ADT 2014 Annual Report Download - page 136

FORM 10-K
THE ADT CORPORATION
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. Basis of Presentation and Summary of Significant Accounting Policies
Nature of Business—The ADT Corporation (“ADT” or the “Company”), a company incorporated in the
state of Delaware, is a leading provider of monitored security, interactive home and business automation and
related monitoring services in the United States and Canada.
Separation from Tyco International Ltd.—On September 19, 2011, Tyco International Ltd. (“Tyco” or
“Parent”) announced that its board of directors had approved a plan to separate Tyco into three separate, publicly
traded companies, identifying the ADT North American Residential Security Business of Tyco as one of those
three companies. In conjunction with this plan, 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. Effective on September 28, 2012 (the “Distribution Date”), Tyco distributed
all of its shares of ADT to Tyco’s stockholders of record as of the close of business on September 17, 2012 (the
“Separation”). On the Distribution Date, each of the stockholders of Tyco received one share of ADT common
stock for every two shares of common stock of Tyco held on September 17, 2012.
The Separation was completed pursuant to the Separation and Distribution Agreement, dated as of
September 26, 2012, between Tyco and ADT (the “2012 Separation and Distribution Agreement”). This
agreement provided for the allocation to ADT of certain of Tyco’s assets, liabilities and obligations attributable
to periods prior to the Separation, which is reflected in the Company’s Consolidated Balance Sheet as of
September 28, 2012.
Basis of Presentation—The Consolidated and Combined Financial Statements have been prepared in United
States dollars (“USD”) and in accordance with generally accepted accounting principles in the United States of
America (“GAAP”). Unless otherwise indicated, references to 2014, 2013 and 2012 are to the Company’s fiscal
years ended September 26, 2014, September 27, 2013 and September 28, 2012, respectively.
The Consolidated and Combined Financial Statements reflect the Company’s financial position, results of
operations and cash flows in conformity with GAAP. The Consolidated Balance Sheets as of September 26, 2014
and September 27, 2013 reflect the consolidated financial position of ADT and its subsidiaries as an independent
publicly-traded company. Additionally, the Company’s Statements of Operations, Comprehensive Income and
Cash Flows for the years ended September 26, 2014 and September 27, 2013 reflect ADT’s consolidated
operations and cash flows as a standalone company. Prior to the Separation, the Company’s 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 were derived from Tyco’s historical accounting records
and presented on a carve-out basis. As such, the Company’s Statements of Operations, Comprehensive Income
and Cash Flows for fiscal year 2012 consist of the combined results of operations and cash flows of the ADT
North American Residential Security Business of Tyco.
For periods prior to the Separation, the Company’s financial statements included allocations of certain
working capital, property and equipment, and operating expense balances. In addition, debt and related interest
expense as well as certain general corporate overhead expenses were allocated by Tyco to the Company for the
financial statements presented on a carve-out basis. The allocation of corporate overhead expenses from Tyco
was based on the relative proportion of either the Company’s headcount or revenue to Tyco’s consolidated
headcount or revenue. Such allocations are believed to be reasonable; however, they may not be indicative of the
actual results of the Company had the Company been operating as an independent, publicly traded company for
the periods presented or the amounts that will be incurred by the Company in the future. Corporate overhead
expenses primarily related to centralized corporate functions, including finance, treasury, tax, legal, information
technology, internal audit, human resources and risk management functions. During fiscal year 2012, the
Company was allocated $52 million of general corporate expenses incurred by Tyco which are included within
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