ADT 2012 Annual Report Download - page 129

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
The following discussion should be read in conjunction with our Consolidated and Combined Financial
Statements and the notes thereto. This discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-
looking statements as a result of many factors, including but not limited to those provided in Item 1A. Risk
Factors and under the heading “Cautionary Statement Regarding Forward-Looking Statements” below.
The Consolidated and Combined Financial Statements include our combined operations, assets and
liabilities and have been prepared in accordance with generally accepted accounting principles in the United
States of America (“GAAP”). Unless otherwise indicated, references to 2012, 2011 and 2010 are to our fiscal
years ended September 28, 2012, September 30, 2011 and September 24, 2010, respectively.
As part of a plan to separate into three independent companies, on or prior to September 28, 2012, Tyco
transferred the equity interests of the entities that held all of the assets and liabilities of its residential and small
business security business in the United States and Canada to ADT (the “Separation”). Our Consolidated and
Combined Balance Sheet as of September 28, 2012 reflects the consolidated financial position of The ADT
Corporation and its subsidiaries as an independent publicly-traded company. Prior to the Separation on
September 28, 2012, our financial position, results of operations and cash flows consisted of Tyco’s residential
and small business security business in the United States, Canada and certain U.S. territories and have been
derived from Tyco’s historical accounting records and presented on a carve-out basis. As such, our Consolidated
and Combined Statements of Operations and Cash Flows for 2012, 2011 and 2010 consist of the combined
results of operations of the ADT North American Residential Security Business of Tyco.
We conduct business through our operating entities and report financial and operating information in one
reportable segment. We have a 52- or 53-week fiscal year that ends on the last Friday in September. Fiscal year
2011 was a 53-week year, while fiscal years 2012 and 2010 were 52-week years. Our next 53-week year will
occur in fiscal year 2016.
Business Overview
ADT is a leading provider of electronic security, interactive home and business automation and related
monitoring services. We currently serve more than six million customers, making us the largest company of our
kind in both the United States and Canada. With a 138-year history, the ADT®brand is one of the most trusted
and well-known brands in the security industry today. Our broad and pioneering set of products and services,
including our ADT Pulse interactive home and business solutions, and our home health services, meet a range of
customer needs for modern lifestyles. Our partner network is the broadest in the industry, and includes dealers,
affinity organizations like USAA and AARP and technology providers. ADT delivers an integrated customer
experience by maintaining the industry’s largest sales, installation and service field force and most robust
monitoring network, all backed by the support of nearly 16,000 employees and approximately 200 sales and
service offices.
For the year ended September 28, 2012, our revenue was $3.2 billion and our operating income was $722
million. The majority of the monitoring services and a large portion of the maintenance services we provide to
our customers are governed by multi-year contracts with automatic renewal provisions. This provides us with
significant recurring revenue, which for the year ended September 28, 2012 was approximately 90% of our
revenue. We believe that the recurring nature of the majority of our revenue enables us to continuously invest in
growing our business. This includes investments in technologies to further enhance the attractiveness of our
solutions to current and potential customers, to continue development and training to enable our direct sales,
installation, customer service and field service personnel to more effectively deliver exceptional service to our
customers, to expand our dealer and partner network and to make continued enhancements to operations
efficiency.
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