ADT 2014 Annual Report Download - page 118

FORM 10-K
For fiscal year 2012, the net cash used in financing activities was primarily the result of changes in parent
company investment of $1.1 billion and changes in balances due to (from) Tyco and affiliates of $63 million,
which were substantially offset by the net proceeds received on our issuance of $2.5 billion in long-term debt and
the removal of $1.5 billion in allocated debt from Tyco.
Commitments and Contractual Obligations
The following table provides a summary of our contractual obligations and commitments for debt, minimum
lease payment obligations under non-cancelable leases and other obligations as of September 26, 2014.
(in millions) 2015 2016 2017 2018 2019 Thereafter Total
Long-term debt(1) ............................$1$1$1,126 $— $500 $3,450 $5,078
Interest payments(2) ........................... 205 203 202 184 184 1,216 2,194
Operating leases ............................. 65 52 39 33 21 45 255
Capital leases ............................... 6 6 6 6 6 14 44
Purchase obligations(3) ........................ 48 9 4 — — — 61
Total contractual cash obligations(4) .............. $325 $271 $1,377 $223 $711 $4,725 $7,632
(1) Long-term debt obligations consist primarily of our senior unsecured notes and revolving credit facility and
exclude debt discount and interest.
(2) Interest payments consist primarily of interest on our fixed-rate debt.
(3) Purchase obligations consist of commitments for purchases of goods and services.
(4) Total contractual cash obligations in the table above exclude income taxes as we are unable to make a
reasonably reliable estimate of the timing for the remaining payments in future years. As of September 26,
2014, we recorded gross unrecognized tax benefits of $49 million and gross interest and penalties of $2
million. See Note 6 to the Consolidated and Combined Financial Statements for further information.
As of September 26, 2014, standby letters of credit related to our insurance programs were immaterial.
Off-Balance Sheet Arrangements
As of September 26, 2014, we had no material off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of the Consolidated and Combined Financial Statements in conformity with U.S. GAAP
requires management to use judgment in making estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and
expenses. The following accounting policies are based on, among other things, judgments and assumptions made
by management that include inherent risks and uncertainties. Management’s estimates are based on the relevant
information available at the end of each period.
Revenue Recognition
Substantially all of our revenue is generated by contractual monthly recurring fees received for monitoring
services provided to customers. Revenue from monitoring services is recognized as those services are provided to
customers. Customer billings for services not yet rendered are deferred and recognized as revenue as the services
are rendered. The balance of deferred revenue is included in current liabilities or long-term liabilities, as
appropriate.
For transactions in which we retain ownership of the security system, non-refundable fees (referred to as
deferred subscriber acquisition revenue) received in connection with the initiation of a monitoring contract are
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