ADT 2012 Annual Report Download - page 93

PART I
Item 1. Business.
Overview
The ADT Corporation (hereinafter referred to as “we”, the “Company” or “ADT”) is a leading provider of
electronic security, interactive home and business automation and related monitoring services in the United
States and Canada. ADT has one of the most trusted and well-known brands in the security industry today. We
currently serve more than six million residential and small business customers, making us the largest company of
our kind in both the United States and Canada. We deliver 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. Our broad and pioneering set of products and services, including interactive
home and business solutions and home health services, meet a range of customer needs for today’s active and
increasingly mobile lifestyles. We believe we are well positioned to continue to lead the large and growing
residential and small business security market, and that our demonstrated expertise and established footprint will
help us to become a leader in the evolving market for integrated security, home health monitoring, lifestyle and
business productivity solutions.
We originated in 1874 as the American District Telegraph Company, a consortium of 57 telegraph
operators. During the early part of the 20th century, we began offering fire and burglar alarm solutions. Over the
years, we engaged in a variety of communications related activities and by 1987 had become one of the leading
electronic security services providers. In 1997, we were acquired by Tyco International Ltd. (“Tyco”). In 2010,
we acquired our largest competitor, Broadview Security.
The Company was incorporated in Delaware in 2012 as a wholly-owned subsidiary of Tyco. As part of a
plan to separate Tyco into three independent companies, 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. On September 28, 2012, Tyco distributed all of the shares of ADT to its shareholders on a pro
rata basis, thereby completing its spin-off of ADT (the “Separation”) as an independent, publicly traded
company.
We conduct business through our operating entities and report financial and operating information in one
operating segment. For the year ended September 28, 2012, our revenue was $3.2 billion and our operating
income was $722 million, and as of September 28, 2012, our total assets were $9.3 billion. Information about
revenues and long-lived assets by geographic area is presented in Note 15 to the Consolidated and Combined
Financial Statements. Unless otherwise indicated, references in this Annual Report on Form 10-K to 2012, 2011
and 2010 are to our fiscal years ended September 28, 2012, September 30, 2011 and September 24, 2010.
Strategies
In order to optimize the financial performance of our business, we focus on several key business drivers,
including customer additions, costs to add a new customer, average revenue per customer, costs incurred to
provide services to customers and customer tenure. We believe we have a proven track record of successfully
balancing these key business drivers to optimize our returns. We use a structured customer acquisition process
designed to generate new customers with attractive characteristics, high adoption of automatic payment methods
and strong credit scores, which we believe results in long average customer tenure.
The majority of the monitoring and home/business automation 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,
combined with our large customer base and increasing average revenue per customer, enables us to invest
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