AUSTIN, Texas, Nov. 6, 2019 /PRNewswire/ -- Resideo
Technologies, Inc. (NYSE: REZI), a leading global provider
of home comfort and security solutions, today reported
third-quarter financial results for the quarter ended Sept. 30, 2019. The company's revenue and
adjusted EBITDA (non-GAAP) for the third quarter are consistent
with the expected results announced on a preliminary basis in
October.
"I am disappointed in our results for the third quarter. While
ADI continued its strong performance, results in our Products &
Solutions segment were adversely impacted by volume declines,
product and channel mix, inventory write-downs, and high product
rebates from a pre-spin contract," said Mike Nefkens, president and CEO of Resideo. "We
remain confident in the fundamentals of our business. We are taking
the following actions to improve business performance:
- working with our channel partners to improve the positioning of
the T-Series line of non-connected thermostats;
- rebuilding value engineering and sourcing capabilities to drive
increased gross margins; and
- conducting a comprehensive operational and financial review of
the company to simplify operations, increase gross margins, reduce
cost structure, and drive sales growth."
Third-Quarter Performance
Net Revenue for the third quarter was $1.23 billion, up 2% year-over-year on a GAAP
basis and up 3% year-over-year on a constant currency basis
(non-GAAP). Adjusted EBITDA (non-GAAP) was $79 million, or $114
million excluding the Honeywell reimbursement agreement cash
payments (non-GAAP). Third-quarter Net Income was $8 million and adjusted Net Income (non-GAAP) was
$23 million, or $58 million excluding the Honeywell reimbursement
agreement cash payments. Basic and diluted earnings per share were
$0.07 and $0.08, respectively, and adjusted basic and
diluted earnings per share (non-GAAP) was $0.19.
In the third quarter, the ADI Global Distribution business
continued its strong growth. The Products & Solutions segment
experienced revenue declines.
ADI Global Distribution revenue increased by 6%, and 7%
on a constant currency basis year-over-year. Segment performance
was driven by solid growth across all regions. Segment adjusted
EBITDA increased year-over-year by 12%. Growth in the quarter was
enhanced by an ongoing focus on digital transformation, designed to
create a seamless experience for professionals online and in the
200 stocking locations around the world. ADI continued to expand
its footprint in the third quarter, including opening and
remodeling branches in Eastern
Europe.
Products & Solutions revenue decreased by 3% and 1%
on a constant currency basis year-over-year, driven by declines in
the Comfort and Residential Thermal Solutions (RTS) gas combustion
businesses. Segment adjusted EBITDA for the third quarter decreased
year-over-year by 38% due to revenue decline, negative product and
channel mix, inventory write-downs, and higher customer
rebates.
Water products grew double digits in North America and Resideo expects continued
growth with the launch of the Buoy® Whole Home Water Controller in
the fourth quarter. Registered connected customers have shown
strong growth from 4.7 million in 2017 to more than 6.3 million at
the end of the third quarter 2019.
The RTS business experienced a slowdown across large OEM
customers, which included impacts by recent regulatory changes. The
Comfort business revenue declines were primarily due to lower
thermostat sales. Resideo believes a poor pre-spin transition from
the prior generation of non-connected thermostats to the T-Series
line impacted the adoption of mid-level T-Series thermostats and
related profit margins. The revenue and margin effects became more
pronounced in the third quarter after the prior generation of
non-connected thermostats was discontinued. The company is working
with its channel partners to enhance and better position the
T-Series and expects improvement in 2020.
The company's new generation of security products and connected
thermostats have experienced solid growth. However, these products
have yet to benefit from lifecycle value engineering, adversely
impacting full-year 2019 Products & Solutions segment gross
margins. The company is actively investing in its value engineering
team and anticipates improvement to gross margins over the next 18
months.
Cash Flow Generation
The company reported a use of cash from operations of
$70 million for the nine months ended
Sept. 30, 2019, driven largely by
increased inventory and cash payments related to the Honeywell
reimbursement agreement.
Total debt increased $52 million
to $1.25 billion. Liquidity remains
strong and is supported by a $350
million revolving credit facility, under which $60 million was outstanding as of the quarter
end.
Full-Year Guidance
The company expects the third-quarter headwinds to continue into
the peak winter demand period, which is expected to reduce
previously anticipated full-year 2019 Products & Solutions
segment revenue by approximately $110
million. Approximately $66
million of this expected shortfall is from Comfort,
$22 million is from RTS, and
$22 million is from Security.
Full-year adjusted EBITDA guidance was reduced due to the lower
revenues, higher-than-anticipated contractual customer rebates,
inventory write-downs, and continued mix headwinds.
As noted in its October preliminary release, Resideo updated its
full-year 2019 guidance for GAAP revenue growth of 2% to 4%, as
compared to the previously expected range of 2% to 5%. The company
also updated its full-year 2019 adjusted EBITDA guidance to be in
the range of $330 million to
$350 million, compared to the
previously expected range of $410
million to $430 million.
Operational and Financial Review
Resideo has begun a comprehensive operational and financial
review, to be overseen by the independent directors of Resideo's
board, and has retained industry-recognized experts in supply chain
optimization and organizational excellence to assist in the
review.
The review will build upon the previously announced cost
optimization program, which is on track and expected to achieve
approximately $15 million in realized
savings in 2019 and $50 million in
run-rate savings by the end of 2020.
"As a spinoff from a much larger business, we believe we have a
significant opportunity to right-size our infrastructure and
simplify our core processes," said Bob
Ryder, interim CFO of Resideo. "This is designed to reduce
our direct and G&A costs, increase profit margins, and enable a
path to higher sales growth."
Resideo plans to discuss project savings, costs and expected
timelines in conjunction with the announcement of its
fourth-quarter and full-year 2019 financial results, expected in
February 2020.
|
Table 1: Summary
of Financial Results – Segment
|
|
($
millions)
|
|
|
|
3Q
2019
|
3Q
2018
|
|
%
Change
|
|
Products &
Solutions
|
|
|
|
|
|
|
Revenue
(1)
|
|
512
|
526
|
|
-3%
|
|
Constant Currency
(Non-GAAP)
|
|
|
|
|
-1%
|
|
Segment
Adjusted EBITDA (2)(3)
|
|
66
|
107
|
|
-38%
|
|
ADI Global
Distribution
|
|
|
|
|
|
|
Revenue
|
|
714
|
674
|
|
6%
|
|
Constant Currency
(Non-GAAP)
|
|
|
|
|
7%
|
|
Segment
Adjusted EBITDA (2)(3)
|
|
48
|
43
|
|
12%
|
|
Total
Company
|
|
|
|
|
|
|
Revenue
|
|
1,226
|
1,200
|
|
2%
|
|
Constant Currency
(Non-GAAP)
|
|
|
|
|
3%
|
|
Adjusted EBITDA
(Non-GAAP) (4)
|
|
79
|
117
|
|
-32%
|
|
|
(1) Represents
Product & Solutions revenue, net of intersegment revenue of $83
million for the three months
ended September 30,
2019 and $77 million for the three months ended September 30, 2018,
respectively. ADI
Global Distribution
does not have any intersegment revenue.
|
|
(2) Excludes $2
million of estimated stand-alone costs for the three months ended
September 30, 2018 which is
included in Adjusted
EBITDA (Non-GAAP).
|
|
(3) Table 7 includes
a Reconciliation of Segment Adjusted EBITDA to Income (loss) before
taxes.
|
|
(4) Table 6 includes
a Reconciliation of Net income to Adjusted EBITDA
(non-GAAP).
|
Conference Call
Resideo will hold a conference call with investors on
Nov. 7, 2019, at 8:30 a.m. EST. To join the conference call,
please dial 888-599-8688 (domestic) or +1 323-994-2135
(international) approximately 10 minutes before it starts. Please
mention to the operator that you are dialing in for Resideo's third
quarter 2019 earnings call or provide the conference code 934775. A
replay of the conference call will be available from 12:30 p.m. EST Nov.
7, until 12:30 p.m. EST
Nov. 14, by dialing 888-203-1112
(domestic) or +1-719-457-0820 (international). The access code is
9530930.
A real-time audio webcast of the presentation will be accessible
at https://investor.resideo.com, where related materials will be
posted before the presentation, and a replay of the webcast will be
available for 30 days following the presentation.
About Resideo
Resideo is a leading global provider of critical comfort and
security solutions primarily in residential environments and
distributor of low-voltage electronic and security products.
Building on a 130-year heritage, Resideo has a presence in more
than 150 million homes, with 15 million systems installed in homes
each year. We continue to serve more than 110,000 contractors
through leading distributors, including our ADI Global Distribution
business, which exports to more than 100 countries from more than
200 stocking locations around the world. Resideo is a $4.8 billion company with approximately 13,000
global employees. For more information about Resideo, please visit
www.resideo.com.
Contacts:
|
Media:
|
Investors:
|
|
Trent
Perrotto
|
Michael
Mercieca
|
|
(512)
726-3512
|
(512)
779-8646
|
|
trent.perrotto@resideo.com
|
michael.mercieca@resideo.com
|
|
investorrelations@resideo.com
|
|
Table 2:
CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS
(UNAUDITED)
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Dollars in
millions except per share data)
|
|
Net
revenue
|
|
$
1,226
|
|
$
1,200
|
|
$
3,684
|
|
$
3,561
|
|
Cost of goods
sold
|
|
937
|
|
853
|
|
2,786
|
|
2,525
|
|
Gross
profit
|
|
289
|
|
347
|
|
898
|
|
1,036
|
|
Selling, general and
administrative expenses
|
|
230
|
|
219
|
|
712
|
|
648
|
|
Operating
Profit
|
|
59
|
|
128
|
|
186
|
|
388
|
|
Other expense,
net
|
|
35
|
|
144
|
|
54
|
|
320
|
|
Interest
expense
|
|
16
|
|
2
|
|
51
|
|
2
|
|
Income (loss) before
taxes
|
|
8
|
|
(18)
|
|
81
|
|
66
|
|
Tax expense
(benefit)
|
|
-
|
|
(329)
|
|
36
|
|
(323)
|
|
Net income
|
|
$
8
|
|
$
311
|
|
$
45
|
|
$
389
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Number of Common Shares Outstanding (in thousands)
|
|
|
|
|
|
|
|
|
|
Basic
|
|
122,770
|
|
122,967
|
|
122,681
|
|
122,967
|
|
Diluted
|
|
123,244
|
|
122,967
|
|
123,404
|
|
122,967
|
|
Earnings Per
Share
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.07
|
|
$
2.53
|
|
$
0.37
|
|
$
3.16
|
|
Diluted
|
|
$
0.06
|
|
$
2.53
|
|
$
0.36
|
|
$
3.16
|
|
Table 3:
CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2019
|
|
2018
|
|
|
(Dollars in
millions, shares in thousands)
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
132
|
|
$
265
|
|
Accounts
receivable
|
|
845
|
|
821
|
|
Inventories
|
|
729
|
|
628
|
|
Other current
assets
|
|
134
|
|
95
|
|
Total current
assets
|
|
1,840
|
|
1,809
|
|
Property, plant and
equipment – net
|
|
306
|
|
300
|
|
Goodwill
|
|
2,632
|
|
2,634
|
|
Other intangible
assets – net
|
|
125
|
|
133
|
|
Other
assets
|
|
230
|
|
96
|
|
Total
assets
|
|
$
5,133
|
|
$
4,972
|
|
LIABILITIES
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
932
|
|
$
964
|
|
Short-term portion of
debt
|
|
88
|
|
22
|
|
Accrued
liabilities
|
|
531
|
|
503
|
|
Total current
liabilities
|
|
1,551
|
|
1,489
|
|
|
|
|
|
|
Long-term
debt
|
|
1,165
|
|
1,179
|
|
Obligations payable
to Honeywell
|
|
580
|
|
629
|
|
Other
liabilities
|
|
264
|
|
142
|
|
EQUITY
|
|
|
|
|
|
Common stock, $0.001
par value, 700,000 shares authorized, 123,382 and 122,967 shares
issued and 122,786 and 122,499 shares outstanding as of September
30, 2019 and December 31, 2018, respectively
|
|
-
|
|
-
|
|
Additional paid-in
capital
|
|
1,751
|
|
1,720
|
|
Treasury stock, at
cost
|
|
(3)
|
|
-
|
|
Retained
earnings
|
|
47
|
|
2
|
|
Accumulated other
comprehensive loss
|
|
(222)
|
|
(189)
|
|
Total
equity
|
|
1,573
|
|
1,533
|
|
Total liabilities and
equity
|
|
$
5,133
|
|
$
4,972
|
|
Table 4:
CONSOLIDATED AND COMBINED INTERIM STATEMENT OF CASH FLOWS
(UNAUDITED)
|
|
|
Nine Months
Ended
|
|
September
30,
|
|
2019
|
|
2018
|
|
(Dollars in
millions)
|
|
Cash flows (used
for) provided by operating activities:
|
|
|
|
|
Net income
|
$
45
|
|
$
389
|
|
|
|
|
|
Adjustments to
reconcile net income to net cash (used for) provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
55
|
|
49
|
|
Repositioning
charges, net of payments
|
12
|
|
(4)
|
|
Stock compensation
expense
|
22
|
|
15
|
|
Deferred income
taxes
|
(3)
|
|
(275)
|
|
Other noncash
expense
|
13
|
|
17
|
|
Changes in assets and
liabilities:
|
|
|
|
|
Accounts, notes and
other receivables
|
(27)
|
|
(11)
|
|
Inventories
|
(109)
|
|
(142)
|
|
Other current
assets
|
(13)
|
|
(4)
|
|
Other
assets
|
(6)
|
|
(6)
|
|
Accounts
payable
|
(23)
|
|
151
|
|
Accrued
liabilities
|
(6)
|
|
(15)
|
|
Obligations payable
to Honeywell
|
(49)
|
|
-
|
|
Other
liabilities
|
19
|
|
211
|
|
Net cash (used for)
provided by operating activities
|
(70)
|
|
375
|
|
Cash flows used
for investing activities:
|
|
|
|
|
Expenditures for
property, plant, equipment and software
|
(66)
|
|
(63)
|
|
Cash paid for
acquisitions, net of cash acquired
|
(17)
|
|
-
|
|
Proceeds received
related to amounts due from related parties
|
-
|
|
7
|
|
Net cash used for
investing activities
|
(83)
|
|
(56)
|
|
Cash flows
provided by (used for) financing activities:
|
|
|
|
|
Net proceeds from
revolving credit facility
|
60
|
|
-
|
|
Repayment of
long-term debt
|
(11)
|
|
-
|
|
Non-operating
obligations paid to Honeywell, net
|
(24)
|
|
-
|
|
Payments related to
amounts due to related parties, net
|
-
|
|
(1)
|
|
Tax payments related
to stock vestings
|
(3)
|
|
-
|
|
Net (decrease) in
invested equity
|
-
|
|
(300)
|
|
Cashflow provided by
cash pooling
|
-
|
|
115
|
|
Net cash provided by
(used for) financing activities
|
22
|
|
(186)
|
|
Effect of foreign
exchange rate changes on cash and cash equivalents
|
(2)
|
|
(5)
|
|
Net (decrease)
increase in cash and cash equivalents
|
(133)
|
|
128
|
|
Cash and cash
equivalents at beginning of period
|
265
|
|
56
|
|
Cash and cash
equivalents at end of period
|
$
132
|
|
$
184
|
|
Table 5:
RECONCILIATION OF NET INCOME (UNAUDITED) TO ADJUSTED NET INCOME
(NON-GAAP)
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Dollars in
millions except per share data)
|
|
Net income
(GAAP)
|
|
$
8
|
|
$
311
|
|
$
45
|
|
$
389
|
|
Environmental expense
(1)
|
|
-
|
|
146
|
|
-
|
|
322
|
|
Honeywell
reimbursement agreement expense (2)
|
|
35
|
|
-
|
|
57
|
|
-
|
|
Estimated stand-alone
costs (3)
|
|
-
|
|
-
|
|
-
|
|
4
|
|
Stock compensation
expense (4)
|
|
8
|
|
6
|
|
22
|
|
15
|
|
Repositioning
charges
|
|
9
|
|
-
|
|
34
|
|
5
|
|
Other
(5)
|
|
19
|
|
-
|
|
65
|
|
1
|
|
Income tax
adjustments (6)
|
|
(21)
|
|
(355)
|
|
(31)
|
|
(415)
|
|
Adjusted Net
Income excluding Honeywell reimbursement agreement payments
(Non-GAAP)
|
|
58
|
|
108
|
|
192
|
|
321
|
|
Assumed cash payments
related to Honeywell Reimbursement Agreement
(7)
|
|
(35)
|
|
(35)
|
|
(105)
|
|
(105)
|
|
Adjusted Net
Income (Non-GAAP)
|
|
$
23
|
|
$
73
|
|
$
87
|
|
$
216
|
|
Adjusted Earnings
Per Share (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
Basic adjusted net
income per share (Non-GAAP)
|
|
$
0.19
|
|
$
0.59
|
|
$
0.71
|
|
$
1.76
|
|
Diluted adjusted
net income per share (Non-GAAP)
|
|
$
0.19
|
|
$
0.59
|
|
$
0.71
|
|
$
1.76
|
|
|
|
|
|
|
|
|
|
|
(1) Represents
historical environmental expenses as reported under 100% carryover
basis.
|
|
(2) Represents
recorded expenses related to the Honeywell Reimbursement
Agreement.
|
|
(3) Represents the
difference between our estimate of Selling, general and
administrative costs as a stand-alone company and historical
allocated costs.
|
|
(4) Stock
compensation expense adjustment includes only non-cash
expenses.
|
|
(5) Represents $19
million and $53 million in cost directly related to the Spin-Off,
$0 million and $13 million related to developments on legal claims
that arose prior to Spin-Off, and $0 million and ($1) million
in non-operating (income) expense adjustment which excludes net
interest (income) for the three and nine months ended September 30,
2019. For the three and nine months ended September 30, 2018, Other
represents other non-operating (income) expense. The nine
months ended September 30, 2019 includes an adjustment for $6
million of costs directly related to the Spin-Off. Costs from
prior quarters of 2019 were identified during the third quarter as
Spin-Off costs and are now included in our nine months ended
adjustments.
|
|
(6) Represents the
tax effect of pre-tax items excluded from Adjusted Net Income and
the removal of discrete tax items, including the income tax impacts
of the Tax Act. The tax effect of pre-tax items excluded from
Adjusted Net Income is computed by adjusting the annualized
effective tax rate to exclude the pre-tax non-GAAP adjustments
noted above. The Income Tax Adjustment for the three and nine
months ended September 30, 2018 has been revised to use this
methodology, rather than statutory tax rates. This change in
methodology increased the Income Tax Adjustment benefit and
decreased Adjusted Net Income by $15 million and $49 million for
the three and nine months ended September 30, 2018,
respectively.
|
|
(7) We are
responsible to indemnify Honeywell in amounts equal to 90% of
payments, which include amounts billed, with respect to certain
environmental claims, remediation and, to the extent arising after
the Spin-Off, hazardous exposure or toxic tort claims, in each case
including consequential damages in respect of specified properties
contaminated through historical business operations, including the
legal and other costs of defending and resolving such liabilities,
less 90% of Honeywell's net insurance receipts relating to such
liabilities, and less 90% of the net proceeds received by Honeywell
in connection with (i) affirmative claims relating to such
liabilities, (ii) contributions by other parties relating to such
liabilities and (iii) certain property sales; such payments will be
subject to a cap of $140 million in respect of liabilities arising
in any given year (exclusive of any late payment fees up to 5% per
annum).
|
|
Table 6:
RECONCILIATION OF NET INCOME (UNAUDITED) TO ADJUSTED EBITDA
(NON-GAAP)
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Dollars in
millions)
|
|
Net income
(GAAP)
|
|
$
8
|
|
$
311
|
|
$
45
|
|
$
389
|
|
Net interest expense
(income)
|
|
16
|
|
-
|
|
49
|
|
(1)
|
|
Tax expense
(benefit)
|
|
-
|
|
(329)
|
|
36
|
|
(323)
|
|
Depreciation and
amortization
|
|
19
|
|
16
|
|
55
|
|
49
|
|
EBITDA
(Non-GAAP)
|
|
43
|
|
(2)
|
|
185
|
|
114
|
|
Environmental expense
(1)
|
|
-
|
|
146
|
|
-
|
|
322
|
|
Honeywell
reimbursement agreement expense (2)
|
|
35
|
|
-
|
|
57
|
|
-
|
|
Estimated stand-alone
costs (3)
|
|
-
|
|
2
|
|
-
|
|
9
|
|
Stock compensation
expense (4)
|
|
8
|
|
6
|
|
22
|
|
15
|
|
Repositioning
charges
|
|
9
|
|
-
|
|
34
|
|
5
|
|
Other
(5)
|
|
19
|
|
-
|
|
65
|
|
1
|
|
Adjusted EBITDA
excluding Honeywell reimbursement agreement payments
(Non-GAAP)
|
|
114
|
|
152
|
|
363
|
|
466
|
|
Assumed cash payments
related to Honeywell Reimbursement Agreement
(6)
|
|
(35)
|
|
(35)
|
|
(105)
|
|
(105)
|
|
Adjusted EBITDA
(Non-GAAP)
|
|
$
79
|
|
$
117
|
|
$
258
|
|
$
361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents
historical environmental expenses as reported under 100% carryover
basis.
|
|
(2) Represents
recorded expenses related to the Honeywell Reimbursement
Agreement.
|
|
(3) Represents the
difference between our estimate of Selling, general and
administrative costs as a stand-alone company and historical
allocated costs, which excludes corporate depreciation
charges.
|
|
(4) Stock
compensation expense adjustment includes only non-cash
expenses.
|
|
(5) Represents $19
million and $53 million in cost directly related to the Spin-Off,
$0 million and $13 million related to developments on legal claims
that arose prior to Spin-Off, and $0 million and ($1) million
in non-operating (income) expense adjustment which excludes net
interest (income) for the three and nine months ended September 30,
2019. For the three and nine months ended September 30, 2018, Other
represents other non-operating (income) expense. The nine
months ended September 30, 2019 includes an adjustment for $6
million of costs directly related to the Spin-Off. Costs from
prior quarters of 2019 were identified during the third quarter as
Spin-Off costs and are now included in our nine months ended
adjustments.
|
|
(6) Pursuant to the
Honeywell Reimbursement Agreement, we are responsible to indemnify
Honeywell in amounts equal to 90% of payments, which include
amounts billed, with respect to certain environmental claims,
remediation and, to the extent arising after the Spin-Off,
hazardous exposure or toxic tort claims, in each case including
consequential damages in respect of specified properties
contaminated through historical business operations, including the
legal and other costs of defending and resolving such liabilities,
less 90% of Honeywell's net insurance receipts relating to such
liabilities, and less 90% of the net proceeds received by Honeywell
in connection with (i) affirmative claims relating to such
liabilities, (ii) contributions by other parties relating to such
liabilities and (iii) certain property sales; such payments will be
subject to a cap of $140 million in respect of liabilities arising
in any given year (exclusive of any late payment fees up to 5% per
annum).
|
|
Table 7:
RECONCILIATION OF SEGMENT ADJUSTED EBITDA TO COMBINED INCOME FROM
CONTINUING OPERATIONS BEFORE TAXES
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Dollars in
millions)
|
|
Products &
Solutions Segment Adjusted EBITDA
|
|
$
66
|
|
$
107
|
|
$
222
|
|
$
333
|
|
ADI Global
Distribution Segment Adjusted EBITDA
|
|
48
|
|
43
|
|
141
|
|
124
|
|
Segment Adjusted
EBITDA (1)
|
|
114
|
|
150
|
|
363
|
|
457
|
|
Environmental
expense(2)
|
|
-
|
|
(146)
|
|
-
|
|
(322)
|
|
Honeywell
reimbursement agreement expense (3)
|
|
(35)
|
|
-
|
|
(57)
|
|
-
|
|
Net interest
(expense) income
|
|
(16)
|
|
-
|
|
(49)
|
|
1
|
|
Depreciation and
amortization
|
|
(19)
|
|
(16)
|
|
(55)
|
|
(49)
|
|
Stock compensation
expense(4)
|
|
(8)
|
|
(6)
|
|
(22)
|
|
(15)
|
|
Repositioning
charges
|
|
(9)
|
|
-
|
|
(34)
|
|
(5)
|
|
Other(5)
|
|
(19)
|
|
-
|
|
(65)
|
|
(1)
|
|
Income (loss)
before taxes
|
|
$
8
|
|
$
(18)
|
|
$
81
|
|
$
66
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes $2
million and $9 million of estimated stand-alone costs for the three
and nine months ended September 30, 2018, which is included in
adjusted EBITDA (Non-GAAP).
|
|
(2) Represents
historical environmental expenses as reported under 100% carryover
basis.
|
|
(3) Represents
recorded expenses related to the Honeywell Reimbursement
Agreement.
|
|
(4) Stock
compensation expense adjustment includes only non-cash
expenses.
|
|
(5) Represents $19
million and $53 million in cost directly related to the Spin-Off,
$0 million and $13 million related to developments on legal claims
that arose prior to Spin-Off, and $0 million and ($1) million
in non-operating (income) expense adjustment which excludes net
interest (income) for the three and nine months ended September 30,
2019. For the three and nine months ended September 30, 2018, Other
represents other non-operating (income) expense. The nine
months ended September 30, 2019 includes an adjustment for $6
million of costs directly related to the Spin-Off. Costs from
prior quarters of 2019 were identified during the third quarter as
Spin-Off costs and are now included in our nine months ended
adjustments.
|
|
Table 8:
RECONCILIATION OF CONSTANT CURRENCY REVENUE % CHANGE
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2019
|
|
2019
|
|
|
(Dollars in
millions)
|
|
Products &
Solutions revenue (decline) growth
|
|
|
|
|
Net Products &
Solutions revenue (decline) growth (GAAP)
|
$
(14)
|
|
$
33
|
|
% Change
|
-3%
|
|
2%
|
|
Exclude: Foreign
currency translation
|
-2%
|
|
-3%
|
|
Constant currency
(decline) growth (Non-GAAP)
|
-1%
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
ADI Global
Distribution revenue growth
|
|
|
|
|
Net ADI Global
Distribution revenue growth (GAAP)
|
$
40
|
|
$
90
|
|
% Change
|
6%
|
|
5%
|
|
Exclude: Foreign
currency translation
|
-1%
|
|
-1%
|
|
Constant currency
growth (Non-GAAP)
|
7%
|
|
6%
|
|
|
|
|
|
|
Total revenue
growth
|
|
|
|
|
Total revenue growth
(GAAP)
|
$
26
|
|
$
123
|
|
% Change
|
2%
|
|
3%
|
|
Exclude: Foreign
currency translation
|
-1%
|
|
-2%
|
|
Constant currency
growth (Non-GAAP)
|
3%
|
|
5%
|
Forward-Looking Statements
This release contains "forward-looking statements." All
statements, other than statements of fact, that address activities,
events or developments that we or our management intend, expect,
project, believe or anticipate will or may occur in the future are
forward-looking statements. Although we believe forward-looking
statements 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 limited to, those described
under the headings "Risk Factors" and "Cautionary Statement
Concerning Forward-Looking Statements" in our Annual Report on Form
10-K for the year ended Dec. 31, 2018
filed with the Securities and Exchange Commission ("SEC"). You are
cautioned not to place undue reliance on these forward-looking
statements, such as guidance regarding full-year 2019, our ability
to realize cost reductions over the lifecycle of our products and
realize related gross margin opportunity, the commencement,
progress and results of the comprehensive operational and financial
review, including our ability to improve operating margins, core
business processes, direct product costs, and G&A, our cost
optimization program and our ability to achieve $15 million of realized savings in 2019 and
$50 million of run-rate savings by
the end of 2020, and our ability to work with our professional
partners to better position the T-Series and the related expected
significant sales improvement in 2020, each of which speak only as
of the date of this release. Forward looking statements are not
guarantees of future performance, and actual results, developments
and business decisions may differ from those envisaged by our
forward-looking statements.
Non-GAAP Financial Measures
This release includes EBITDA, adjusted EBITDA, adjusted EBITDA
excluding Honeywell reimbursement agreement payments, adjusted Net
Income, adjusted Net Income excluding Honeywell reimbursement
agreement payments, adjusted basic and diluted earnings per share,
constant currency growth, and other financial measures not
compliant with generally accepted accounting principles in
the United States (GAAP). The
non-GAAP financial measures are adjusted for certain items above
and may not be directly comparable to similar measures used by
other companies in our industry, as other companies may define such
measures differently. Management believes that, when considered
together with reported amounts, these measures are useful to
investors and management in understanding our ongoing operations
and in analysis of ongoing operating trends and provide useful
additional information relating to our operations and financial
condition. These metrics should be considered in addition to, and
not as replacements for, the most comparable GAAP measure. Refer to
the tables above in this release for reconciliations of non-GAAP
financial measures to the most directly comparable GAAP measures.
We believe EBITDA, adjusted EBITDA excluding Honeywell
reimbursement agreement payments, adjusted Net Income, adjusted Net
Income excluding Honeywell reimbursement agreement payments,
adjusted basic and diluted earnings per share, and constant
currency growth are important indicators of operating performance.
They should be read in connection with our financial statements
presented in accordance with GAAP.
A reconciliation of adjusted EBITDA to the corresponding GAAP
measure is not available on a forward-looking basis without
unreasonable efforts due to the impact and timing on future
operating results arising from items excluded from these measures,
particularly environmental expense, Honeywell reimbursement
agreement expense or gain, stock compensation expense,
repositioning charges, and other non-operating expense
(income).
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SOURCE Resideo Technologies, Inc.