i) in light of the COVID-19 pandemic that
impacted the Company’s business in the middle of
the
management team was working collaboratively toward achievement of overall results regardless of particular
impacts on the Company’s business segments and (ii) certain financial benefits impacted the Company’s
consolidated results that did not flow through to the business segments and could not reasonably be allocated to
the business segments. As indicated below, each NEO who participated in the annual incentive plan thus earned
a payout equal to 77.6% of the NEO’s target bonus based on these financial results.
the Committee wanted to ensure that
incentive payouts,
the year,
The tables below summarize the plan goals and performance results for 2020 for the Company overall and for the
ADI and Products & Solutions segments. Notably, the Committee did not change the incentive metrics or approve
adjustments related to the impact of COVID-19 after they were set in April. As indicated above, each NEO who
participated in the 2020 annual incentive plan was ultimately paid based solely on the Company’s consolidated
results, which slightly exceeded the near- or above-target results achieved by each segment and represents
substantial improvement over 2019 results.
Financial Performance (80% of bonus)
For the period January 1 - December 31, 2020
Total Company Financial Metric* (% weighting)
Revenue $M (35%)
Gross Margin (25%)
Adjusted EBITDA $M (25%)
Operating Cash Flow $M (15%)
Threshold
($M)
$ 3,912
27.4%
$
$
283
209
Goal
($M)
$ 5,101
28.8%
$
$
435
321
Maximum
($M)
$ 5,356
30.0%
$
$
500
369
Actual
($M)
$ 5,047
27.5%
$
$
427
404
Financial
Performance
%
99%
95%
98%
126%
2021 PROXY STATEMENT | 47
Financial Performance (80% of bonus)
For the period January 1 - December 31, 2020
ADI Global Distribution Financial Metric*
(% weighting)
Revenue $M (35%)
Gross Margin (25%)
Adjusted EBITDA $M (25%)
Operating Cash Flow $M (15%)
Threshold
($M)
$ 2,391
17.3%
$
$
164
121
Goal
($M)
$ 2,958
18.2%
$
$
252
186
Maximum
($M)
$ 3,106
18.9%
$
$
290
214
Actual
($M)
$ 2,903
17.1%
$
$
219
212
Financial Performance (80% of bonus)
For the period January 1 - December 31, 2020
Products & Solutions Global (P&S) Financial
Metric* (% weighting)
Revenue $M (35%)
Gross Margin (25%)
Adjusted EBITDA $M (25%)
Operating Cash Flow $M (15%)
Threshold
($M)
$ 1,521
41.4%
$
$
374
343
Goal
($M)
$ 2,242
43.6%
$
$
576
528
Maximum
($M)
$ 2,354
45.3%
$
$
662
607
Actual
($M)
$ 2,144
41.9%
$
$
527
511
*
Each financial metric is reported excluding fluctuations in foreign currency.
Financial
Performance
%
98%
94%
87%
114%
Financial
Performance
%
96%
96%
91%
97%
2020 Annual Incentive Plan – Individual Performance Objectives (20% of target award)
The Committee conducted a qualitative assessment to determine the individual performance objectives portion of
the 2020 annual
incentive award payout, which accounts for 20% of the target award. The Committee first
reviewed corporate performance for each business unit and functional area and noted general 2020
accomplishments that were significant to understanding individual NEO performance. Because the individual
performance component for certain NEOs was guaranteed in connection with their transition and no individual
performance component was determined for newly hired NEOs whose annual incentive payouts were guaranteed
for fiscal 2020, set forth below are the objectives and results against those objectives for those NEOs who were
eligible to receive a payout based on individual performance objectives:
Robert Aarnes, President, ADI Global Distribution
Objectives
Results
• Ensure ADI global targets are achieved
• Achieve targeted internal rate of return (IRR) thresholds for key
digital-enablement investments
• Build and develop internal competence within ADI for growth
initiatives
Based on the results below, the Committee approved a payout of
Mr. Aarnes’ personal performance component at 100% of target for
this component (equal to 20% of total target incentive)
➣ Efficiency and cost savings projects completed
➣ Pricing initiatives implemented to achieve IRR thresholds
➣ E-commerce revenue growth achieved
➣ Transitioned development team into ADI
➣ Synergies from prior acquisitions achieved
➣ Growth initiatives pipeline developed; certain activities delayed
due to COVID-19 impacts
48 | 2021 PROXY STATEMENT
Stephen Kelly, Executive Vice President, Chief Human Resources Officer
Objectives
Results
• Design and implement Employee Stock Purchase Plan
• Strengthen organizational capability and capacity
• Strengthen HR organizational capability via self-service and
Based on the results below, the Committee approved a payout of
Mr. Kelly’s personal performance component at 100% of target for
this component (equal to 20% of total target incentive)
process standardization/simplification
➣ ESPP successfully launched
➣ Payroll processing simplified
➣ Succession depth below officer level identified
➣ Key role stability mission critical experience identified
➣ Organizational capabilities achieved
➣ Global HR operations network implemented and processes
standardized
Jeannine Lane, Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance
Officer
Objectives
Results
• Drive a robust integrity and compliance and regulatory function
• Continued development of Law, HSE and Risk Management
Program
• Effective management of litigation and IP strategy
Based on the results below, the Committee approved a payout of
Ms. Lane’s personal performance component at 100% of target for
this component (equal to 20% of total target incentive)
➣ Supported executive leadership onboarding and transition
➣ Operationalized and enhanced board support and governance
processes
➣ Integrity and compliance model finalized
➣ Key compliance trainings rolled out
➣ Code of Conduct attestation level of 99.5%
➣ Data privacy compliance evaluated
➣ Global coordination around COVID-related regulations
➣ Continued progress defending and assessing IP portfolio
➣ Supported brand transition matters with Honeywell
In determining the actual 2020 bonus awards paid to each NEO pursuant to the annual
incentive plan, the
following formula was applied. The base salary amount used in the formula was the NEO’s 2020 base salary rate,
excluding the impact of the base salary reductions related to the Company’s COVID-19 cost savings.
Annual Incentive
Cash Bonus
=
Base Salary
×
Target Bonus
Percentage
× [
Financial
Performance
Payout
Percentage
+
Individual
Performance
Payout
Percentage
]
In connection with our recent leadership transition, the Committee approved compensation arrangements for
Mr. Nefkens, Mr. Flink and Mr. Sankpal. Mr. Nefkens’ payout would be calculated based on his target incentive
award, pro-rated for his period of service during 2020. In connection with Mr. Flink’s transition, he ceased serving
as an executive officer effective May 31, 2020; however, he was entitled to a payment of his fiscal 2020 annual
incentive award, in accordance with the Company’s actual financial results with respect to the financial metric
components and reduced by 50% for the individual performance component, but guaranteed at that reduced
level. Mr. Sankpal was eligible to receive a payment based on the Company’s actual financial results with respect
to the financial metric components of the award and a reduced individual component that was equal to 10% of the
total target award, which individual component was guaranteed, with the resulting amount pro-rated based on
Mr. Sankpal’s period of service during 2020.
In connection with the hire of Mr. Geldmacher and Mr. Trunzo, the Committee guaranteed payouts equal to their
pro-rated target annual incentive for fiscal 2020. Accordingly, they did not participate in the annual incentive plan
described above.
2021 PROXY STATEMENT | 49
The table below shows the total amount of annual
participated in the plan (the table excludes those NEOs whose payouts were guaranteed as described above):
incentive plan payouts for fiscal 2020 for each NEO who
NEO
Robert Aarnes
Stephen Kelly
Jeannine Lane
Michael Flink
Sachin Sankpal
Financial
Performance
Result
Individual
Performance
Result
Total Incentive
Result (%)
Target
Incentive
Payout ($)(1)
Actual Incentive
Payout ($)
77.6%
77.6%
77.6%
77.6%
77.6%
20%
20%
20%
10%
10%
97.6%
97.6%
97.6%
87.6%
87.6%
500,000
354,320
360,000
434,763
500,000
488,000
345,816
351,360
380,852
337,475
(1) Target bonus reflected above for Mr. Sankpal was pro-rated based on the actual number of days he was employed during 2020.
Discretionary Payments
In connection with the Committee’s evaluation of individual NEO performance during fiscal 2020, the Committee
approved a $150,000 performance recognition payment to Mr. Trunzo for his exceptional efforts in fiscal 2020 to
complete an equity financing and debt refinancing that strengthen the Company’s balance sheet and provide
meaningfully increased financial flexibility.
Also, in fiscal 2020, as described above, the Committee approved special bonus payouts to each then-serving
NEO approximating the amount of the NEO’s COVID-19 related salary reduction amount.
2020 Long-Term Incentives
The goal of our long-term incentive plan is to align the compensation of our executives with the interests of
shareholders by encouraging sustained long-term improvement in operational and financial performance and
long-term increase in shareholder value. Long-term incentives also serve as retention instruments and provide
equity-building opportunities for executives. Equity awards to our employees are granted under the Amended and
Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates (the “2018 Stock Incentive
Plan”). For fiscal 2020, the Committee approved an increase in the amount of the LTI value attributed to
performance stock units. The table below shows the mix of LTI components for 2019 and 2020:
Performance Stock Units
Stock Options
Restricted Stock Units
2019
(% of Total LTI)
33%
33%
33%
2020
(% of Total LTI)
50%
30%
20%
As described above, Mr. Geldmacher’s LTI award for fiscal 2020 reflected the particular circumstances of his hire.
Mr. Geldmacher’s LTI value for fiscal 2020 was issued in the form of performance stock units (25%), stock options
(15%), restricted stock units (10%) and a long-term cash incentive award (50%). All of Mr. Geldmacher’s awards
cliff vest after three years.
2020 Stock Options
The stock options awarded in 2020 will vest ratably over three-years with one-third of the option shares vesting on
each anniversary of the grant date until fully vested on the third anniversary of the grant date, assuming the
recipient is continually employed through each vesting date, provided that the options granted to Mr. Geldmacher
will vest in full on the third anniversary of the grant date subject to his continued employment. The options will
expire if unexercised prior to the seventh anniversary of the grant date.
50 | 2021 PROXY STATEMENT
2020 Restricted Stock Units
The annual restricted stock units (or RSUs) awarded in 2020 will vest ratably over three-years with one-third of
the shares vesting on each anniversary of the grant date until fully vested on the third anniversary of the grant
date, assuming the recipient is continually employed through each vesting date, except as indicated below.
The RSUs granted to Mr. Geldmacher will vest in full on the third anniversary of the grant date, subject to his
continued employment through such date. The RSUs granted to Mr. Nefkens in 2020 under the CEO transition
plan vested monthly until a successor was appointed in May 2020.
In addition to the annual LTI awards, the Committee approved three separate RSU awards as follows:
• Mr. Sankpal was granted a sign-on award of 215,231 RSUs pursuant to his offer letter. The RSUs were
scheduled to vest as to one-third of the units on each of the first three anniversaries of the grant date, subject
to his continued employment
In connection with Mr. Sankpal’s termination of
employment, the RSUs were modified to permit continued vesting that portion of the RSUs that were not
otherwise subject to pro-rata vesting upon termination.
through such dates.
• Mr. Trunzo was granted a sign-on award of 300,000 RSUs pursuant to his offer letter. The RSUs will vest as
to 50% of the units on each of the third and fourth anniversaries of the grant date, subject to his continued
employment through such date.
• Mr. Aarnes was granted a one-time award of 50,000 RSUs that will vest on the fifth anniversary of the grant
date, subject to his continued employment through such date. The RSUs were granted to serve as an
incentive to Mr. Aarnes’ continued service and performance with the Company.
2020 Performance Stock Units
The performance stock units (or PSUs) granted in 2020 reflect a change in the performance metrics from the
performance stock units granted in prior years. Previously, PSUs vested based on achievement of internal
financial metrics, including revenue and adjusted EBITDA. When the PSUs were originally granted in February
2020, the Committee set metrics for the PSUs whereby 50% of the award would vest based on certain revenue
goals and 50% would vest based on a relative total shareholder return (rTSR) metric. In April 2020, upon
completion of the budget for 2020, the Committee reviewed the metrics and determined to modify the award so
that the entire award would vest based on achievement of the rTSR metric previously approved. In determining to
make this modification, the Committee considered the leadership and business transformation underway and
considered that revenue was also used a financial metric under the annual incentive plan and the use of rTSR as
the sole metric for the PSUs created a strong alignment with shareholder interests.
Accordingly, all of the PSUs granted in 2020, as modified, will vest based on a relative total shareholder return
(rTSR) metric and will be earned by comparing our total shareholder return to the total shareholder return of other
companies in the S&P 400 Industrial Index from January 1, 2020 through December 31, 2022. The threshold,
target and maximum levels of rTSR achievement that correspond to the number of shares that will be earned are
forth below, and the levels were not changed from the levels originally approved in February 2020.
set
Performance below the threshold will result in no shares being paid.
Threshold
Target
Maximum
*linear interpolations between points
Percentile Rank
Payout as percent of
target shares
25th
55th
75th
50%
100%
200%
2021 PROXY STATEMENT | 51
Other Components of Our Compensation Program
Offer Letter Agreements and Transition Letter Agreements
As described above, the Board effected several executive leadership changes in fiscal 2020. In connection with
those transitions, the Committee approved offer letters for newly hired NEOs and transition letter agreements for
departing NEOs. The terms of these agreements are described in more detail below under “Compensatory
Arrangements with NEOs.”
The following principles guided the Committee’s decision to enter into these agreements:
• The Board determined that it was important to make key executive leadership changes as part of the
Company’s transformation. The Board conducted a robust search for executive leaders who had the right
skills and experience to lead the company at this critical time and sought to attract them to leave their prior
employment to join Resideo. Accordingly, the compensation terms in the offer letters were designed to attract
and retain these talented executives. Among other things, these terms include guaranteed bonus for fiscal
2020 to recognize the uncertainty presented by the pandemic and the Company’s transformation. In addition,
the Committee approved vesting schedules for Mr. Geldmacher and Mr. Trunzo that created longer retention
periods. The specific terms of Mr. Geldmacher’s offer letter, including factors considered by the Committee,
are described above under “New CEO Fiscal 2020 Compensation Program.”
• The Board felt it was important to ensure a seamless transition of responsibilities from NEOs who were
departing the Company and incentivize them to remain with the Company for appropriate transition periods.
Accordingly, each transition agreement was designed to incentivize the departing NEO to ensure the success
of the transition based on the relevant circumstances.
Severance Plan
Each of our NEOs participates in the Resideo Technologies, Inc. Severance Plan for Designated Officers (the
“Severance Plan”). The terms of the Severance Plan were established following a review of the severance
practices among companies in our approved compensation peer group.
The Severance Plan addresses severance for our NEOs upon a termination following a change in control (“CIC”),
considered a “double trigger”, and is intended to ensure the continued attention of our NEOs to their roles and
responsibilities without the distraction that may arise from the possibility of a job loss concurrent with a CIC of the
Company.
In addition, the Severance Plan provides for severance payments and benefits that become payable if the
employment of one of our NEOs is terminated by us without “cause” (as defined in the Severance Plan) subject to
such individual signing and not revoking a release of claims agreement.
The Committee has adopted the Severance Plan to provide competitive post-employment compensation
arrangements that promote the continued attention, dedication and continuity of the members of our senior
management team, including our NEOs, and enable us to continue to recruit talented senior executive officers.
The Committee intends to periodically review the severance available to our NEOs under the Severance Plan to
ensure ongoing competitiveness and alignment with our overall compensation philosophy.
The severance benefits provided to our NEOs are outlined in the Potential Payments Upon Termination or
Change in Control Table found later in this Proxy Statement.
Nonqualified Deferred Compensation Plan
Executive officers (including the NEOs) may choose to participate in the Resideo Supplemental Savings Plan, a
nonqualified deferred compensation plan that permits additional tax-deferred retirement savings options. The Resideo
Supplemental Savings Plan has two components, the Deferred Incentive Program (DIP) and the Supplemental
Savings Program (SSP). Executive officers can elect to defer up to 100% of their annual incentive award under the DIP
component. In addition, under the SSP component, executive officers may also elect to defer eligible compensation
that cannot be contributed to the Company’s 401(k) plan due to IRS limitations. The amounts contributed to the
Supplemental Savings Plan are eligible for company matching credits, not to exceed 87.5% of the first 8% contributed
combined between the SSP and the Company’s 401(k) plan. The participant account balances in the SSP are subject
to gains and losses, based on the returns of the Fidelity® U.S. Bond Index Fund.
52 | 2021 PROXY STATEMENT
Benefits and Perquisites
Our NEOs are eligible to receive the same benefits as our salaried employees in the U.S. The Company and the
Committee believe this approach is reasonable and consistent with the overall compensation objectives to attract
and retain employees. These benefits include medical, dental, vision, disability insurance, a 401(k) plan and other
plans and programs made available to other eligible employees in the U.S. Employee benefits and perquisites are
reviewed periodically to ensure that benefit levels remain competitive.
Executive Annual Physical Program
Starting in 2019, the Committee approved that all officers are required to have an annual executive physical and
are eligible to participate in an executive annual physical program paid for by the Company. These physicals
provide a more in-depth review of the health of those employees reporting to the President and Chief Executive
Officer of the Company. NEO participation in 2020 was limited due to travel and other restrictions related to
elective medical appointments.
As described above, the Committee approved additional benefits for Mr. Geldmacher related to his health and
safety, particularly in light of the COVID-19 pandemic.
Executive Stock Ownership Guidelines
The Committee believes that the interests of our executives, including our NEOs, will be more aligned with those
of our shareholders, and our NEOs will more effectively pursue strategies that promote our shareholders’ long-
term interests, if our executives hold substantial amounts of our stock. All of our executive officers, including our
NEOs, are subject to minimum stock ownership guidelines that are administered by the Committee. Under these
in value to the following
guidelines, our executive officers must hold shares of Resideo common stock equal
multiples of their current base salary:
CEO
6x Base Salary
Other Executive Officers
3x Base Salary
Our executive officers have five years from the date they become subject to the guidelines to meet the ownership
requirement. Shares owned outright, unvested RSU awards and earned performance share awards are counted
toward the ownership requirement. Shares may be sold during the accumulation period if satisfactory progress
towards meeting the minimum requirement is demonstrated. As of December 31, 2020, Mr. Trunzo, Mr. Aarnes,
Mr. Kelly and Ms. Lane have met the minimum stock ownership requirement under the policy.
Incentive Recoupment Policy (“Clawback”)
In the event of a material restatement of our financial results (a “Restatement”), the Board will review all incentive
compensation paid to senior executives on the basis of having met or exceeded specific performance targets for
performance periods during the Restatement period. To the extent permitted by applicable law, the Board will
seek to recoup incentive compensation, in all appropriate cases (taking into account all relevant factors, including
whether the assertion of a recoupment claim may prejudice the interests of
the Company in any related
proceeding or investigation), paid to, or credited to a deferred compensation account of, any senior executive, if
and to the extent that:
(i)
(ii)
(iii)
the amount of incentive compensation was calculated based upon the achievement of certain financial
results that were subsequently reduced due to a Restatement;
the senior executive engaged in misconduct that caused the need for the Restatement; and
the amount of incentive compensation that would have been awarded to the senior executive had the
financial results been properly reported would have been lower than the amount actually awarded.
Hedging and Pledging Policy
It is our policy that all of our directors, officers and employees are prohibited from engaging in short sales of
Resideo securities and selling or purchasing puts or calls or otherwise trading in or writing options on Resideo
securities and using certain financial
instruments (including forward sale contracts, equity swaps, collars and
exchange funds), holding securities in margin accounts or pledging Resideo securities as collateral, in each case,
that are designed to hedge or offset any decrease in the market value of Resideo securities.
2021 PROXY STATEMENT | 53
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code generally limits the tax deductibility of compensation paid to the
CEO and other covered officers to $1 million in any taxable year. Thus, we generally will not be able to take a
deduction for any compensation paid to our NEOs in excess of $1 million. While the Committee considers this
limitation on tax deductibility, its decisions regarding executive compensation are determined based on the
philosophy and factors described above.
Compensation and Human Capital Management Committee Report
The Committee has reviewed and discussed with management the Company’s Compensation Discussion and
Analysis included in this Proxy Statement. Based on this review and discussion, the Committee recommended to
the Board that
the Compensation Discussion and Analysis be included in this Proxy Statement and the
Company’s Form 10-K for the year ended December 31, 2020.
This report is provided by the following independent members of the Board, who comprise the Committee:
Sharon Wienbar (Chair)
Nina Richardson
Andrew Teich
54 | 2021 PROXY STATEMENT
Summary Compensation Table
The following table sets forth information concerning the compensation awarded to, earned by or paid to our
NEOs during 2020.
Officer Name
Position
Year
Base
Salary
($)
Bonus
($)(1)
Stock
Awards ($)(2)
Option
Awards ($)(3)
Non-Equity
Incentive Plan
Compensation
($)(4)
Changes in
Pension
Values and
Non Qual.
Deferred
Comp
Earnings
($)(5)
2020 526,154 2,894,098
774,547
464,589
2020 326,250
447,775 3,438,060
339,343
—
—
—
—
All Other
Compensation
($)(6)
Total
Compensation
($)
38,579
4,697,966
17,749
4,569,177
Jay
Geldmacher
Tony Trunzo
Robert Aarnes
President & Chief
Executive Officer
EVP, Chief
Financial Officer
President, ADI
Global Distribution
2020 487,115
— 2,222,916
524,999
488,000
40,092
19,637
3,782,759
2019 437,671
— 933,308
466,661
490,500
40,977
19,145
2,388,262
2018 60,135
44,987
885,007
— 138,905
9,996
4,440
1,143,470
Stephen Kelly
EVP, Chief
Human Resources
Officer
2020 438,228
— 578,682
232,199
345,816
45,584
25,544
1,666,054
2019 430,000
— 515,995
257,999
279,328
140,014
713,972
2,337,308
2018 65,346
67,898 1,041,057
— 178,415
8,163
9,111
1,369,991
Jeannine Lane
Michael
Nefkens
Robert Ryder
Michael Flink
EVP, General
Counsel,
Corporate
Secretary and
Chief Compliance
Officer
Former
President & Chief
Executive Officer
Former Interim
Chief Financial
Officer(7)
Former SVP,
Executive Advisor
Sachin Sankpal
Former President,
Products &
Solutions
2020 434,327
— 538,314
215,997
351,360
84,107
22,587
1,646,692
2020 393,923
— 1,457,118
—
—
— 2,055,546
3,906,587
2019 895,068
— 2,866,654 1,433,333
655,200
2018 135,385
193,227 4,104,724
— 998,977
—
—
502,910
6,353,165
1,645
5,433,958
2020
2019
—
—
—
—
—
—
—
—
—
—
— 1,553,344
1,553,344
—
391,000
391,000
2020 477,974
— 701,308
281,399
380,852
202,045
35,952
2,079,531
2019 469,000
— 625,311
312,666
240,597
219,889
370,764
2,238,227
2018 72,154
91,336 1,067,381
— 222,065
70,855
8,412
1,532,202
2020 468,269
— 3,956,834
524,999
—
— 2,094,051
7,044,153
(1) For 2020, Mr. Geldmacher received a sign-on bonus and both Mr. Geldmacher and Mr. Trunzo received guaranteed bonus payouts at
target, pro-rated for their period of employment, for fiscal 2020 pursuant to the terms of their offer letters. For 2018, our NEOs received a
discretionary bonus payment for their significant contributions to our successful Spin-Off from Honeywell.
(2) Stock awards in 2020 consisted of restricted stock unit (RSU) awards and performance stock unit (PSU) awards. The amounts reported
in this column represent the aggregate grant date fair value of the RSU awards for fiscal years 2020, 2019 and 2018 and of the target
level of the PSU awards for fiscal years 2020 and 2019. We calculated these amounts in accordance with the provisions of FASB ASC
Topic 718 utilizing the assumptions discussed in Note 18 to our financial statements for the fiscal year ended December 31, 2020. The
fair value of the RSUs is based on the average of the high and low prices for Resideo stock on the grant date. The fair value of the
PSUs that vest based on the rTSR metric was determined using the Monte Carlo simulation valuation method. The value of the PSUs
reflects the original grant date fair value of the PSUs when granted in February 2020 (for NEOs who received their PSUs in February).
At that time, the awards had a grant date fair value of $10.995 per share, comprised of $10.27 per share for the 50% of the award
subject to the original revenue metric, which was the average of the high and low prices for Resideo stock on the grant date assuming
that a payout at target was probable, and $11.72 per share for the 50% of the award subject to the rTSR metric, based on the Monte
Carlo simulation model assuming volatility of 30.77% and a risk-free interest rate of 1.35%. When the PSUs were modified in April 2020,
the modification date fair value of the award was $2.97 per share, based on the Monte Carlo simulation model assuming volatility of
36.62% and a risk-free interest rate of 0.24%. Accordingly, there was no incremental modification date fair value. The PSUs granted to
Mr. Geldmacher and Mr. Trunzo after the modification had a grant date fair value of $3.95 per share, based on the Monte Carlo
2021 PROXY STATEMENT | 55
simulation model using similar assumptions. The grant date fair value of the 2020 RSUs and the grant date fair value of the 2020 PSUs
if target performance and maximum performance is achieved are as follows:
Name
Jay Geldmacher
Tony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Michael Nefkens
Michael Flink
Sachin Sankpal
PSUs
RSUs ($)
Target ($) Maximum ($)
311,133
463,414
926,828
3,197,845
240,215
480,430
1,270,386
952,530
1,905,060
157,398
421,284
842,568
146,419
391,895
783,790
1,457,118
—
—
190,755
510,553
1,021,106
3,004,304
952,530
1,905,060
(3) The amounts reported in this column represent the aggregate grant date fair value of the option awards for fiscal year 2020 and 2019. No
options were issued in 2018. We calculated these amounts in accordance with the provisions of FASB ASC Topic 718 utilizing the
assumptions discussed in Note 18 to our financial statements for the fiscal year ended December 31, 2020.
(4) The amounts in this column represent the total 2020 annual incentive payments made to the NEOs as described in more detail above in
the “Compensation Discussion & Analysis – Elements of Compensation” section of this Proxy Statement. The amount shown was paid
shortly after the end of the fiscal year.
(5) The amounts in this column represent the aggregate change in the present value of each NEO’s accumulated benefit under the
Company’s pension plans (as disclosed in the Pension Benefits table below).
(6) The amounts reported in this column for 2020 include costs for company contributions under the 401(k) and deferred compensation plan,
the imputed value of company-provided life insurance, costs for executive healthcare services and, in the case of Mr. Nefkens and
Mr. Sankpal only, severance benefits. The amount for Mr. Ryder includes the payments made to Horsepower, which are described in
more detail below in footnote 7.
Name
Jay Geldmacher
Anthony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Michael Nefkens
Michael Flink
Sachin Sankpal
401(k) Company
Contributions ($)
Deferred
Compensation
Plan Company
Contributions ($)
Severance
($)(a)
All
Other ($)(b)
—
17,063
17,063
19,950
17,063
—
19,950
—
—
—
—
—
—
—
13,508
—
—
—
—
—
2,054,702
—
—
2,093,207
38,579
10,686
2,574
5,594
5,524
844
2,494
844
(a) Amounts reflect severance payments and benefits paid to or accrued for Mr. Nefkens and Mr. Sankpal pursuant to the terms of their
separation agreements described below under “Compensatory Arrangements with NEOs.”
(b)
Includes costs for executive healthcare services and excess liability insurance premiums paid by the Company. In the case of
Mr. Geldmacher and Mr. Trunzo, includes $37,500 and $10,000, respectively, for reimbursement of legal fees in connection with
negotiating their offer letters, which the Company agreed to reimburse pursuant to the terms of the offer letters.
(7) Mr. Ryder was appointed as Interim Chief Financial Officer effective November 7, 2019. Mr. Ryder is the President of Horsepower, a
consulting firm through which his services have been retained under an engagement letter dated October 22, 2019. Pursuant to that
engagement letter, the Company paid Horsepower a bi-weekly fee of $115,000 for Mr. Ryder’s services, as well as reimbursement of
reasonable and authorized travel expenses related to performance of the services. Mr. Ryder did not receive any equity or other
compensation per the terms of the engagement letter.
56 | 2021 PROXY STATEMENT
Grants of Plan-Based Awards – Fiscal Year 2020
The following table summarizes the grants of plan-based awards made to our NEOs during the fiscal year ended
December 31, 2020.
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
Estimated Future Payouts
Under Equity
Incentive Plan Awards
Officer Name
Award Type
Grant Date
Threshold
($)(A)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Jay Geldmacher AIP(1)
N/A
804,098 1,608,196
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
Exercise
or Base
Price of
Option
Awards
($/sh.)
Closing
Price on
Date of
Grant of
Option
Awards
($/sh.)
Grant Date
Fair Value
of Stock
and Option
Awards
($/sh.)
All Other
Stock
Awards
(#)
—
—
—
—
—
— 237,035
6.63
6.56
464,589
46,928
—
—
300,000
—
—
—
—
—
—
—
—
—
—
—
311,133
463,414
—
— 2,958,000
— 111,078
9.86
10.09
339,343
24,325
—
—
—
—
—
—
—
—
—
—
—
239,845
240,215
—
— 184,989
10.27
10.21
524,999
34,653
50,000
—
—
—
—
—
—
—
—
—
—
—
—
—
355,886
952,530
914,500
— 81,818
10.27
10.21
232,199
15,326
—
—
—
—
—
—
—
—
—
—
—
157,398
421,284
—
— 76,109
10.27
10.21
215,997
14,257
—
141,881
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
146,419
391,895
—
— 1,457,118
—
—
—
—
— 99,154
10.27
10.21
281,399
18,574
—
—
215,231
—
—
—
—
—
—
—
—
—
—
—
190,755
510,553
—
— 2,648,417
— 184,989
10.27
10.21
524,999
34,653
—
—
—
—
—
—
355,886
952,530
— 58,660
117,320 234,640
N/A
297,775
595,549
120,000
500,000 1,000,000
— 30,407
60,814
121,628
— 43,317
86,633
173,266
—
85,037
354,320
708,640
86,400
360,000
720,000
— 19,158
38,316
76,632
— 17,822
35,643
71,286
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
120,000
500,000 1,000,000
— 23,218
46,435
92,870
Stock Options(2)
RSU(3)
PSU(5)
Tony Trunzo
AIP(1)
RSU(4)
Stock Options(2)
RSU(3)
PSU(5)
Robert Aarnes
AIP(1)
Stock Options(2)
RSU(3)
PSU(5)
RSU(4)
Stephen Kelly
AIP(1)
Stock Options(2)
RSU(3)
PSU(5)
Jeannine Lane
AIP(1)
Stock Options(2)
RSU(3)
PSU(5)
05/28/2020
05/28/2020
05/28/2020
06/08/2020
06/08/2020
06/08/2020
06/08/2020
02/20/2020
02/20/2020
02/20/2020
12/14/2020
02/20/2020
02/20/2020
02/20/2020
02/20/2020
02/20/2020
02/20/2020
Stock Options(2)
RSU(3)
PSU(5)
Sachin Sankpal AIP(1)
RSU(4)
Stock Options(2)
RSU(3)
PSU(5)
02/20/2020
02/20/2020
02/20/2020
01/07/2020
02/20/2020
02/20/2020
02/20/2020
Michael Nefkens AIP(1)
302,400
1,260,000 2,520,000
RSU(3)
Robert Ryder
—
Michael Flink
AIP(1)
02/20/2020
—
—
—
—
—
—
—
104,343
434,763
869,526
— 43,317
86,633
173,266
—
(A) Represents the payment received for the minimum level of performance required to achieve a payout under the plan for 2020.
Mr. Geldmacher and Mr. Trunzo were guaranteed a payout equal to target pursuant to the terms of their offer letters.
(1) Annual incentive compensation (or AIP) awarded under the Resideo Bonus Plan for the 2020 performance year, which are paid in early 2021.
(2) Non-qualified stock options granted under the Resideo 2018 Stock Incentive Plan. The options will vest ratably on first, second and third
anniversaries of the grant date, with the exception of the grant to Mr. Geldmacher, which will vest in full on the third anniversary of the grant
date. See the Outstanding Equity Awards at 2020 Fiscal Year-End table below for further details on the equity awards listed above. The grant
date fair value of stock options was calculated in accordance with FASB ASC Topic 718 using the Black-Scholes option valuation model as of
the date of grant based on the assumptions reflected in Note 18 to our financial statements for the fiscal year ended December 31, 2020.
2021 PROXY STATEMENT | 57
(3) Annual restricted stock units granted under the Resideo 2018 Stock Incentive Plan. The restricted stock units will vest ratably on the first,
second and third anniversaries of the grant date, with the exception of the grant to Mr. Geldmacher, which will vest in full on the third
anniversary of the grant date. See the Outstanding Equity Awards at 2020 Fiscal Year-End table below for further details on the equity
awards listed above. The fair value of the RSUs reflected in the final column is based on the average of the high and low prices for
Resideo stock on the grant date.
(4) The restricted stock units (RSUs) reflected were issued as sign-on awards for Mr. Trunzo and Mr. Sankpal, and as a special retention
related restricted stock unit for Mr. Aarnes. The award granted to Mr. Trunzo will vest in equal
installments on the third and fourth
anniversaries of the grant date. The award granted to Mr. Sankpal was scheduled to vest in equal installments on the first, second and
third anniversaries of the grant date, but was modified as described on page 65 of this proxy. The award to Mr. Aarnes will vest in full on
the fifth anniversary of the grant date. The fair value reflected in the final column is based on the average of the high and low prices for
Resideo stock on the grant date.
(5) Performance stock units (PSUs) granted under the Resideo 2018 Stock Incentive Plan. The award is subject to Resideo’s relative Total
Shareholder Return ranking against the companies in the S&P 400 Industrials Index for the period from January 1, 2020 through
December 31, 2022 and will pay out in February 2023 if earned. The amounts in the Target column represent the number of shares
earned at a ranking of the 55th percentile as compared to the companies in the Index. The amounts in the column labeled Threshold
represent the total number of shares that would be earned if Resideo were to achieve a ranking of the 25th percentile. The amounts in the
column labeled Maximum represent the total number of shares that would be earned if Resideo were to achieve a ranking of the 75th
percentile or above. The fair value reflected in the final column is calculated in accordance with the provisions of FASB ASC Topic 718 as
described in footnote 2 to the Summary Compensation Table above.
Certain Terms of Equity Awards
Dividend equivalents may be earned on the 2020 RSU and PSU awards, however they will be subject to the same
vesting and forfeiture provisions that apply to the underlying award to which they relate. The Company has not
paid dividends since becoming an independent public company.
The 2020 option, RSU and PSU awards are subject to double trigger accelerated vesting and payout upon a
change in control only if the award is (1) assumed, replaced or continued by the successor entity and (2) the
recipient’s employment is terminated without cause or, in the case of certain executives only, if the award
recipient resigns for good reason, in each case, within 24 months after the change in control, or if the surviving
entity in the change in control transaction refuses to continue, assume, or replace the awards. In such instance
the 2020 options and RSU awards will vest in full immediately, and assuming the performance period has not
been completed, the 2020 PSU awards will vest based on target performance during the truncated performance
period and on a pro rata basis based on a target number of units for the year following the truncated performance
period.
If an award recipient’s employment ends as a result of his or her death or disability, vesting of the options and
RSU awards will accelerate in full, while the 2020 PSU awards will vest on a pro-rata basis, based on actual
performance as measured at the end of the performance period. If an award recipient’s employment ends as a
result of retirement and the participant accepts certain post-employment conditions, the RSU awards and options
will continue to vest in accordance with the original vesting schedule and the 2020 PSU awards will vest in
accordance with the previous sentence.
In the case of executive officers only, if an award recipient’s employment ends as a result of an involuntary
termination without cause by the Company, the options and RSU awards will vest on a pro rata basis immediately
and the 2020 PSU awards will vest on a pro-rata basis, based on actual performance as measured at the end of
the performance period.
If an award recipient’s employment ends for any other reason, unvested options, RSU and PSU awards will be
forfeited. With respect to each of the option, RSU and PSU awards described above, if an award recipient
breaches certain non-competition or non-solicitation obligations, the recipient’s unvested units will be forfeited,
and certain shares issued in settlement of units that have already vested must be returned to the Company or the
recipient must pay the Company the amount of the shares’ fair market value as of the date they were issued.
The impact of a termination of employment or change in control of our Company on option, RSU and PSU awards
held by our NEOs is quantified in the “Potential Payments Upon Termination or Change in Control” section below.
All stock awards granted to the NEOs shown in the table above were granted under the 2018 Stock Incentive
Plan and are governed by and subject to the terms and conditions of the plan and the relevant award agreements.
58 | 2021 PROXY STATEMENT
Outstanding Equity Awards at 2020 Fiscal Year-End
The following table summarizes information regarding outstanding equity awards held by our NEOs as of
December 31, 2020.
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option
Price
($)
Unexercised
Option
Expiration
Date
Number of
Shares or
Units
of Stock
That
Have Not
Vested
(#)
Market
Value* of
Shares or
Units
That Have
Not
Vested
($)
Officer Name
Jay Geldmacher
Anthony Trunzo
Robert Aarnes
Grant Date Notes
05/28/2020
05/28/2020
05/28/2020
Total
6/8/2020
6/8/2020
6/8/2020
6/8/2020
Total
9/29/2016
2/28/2017
2/27/2018
2/27/2018
10/29/2018
11/15/2018
2/11/2019
2/11/2019
2/11/2019
2/20/2020
2/20/2020
2/20/2020
(1)
(2)
(3)
(4)
(5)
(3)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(3)
12/14/2020
(18)
237,035
6.63 5/27/2027
—
—
—
—
9.86
6/7/2027
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
237,035
111,078
—
—
—
111,078
—
—
—
—
—
—
—
—
—
22,943
45,886
24.39
—
—
—
—
184,989
10.27
Total
22,943
230,875
Stephen Kelly
7/29/2016
(19)
2/28/2017
2/27/2018
2/27/2018
10/29/2018
11/15/2018
2/11/2019
2/11/2019
2/11/2019
2/20/2020
2/20/2020
2/20/2020
Total
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(3)
—
—
—
—
—
—
12,684
—
—
—
—
—
12,684
—
—
—
—
—
—
25,369
—
—
81,818
—
—
107,187
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
24.39
—
—
10.27
—
—
—
46,928
997,689
— 117,320 2,494,223
164,248 3,491,912
—
—
24,325
517,150
60,814 1,292,906
— 300,000 6,378,000
385,139 8,188,055
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7,450
1,120
2,421
4,394
158,387
23,811
51,470
93,416
28,730
610,800
5,558
118,163
12,756
271,193
19,133
406,768
34,653
736,723
86,633 1,841,818
50,000 1,063,000
252,848 5,375,548
13,096
278,421
2,240
3,610
6,533
32,320
8,337
47,622
76,749
138,892
687,123
177,244
7,052
10,578
149,926
224,888
15,326
38,316
325,831
814,598
137,408 2,921,294
2021 PROXY STATEMENT | 59
Officer Name
Jeannine Lane
Michael Nefkens
Robert Ryder
Michael Flink
Sachin Sankpal
Grant Date Notes
2/28/2017
2/27/2018
2/27/2018
10/29/2018
11/15/2018
2/11/2019
2/11/2019
2/11/2019
2/20/2020
2/20/2020
2/20/2020
Total
10/29/2018
2/11/2019
2/11/2019
Total
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(3)
(11)
(13)
(15)
— —
7/25/2014
6/1/2016
2/28/2017
(20)
(21)
(8)
7/27/2017
(22)
2/27/2018
2/27/2018
10/29/2018
11/15/2018
2/11/2019
2/11/2019
2/11/2019
2/20/2020
2/20/2020
2/20/2020
Total
1/7/2020
2/20/2020
2/20/2020
Total
(9)
(10)
(11)
(12)
(13)
(15)
(14)
(16)
(17)
(3)
(23)
(24)
(3)
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option
Price
($)
Unexercised
Option
Expiration
Date
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
11,799
23,599
24.39
—
—
—
—
76,109
10.27
11,799
99,708
— 24.39 5/27/2021
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
131,109
—
131,109
—
—
—
—
—
—
—
—
—
15,372
30,744
24.39
—
—
—
—
—
15,372
—
40,134
—
40,134
—
—
—
—
99,154
10.27
—
—
—
—
129,898
—
—
— 10.27
—
—
Number of
Shares or
Units
of Stock
That
Have Not
Vested
(#)
Market
Value* of
Shares or
Units
That Have
Not
Vested
($)
1,222
2,039
3,695
25,980
43,349
78,556
28,730
610,800
4,631
98,455
6,560
9,840
139,466
209,198
14,257
303,104
35,643
757,770
106,617 2,266,677
—
—
—
—
—
—
—
—
—
—
—
— 154,400 3,282,544
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
27,507
584,799
181,907 3,867,343
—
—
7,916
168,294
18,702
397,605
2,037
43,307
13,831
294,047
3,398
6,157
72,241
130,898
33,690
716,249
7,874
167,401
12,819
272,532
8,546
181,688
18,574
394,883
46,435
987,208
179,979 3,826,354
— 159,903 3,399,538
—
—
483,984
22,765
182,668 3,883,522
*
(1)
(2)
(3)
Based on the closing stock price for Resideo stock on December 31, 2020 ($21.26). All awards with grant dates prior to October 29,
2018, the date of the Spin-Off, were equity awards (stock options, RSUs and PSUs) issued by Honeywell that were converted to Resideo
RSUs on October 29, 2018.
These non-qualified stock options will vest in full on May 28, 2023.
These RSUs will vest in full on May 28, 2023.
These PSUs were awarded in 2020 and can be earned after the end of the three-year performance period ending December 31, 2022.
The number of PSUs that the NEO will receive is dependent upon the ranking of our relative Total Shareholder Return as compared to
the Total Shareholder Return of the companies in the S&P 400 Industrials Index. The number of PSUs shown is the target number of
shares that can be earned. Pursuant to their award agreement, Mr. Geldmacher’s PSU award, if earned, will vest on May 28, 2023 and
Mr. Trunzo’s award, if earned, will vest on June 8, 2023.
(4)
These non-qualified stock options will vest in equal annual installments on June 8, 2021, June 8, 2022, and June 8, 2023.
60 | 2021 PROXY STATEMENT
(5)
(6)
(7)
(8)
(9)
These RSUs will vest in equal annual installments on June 8, 2021, June 8, 2022, and June 8, 2023.
These RSUs will vest in equal installments on June 8, 2023 and June 8, 2024.
The remaining unvested RSUs under this converted Honeywell award will vest in the amount of 3,662 shares on September 29, 2021
and 3,788 shares on September 29, 2023.
The remaining unvested RSUs under this converted Honeywell award vested on February 28, 2021.
The remaining unvested RSUs under this converted Honeywell award will vest in equal annual installments on February 27, 2021 and
February 27, 2022.
(10) The remaining unvested RSUs under this converted Honeywell award vested on February 27, 2021.
(11) These Founder’s Grant RSU Awards were granted on October 29, 2018 and will vest in equal amounts on October 29, 2021 and
October 29, 2022.
(12) The remaining unvested RSUs under this converted Honeywell award vested on March 15, 2021.
(13) These non-qualified stock options will vest in equal annual
installments on each of February 11, 2020, February 11, 2021 and
February 11, 2022. The stock option shown for Mr. Nefkens represents the number of shares which were vested and outstanding as of
May 27, 2020 at his separation. The remaining unvested portion of the stock option was forfeited and cancelled on that date.
(14) These RSUs vest in equal annual installments on February 11, 2020, February 11, 2021 and February 11, 2022.
(15) These PSUs were awarded on February 11, 2019 can be earned based on achievement of certain financial measures set early in 2019.
The performance period ends December 31, 2021. The number of PSUs that the NEO will receive is dependent upon the achievement of
certain financial metrics approved by the Committee measuring revenue and Adjusted EBITDA. For each NEO the amount of PSUs
shown is the target number of units that could be earned and paid out in shares. The PSUs shown for each of Mr. Nefkens and
Mr. Sankpal represent the pro-rated target number of PSUs remaining under his award which may be earned through the end of the
performance period.
(16) These non-qualified stock options will vest in equal annual installments on February 20, 2021, February 20, 2022, and February 20, 2023.
(17) These RSUs will vest in equal annual installments on February 20, 2021, February 20, 2022 and February 20, 2023.
(18) These RSUs will vest 100% on December 14, 2025.
(19) The remaining unvested RSUs under this converted Honeywell award will vest for 6,446 shares on July 29, 2021 and 6,650 shares on
July 29, 2023.
(20) The remaining unvested RSUs under this converted Honeywell award will vest on July 25, 2021.
(21) The remaining unvested RSUs under this converted Honeywell award will vest for 9,205 shares on June 1, 2021 and 9,497 shares on
June 1, 2023.
(22) The remaining unvested RSUs under this converted Honeywell award will vest for 6,811 shares on July 27, 2021 and 7,020 shares on
July 27, 2023.
(23) These RSUs vest as to 16,416 shares on January 7, 2021, 71,743 shares on January 7, 2022, and 71,744 shares on January 7, 2023.
(24) These non-qualified stock options vested in full on October 14, 2020.
Option Exercises and Stock Vested – Fiscal Year 2020
The following table summarizes information regarding stock options exercised by the NEOs during the fiscal year
ended December 31, 2020 and RSU awards that vested during that same period.
Officer Name
Jay Geldmacher
Anthony Trunzo
Rob Aarnes
Steve Kelly
Jeannine Lane
Mike Nefkens
Bob Ryder
Michael Flink
Sachin Sankpal
Option Awards
Stock Awards
# of Shares
Acquired on
Exercise
(#)
Value Realized
on Exercise
($)
Number of Shares
Acquired on
Vesting (#)(1)
Value Realized
on Vesting
($)(2)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
19,442
41,720
23,751
74,585
—
27,647
62,846
—
—
180,026
418,140
242,254
524,450
—
250,726
743,971
(1) Represents the total number of RSUs that vested during 2020 before share withholding for taxes and transaction costs.
(2) Represents the total value of RSUs at the vesting date calculated as the average of the high and low prices for Resideo stock on the day of
vesting multiplied by the total number of RSUs that vested. The individual totals may include multiple vesting transactions during the year.
2021 PROXY STATEMENT | 61
Pension Benefits
The following table provides summary information and related disclosures provide information regarding benefits
under the Resideo Technologies Inc. Pension Plan (“RPP”) and the Resideo Supplemental Pension Plan (“SPP”),
a nonqualified plan. The RPP and SPP provide pension benefits only to those employees who previously
participated in the Honeywell pension plans prior to the Spin-Off. Accordingly, the only NEOs who participate in
the RPP and SPP are Messrs. Aarnes, Kelly and Flink and Ms. Lane.
The RPP and SPP benefits depend on the length of each NEO’s employment with the Company and certain
predecessor companies. This information is provided in the table below under the column entitled “Number of
Years of Credited Service.” A participant’s credited service is generally equal to his or her period of employment
with the Company or an affiliate (or, for periods prior to October 29, 2018, Honeywell International Inc. or a
Honeywell affiliate), excluding periods of employment when the participant was not eligible to participate in the
RPP or a predecessor Honeywell plan. The column in the table below entitled “Present Value of Accumulated
Benefits” represents a financial calculation that estimates the cash value today of the full pension benefit that has
been earned by each NEO. It is based on various assumptions, including assumptions about how long each NEO
will live and future interest rates. Additional details about the pension benefits for each NEO follow the table.
Officer Name
Robert Aarnes
Stephen Kelly
Jeannine Lane
Michael Flink
Plan Names
Resideo Technologies Inc. Pension Plan
(Qualified component)
Resideo Technologies Inc. Supplemental
Pension Plan (Non-Qualified component)
Total
Resideo Technologies Inc. Pension Plan
(Qualified component)
Resideo Technologies Inc. Supplemental
Pension Plan (Non-Qualified component)
Total
Resideo Technologies Inc. Pension Plan
(Qualified component)
Resideo Technologies Inc. Supplemental
Pension Plan (Non-Qualified component)
Total
Resideo Technologies Inc. Pension Plan
(Qualified component)
Resideo Technologies Inc. Supplemental
Pension Plan (Non-Qualified component)
Total
Number of
Years of
Credited
Service
(#)
Present
Value of
Accumulated
Benefits ($)
Payments
During
Last
Fiscal
Year ($)
Early
Retirement
Eligible?
No
No
Yes
Yes
8.0
8.0
12.4
12.4
26.3
26.3
17.8
17.8
73,046
73,751
146,797
226,426
281,955
508,381
470,967
451,608
922,575
970,656
—
970,656
—
—
—
—
—
—
—
—
—
—
—
—
Summary Information
• The RPP is a tax-qualified pension plan in which a significant portion of our U.S. employees participate.
• The RPP complies with tax requirements applicable to broad-based pension plans, which impose dollar limits
on the compensation that can be used to calculate benefits and on the amount of benefits that can be
provided. As a result, the pensions that can be paid under the RPP for higher-paid employees represent a
much smaller fraction of current income than the pensions that can be paid to less highly paid employees.
We make up for this difference, in part, by providing supplemental pensions through the SPP.
Pension Benefit Calculation Formulas
Within the RPP and the SPP, a variety of formulas are used to determine pension benefits. Different benefit
formulas apply for different groups of employees for historical reasons (e.g., past acquisitions by a predecessor
company) and the differences in the benefit formulas for our NEOs reflect this history.
• The Retirement Earnings Plan (“REP”) Formula is used to determine the amount of pension benefits for each of
our NEOs under the RPP and the SPP. Under this Formula, benefits are paid as a lump sum equal to (1) 3% or
6% of final average compensation (the average of a participant’s annual compensation for the five calendar years
out of the previous ten calendar years that produces highest average) times (2) credited service.
62 | 2021 PROXY STATEMENT
• Under the Pittway (“PW”) formula, the annual annuity benefit is equal to the sum of (1) for each of the first 35
years of service, 1.2% of annual compensation up to a social security breakpoint and 1.85% of annual
compensation over the breakpoint and (2) for each year of service over 35, 1.2% of annual compensation.
For years after 2015, a participant’s (A) social security breakpoint is determined as of December 31, 2015
and (B) compensation is the lesser of the participant’s 2015 compensation or compensation for the current
year.
For each pension benefit calculation formula, compensation includes base pay, short-term incentive
compensation, payroll-based rewards and recognition and lump sum incentives. The amount of compensation
taken into account under the RPP is limited by tax rules. The amount of compensation taken into account under
the SPP is not.
The table below describes which formulas are applicable to each of our participating NEOs.
NAME/FORMULA
DESCRIPTION OF TOTAL PENSION BENEFITS
Mr. Aarnes
REP formula 3%
Mr. Kelly
REP formula 6%
Ms. Lane
REP formula 6%
Mr. Flink
PW formula
• Mr. Aarnes’ pension benefits under the RPP and the SPP are determined under the REP
formula.
• Mr. Kelly’s pension benefits under the RPP and the SPP are determined under the REP
formula.
• Ms. Lane’s pension benefits under the RPP and the SPP are determined under the REP
formula.
• Mr. Flink’s pension benefits under the RPP and the SPP are determined under the PW
formula.
Mr. Flink and Ms. Lane are currently eligible for early retirement. Under the PW formula, Mr. Flink was eligible
once he reached age 55 with 10 years of service, and under the REP formula. At early retirement, the monthly
pension is computed on the same basis as at normal retirement, but the pension is reduced 6.67% per year for
each of the first five years and 3.33% for each of the next five years by which commencement precedes normal
retirement date. Ms. Lane participates in the REP formula and would be eligible, upon termination of employment,
to receive a lump sum payment of her accrued plan benefit (or an actuarial equivalent annuity payment,
determined in accordance with the plan’s actuarial equivalency provisions).
Nonqualified Deferred Compensation
Officer Name
Stephen Kelly
Jeannine Lane
Michael Flink
Executive
Contributions
in 2020
($)(1)
Registrant
Contributions
in 2020
($)(2)
Aggregate
Earnings
in 2020
($)(3))
Aggregate
Withdrawals and
Distributions in 2020
($)
Aggregate Balance
at the End of
Fiscal Year 2020
($)(4)
—
—
—
—
5,553
1,914
38,238
13,508
25,166
—
—
—
184,276
63,769
850,600
All deferred compensation amounts are unfunded and unsecured obligations of the Company and are subject to the same risks as any of the
Company’s general obligations.
(1) The amounts in this column were contributed by the NEO into his account under the deferred compensation plan, which includes amounts
reflected in the “Base Salary” column of the Summary Compensation Table.
(2) Amounts in this column are contributions made to the NEOs account in 2021 for the 2020 calendar year.
(3) The amounts in this column represent interest and dividends earned on balances held in the NEO’s account during 2020.
(4) Of the balances, the following amounts have reported in the current or prior year’s Summary Compensation Tables: Mr. Kelly – (i) $5,228
reported as Salary and $550 reported as All Other Compensation in the Summary Compensation table for 2018, and (ii) $17,200 reported
as Salary and $13,475 reported as All Other Compensation in the Summary Compensation Table for 2019; and Mr. Flink – (i) $38,238
reported as Salary and $13,508 reported as All Other Compensation in the Summary Compensation Table for 2020.
2021 PROXY STATEMENT | 63
Resideo Supplemental Savings Plan
The Resideo Supplemental Savings Program (“RSSP”) is a nonqualified deferred compensation plan that allows
eligible Resideo employees, including the NEOs, to save additional amounts in excess of what is allowed under
the Company’s tax-qualified 401(k) plan due to the annual deferral and compensation limits imposed by the
Internal Revenue Code. The RSSP has two components,
the Deferred Incentive Program (DIP) and the
Supplemental Savings Program (SSP). Executive officers can elect to defer up to 100% of their annual bonus
awards under the DIP component. In addition, executive officers may also participate in the SSP component to
defer eligible compensation that cannot be contributed to the Company’s 401(k) savings plan due to IRS
limitations. The amounts contributed to the SSP component are eligible for matching contributions not to exceed
87.5% of the first 8% contributed combined between the SSP and the 401(k) plan. Matching contributions are
always vested.
Interest Rate. Participant account balances were moved from the Honeywell plans to the RSSP on October 29,
2018. All funds are invested in the Fidelity U.S. Bond Index Fund and participant accounts are credited with
interest based on the fund’s performance. Matching contributions are also treated as invested in Fidelity U.S.
Bond Index Fund.
Distribution. Amounts transferred from the Honeywell Supplemental Savings Plan or Honeywell Deferred
Incentive Plan to the RSSP will follow the same distribution options as applied under the Honeywell plan. For
deferrals to the RSSP starting in 2019 or later years, payments will commence at the earlier of the participant’s
separation from service, death or the in-service distribution date elected by the participant. Amounts will be paid
to participants in a lump sum or installment payments, for payments triggered by separation from service or an
in-service distribution at the election of the participant. Participant RSSP accounts are distributed in cash only.
Participants can make different payment elections under the SSP and the DIP components of the RSSP.
Compensatory Arrangements with NEOs
As described above, during fiscal 2020, the Board effected several executive leadership transitions, including
hiring a new CEO and CFO. In connection with these transitions, the Committee approved certain offer letters for
new executive officers, as well as transition and severance arrangements for certain departing executive officers.
Below is a summary of the material terms of these compensatory arrangements. The summary below excludes
payments and benefits generally available to all executive officers under the terms of the Company’s equity award
agreements that are described above.
Offer Letter with Jay Geldmacher, President and Chief Executive Officer
the payout was guaranteed at no less than his pro-rated target
The Company entered into an offer letter with Mr. Geldmacher, effective May 28, 2020, in connection with his
appointment as President and Chief Executive Officer. Pursuant to the letter agreement, Mr. Geldmacher will
receive an annual base salary of $900,000. Mr. Geldmacher will have a target annual incentive compensation
opportunity equal to 150% of his annual base salary, with a maximum opportunity of no less than 200% and, for
2020,
incentive amount. Also for 2020,
Mr. Geldmacher was granted a pro-rated long-term incentive award equal valued at $3.097 million at target, 10%
of which value will be granted as time-based restricted stock units, 15% as stock options and 25% as
performance-based restricted stock units, all of which will vest on the third anniversary of the grant date, and the
remaining 50% was granted as a cash bonus payable following the third anniversary of
if
Mr. Geldmacher remains employed; provided that Mr. Geldmacher will receive a pro-rated payout of the cash
bonus if his employment terminates due to death, disability, termination without cause or resignation for good
reason. In the event of a change in control, all of Mr. Geldmacher’s equity awards will vest in full in the event they
are not assumed in such change in control or if his employment is terminated without cause or for good reason
within 24 months following such change in control.
the grant
Mr. Geldmacher received a cash sign-on bonus of $2.0 million that will be subject to ratable repayment if he
resigns other than for good reason or is terminated for cause before completing 24 months of employment.
Mr. Geldmacher also was entitled to receive a make-whole payment of up to $90,000 due to the forfeiture of a
quarterly bonus opportunity with his prior employer. Mr. Geldmacher will be eligible for the severance benefits
that Mr. Geldmacher will also be eligible to
provided to the Company’s other executive officers; provided,
64 | 2021 PROXY STATEMENT
severance benefits in the event he resigns for good reason. Good reason is defined as Mr. Geldmacher not
the Company or reporting directly and exclusively to the Board,
serving as the most senior executive of
assignment to Mr. Geldmacher of duties materially inconsistent with his position, any material diminution of his
position, authority, duties or responsibilities, any reduction in annual base salary or target annual
incentive
opportunity from the amounts in the offer letter, requiring Mr. Geldmacher to be based at any office or location
greater than 25 miles away from the Company’s headquarters or any material breach of the offer letter by the
Company.
In addition to participating in the Company’s benefits for other employees and executives, Mr. Geldmacher will
receive (i) an executive physical benefit valued at up to $5,000 annually, (ii) the right to use a private jet for
business and commuting purposes, including a full tax gross-up for any income taxes on such use, (iii) relocation
assistance under the Company’s officer level relocation guidelines and reimbursement for temporary housing for
up to 12 months and up to $75,000, and (iv) reimbursement of his legal
fees related to negotiation and
documentation of his employment agreement up to $37,500.
Offer Letter with Anthony Trunzo, Executive Vice President, Chief Financial Officer
The Company entered into an offer letter with Mr. Trunzo on May 22, 2020, in connection with Mr. Trunzo’s
appointment as Executive Vice President, Chief Financial Officer effective June 8, 2020. Pursuant to the terms of
the offer letter, Mr. Trunzo will receive an annual base salary of $585,000. Mr. Trunzo will have a target annual
incentive compensation opportunity equal to 90% of his annual base salary, and for 2020, the payout shall be no
less than his pro-rated target incentive amount. Also for 2020, Mr. Trunzo was granted a long-term incentive
award valued at $1,131,148 at target, 20% of which value was granted as time-based restricted stock units, 30%
as stock options and 50% as performance-based restricted stock units, subject to the same customary vesting
terms for the Company’s equity awards for other executive officers.
Mr. Trunzo received a sign-on equity award of 300,000 restricted stock units that will vest as to one-half of such
shares on each of the third and fourth anniversaries of the date of grant. Mr. Trunzo will be eligible for the
Severance Plan; provided that Mr. Trunzo will also be eligible to receive severance benefits in the event he
resigns for good reason. Pursuant to the letter agreement, good reason is defined as assignment to Mr. Trunzo of
duties materially inconsistent with his position, any material diminution of his position, authority, duties or
responsibilities, any reduction in annual base salary or target annual incentive opportunity from the amounts in the
offer letter or any material breach of the offer letter by the Company. In addition to participating in the Company’s
benefits for other employees and executives, Mr. Trunzo was entitled to reimbursement of his legal fees related to
negotiation and documentation of his offer letter up to $10,000.
Separation Agreement with Michael Nefkens, Former President and Chief Executive Officer
The Company entered into a separation agreement with Mr. Nefkens on January 22, 2020 in connection with the
termination of Mr. Nefkens’ employment. Pursuant to the separation agreement, Mr. Nefkens was entitled to
receive severance benefits in accordance with and subject to the Severance Plan and other conditions set forth in
the separation agreement provided to Mr. Nefkens, Mr. Nefkens is also entitled to continued vesting
of a pro-rated portion of the restricted stock units that were granted to him on October 29, 2018 and he received a
to 140% of his base
payment equal
salary, pro-rated for the portion of
In addition,
Mr. Nefkens received a long-term incentive grant for fiscal 2020 valued at $1.433 million that vested monthly
during fiscal 2020 with a minimum vesting of three months and, following the severance period, Mr. Nefkens will
be engaged to provide consulting services for twelve months for an annual fee of $200,000. The payments and
benefits under the separation agreement were subject to Mr. Nefkens signing a general release of claims in favor
of the Company and complying with his restrictive covenants, including one-year non-competition and two-year
non-solicitation restrictions.
fiscal 2020 during which Mr. Nefkens remained employed.
to his fiscal 2020 target annual
incentive award, which is equal
Separation Agreement with Sachin Sankpal, Former President, Products & Solutions
The Company entered into a separation agreement with Mr. Sankpal on October 14, 2020 in connection with the
termination of Mr. Sankpal’s employment effective October 14, 2020. Pursuant to the terms of the separation
agreement, Mr. Sankpal was entitled to receive severance benefits in accordance with and subject to the
Severance Plan and other conditions set forth in the separation agreement. Mr. Sankpal is entitled to continued
vesting of that portion of the restricted stock units that were granted to him on January 7, 2020 that were not
2021 PROXY STATEMENT | 65
otherwise subject to pro-rata vesting upon termination, as well as a payment of his fiscal 2020 annual incentive
award, in accordance with the Company’s actual financial results with respect to the financial metric components
and reduced by 50% for the individual performance component, but guaranteed at
that reduced level, all
pro-rated for the portion of fiscal 2020 during which Mr. Sankpal remained employed. Mr. Sankpal was entitled to
reimbursement of $5,000 for the cost of shipping his household goods in connection with relocation. The
payments and benefits under the separation agreement were subject to Mr. Sankpal signing a general release of
including
claims
one-year non-competition and two-year non-solicitation restrictions.
complying with
the Company
covenants,
restrictive
favor
and
his
of
in
Separation Agreement with Michael Flink, Former Senior Vice President, Executive Advisor
The Company entered into an employment terms letter with Mr. Flink on June 4, 2020 pursuant to which Mr. Flink
transitioned from his prior position of Executive Vice President, Transformation to Senior Vice President,
Executive Advisor effective June 1, 2020 for a transition period prior to the termination of his employment on
March 31, 2021. Mr. Flink was entitled to receive the same compensation he received previously for his continued
role as Senior Vice President, Executive Advisor, and, in the event his employment was terminated within one
year thereafter, he remained entitled to eighteen months of salary continuation and continued vesting of restricted
stock units that were granted to him on October 29, 2018 and November 15, 2018. Mr. Flink was entitled to a
payment of his fiscal 2020 annual incentive award, in accordance with the Company’s actual financial results with
respect to the financial metric components and reduced by 50% for the individual performance component, but
guaranteed at that reduced level, if his employment terminated prior to payout of the incentive award in the
ordinary course (in which case the payout would have pro-rated for the portion of fiscal 2020 during which
Mr. Flink remained employed). Mr. Flink remained employed through the payout of his incentive award so no
incremental benefit was provided, and his individual component paid out at the reduced, guaranteed level. As a
condition to the payments and benefits under the employment terms letter, Mr. Flink was obligated at the time of
his termination to sign a separation agreement that included a general release of claims in favor of the Company
and a requirement that he comply with his restrictive covenants, including one-year non-competition and two-year
non-solicitation restrictions.
Potential Payments Upon Termination or Change in Control
Overview
This section describes the benefits payable to our NEOs in two circumstances:
• Termination of employment
• Change in Control (“CIC”)
Officer Severance Plan
These benefits are determined primarily under our Resideo Technologies, Inc. Severance Plan for Designated
Officers, or Severance Plan, which our Committee approved in November 2018 and reflects their assessment of
external market data on benefits commonly offered to senior executives in such circumstances. The Committee
strongly believes that our severance benefits are generally in line with current market practices and are
particularly important as we do not maintain employment agreements with our NEOs. Benefits provided under the
Severance Plan are conditioned on the executive executing a full release of claims and compliance with certain
non-competition and non-solicitation covenants in favor of
the Company. The right to continued severance
benefits under the plan ceases in the event of a violation of such covenants. In addition, we would seek to recover
certain severance benefits already paid to any executive who violates such restrictive covenants.
In addition to the Severance Plan, several of our other benefits plans, such as our Annual
Incentive
Compensation Plan, also have provisions that impact these benefits. These benefits ensure that our executives
are motivated primarily by the needs of the businesses for which they are responsible, rather than circumstances
that are outside the ordinary course of business, i.e., circumstances that might lead to the termination of an
executive’s employment or that might lead to a CIC of the Company. Generally, this is achieved by assuring our
NEOs that they will receive a level of continued compensation if their employment is adversely affected in these
circumstances, subject to certain conditions. We believe that these benefits help ensure that affected executives
act in the best interests of our shareholders, even if such actions are otherwise contrary to their personal
66 | 2021 PROXY STATEMENT
interests. This is critical because these are circumstances in which the actions of our NEOs may have a material
impact upon our shareholders. Accordingly, we set the level and terms of these benefits in a way that we believe
is necessary to obtain the desired results. The level of benefit and the rights to benefits are determined by the
type of termination event, as described below.
In the case of a CIC, severance benefits under the Severance Plan are payable only in the event that both parts
of the “double trigger” are satisfied. That is, (i) there must be a CIC of our Company, and (ii)(A) the NEO must be
involuntarily terminated other than for cause, or (B) the NEO must initiate the termination of his own employment
for good reason. Similarly, our 2018 Stock Incentive Plan does not offer single-trigger vesting of equity awards
that are assumed or replaced by an acquirer upon a CIC.
Equity Awards
Death and Disability – In the case of a recipient’s death or disability, vesting of options and restricted stock units
accelerates in full and a pro rata portion of the PSUs will vest and settle if, and to the extent of, Resideo’s actual
achievement of the performance measures during the performance period. The options remain exercisable until
the earlier of three years after termination or the original expiration date.
Involuntary Termination Without Cause – If an executive officer is subject to an involuntary termination without
cause by Resideo, a pro rata portion of his or her options and restricted stock units will vest immediately upon
termination, and a pro rata portion of the PSUs will vest and settle if, and to the extent of, Resideo’s actual
achievement of the performance measures during the performance period. The options will remain exercisable
until the earlier of one year after termination or the original expiration date.
Voluntary Resignation – If a recipient resigns voluntarily from the Company, he or she will forfeit any unvested
options, restricted stock units and PSUs, and will have 30 days to exercise any then-vested options.
Retirement – With respect to equity awards granted prior to February 2019, non-vested awards are generally
forfeited upon any retirement. Equity awards granted in or after February 2019 generally provide that an award
recipient is retirement eligible if he or she is age 55 years or older, has at least 10 years of service to Resideo and
also has provided Resideo with at least 6 months’ prior notice that he or she is considering retirement. If an NEO
is retirement eligible, his or her employment with Resideo ends as a result of retirement and he or she accepts
certain post-employment conditions, the RSU awards and options granted in or after February 2019 will continue
to vest in accordance with the original vesting schedule (and options shall remain exercisable until the earlier of
their original expiration date and three (3) years after retirement) and the PSU awards granted in or after February
2019 will vest on a pro-rata basis, based on actual performance as measured at the end of the performance
period. Ms. Lane is the only NEO who is currently retirement eligible.
Pension and Non-Qualified Deferred Compensation
Pension and non-qualified deferred compensation benefits, which are described elsewhere in this Proxy
Statement, are not included in the table below in accordance with the applicable proxy statement disclosure
requirements, even though they may become payable at the times specified in the table. If an officer who
participates in the RSSP terminates employment with Resideo, the balance of that executive’s SSP or DIP
account will be paid to the executive in June of the year following his or her termination. Similarly, if an officer who
is a participant in the RPP or the SPP described above terminates employment, the executive’s balance in the
pension plan will be paid to the executive one hundred and five days after his or her termination date.
The following table summarizes estimated payments and benefits to which our NEOs would be entitled upon the
hypothetical occurrence of various termination scenarios or a CIC. The information in the table below is based on
the assumption, in each case, that the termination of employment occurred on December 31, 2020. None of these
termination benefits are payable to NEOs who voluntarily resign (other than voluntary resignations for good
reason as specified or certain qualifying retirements) or whose employment is terminated by us for cause.
NEOs Who Have Terminated Employment
The employment of Mr. Nefkens terminated on May 27, 2020, Mr. Sankpal terminated on October 14, 2020 and
Mr. Flink terminated on March 31, 2021, each under circumstances that entitle such NEO to severance benefits.
Accordingly, the severance amounts shown below for termination by the Company without Cause for Messrs.
2021 PROXY STATEMENT | 67
Nefkens, Sankpal, and Flink reflect the actual amounts they are entitled to in connection with the termination of
their employment pursuant to their severance agreements, which are described above under “Compensatory
Arrangements with NEOs,” and no amounts are reported for the other scenarios for these NEOs.
Death
($)
Disability
($)
Change-in-Control–
No Termination
of Employment ($)
Change-in-Control–
Termination of
Employment by
Company, Without
Cause, by NEO for
Good Reason or
Due to Disability
($)
Payments and Benefits
Cash Severance
(Base Salary)
Annual Incentive
Compensation (2)–Year
of Termination
Outstanding Equity
Awards (3)(4)
Benefits (5)
Named Executive
Officer
Jay Geldmacher
Anthony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Mike Nefkens
Robert Ryder
Michael Flink
Sachin Sankpal
Jay Geldmacher
Anthony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Mike Nefkens
Robert Ryder
Michael Flink
Termination
by the
Company
Without
Cause ($)(1)
1,800,000
877,500
862,500
664,350
675,000
1,800,000
—
724,605
750,000
—
—
—
—
—
509,508
—
—
Sachin Sankpal
337,475
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Jay Geldmacher
Anthony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Mike Nefkens
Robert Ryder
Michael Flink
Sachin Sankpal
Jay Geldmacher
Anthony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Mike Nefkens
Robert Ryder
Michael Flink
Sachin Sankpal
— 6,959,735
6,959,735
— 9,454,344
9,454,344
— 7,408,578
7,408,578
— 3,820,474
3,820,474
— 3,103,115
3,103,115
1,073,902
—
3,133,140
2,474,281
11,023
16,484
13,144
16,904
12,874
23,042
—
14,380
17,282
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
68 | 2021 PROXY STATEMENT
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,800,000
1,170,000
1,150,000
885,800
900,000
—
—
—
—
2,700,000
1,053,000
1,150,000
708,640
720,000
—
—
—
—
6,959,735
9,454,344
7,408,578
3,820,474
3,103,115
—
—
—
—
11,023
21,978
17,525
22,538
17,165
—
—
—
—
Death
($)
Disability
($)
Change-in-Control–
No Termination
of Employment ($)
Payments and Benefits
All Other–Payments/
Benefits (6)
Total
Named Executive
Officer
Jay Geldmacher
Anthony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Mike Nefkens
Robert Ryder
Michael Flink
Sachin Sankpal
Jay Geldmacher
Anthony Trunzo
Robert Aarnes
Stephen Kelly
Jeannine Lane
Mike Nefkens
Robert Ryder
Michael Flink
Termination
by the
Company
Without
Cause ($)(1)
—
—
—
—
—
200,000
—
—
5,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,811,023
6,959,735
6,959,735
893,984
9,454,344
9,454,344
875,644
7,408,578
7,408,578
681,254
3,820,474
3,820,474
687,874
3,103,115
3,103,115
3,406,453
—
—
—
—
—
3,872,125
4,916,056
4,916,056
Change-in-Control–
Termination of
Employment by
Company, Without
Cause, by NEO for
Good Reason or
Due to Disability
($)
—
—
—
—
—
—
—
—
—
11,470,758
11,699,323
9,726,103
5,437,452
4,740,280
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Sachin Sankpal
3,579.038
—
—
The amounts reflected in the first column related to involuntary termination unrelated to a CIC, as well as the final two columns specific to
circumstances following a CIC are based on the provisions of the Severance Plan, and the provisions of the 2018 Stock Incentive Plan.
(1) Pursuant to their offer letters, Mr. Geldmacher and Mr. Trunzo are also entitled to receive the same severance benefits set forth here for
termination by the Company without cause if they terminate their employment for good reason as defined in their offer letters. See
“Compensatory Arrangements with NEOs” above for additional information.
(2) Severance amounts in the event of involuntary termination not related to CIC represent a cash payment equal to 24 months of annual
base salary for Mr. Geldmacher and Mr. Nefkens and 18 months of annual base salary for the other NEOs. Severance amounts related to
an involuntary termination or termination for good reason related to a CIC represent a cash payment equal to 24 months of annual base
salary as well as two times the NEO’s target annual incentive compensation.
(3)
In addition to the amounts reflected in the final column, if an NEO is terminated without cause in situations following a CIC, the executive
will also be entitled to a pro-rated Annual Incentive Award for the period of employment during the year of termination.
(4) Amounts represent the intrinsic value of RSUs, and PSUs as of December 31, 2020 for which the vesting would be accelerated. RSUs will
be vested in full upon a termination due to death, disability or an involuntary termination or termination for good reason within 24 months
of a CIC. With respect to RSU grants issued after December 31, 2018 only, a pro rata portion of the award would accelerate upon an
involuntary termination not related to a CIC. With respect to the PSUs, upon termination due to death, disability or involuntary termination
not related to a CIC, a pro rata portion of the PSUs are eligible to vest at actual performance levels at the end of the performance period.
In the case of an involuntary termination or termination for good reason within 24 months of a CIC, a pro rata portion of the PSUs will vest
at target or at the level of substantially achieved performance, as determined by the Committee prior to the CIC. The value included for
RSUs and PSUs is the product of the number of units for which vesting would be accelerated and $21.26, the closing price of Resideo
common stock on December 31, 2020, except for the values reflected for Mr. Nefkens, Mr. Sankpal, and Mr. Flink, where the value
reflected is based on the actual fair value of the awards accelerated or amended to permit continued vesting on the respective date of
termination - $6.60, $10.98, and $28.82, respectively. None of the February 11, 2019 stock option grants are included in the table
because the exercise price was below the fair market value as of December 31, 2020.
(5) The amounts reflected represent the Company’s cost for continuation of benefits, such as medical, dental, vision and life insurance, for
the Salary Continuation Period as defined under the Severance Plan.
(6) The amounts reflect payments to be made to Mr. Nefkens for consulting services for one year following his severance period and $5,000
of reimbursement payments for Mr. Sankpal’s relocation following termination of his employment.
Mr. Ryder is not eligible to participate in the Severance Plan and has not received any equity awards. His
compensation is governed solely by the engagement
letter between the Company and Horsepower dated
October 22, 2019.
2021 PROXY STATEMENT | 69
CEO Pay Ratio
the Dodd-Frank Wall Street Reform and Consumer Protection Act, and
As required by Section 953(b) of
Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total
compensation of the individual identified as our median paid employee and the annual total compensation of
Mr. Jay Geldmacher, our President and Chief Executive Officer (the CEO).
For the year ended December 31, 2020, the total compensation for Mr. Geldmacher, was $4,697,966 as reported
in the Total Compensation column of the Summary Compensation Table on page 55. Since Mr. Geldmacher was
appointed CEO effective May 28, 2020, we annualized his Salary, Stock and Option Awards, Non-Equity Incentive
Plan Compensation, and the Excess Liability Insurance component of the total of All Other Compensation of the
Summary Compensation Table. We then added the disclosed values of his Bonus and other components of All
Other Compensation amount to arrive at a value of $7,422,494 used for the ratio of annual total compensation for
our CEO to the annual total compensation for our median employee. The table below provides the amounts as
shown in the SCT and as annualized:
Actual Values
from SCT ($)
For CEO Pay Ratio:
Annualized Values +
One-Time Values ($)
Rationale
526,154
900,000
Annualized salary
SCT Components
Salary
Bonus (Sign-On)
Bonus (Guaranteed Annual Cash
Incentive)
Stock Awards
Option Awards
2,090,000
2,090,000
804,098
1,350,000
774,547
464,589
1,902,579
1,141,204
All Other Compensation
38,579
38,711
Total CEO Pay
4,697,966
7,422,494
Not annualized; one-time sign-on
payment
Annualized for target incentive equal
to 150% of salary; actual 2020
amount was guaranteed at target
Annualized stock award value
Annualized stock option award value
Annualized excess liability
insurance, plus actual amount of
legal fee reimbursement and
executive physical
For 2020, our last completed fiscal year:
•
•
the annual total compensation of our median employee was $21,539; and
the annualized total compensation of our CEO as shown above was $7,422,494.
Based on this information, for 2020, the ratio of the annual total annualized compensation of Mr. Geldmacher, our
CEO, to the annual total compensation of the median employee was estimated to be 345 to 1. This pay ratio is a
reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment
records and the methodology described below.
To identify our median employee for 2020, we considered our global population as of October 1, 2020 (the
“Measurement Date”). As of the Measurement Date, our total global employee population (excluding our CEO)
consisted of approximately 14,475 individuals.
Total U.S. Employees
Total Non-U.S. Employees
Total Global Workforce
3,068
11,407
14,475
(no exemptions utilized)
To identify the “median employee” from our total global employee population (excluding our CEO), we aggregated
annual total base salary and actual incentive awards paid during 2020, including bonuses and commissions. We
also annualized the compensation of all newly hired permanent employees who were employed on the
70 | 2021 PROXY STATEMENT
measurement date, for the 12-month period ending December 31, 2020, as permitted under SEC rules. All
non-US pay components were converted to US dollars using the same currency exchange rates in effect in our
financial records at October 1, 2020.
Once we identified the median employee, we determined the median employee’s total compensation by applying
the same rules required to report NEO compensation on the Summary Compensation Table.
The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that
employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain
exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As
such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other
companies may have different employment and compensation practices and may utilize different methodologies,
exclusions, estimates and assumptions in calculating their own pay ratios.
2021 PROXY STATEMENT | 71
Equity Compensation Plan Information
As of December 31, 2020, information about equity compensation plans is as follows:
Number of Shares to be
Issued Upon Exercises of
Outstanding Options, Warrants
and Rights
(a)
Weighted-Average Exercise
Price of Outstanding
Options, Warrants and
Rights
(b)
Number of Securities Remaining
Available for Future Issuance Under
Equity Compensation Plans
(Excluding Securities Reflected in
Column (a))
(c)
6,924,987(1)
—
6,924.987
15.98
—
15.98
10,862,646(1)
—
10,862,646
Plan Category
Equity compensation plans
approved by security
holders
Equity compensation Plans
not approved by security
holders
Total
Equity compensation plans approved by shareholders in the table above include the 2018 Stock Incentive Plan for Resideo Technologies, Inc.
and its Affiliates as well as the 2018 Stock Plan For Non-Employee Directors of Resideo Technologies, Inc., the Resideo Employee Stock
Purchase Plan, and the Resideo Technologies UK ShareBuilder Plan.
(1)
(2)
Includes 1,725,223 shares underlying stock options, 4,286,964 shares underlying RSUs and 912,800 shares underlying PSUs (assuming
target).
Includes 6,940,614 shares available for future issuance under the Resideo Technologies, Inc. 2018 Stock Incentive Plan, 3,000,000
shares available for future issuance under the Resideo Technologies, Inc. Employee Stock Purchase Plan, 723,838 shares available for
future issuance under the 2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc., and 198,194 shares available for
future issuance under the Resideo Technologies UK ShareBuilder Plan.
72 | 2021 PROXY STATEMENT
Proposal 3:
Ratification of the Appointment of
Independent Registered Public Accounting
Firm
Under its written charter, the Audit Committee of the Board has sole authority and is directly responsible for the
appointment, compensation, retention, oversight, evaluation and termination of the independent registered public
accounting firm retained to audit the Company’s financial statements.
The Audit Committee evaluated the qualifications, performance and independence of the Company’s independent
auditors and based on its evaluation, has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s
independent registered public accounting firm for 2021. Deloitte served as the independent auditor of Resideo
during 2020. The Audit Committee and the Board believe that the retention of Deloitte to serve as the Company’s
independent registered public accounting firm is in the best interests of the Company and its shareholders.
The Audit Committee is responsible for the approval of the engagement fees and terms associated with the
retention of Deloitte. In addition to assuring the regular rotation of the lead audit partner as required by law, the
Audit Committee will be involved in the selection and evaluation of the lead audit partner and considers whether,
in order to assure continuing auditor independence, there should be a regular rotation of the independent
registered public accounting firm.
Although the By-Laws do not require that we seek shareholder ratification of the appointment of Deloitte as our
independent registered public accounting firm, we are doing so as a matter of good corporate governance. If the
shareholders do not ratify the appointment, the Audit Committee will reconsider whether to retain Deloitte.
Representatives of Deloitte are expected to be present at the annual meeting, will have the opportunity to make a
statement if they desire to do so and will be available to respond to appropriate questions by shareholders.
The Board of Directors unanimously recommends a vote “FOR” Proposal 3, to ratify
the appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for 2021.
Report of the Audit Committee
The Audit Committee consists of the three directors named below. Each member of the Audit Committee is an
independent director as defined by applicable SEC and NYSE listing standards. In addition, the Board has
determined that Mr. Lazar and Mr. Deninger are “audit committee financial experts” as defined by applicable SEC
rules and satisfy the “accounting or related financial management expertise” criteria established by the NYSE.
In accordance with its written charter, the Audit Committee of the Board is responsible for assisting the Board to
fulfill its oversight of:
•
•
•
•
the integrity of the Company’s financial statements and internal controls;
the Company’s compliance with legal and regulatory requirements;
the independent auditors’ qualifications and independence; and
the performance of the Company’s internal audit function and independent auditors.
2021 PROXY STATEMENT | 73
It is the responsibility of Resideo’s management to prepare the Company’s financial statements and to develop
and maintain adequate systems of internal accounting and financial controls. The Company’s internal auditors are
responsible for conducting internal audits intended to evaluate the adequacy and effectiveness of the Company’s
financial and operating internal control systems.
Deloitte, the Company’s independent registered public accounting firm for 2021 (the “independent auditor”), is
responsible for performing an independent audit of the Company’s consolidated financial statements and issuing
an opinion on the conformity of those audited financial statements with accounting principles generally accepted
in the United States of America (“GAAP”). The independent auditor also reviews the Company’s interim financial
statements in accordance with applicable auditing standards.
In evaluating the independence of Deloitte, the Audit Committee has (i) received the written disclosures and the
letter from Deloitte required by applicable requirements of the Public Company Accounting Oversight Board
(“PCAOB”) regarding the audit
firm’s communications with the Audit Committee concerning independence,
(ii) discussed with Deloitte the firm’s independence from the Company and management and (iii) considered
whether Deloitte’s provision of non-audit services to the Company is compatible with the auditors’ independence.
In addition, the Audit Committee assures that the lead audit partner is rotated at least every five years in
accordance with SEC and PCAOB requirements, and considered whether there should be a regular rotation of
the audit firm itself in order to assure the continuing independence of the outside auditors. The Audit Committee
has concluded that Deloitte is independent from the Company and its management.
The Audit Committee has reviewed with the independent auditor and the Company’s internal auditors the overall
scope and specific plans for their respective audits, and the Audit Committee is monitoring the progress of both in
assessing the Company’s preparedness for future compliance with Section 404 of the Sarbanes-Oxley Act.
At every regular meeting, the Audit Committee meets separately, and without management present, with the
independent auditor and the Company’s Vice President, Internal Audit to review the results of their examinations,
their evaluations of the Company’s internal controls and the overall quality of the Company’s accounting and
financial reporting. The Audit Committee also meets separately at its regular meetings with the Chief Financial
Officer, the Chief Accounting Officer, the General Counsel and Chief Compliance Officer.
The Audit Committee has met and discussed with management and the independent auditor the fair and
complete presentation of the Company’s financial statements. The Audit Committee has also discussed and
reviewed with the independent auditor all matters required to be discussed by applicable requirements of the
PCAOB and the SEC. The Audit Committee has discussed significant accounting policies applied in the financial
statements, as well as alternative treatments. Management has represented that
the consolidated financial
statements have been prepared in accordance with GAAP, and the Audit Committee has reviewed and discussed
the audited consolidated financial statements with both management and the independent auditor.
Relying on the foregoing reviews and discussions, the Audit Committee recommended to the Board, and the
Board approved, inclusion of the audited consolidated and combined financial statements in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the SEC. In addition, the Audit
Committee has approved, subject to shareholder ratification, the selection of Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for 2021.
The Audit Committee
Jack Lazar (Chair)
Paul Deninger
Brian Kushner
74 | 2021 PROXY STATEMENT
Audit Committee Pre-Approval Policy
The Audit Committee has adopted policies and procedures for pre-approval of audit, audit-related, tax and other
services, and for pre-approval of related fee estimates or fee arrangements. These procedures require that the
terms and fees for the annual audit service engagement be approved by the Audit Committee. The Audit
Committee is required to pre-approve the audit and non-audit services performed by the independent auditor in
order to assure that the provision of such services does not impair the auditor’s independence. Unless a type of
service to be provided by the independent auditor has received general pre-approval under this policy, it will
require specific pre-approval by the Audit Committee before the service is provided. In the event the invoice in
respect of any covered service that is the subject of general pre-approval is materially in excess of the estimated
amount or range, the Audit Committee must approve such excess amount prior to payment of the invoice.
Predictable and recurring covered services and their related fee estimates or fee arrangements may be
considered for general pre-approval by the full Audit Committee on an annual basis at or about the start of each
fiscal year. Specific pre-approval of such services that have not received general pre-approval may be given or
effective up to one year prior to commencement of the services. Under the policy, the Audit Committee has
delegated to the Chair the authority to pre-approve audit-related and non-audit services and associated fees, that
are not otherwise prohibited by law, to be performed by the Company’s independent registered public accounting
firm in an amount of up to $100,000 for any one service; the Chair is required to report any pre-approval decisions
to the Audit Committee at its next scheduled meeting. All services set forth in the following table below were
approved by the Audit Committee before being rendered.
Audit and Non-Audit Fees
The following table shows fees for professional services rendered by Deloitte for the years ended December 31,
2020 and 2019.
2020 ($)
2019 ($)
Description of Services
Audit Fees
5,006,000 5,445,000 Fees pertaining to the audit of the Company’s annual consolidated
financial statements, audits of statutory financial statements of our
subsidiaries and fees pertaining to the review of SEC filings.
Audit-Related Fees
Tax Fees
All Other Fees
Total
0
0
0
0
1,895
30,000
5,007,895 5,475,000
2021 PROXY STATEMENT | 75
Proposal 4:
Shareholder Proposal Requesting
Shareholders’ Right to Act by Written
Consent
John Chevedden, whose address is 2215 Nelson Ave., No. 205, Redondo Beach, CA 90278, has requested that
the following proposal be included in this Proxy Statement and has indicated that he intends to present such
proposal at the annual meeting. Mr. Chevedden has submitted documentation indicating that he is the beneficial
owner of at least 114 shares of our common stock and has advised the Company that he intends to continue to
hold the requisite amount of shares through the date of the 2021 annual meeting. Mr. Chevedden’s proposal and
his related supporting statement are followed by a recommendation from the Board. The Board disclaims any
responsibility for the content of the proposal and the statement in support of the proposal, which are presented in
the form received from the shareholder.
Proposal 4: Adopt a Mainstream Shareholder Right – Written Consent
Shareholders request that our board of directors take such steps as may be necessary to permit written consent
(with as few governing document words as possible) by shareholders entitled to cast the minimum number of
votes that would be necessary to authorize an action at a meeting at which all shareholders entitled to vote
thereon were present and voting. This written consent is to give shareholders the fullest power to act by written
consent consistent with applicable law. This includes shareholder ability to initiate any appropriate topic for written
consent.
This proposal topic won 95%-support at Dover Corporation and 88%-support at AT&T. Written consent allows
shareholders to vote on important matters, such as electing new directors that can arise between annual
meetings. This proposal is in favor of adopting a shareholder right to act by written consent with as few words as
possible in the governing documents because more words are a management device to limit shareholder rights.
In spite of supporting votes exceeding 88% for this proposal topic our management fought hard with REZI
shareholder money to prevent shareholders from voting on this proposal topic at our 2020 annual meeting. Our
management hired Faegre Drinker, a law firm with 1300 attorneys, at shareholder expense to fight this proposal
topic.
REZI shareholders could determine that a director needs replacing if the director received a large number of
negative votes or if management pay was rejected by 20% of shares or more at the annual meeting (an indication
that the chair of the management pay committee needs replacing).
A shareholder right to act by written consent still affords REZI management a strong defense for a management
holdout position against shareholders. Any action taken by written consent would still need 64% supermajority
approval from the shares that normally cast ballots at the REZI annual meeting to equal a majority from the REZI
shares outstanding.
Please vote yes:
Adopt a Mainstream Shareholder Right - Written Consent - Proposal 4
76 | 2021 PROXY STATEMENT
Statement of the Board of Directors in Opposition to Proposal 4
Our Board has carefully considered this proposal and, for the reasons set forth below, does not believe it is in the
best interests of the Company and our shareholders:
• We believe that matters requiring shareholder approval should be presented to, and voted on, by all
shareholders.
• We believe that providing shareholders with the meaningful ability to call a special meeting of shareholders
outside of the annual meeting cycle empowers all shareholders to participate collectively and cast informed
votes.
• Our existing corporate governance practices, including those listed below, enforce Board and management
accountability to our shareholders.
We believe that matters requiring shareholder approval should be presented to, and voted on, by all
shareholders.
Delaware law does not require a communication to all shareholders about the matter raised when shareholders
act by written consent. As a result, many shareholders may be denied the ability to participate in major decisions
affecting the Company and their interests. Our Board believes that our shareholders are best served by holding
meetings in which all shareholders are provided with notice and an opportunity to consider and discuss the
proposed actions and vote their shares.
Additionally, unlike meetings of shareholders, action by written consent could deny shareholders the ability to vote
or otherwise have a say on proposed shareholder actions. The shareholder proposal would permit shareholders
owning just over 50% of the Company’s outstanding shares to act on matters that could be of great significance to
the Company and all of its shareholders. Furthermore, permitting shareholder action by written consent could
create confusion and disruption, as multiple shareholders could solicit written consents at any time on a wide
range of issues, which may duplicate or conflict with other proposals.
Providing shareholders with the meaningful ability to call a special meeting of shareholders outside of
the annual meeting cycle empowers all shareholders to participate collectively and cast informed votes.
In 2021, our Board amended the Company’s By-Laws to provide that shareholders holding at least 25% of the
outstanding stock of
the Company may call a special meeting. A special meeting provides a forum for
shareholders, our Board and the Company’s management to consider shareholder concerns, and our Board
believes that the 25% ownership requirement to call such a meeting sets a reasonable balance in making an
extraordinary action more available to our shareholders without handing excessive power to a small minority.
Unlike action by written consent, a special meeting provides all Company shareholders to have the opportunity to
participate and make an informed decision.
The Company’s existing corporate governance practices empower shareholders and promote Board and
management accountability.
The Board further believes that our strong corporate governance practices make adoption of this proposal
to call special meetings, our corporate
unnecessary.
governance practices provide transparency and accountability of
the Board to all of our shareholders and
demonstrates that we are responsive to shareholder concerns. For example:
In addition to providing shareholders with the right
•
Independent Board and Committee Leadership. In addition to our non-employee Chairman of the Board,
we have an Independent Lead Director and each of our key Board committees is chaired by and composed
solely of independent directors.
• Majority Vote Standard. Our By-Laws provide for the election of directors by a majority of votes cast in
uncontested elections.
• Proxy Access. Our By-Laws provide for proxy access which permits a shareholder, or a group of up to 20
shareholders, owning 3% or more of our outstanding shares of common stock continuously for at least three
years to nominate and include in our proxy materials nominees for director constituting up to 20% of the
Board or two directors, whichever is greater, subject to the requirements set forth in our By-Laws.
2021 PROXY STATEMENT | 77
• Annual Say on Pay Vote. We provide our shareholders an annual advisory vote on our executive
compensation.
• Communication with the Board. We encourage open communication from our shareholders and provide a
means for shareholders to communicate with and raise concerns to the Board.
• Annual Election of Directors Commencing in 2022. This is the last year following our Spin-Off that we
have a classified Board, and all directors will be elected annually commencing next year at the 2022
shareholders meeting.
In summary, our Board believes that the implementation of this shareholder proposal is unnecessary and not in
the best interests of the Company or its shareholders, given shareholders’ ability to call special meetings and the
Company’s existing strong corporate governance practices.
For the reasons stated above, our Board of Directors unanimously recommends a vote “AGAINST” this
Shareholder Proposal
78 | 2021 PROXY STATEMENT
Stock Performance Graph
The following graph shows a comparison through December 31, 2020 of the cumulative total returns for (i) our
common stock, (ii) the S&P MidCap 400 Total Return Index and (iii) the S&P 400 Industrials assuming an initial
investment of $100 on the Spin-Off date and reinvestment of all dividends. The returns in the graph are not
intended to forecast or be indicative of possible future performance of our common stock.
COMPARISON OF CUMULATIVE TOTAL RETURNS
SUBSEQUENT TO SPIN-OFF
$200
$150
$100
$50
$0
Spin-Off
12/31/2018
6/30/2019
12/31/2019
6/30/2020
12/31/2020
Resideo
S&P Mid Cap 400 Total Return Index
S&P 400 Industrials TR
2021 PROXY STATEMENT | 79
Questions and Answers
About the Annual Meeting and Voting
1. Who is entitled to vote and how many votes do I have?
If you were a holder of record of Resideo common stock at the close of business on the record date, April 14,
2021, you are eligible to vote at the annual meeting. For each matter presented for vote, you have one vote
for each share you own.
2. What is the difference between holding shares as a shareholder of record, a registered shareholder
and a beneficial owner of shares?
Shareholder of Record or Registered Shareholder. If your shares of common stock are registered directly
in your name with our transfer agent, EQ Shareowner Services, you are considered a “shareholder of record”
or a “registered shareholder” of those shares.
Beneficial Owner of Shares. If your shares are held in an account at a bank, brokerage firm or other similar
organization, then you are a beneficial owner of shares held in “street name.” In that case, you will have
received these proxy materials from the bank, brokerage firm or other similar organization holding your
account and, as a beneficial owner, you have the right to direct your bank, brokerage firm or similar
organization as to how to vote the shares held in your account.
3. How do I vote if I am a shareholder of record?
By Internet. You may vote your shares by internet at www.proxyvote.com.
By Telephone. All shareholders of record can vote by touchtone telephone within the U.S., U.S. territories
and Canada by calling 1-800-690-6903. The telephone voting procedures are designed to authenticate
shareholders’ identities, to allow shareholders to vote their shares and to confirm that their instructions have
been recorded properly.
By Written Proxy. All shareholders of record can also vote by written proxy card. If you are a shareholder of
record and receive a Notice of Internet Availability of Proxy Materials (“Notice”) received or requested from
us, you may request a written proxy card by following the instructions included in the Notice. If you sign and
return your proxy card but do not mark any selections giving specific voting instructions, your shares
represented by that proxy will be voted as recommended by the Board.
Via the Virtual Meeting Website. You may vote your shares live at the virtual annual meeting. Even if you
plan to attend and participate in our virtual annual meeting via www.virtualshareholdermeeting.com/
REZI2021, we encourage you to vote by internet at www.proxyvote.com or by calling 1-800-690-6903, or by
returning a proxy card. This will ensure that your vote will be counted if you are unable to, or later decide not
to, participate in the virtual annual meeting. Whether you are a shareholder of record or hold your shares in
street name, you may vote online at the virtual annual meeting. You will need to enter the 16-digit control
number provided in your proxy materials to vote your shares at the virtual annual meeting. See Question 5 for
further details on accessing and voting at the virtual annual meeting.
Unless you vote live at the virtual annual meeting, we must receive your vote by 11:59 p.m., Eastern Daylight
Time, on June 8, 2021, the day before the virtual annual meeting, for your vote by proxy to be counted.
Whether or not you plan to attend the virtual annual meeting, we encourage you to vote by proxy as
soon as possible. Your shares will be voted in accordance with your instructions.
4. How do I vote if I am a beneficial owner of shares?
As a beneficial owner, you have the right to direct your broker, bank or other similar organization on how to
vote via the internet or by telephone if the broker, bank or other similar organization offers these options or by
signing and returning a voting instruction form. Your broker, bank or other similar organization will send you
instructions for voting your shares.
80 | 2021 PROXY STATEMENT
Your broker is not permitted to vote on your behalf on “non-routine” matters unless you provide specific
instructions by completing and returning the voting instruction form from your broker, bank or other similar
organization or by following the instructions provided to you for voting your shares via telephone or the
internet. A “broker non-vote” occurs when a broker submits a proxy for the meeting with respect to a “routine”
matter but does not have the authority to vote on non-routine matters because the beneficial owner did not
provide voting instructions on those matters. Under NYSE rules, the proposal to ratify the appointment of
independent auditors (Proposal 3) is considered a routine item. This means that brokerage firms may vote in
their discretion on behalf of clients (beneficial owners) who have not furnished voting instructions at least 15
days before the date of the annual meeting. In contrast, all of the other proposals set forth in this Proxy
Statement are “non-routine” items. Brokerage firms that have not received voting instructions from their
clients on these matters may not vote on these proposals.
5. How do I attend the virtual annual meeting?
The annual meeting will be completely virtual and shareholders will be able to access the meeting live by
visiting www.virtualshareholdermeeting.com/REZI2021. We are utilizing the virtual meeting format to enhance
shareholder access and encourage participation and communication with our management.
We believe a virtual-only meeting provides expanded access, improved communication and cost savings for
our shareholders. A virtual meeting will enable increased attendance because shareholders around the world
will be able to attend and listen to the annual meeting live, submit questions and vote their shares
electronically, at no cost.
Participating in the Virtual Annual Meeting.
•
Instructions
the
how
www.virtualshareholdermeeting.com/REZI2021.
attend
on
to
virtual
annual
meeting
are
posted
at
• Shareholders will need to use the 16-digit control number provided in their proxy materials to attend the
virtual annual meeting and listen live at www.virtualshareholdermeeting.com/REZI2021.
• Shareholders of record and beneficial owners as of the record date may vote their shares electronically
live during the virtual annual meeting.
• Shareholders with questions regarding how to attend and participate in the virtual meeting may
call 800-586-1548 (US) or 303-562-9288 (International) on the date of the annual meeting.
• Shareholders encountering any difficulties accessing the virtual meeting during the check-in or meeting
time can call 800-586-1548 (US) or 303-562-9288 (International).
Additional Information about the Virtual Annual Meeting.
• Shareholders may submit questions during the live meeting at www.virtualshareholdermeeting.com/
REZI2021 or in advance of the meeting at www.proxyvote.com.
• Management will answer questions on any matters on the agenda before voting is closed.
• During the live Q&A session of the meeting, management will answer questions as they come in and
address those asked in advance, as time permits.
•
•
In order to allow us to answer questions from as many shareholders as possible, we limit each
shareholder to one question.
If there are matters of individual concern to a shareholder and not of general concern to all shareholders,
or if a question posed was not otherwise answered, shareholders can contact Investor Relations after
the meeting at InvestorRelations@resideo.com.
• The Q&A session will be posted to our Investor Relations website investor.resideo.com as soon as
practicable following the conclusion of the virtual annual meeting.
• Although the live virtual meeting is available only to shareholders at the time of the meeting, a replay of
the meeting will be made publicly available on our Investor Relations website investor.resideo.com after
the meeting concludes.
2021 PROXY STATEMENT | 81
6. What constitutes a “quorum” for the meeting?
A quorum is a majority of the outstanding shares that are entitled to vote as of the record date present at the
meeting or represented by proxy. A quorum is necessary to conduct business at the annual meeting. Your
shares will be counted as present at the annual meeting if you have properly voted by proxy. Abstentions and
broker non-votes count as present at the meeting for purposes of determining a quorum. If you vote to
abstain on one or more proposals, your shares will be counted as present for purposes of determining the
presence of a quorum.
7. What is the voting requirement to approve each of the proposals, and how are votes counted?
At the close of business on April 14, 2021, the record date for the meeting, Resideo had 144,896,552
outstanding shares of common stock. Each share of common stock outstanding on the record date is entitled
to one vote for each director nominee and one vote for each of the other proposals to be voted on.
Resideo is incorporated in the State of Delaware. As a result, the Delaware General Corporation Law (the
“DGCL”) and the NYSE listing standards govern the voting standards applicable to actions taken by our
shareholders. Under our By-Laws, when a quorum is present, in all matters other than the election of
directors and frequency of future advisory votes approving the compensation of our NEOs, the affirmative
vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote
on the matter shall be the act of the Company’s shareholders. Under the DGCL and our By-Laws, shares that
abstain constitute shares that are present and entitled to vote. Shares abstaining have the practical effect of
being voted “against” the matter, other than in the election of directors.
With respect to the election of directors, Proposal 1, in order to be elected, each nominee must receive the
affirmative vote of a majority of the votes cast at the meeting in respect of his or her election. Broker
non-votes and abstentions will have no impact, as they are not counted as votes cast for this purpose.
82 | 2021 PROXY STATEMENT
A description of the voting requirements and related effect of abstentions and broker non-votes on each item
for shareholder proposal is as follows:
VOTING OPTIONS
BOARD
RECOMMENDATION
Proposal 1—Election of
Class III Directors
Proposal 2—Advisory Vote to
Approve Executive Compensation
Proposal 3—Ratification of
Appointment of Independent
Registered Public Accounting Firm
Proposal 4—Act on a Shareholder
Proposal Requesting a Shareholder
Right to Act by Written Consent
For,
Against
or
Abstain
on each
nominee
For,
Against
or
Abstain
For,
Against
or
Abstain
For,
Against
or
Abstain
FOR
each
nominee
FOR
FOR
AGAINST
EFFECT OF
ABSTENTIONS AND
BROKER
NON-VOTES
None.
VOTE REQUIRED
TO ADOPT THE
PROPOSAL
Majority of
votes cast for
such nominee
Majority of
shares
represented at
the annual
meeting and
entitled to vote
Majority of
shares
represented at
the annual
meeting and
entitled to vote
Majority of
shares
represented at
the annual
meeting and
entitled to vote
Abstentions
are treated
as votes
against.
Broker
non-votes
have no
effect.
Abstentions
are treated
as votes
against.
Brokers have
discretion to
vote on this
item.
Abstentions
are treated
as votes
against.
Broker
non-votes
have no
effect.
8. Can I change my vote?
There are several ways in which you may revoke your proxy or change your voting instructions before the
time of voting at the meeting (please note that, in order to be counted, the revocation or change must be
received by 11:59 p.m. EDT on June 8, 2021):
• Vote again by telephone or at www.proxyvote.com;
• Transmit a revised proxy card or voting instruction form that is dated later than the prior one;
• Shareholders of record and beneficial owners may vote electronically at the virtual annual meeting; or
• Shareholders of record may notify Resideo’s Corporate Secretary in writing that a prior proxy is revoked.
The latest-dated,
timely, properly completed proxy that you submit, whether by mail, telephone or the
internet, will count as your vote. If a vote has been recorded for your shares and you subsequently submit a
proxy card that is not properly signed and dated, then the previously recorded vote will stand.
9.
Is my vote confidential?
Yes. Proxy cards, ballots and voting tabulations that identify shareholders are kept confidential except:
• As necessary to meet applicable legal requirements and to assert or defend claims for or against the Company;
2021 PROXY STATEMENT | 83
•
•
In the case of a contested proxy solicitation;
If a shareholder makes a written comment on the proxy card or otherwise communicates his or her vote
to management; or
• To allow the independent judge of election to certify the results of the vote.
Broadridge, the independent proxy tabulator used by Resideo, counts the votes and acts as the inspector of
elections for the meeting.
10. How will the voting results be disclosed?
We will announce preliminary voting results at the virtual annual meeting and publish them on our website
www.resideo.com. Voting results will also be disclosed on a Form 8-K filed with the SEC within four business
days after the annual meeting, which will be available on our website.
11. What does it mean if I receive more than one Notice?
If you are a shareholder of record, you will receive one Notice (or if you are an employee with a Resideo
email address, an email proxy form) for all shares of common stock held in or credited to your accounts as of
the record date, if the account names are exactly the same. If your shares are registered differently and are
in more than one account, you will receive more than one Notice or email proxy form, and in that case, you
can and are urged to vote all of your shares, which will require you to vote more than once.
12. What is “householding”?
Shareholders of record who have the same last name and address and who request paper copies of the
proxy materials will receive only one copy unless one or more of them notifies us that they wish to receive
individual copies. This method of delivery, known as “householding,” will help ensure that shareholder
households do not receive multiple copies of the same document, helping to reduce our printing and postage
costs, as well as saving natural resources.
We will deliver promptly upon written or oral request a separate copy of the 2020 Annual Report and Proxy
Statement or Notice of Internet Availability of Proxy Materials, as applicable, to a security holder at a shared
address to which a single copy of the document was delivered. Please go to www.proxyvote.com to request a
copy.
Shareholders of record may request to begin or to discontinue householding in the future by contacting
Broadridge, either by calling (866) 540-7095, or by writing to Broadridge, Householding Department, 51
Mercedes Way, Edgewood, New York 11717. Shareholders owning their shares through a bank, brokerage
firm or other similar organization may request to begin or to discontinue householding by contacting their
bank, brokerage firm or other similar organization.
13. Who pays for the solicitation of proxies?
Resideo is making this solicitation and will pay the cost of soliciting proxies. Proxies will be solicited on behalf
of the Board of Directors by mail, telephone other electronic means. We have retained Innisfree M&A Inc.,
501 Madison Avenue, New York, NY 10022, to assist with the solicitation for an estimated fee of $10,000,
plus expenses. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses for sending proxy materials to shareholders and obtaining their votes.
Our employees may also solicit proxies for no additional compensation.
14. How do I comment on Company business?
You will have the opportunity to comment when you vote using the internet or you may write any comments
on the proxy card if you vote by mailing a proxy card. You may also send your comments to us at Resideo
Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Investor Relations. Although it is not
possible to respond to each shareholder, your comments are appreciated and help us to understand your
concerns.
84 | 2021 PROXY STATEMENT
15. When are the 2022 shareholder proposals due?
To be considered for inclusion in the Company’s 2022 Proxy Statement, shareholder proposals submitted in
accordance with SEC Rule 14a-8 must be received in writing at our principal executive offices no later than
December 24, 2021. Address all shareholder proposals to Resideo Technologies, Inc., 901 E. 6th Street,
Austin, TX 78702, Attention: Corporate Secretary. For any proposal that is not submitted for inclusion in next
year’s Proxy Statement, but is instead sought to be presented directly at the 2022 annual meeting, notice of
intention to present the proposal, including all
information required to be provided by the shareholder in
accordance with the Company’s By-Laws, must be received in writing at our principal executive offices by
March 11, 2022, and no earlier than February 9, 2022. Address all notices of intention to present proposals at
the 2021 annual meeting to Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702, Attention:
Corporate Secretary. For information on nominating directors for the 2022 annual meeting, please see the
information above under “Advance Notice Director Nominations” and “Proxy Access Director Nominations” on
page 25.
16. How may I obtain a copy of Resideo’s 2020 Annual Report on Form 10-K and proxy materials?
If you would like to receive paper or e-mail copies of our 2020 Annual Report and the Proxy Statement, free
of charge, you may request them by internet at www.proxyvote.com, by telephone at 1-800-579-1639 or by
e-mail at sendmaterial@proxyvote.com. You will need your 16-digit control number provided in your proxy
materials to request paper copies. Requests for materials relating to the 2021 annual meeting may be made
by calling 1-800-579-1639, and must be made by May 26, 2021 to facilitate timely delivery. Our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments
to those reports, are available free of charge on our Investor Relations website at investor.resideo.com.
17. How do I contact the Company or the Board of Directors?
Our Investor Relations department is the primary point of contact for shareholder interaction with Resideo.
Shareholders can contact our Investor Relations department by email at InvestorRelations@resideo.com, by
phone at 512-726-3500, or by writing to Resideo Technologies, Inc., 901 E. 6th Street, Austin, TX 78702,
Attention: Investor Relations.
Shareholders, as well as other interested parties, may communicate directly with the Lead Independent
Director, the non-employee directors as a group, or individual directors by writing to Resideo Technologies,
Inc., 901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. Our Corporate Secretary reviews
and promptly forwards communications to the directors as appropriate. Communication involving substantive
accounting or auditing matters are forwarded to the Chair of the Audit Committee. Certain items that are
unrelated to the duties and responsibilities of the Board will not be forwarded such as junk mail and mass
mailings; product complaints and product inquiries; new product or technology suggestions; job inquiries and
resumes; advertisements or solicitations; surveys; spam and overly hostile, threatening, potentially illegal or
similarly unsuitable communications.
18. Can other business in addition to the items listed on the agenda be transacted at the meeting?
The Company knows of no other business to be presented for consideration at the meeting. If other matters
are properly presented at the meeting, the persons designated as authorized proxies on your proxy card may
vote on such matters at their discretion.
By Order of the Board of Directors,
Jeannine Lane
Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer
April 23, 2021
2021 PROXY STATEMENT | 85