ADT 2013 Annual Report Download - page 65

FORM 10-K
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 approximately 6.5 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 as well as a robust monitoring
network, all backed by the support of approximately 17,000 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 27, 2013, our revenue was $3.3 billion and our operating
income was $735 million, and as of September 27, 2013, our total assets were $9.9 billion. Information about
revenues and long-lived assets by geographic area is presented in Note 12 to the Consolidated and Combined
Financial Statements. Unless otherwise indicated, references in this Annual Report on Form 10-K to 2013, 2012
and 2011 are to our fiscal years ended September 27, 2013, September 28, 2012 and September 30, 2011.
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 27, 2013,
was approximately 92% 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
continuously in growing and optimizing our business. This includes investments in technologies to further
enhance the attractiveness of our solutions to current and potential customers, to continue development and
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