ADT 2014 Annual Report Download - page 144

FORM 10-K
2. Acquisitions
Dealer Generated Customer Accounts and Bulk Account Purchases
During fiscal years 2014, 2013 and 2012, the Company paid $526 million, $555 million and $648 million,
respectively, for customer contracts for electronic security services generated under the ADT dealer program and
bulk account purchases.
Acquisitions
On July 8, 2014, the Company acquired all of the issued and outstanding capital stock of Reliance
Protectron Inc. (“Protectron”), a leading electronic security services company in Canada. The primary purpose of
the acquisition was to expand the Company’s market share in Canada and create a stronger organization that is
better positioned to serve Canadian customers. The consideration transferred in Canadian dollars (“CAD”) was
CAD $560 million ($525 million), and cash paid during fiscal year 2014 was $517 million, net of cash acquired.
The transaction was financed with borrowings of $375 million under the Company’s revolving credit facility and
cash on hand.
Under the acquisition method of accounting, the purchase price has been allocated to Protectron’s tangible
and identifiable intangible assets acquired and liabilities assumed based on estimates of fair value using available
information and making assumptions management believes are reasonable. The excess of the purchase price over
those fair values was recorded as goodwill. The following table summarizes the allocation of the purchase price
of this acquisition and the estimated fair value of the assets acquired and liabilities assumed at the date of
acquisition for fiscal year 2014:
Estimated fair value of assets acquired and liabilities assumed
(in millions):
Cash and cash equivalents ............................... $ 5
Customer relationships ................................. 253
Trade name and other intangibles ......................... 43
Goodwill ............................................ 296
Deferred tax liabilities .................................. (65)
Other, net ............................................ (7)
Consideration transferred ............................... $525
The purchase price allocation for the Protectron acquisition as of September 26, 2014 is preliminary and
remains subject to post-closing adjustments. The amortization period for intangible assets acquired ranges from 7
to 20 years. The Company recorded approximately $296 million of goodwill, reflecting the strategic fit and the
value of Protectron’s recurring revenue and earnings growth potential to the Company. The goodwill amount is
not deductible for tax purposes. Protectron’s impact on the Company’s Consolidated Results of Operations for
fiscal year 2014 and pro-forma results for fiscal years 2014 and 2013 is immaterial.
On August 2, 2013, the Company acquired all of the issued and outstanding capital stock of Devcon
Security Holdings, Inc. (“Devcon Security”) for cash consideration of $146 million, net of cash acquired. Devcon
Security provides alarm monitoring services and related equipment to residential homes, businesses and
homeowners associations in the United States. As part of this acquisition, the Company recognized intangible
assets of $84 million in customer relationships and $60 million of goodwill as well as insignificant amounts of
net working capital and tangible assets. On October 1, 2012, the Company completed its acquisition of Absolute
Security, which had been an ADT authorized dealer, with $16 million of cash paid during fiscal year 2013. As
part of this acquisition, the Company recognized $20 million of goodwill.
These acquisitions were not material to the Company’s financial statements. There was no acquisition made
by the Company during fiscal year 2012.
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