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(Mark One)
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x
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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¨
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Delaware
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47-4116383
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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New York Stock Exchange
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Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
x
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Smaller reporting company
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Emerging growth company
¨
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(Do not check if a smaller reporting company)
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Page
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•
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Residential:
Residential customers are typically owners of single-family homes who have purchased monitored security and automation services as a result of having moved to a new residence, in response to changes in the perceived threat of crime or life safety concerns in their neighborhood, or in conjunction with other significant life events, such as the birth of a child.
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Commercial:
Commercial customers generally include small and large retail businesses, food and beverage service providers, medical offices, financial institutions, service businesses, and multi-site customers with locations around the country. The market is characterized by higher penetration rates, which are driven by insurance requirements and regulations, and by a higher degree of complexity with respect to system installations. As IP video solutions have become more affordable and interactive, businesses increasingly view these solutions for applications beyond just security, and leverage them for operational purposes as well, including employee safety, theft prevention, and inventory management.
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Growth Markets:
New customer types and new offerings present opportunities for us to leverage our brand name, our core focus on security, and our high degree of trust among our customer base to pursue complementary markets such as smart home technologies, network and cyber security, and mobile security. We also leverage our security monitoring infrastructure to provide customers with solutions that help sustain independent living, encourage better self-care activities, and improve communications of critical health information.
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difficulties in achieving anticipated cost savings, synergies, business opportunities, and growth prospects from the combination;
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difficulties in the integration of operations and systems;
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difficulties in replacing numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll, data privacy, and security and regulatory compliance, many of which may be dissimilar;
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conforming standards, controls, procedures, accounting and other policies, business cultures, and compensation structures between the two companies;
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difficulties in the assimilation of employees, including possible culture conflicts and different opinions on technical decisions and product roadmaps;
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difficulties in managing the expanded operations of a significantly larger and more complex company;
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challenges in keeping existing customers and obtaining new customers;
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challenges in attracting and retaining key personnel; and
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coordinating a geographically dispersed organization.
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limit our ability to borrow money for our working capital, capital expenditures, debt service requirements, strategic initiatives, or other purposes;
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make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness;
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require us to dedicate a substantial portion of our cash flow from operations to the repayment of our indebtedness, thereby reducing funds available to us for other purposes;
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limit our flexibility in planning for, or reacting to, changes in our operations or business;
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make us more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;
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make us more vulnerable to downturns in our business or the economy;
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restrict us from making strategic acquisitions, engaging in development activities, introducing new technologies, or exploiting business opportunities;
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cause us to make non-strategic divestitures;
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limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds or dispose of assets; or
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expose us to the risk of increased interest rates, as certain of our borrowings are at variable rates of interest.
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our future financial and operating performance (including the realization of any cost savings described herein), which will be affected by prevailing economic, industry, and competitive conditions and financial, business, legislative, regulatory and other factors, many of which are beyond our control; and
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our future ability to borrow under our Revolving Credit Facilities, the availability of which depends on, among other things, our complying with the covenants in the credit agreement governing such facilities.
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incur additional debt, guarantee indebtedness, or issue certain preferred equity interests;
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pay dividends on or make distributions in respect of, or repurchase or redeem, our capital stock, or make other restricted payments;
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will not be required to lend any additional amounts to us;
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could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable; or
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could require us to apply all of our available cash to repay these borrowings.
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our operating and financial performance and prospects;
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quarterly variations in the rate of growth (if any) of our financial indicators, such as net income per share, net income and revenues;
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the public reaction to our press releases, our other public announcements and our filings with the SEC;
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strategic actions by our competitors;
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changes in operating performance and the stock market valuations of other companies;
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announcements related to litigation;
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our failure to meet revenue or earnings estimates made by research analysts or other investors;
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changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;
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speculation in the press or investment community;
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sales of our common stock by us or our stockholders, or the perception that such sales may occur;
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changes in accounting principles, policies, guidance, interpretations, or standards;
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additions or departures of key management personnel;
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actions by our stockholders;
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general market conditions;
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domestic and international economic, legal, and regulatory factors unrelated to our performance;
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material weakness in our internal controls over financial reporting; and
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the realization of any risks described under this “Risk Factors” section, or other risks that may materialize in the future.
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a majority of the board of directors consist of independent directors;
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the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
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the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
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there be an annual performance evaluation of the nominating and corporate governance and compensation committees.
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providing that our board of directors will be divided into three classes, with each class of directors serving staggered three-year terms;
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providing for the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if less than 50.1% of our outstanding common stock is beneficially owned by funds affiliated with Apollo;
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empowering only the board to fill any vacancy on our board of directors (other than in respect of a Sponsor Director (as defined below)), whether such vacancy occurs as a result of an increase in the number of directors or otherwise;
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authorizing the issuance of “blank check” preferred stock without any need for action by stockholders;
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prohibiting stockholders from acting by written consent if less than 50.1% of our outstanding common stock is beneficially owned by funds affiliated with Apollo;
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to the extent permitted by law, prohibiting stockholders from calling a special meeting of stockholders if less than 50.1% of our outstanding common stock is beneficially owned by funds affiliated with Apollo; and
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establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
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Equity Compensation Plan
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||||||||
Plan category
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Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
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Weighted-average exercise price of outstanding options, warrants and rights
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Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(b)
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Equity compensation plans approved by stockholders:
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2016 Equity Incentive Plan
(1)
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2,880,920
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$
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11.41
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22,116,580
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Equity compensation plans not approved by stockholders
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—
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—
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Total
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2,880,920
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22,116,580
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(1)
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The ADT Inc. 2016 Equity Incentive Plan provides for the award of stock options, restricted stock units, and other equity and equity-based awards to our board of directors, officers, and non-officer employees. Amount shown in column denoted by (a) includes 1,429,904 of service-based and 1,451,016 of performance-based shares that may be issued upon the exercise of stock options.
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On March 27, 2017, we issued 855,556 options to acquire shares of our common stock to certain employees pursuant to our 2016 Equity Incentive Plan.
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On June 29, 2017, we issued 279,253 options to acquire shares of our common stock to certain employees pursuant to our 2016 Equity Incentive Plan.
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On August 21, 2017, we issued 50,000 options to acquire shares of our common stock to certain employees pursuant to our 2016 Equity Incentive Plan.
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On June 28, 2017, we issued 24,217 shares of our common stock to Ultimate Parent for total proceeds of approximately $290 thousand.
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On October 17, 2017, we issued 3,771 shares of our common stock to Ultimate Parent.
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On October 18, 2017, we issued 1,111 shares of our common stock to a former employee upon such former employee’s exercise of his vested options.
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On October 27, 2017, we issued 12,108 shares of our common stock to Ultimate Parent for total proceeds of approximately $200 thousand.
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On November 3, 2017, we issued 1,389 shares of our common stock to a former employee upon such former employee’s exercise of his vested options.
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On January 4, 2018, we effected a stock split whereby our issued and outstanding shares of common stock were reclassified as 641,118,571 shares of our common stock.
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Successor
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Predecessor
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(in thousands, except per share data)
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Year Ended December 31,
2017
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Year Ended December 31,
2016
(a)
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From Inception through December 31,
2015
(a)
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Period from January 1, 2015 through June 30,
2015 (a) |
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Year Ended December 31,
2014
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Year Ended December 31,
2013
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Statement of Operations Data:
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Total Revenue
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$
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4,315,502
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$
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2,949,766
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$
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311,567
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$
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237,709
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$
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466,557
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$
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429,277
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Operating income (loss)
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282,439
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(229,315
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)
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(39,774
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)
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11,232
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42,302
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26,138
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Net income (loss)
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342,627
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(536,587
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)
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(54,253
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)
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(18,591
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)
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(18,488
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)
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(38,585
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)
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Net income (loss) per share:
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Basic
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$
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0.53
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$
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(0.84
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)
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$
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(0.08
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)
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$
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(185,910
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)
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$
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(184,880
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)
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$
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(385,850
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)
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Diluted
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$
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0.53
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$
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(0.84
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)
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$
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(0.08
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)
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$
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(185,910
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)
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$
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(184,880
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)
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$
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(385,850
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)
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Weighted-average shares used to compute net income (loss) per share
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||||||||||||
Basic
(b)
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641,074
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640,725
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640,723
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0.1
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0.1
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0.1
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||||||
Diluted
(b)
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641,074
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640,725
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640,723
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|
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0.1
|
|
|
0.1
|
|
|
0.1
|
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||||||
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||||||||||||
Cash dividends declared per common share
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$
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1.17
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$
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—
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|
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$
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—
|
|
|
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$
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—
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|
|
$
|
—
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|
|
$
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—
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||||||||||||
Balance Sheet Data (at period end):
|
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||||||||||||
Cash and cash equivalents
|
$
|
122,899
|
|
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$
|
75,891
|
|
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$
|
15,759
|
|
|
|
|
|
|
$
|
89,834
|
|
|
$
|
3,365
|
|
|
Total assets
(c)
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17,014,820
|
|
|
17,176,481
|
|
|
2,319,515
|
|
|
|
|
|
|
1,099,531
|
|
|
1,011,930
|
|
||||||
Total debt
(c)
|
10,169,186
|
|
|
9,509,970
|
|
|
1,346,958
|
|
|
|
|
|
|
872,904
|
|
|
775,910
|
|
||||||
Mandatorily redeemable preferred securities
(d)
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682,449
|
|
|
633,691
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
—
|
|
||||||
Total liabilities
(c)
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13,581,708
|
|
|
13,371,505
|
|
|
1,616,618
|
|
|
|
|
|
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1,057,639
|
|
|
955,882
|
|
||||||
Total stockholders' equity
(d)(e)
|
3,433,112
|
|
|
3,804,976
|
|
|
702,897
|
|
|
|
|
|
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41,892
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|
|
56,048
|
|
(a)
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During the third quarter of 2015 and second quarter of 2016, we completed the Formation Transactions and the ADT Acquisition, respectively. The impact of these transactions on our operating results has been included from the dates of these acquisitions. Refer to Note 3 “Acquisitions” to the accompanying consolidated financial statements for further discussion.
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(b)
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The weighted-average share numbers are presented after giving effect to the 1.681-for-1 stock split of our common stock that was effected on January 4, 2018, and have been adjusted retroactively for the Successor periods presented.
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(c)
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Total assets and total liabilities for 2015, 2014, and 2013 were adjusted to reflect the impact of the accounting standards adopted in 2016 related to the presentation of debt issuance costs and income taxes. Total debt for these years was also adjusted to reflect the impact from the accounting standard adoption related to the presentation of debt issuance costs.
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(d)
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On May 2, 2016, ADT Inc. issued 750,000 shares of the Koch Preferred Securities and Ultimate Parent issued the Warrants to the Koch Investor for aggregate consideration of $750 million. Of this amount, $659 million, net of issuance costs of $27 million, was allocated to the Koch Preferred Securities and reflected as a liability in our Consolidated Balance Sheets. The remaining $91 million in proceeds was allocated to the Warrants, and was contributed by Ultimate Parent in the form of common equity to us, net of $4 million in issuance costs. Refer to Note 6 “Mandatorily Redeemable Preferred Securities” to the accompanying consolidated financial statements for additional information. The proceeds from these issuances were used to fund a portion of the ADT Acquisition and to pay related fees and expenses. Dividends of
$41 million
and
$53 million
were paid during the years ended
December 31, 2017
and
2016
, respectively. Such dividends are recorded in interest expense, net in the Consolidated Statements of Operations. In addition, during the third and fourth quarters of 2017, in lieu of declaring and paying a dividend on the Koch Preferred Securities, we elected to increase the accumulated stated value of such securities, which increased mandatorily redeemable preferred securities on our Consolidated Balance Sheet by approximately
$45 million
as of
December 31, 2017
.
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(e)
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During the year ended
December 31, 2017
, we paid
$750 million
of dividends to our equity holders and Ultimate Parent, which primarily included distributions to our Sponsor. Such dividends are presented on the Consolidated Statement of Stockholders’ Equity for the year ended
December 31, 2017
.
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•
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year ended
December 31, 2017
compared to year ended
December 31, 2016
; and
|
•
|
year ended
December 31, 2016
compared to the period from Inception through December 31, 2015 (Successor) and the period from January 1, 2015 through June 30, 2015 (Predecessor) (collectively, the “Successor and Predecessor 2015 Periods”).
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(i)
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equity proceeds of
$3,571 million
, net of issuance costs, which resulted from equity issuances by the Company and Ultimate Parent to our Sponsor and certain other investors;
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(ii)
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incremental first lien term loan borrowings of $1,555 million and the issuance of $3,140 million of the Prime Notes; and
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(iii)
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issuance by ADT Inc. of 750,000 shares of the Koch Preferred Securities and issuance by Ultimate Parent of the Warrants to the Koch Investor for an aggregate amount of $750 million. We allocated $659 million to the Koch Preferred Securities, which is reflected net of issuance costs of $27 million as a liability in our Consolidated Balance Sheets. We allocated the remaining $91 million in proceeds to the Warrants, which was contributed by Ultimate Parent in the form of common equity to the Company, net of $4 million in issuance costs.
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Successor
|
|
|
|
|
Predecessor
|
||||||||
(in thousands, except as otherwise indicated)
|
Year Ended December 31,
2017
|
|
Year Ended December 31,
2016
|
|
From Inception through December 31,
2015
|
|
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Period from January 1, 2015 through June 30,
2015 |
||||||||
Results of Operations:
|
|
|
|
|
|
|
|
|
||||||||
Monitoring and related services
|
$
|
4,029,279
|
|
|
$
|
2,748,222
|
|
|
$
|
238,257
|
|
|
|
$
|
189,028
|
|
Installation and other
|
286,223
|
|
|
201,544
|
|
|
73,310
|
|
|
|
48,681
|
|
||||
Total Revenue
|
4,315,502
|
|
|
2,949,766
|
|
|
311,567
|
|
|
|
237,709
|
|
||||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
895,736
|
|
|
693,430
|
|
|
148,521
|
|
|
|
100,591
|
|
||||
Selling, general and administrative expenses
|
1,209,200
|
|
|
858,896
|
|
|
84,134
|
|
|
|
74,977
|
|
||||
Depreciation and intangible asset amortization
|
1,863,299
|
|
|
1,232,967
|
|
|
83,650
|
|
|
|
41,548
|
|
||||
Merger, restructuring, integration, and other costs
|
64,828
|
|
|
393,788
|
|
|
35,036
|
|
|
|
9,361
|
|
||||
Operating income (loss)
|
282,439
|
|
|
(229,315
|
)
|
|
(39,774
|
)
|
|
|
11,232
|
|
||||
Interest expense, net
|
(732,841
|
)
|
|
(521,491
|
)
|
|
(45,169
|
)
|
|
|
(29,129
|
)
|
||||
Other income (expense)
|
28,716
|
|
|
(51,932
|
)
|
|
325
|
|
|
|
331
|
|
||||
Loss before income taxes
|
(421,686
|
)
|
|
(802,738
|
)
|
|
(84,618
|
)
|
|
|
(17,566
|
)
|
||||
Income tax benefit (expense)
|
764,313
|
|
|
266,151
|
|
|
30,365
|
|
|
|
(1,025
|
)
|
||||
Net income (loss)
|
$
|
342,627
|
|
|
$
|
(536,587
|
)
|
|
$
|
(54,253
|
)
|
|
|
$
|
(18,591
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Summary Cash Flow Data:
|
|
|
|
|
|
|
|
|
||||||||
Net cash provided by operating activities
|
$
|
1,591,930
|
|
|
$
|
617,523
|
|
|
$
|
1,754
|
|
|
|
$
|
34,556
|
|
Net cash used in investing activities
|
$
|
(1,402,191
|
)
|
|
$
|
(9,384,869
|
)
|
|
$
|
(2,062,022
|
)
|
|
|
$
|
(39,638
|
)
|
Net cash (used in) provided by financing activities
|
$
|
(143,069
|
)
|
|
$
|
8,828,775
|
|
|
$
|
2,076,027
|
|
|
|
$
|
(6,212
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Key Performance Indicators:
(1)
|
|
|
|
|
|
|
|
|
||||||||
RMR
|
$
|
334,810
|
|
|
$
|
327,948
|
|
|
$
|
40,142
|
|
|
|
$
|
30,598
|
|
Gross customer revenue attrition (percent)
(2)
|
13.7
|
%
|
|
14.8
|
%
|
|
15.9
|
%
|
|
|
N/A
|
|
||||
Adjusted EBITDA
(3)
|
$
|
2,352,803
|
|
|
$
|
1,532,889
|
|
|
$
|
104,828
|
|
|
|
$
|
72,326
|
|
Free Cash Flow
(3)
|
$
|
225,361
|
|
|
$
|
(336,672
|
)
|
|
$
|
(32,292
|
)
|
|
|
$
|
3,934
|
|
(1)
|
Refer to the “—Key Performance Indicators” section for the definitions of these key performance indicators.
|
(2)
|
Gross customer revenue attrition (percent) is presented on a pro forma basis for The ADT Corporation business and ASG, as applicable.
|
(3)
|
Adjusted EBITDA and Free Cash Flow are non-GAAP measures. Refer to the “—Non-GAAP Measures” section for the definitions of these terms and reconciliations to the most comparable GAAP measures.
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
||||||||
(in thousands)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through December 31,
2015
|
|
|
Period from January 1, 2015 through June 30,
2015
|
||||||||
Net income (loss)
|
$
|
342,627
|
|
|
$
|
(536,587
|
)
|
|
$
|
(54,253
|
)
|
|
|
$
|
(18,591
|
)
|
Interest expense, net
|
732,841
|
|
|
521,491
|
|
|
45,169
|
|
|
|
29,129
|
|
||||
Income tax (benefit) expense
(1)
|
(764,313
|
)
|
|
(266,151
|
)
|
|
(30,365
|
)
|
|
|
1,025
|
|
||||
Depreciation and intangible asset amortization
|
1,863,299
|
|
|
1,232,967
|
|
|
83,650
|
|
|
|
41,548
|
|
||||
Merger, restructuring, integration and other costs
(2)
|
64,828
|
|
|
393,788
|
|
|
35,036
|
|
|
|
9,361
|
|
||||
Financing and consent fees
(3)
|
63,593
|
|
|
5,302
|
|
|
—
|
|
|
|
—
|
|
||||
Foreign currency (gains) / losses
(4)
|
(23,804
|
)
|
|
16,042
|
|
|
—
|
|
|
|
—
|
|
||||
Loss on extinguishment of debt
(5)
|
4,331
|
|
|
28,293
|
|
|
—
|
|
|
|
—
|
|
||||
Purchase accounting deferred revenue fair value adjustment
(6)
|
—
|
|
|
62,845
|
|
|
18,574
|
|
|
|
—
|
|
||||
Other non-cash items
(7)
|
12,899
|
|
|
16,276
|
|
|
—
|
|
|
|
—
|
|
||||
Radio conversion costs
(8)
|
12,244
|
|
|
34,405
|
|
|
4,312
|
|
|
|
1,014
|
|
||||
Amortization of deferred subscriber acquisition costs and revenue, net
(9)
|
5,037
|
|
|
6,052
|
|
|
770
|
|
|
|
7,578
|
|
||||
Share-based compensation expense
(10)
|
11,276
|
|
|
4,625
|
|
|
2,259
|
|
|
|
781
|
|
||||
Management fees and other charges
(11)
|
27,945
|
|
|
13,541
|
|
|
(324
|
)
|
|
|
481
|
|
||||
Adjusted EBITDA
|
$
|
2,352,803
|
|
|
$
|
1,532,889
|
|
|
$
|
104,828
|
|
|
|
$
|
72,326
|
|
(1)
|
For 2017, reflects the impact of Tax Reform. Refer to Note 7 “Income Taxes” to the accompanying consolidated financial statements for further discussion.
|
(2)
|
Represents direct and incremental costs resulting from acquisitions made by the Company, primarily associated with the ADT Acquisition, and certain related restructuring and integration efforts as a result of those acquisitions, as well as certain asset impairment charges related to cost method investments.
|
(3)
|
For
2017
, includes fees incurred in connection with the Special Dividend and fees incurred in connection with amendments and restatements to our First Lien Credit Facilities and the 2017 Incremental Term B-1 Loan. For
2016
, includes fees incurred in connection with amendments and restatements to our First Lien Credit Facilities.
|
(4)
|
Foreign currency (gains)/losses are related to the translation of monetary assets and liabilities that are denominated in Canadian dollars, primarily due to intercompany loans.
|
(5)
|
Loss on extinguishment of debt primarily relates to the write-off of debt discount and issuance costs associated with the amendments and restatements to our First Lien Credit Facilities during 2017 and 2016, and the voluntary paydown of $260 million of the second lien notes, as defined herein, in July and October 2016.
|
(6)
|
Represents adjustments related to the fair value of deferred revenue under GAAP, primarily related to the ADT Acquisition in
2016
, and the Formation Transactions in
2015
.
|
(7)
|
Primarily represents non-cash asset write-downs associated with our cost method investments, as well as a net loss on the settlement of derivative contracts that were executed to hedge future cash flows associated with the ADT Acquisition for the
year ended
December 31, 2016
.
|
(8)
|
Represents costs associated with our program that began in 2015 to upgrade cellular technology used in many of our security systems.
|
(9)
|
Represents non-cash amortization expense associated with deferred subscriber acquisition costs, net of non-cash amortization of deferred installation revenue.
|
(10)
|
Share-based compensation expense represents compensation expense associated with our equity compensation plans. Refer to Note 12 “Share-based Compensation” to the accompanying consolidated financial statements for further discussion.
|
(11)
|
Primarily represents fees paid under the Management Consulting Agreement as defined in the notes to the consolidated financial statements. Such agreement was terminated in connection with the consummation of the IPO.
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
||||||||
(in thousands)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through December 31, 2015
|
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Net cash provided by operating activities
|
$
|
1,591,930
|
|
|
$
|
617,523
|
|
|
$
|
1,754
|
|
|
|
$
|
34,556
|
|
Dealer generated customer accounts and bulk account purchases
|
(653,222
|
)
|
|
(407,102
|
)
|
|
—
|
|
|
|
—
|
|
||||
Subscriber system assets and deferred subscriber installation costs
|
(582,723
|
)
|
|
(468,594
|
)
|
|
(29,556
|
)
|
|
|
(24,527
|
)
|
||||
Capital expenditures
|
(130,624
|
)
|
|
(78,499
|
)
|
|
(4,490
|
)
|
|
|
(6,095
|
)
|
||||
Free Cash Flow
|
$
|
225,361
|
|
|
$
|
(336,672
|
)
|
|
$
|
(32,292
|
)
|
|
|
$
|
3,934
|
|
•
|
a first lien term loan facility maturing on May 2, 2022 (the “First Lien Term Loan Facility”), which consists of (i) a term loan facility with an initial aggregate principal amount of
$1,095 million
maturing on July 1, 2021 (the “First Lien Term B Loan”) (all of which has since been reallocated to the First Lien Term B-1 Loan as defined herein), and (ii) a term loan facility with an initial aggregate principal amount of
$1,555 million
maturing on May 2, 2022 (the “First Lien Term B-1 Loan”), including an incremental term loan facility of
$125 million
(the “Incremental First Lien Term B-1 Loan”) and an incremental first lien term loan facility of
$800 million
(the “2017 Incremental First Lien Term B-1 Loan”);
|
•
|
a first lien revolving credit facility, in an aggregate principal amount of up to
$95 million
, maturing on July 1, 2020, including
|
•
|
a first lien revolving credit facility, in an aggregate principal amount of up to
$255 million
, maturing on May 2, 2021, including a letter of credit sub-facility and a swingline loan sub-facility (the “2021 Revolving Credit Facility” and, together with the 2020 Revolving Credit Facility, the “Revolving Credit Facilities”).
|
•
|
$300 million aggregate principal amount of 5.250% Senior Notes due 2020, which will mature on March 15, 2020. Interest is payable on March 15 and September 15 of each year;
|
•
|
$1,000 million aggregate principal amount of 6.250% Senior Notes due 2021, which will mature on October 15, 2021. Interest is payable on April 15 and October 15 of each year;
|
•
|
$1,000 million aggregate principal amount of 3.500% Notes due 2022, which will mature on July 15, 2022. Interest is payable on January 15 and July 15 of each year;
|
•
|
$700 million aggregate principal amount of 4.125% Senior Notes due 2023, which will mature on June 15, 2023. Interest is payable on June 15 and December 15 of each year;
|
•
|
$22 million aggregate principal amount of 4.875% Senior Notes due 2042, which will mature on July 15, 2042. Interest is payable on January 15 and July 15 of each year.
|
•
|
$728 million aggregate principal amount of 4.875% First-Priority Senior Secured Notes due 2032, which mature on July 15, 2032. Interest is payable on January 15 and July 15 of each year.
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
||||||||
(in thousands)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through
December 31, 2015 |
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Net cash provided by operating activities
|
$
|
1,591,930
|
|
|
$
|
617,523
|
|
|
$
|
1,754
|
|
|
|
$
|
34,556
|
|
Net cash used in investing activities
|
$
|
(1,402,191
|
)
|
|
$
|
(9,384,869
|
)
|
|
$
|
(2,062,022
|
)
|
|
|
$
|
(39,638
|
)
|
Net cash (used in) provided by financing activities
|
$
|
(143,069
|
)
|
|
$
|
8,828,775
|
|
|
$
|
2,076,027
|
|
|
|
$
|
(6,212
|
)
|
(in thousands)
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
||||||||||||||
Debt principal
(1)
|
$
|
35,537
|
|
|
$
|
35,537
|
|
|
$
|
335,537
|
|
|
$
|
1,035,537
|
|
|
$
|
4,393,778
|
|
|
$
|
4,590,178
|
|
|
$
|
10,426,104
|
|
Interest payments
(2)
|
632,211
|
|
|
642,535
|
|
|
638,807
|
|
|
627,394
|
|
|
448,588
|
|
|
525,430
|
|
|
3,514,965
|
|
|||||||
Koch Preferred Securities,
including dividends (3) |
91,579
|
|
|
92,887
|
|
|
94,085
|
|
|
94,281
|
|
|
94,411
|
|
|
1,501,908
|
|
|
1,969,151
|
|
|||||||
Operating leases
|
60,379
|
|
|
51,283
|
|
|
40,303
|
|
|
24,948
|
|
|
16,414
|
|
|
16,643
|
|
|
209,970
|
|
|||||||
Capital leases
(4)
|
14,778
|
|
|
12,546
|
|
|
9,700
|
|
|
5,670
|
|
|
2,514
|
|
|
—
|
|
|
45,208
|
|
|||||||
Purchase obligations
(5)
|
40,620
|
|
|
6,708
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47,328
|
|
|||||||
Total contractual cash obligations
(6)
|
$
|
875,104
|
|
|
$
|
841,496
|
|
|
$
|
1,118,432
|
|
|
$
|
1,787,830
|
|
|
$
|
4,955,705
|
|
|
$
|
6,634,159
|
|
|
$
|
16,212,726
|
|
(1)
|
Debt principal consists of short-term and long-term debt obligations, and excludes capital lease obligations, debt discounts, deferred financing costs, and interest. Future obligations related to debt assumed in the ADT Acquisition are based on principal balances due at maturity, and exclude amounts related to the purchase accounting fair value adjustments.
|
(2)
|
Interest payments represent estimated interest payments on our outstanding debt balance as of
December 31, 2017
. The interest payments assume we did not have any outstanding borrowings under our Revolving Credit Facilities for all periods presented above. Interest payments on our variable-rate debt are calculated based on a forward London Interbank Offered Rate (“LIBOR”) curve (or floor, whichever is higher) plus the applicable margin in effect at
December 31, 2017
. The actual interest rates on the variable indebtedness incurred and the amount of our indebtedness could vary from those used to compute the above interest payments.
|
(3)
|
The table above includes estimated payments associated with the dividend obligation on the Koch Preferred Securities, and on May 2, 2030, the date of the mandatory redemption, assumes the payment of (i) the aggregate stated value amount of $750 million and (ii) the cash payment of the accumulated dividends of approximately
$45 million
. Cash dividend payments are calculated based on a rate of the five-year U.S. Treasury yield in effect at
December 31, 2017
plus 9.00% per annum, with a floor of 1.25%. Dividends paid on the Koch Preferred Securities are presented as interest expense. Refer to Note 6 “Mandatorily Redeemable Preferred Securities” to the accompanying consolidated financial statements for further information.
|
(4)
|
Capital leases reflect the principal amount of capital lease obligations, including related interest.
|
(5)
|
Purchase obligations consist of commitments related to agreements for purchases of goods and services, including purchase orders, entered into in the ordinary course of business. In May 2017, we entered into an agreement with one of our suppliers for the purchase of certain security system equipment and components. Based on certain milestones in the agreement, we could potentially be required to make purchases in aggregate of up to $150 million over a multi-year period. As of
December 31, 2017
, we do not have any purchase obligation under this agreement.
|
(6)
|
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
December 31, 2017
, we had unrecognized tax benefits of
$71 million
. Accrued interest and penalties related to the unrecognized tax benefits were not material. Refer to Note 7 “Income Taxes” to the accompanying consolidated financial statements for further discussion.
|
•
|
year ended
December 31, 2017
on a historical basis compared to the
year ended
December 31, 2016
on a supplemental pro forma basis; and
|
•
|
year ended
December 31, 2016
compared to the
year ended
December 31, 2015
, in each case on supplemental pro forma basis.
|
(in thousands, except as otherwise indicated)
|
Year Ended December 31,
2017 |
|
Supplemental
Pro Forma Year Ended December 31, 2016 (1) |
|
Supplemental Pro Forma Year Ended December 31,
2015 (2) |
||||||
Monitoring and related services
|
$
|
4,029,279
|
|
|
$
|
3,954,424
|
|
|
$
|
3,897,107
|
|
Installation and other
|
286,223
|
|
|
212,492
|
|
|
160,135
|
|
|||
Total Revenue
|
4,315,502
|
|
|
4,166,916
|
|
|
4,057,242
|
|
|||
Cost of revenue (exclusive of depreciation and intangible asset amortization shown below)
|
895,736
|
|
|
869,689
|
|
|
807,536
|
|
|||
Selling, general and administrative expenses
|
1,209,200
|
|
|
1,238,923
|
|
|
1,331,326
|
|
|||
Depreciation and intangible asset amortization
|
1,863,299
|
|
|
1,574,219
|
|
|
1,591,410
|
|
|||
Merger, restructuring, integration, and other costs
|
64,828
|
|
|
86,186
|
|
|
33,224
|
|
|||
Operating income
|
282,439
|
|
|
397,899
|
|
|
293,746
|
|
|||
Interest expense, net
|
(732,841
|
)
|
|
(750,006
|
)
|
|
(768,789
|
)
|
|||
Other income (expense)
|
28,716
|
|
|
(51,688
|
)
|
|
4,422
|
|
|||
Loss before income taxes
|
(421,686
|
)
|
|
(403,795
|
)
|
|
(470,621
|
)
|
|||
Income tax benefit
|
764,313
|
|
|
118,854
|
|
|
189,251
|
|
|||
Net income (loss)
|
$
|
342,627
|
|
|
$
|
(284,941
|
)
|
|
$
|
(281,370
|
)
|
|
|
|
|
|
|
||||||
Key Performance Indicators:
(3)
|
|
|
|
|
|
||||||
RMR
|
$
|
334,810
|
|
|
$
|
327,948
|
|
|
$
|
322,106
|
|
Gross customer revenue attrition (percent)
|
13.7
|
%
|
|
14.8
|
%
|
|
15.9
|
%
|
|||
Adjusted EBITDA
(4)
and
Supplemental Pro Forma Adjusted EBITDA (4) |
$
|
2,352,803
|
|
|
$
|
2,176,943
|
|
|
$
|
2,031,281
|
|
(1)
|
Refer to Note 1 to Notes to the Unaudited Supplemental Pro Forma Financial Information presented in the Supplemental Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
(2)
|
Refer to Note 2 to Notes to the Unaudited Supplemental Pro Forma Financial Information presented in the Supplemental Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
(3)
|
Refer to the “Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Key Performance Indicators” section for the definitions of these key performance indicators.
|
(4)
|
Adjusted EBITDA and Supplemental Pro Forma Adjusted EBITDA are non-GAAP measures. Refer to the “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures” section for the definitions thereof and below for reconciliations to net income (loss), the most comparable GAAP measure.
|
(in thousands)
|
Year Ended December 31,
2017 |
|
Supplemental
Pro Forma Year Ended December 31, 2016 |
|
Supplemental Pro Forma Year Ended December 31,
2015 |
||||||
Net income (loss)
|
$
|
342,627
|
|
|
$
|
(284,941
|
)
|
|
$
|
(281,370
|
)
|
Interest expense, net
|
732,841
|
|
|
750,006
|
|
|
768,789
|
|
|||
Income tax (benefit) expense
|
(764,313
|
)
|
|
(118,854
|
)
|
|
(189,251
|
)
|
|||
Depreciation and intangible asset amortization
|
1,863,299
|
|
|
1,574,219
|
|
|
1,591,410
|
|
|||
Merger, restructuring, integration and other costs
(1)
|
64,828
|
|
|
86,186
|
|
|
33,224
|
|
|||
Financing and consent fees
(2)
|
63,593
|
|
|
5,302
|
|
|
—
|
|
|||
Foreign currency (gains)/losses
(3)
|
(23,804
|
)
|
|
16,042
|
|
|
—
|
|
|||
Loss on extinguishment of debt
(4)
|
4,331
|
|
|
28,293
|
|
|
—
|
|
|||
Other non-cash items
(5)
|
12,899
|
|
|
16,276
|
|
|
—
|
|
|||
Radio conversion costs
(6)
|
12,244
|
|
|
67,816
|
|
|
60,410
|
|
|||
Amortization of deferred subscriber acquisition costs and revenue, net
(7)
|
5,037
|
|
|
6,052
|
|
|
1,063
|
|
|||
Share-based compensation expense
(8)
|
11,276
|
|
|
10,108
|
|
|
28,103
|
|
|||
Management fees and other charges
(9)
|
27,945
|
|
|
20,438
|
|
|
18,903
|
|
|||
Adjusted EBITDA
|
$
|
2,352,803
|
|
|
N/A
|
|
|
N/A
|
|
||
Supplemental Pro Forma Adjusted EBITDA
|
N/A
|
|
|
$
|
2,176,943
|
|
|
$
|
2,031,281
|
|
(1)
|
Represents post-acquisition restructuring and integration charges associated with various acquisitions and other asset impairments.
|
(2)
|
Financing and consent fees represents fees associated with (i) the Special Dividend, (ii) amendments and restatements to our First Lien Credit Facilities, and (iii) the 2017 Incremental First Lien Term B-1 Loan.
|
(3)
|
Foreign currency (gains)/losses relates to the translation of monetary assets and liabilities that are denominated in Canadian dollars, primarily due to intercompany loans.
|
(4)
|
Loss on extinguishment of debt for
year ended
December 31, 2017
and supplemental pro forma
year ended
December 31, 2016
primarily relates to the write-off of debt discount and issuance costs associated with amendments and restatements to the First Lien Credit Facilities.
|
(5)
|
Represents other non-cash items such as certain asset write-downs, as well as a net loss on the settlement of derivative contracts that were executed to hedge future cash flows associated with the ADT Acquisition during the supplemental pro forma
year ended
December 31, 2016
.
|
(6)
|
Represents costs associated with our program that began in 2015 to upgrade cellular technology used in many of our security systems.
|
(7)
|
Represents non-cash amortization expense associated with deferred subscriber acquisition costs, net of non-cash amortization of revenue associated with deferred installation revenue.
|
(8)
|
Share-based compensation expense represents compensation expense associated with our equity compensation plans. Refer to Note 12 “Share-based Compensation” to the accompanying consolidated financial statements for further discussion
|
(9)
|
Includes $20 million of management fees to our Sponsor for certain management consulting and advisory services for the
year ended
December 31, 2017
, supplemental pro forma
year ended
December 31, 2016
and
2015
. Such agreement was terminated in connection with the consummation of the IPO.
|
(in thousands)
|
ADT Inc. Historical
|
|
The ADT Corporation Historical
1(a) |
|
Acquisition Adjustments
|
|
Supplemental Pro Forma December 31,
2016 |
||||||||
Monitoring and related services
|
$
|
2,748,222
|
|
|
$
|
1,143,357
|
|
|
$
|
62,845
|
|
1(b)
|
$
|
3,954,424
|
|
Installation and other
|
201,544
|
|
|
69,352
|
|
|
(58,404
|
)
|
1(b)
|
212,492
|
|
||||
Total Revenue
|
2,949,766
|
|
|
1,212,709
|
|
|
4,441
|
|
1(b)
|
4,166,916
|
|
||||
Cost of revenue
|
693,430
|
|
|
176,259
|
|
|
—
|
|
|
869,689
|
|
||||
Selling, general and administrative expenses
|
858,896
|
|
|
425,315
|
|
|
(45,288
|
)
|
1(c)
|
1,238,923
|
|
||||
Depreciation and intangible asset amortization
|
1,232,967
|
|
|
394,827
|
|
|
(53,575
|
)
|
1(d)
|
1,574,219
|
|
||||
Merger, restructuring, integration, and other costs
|
393,788
|
|
|
46,595
|
|
|
(354,197
|
)
|
1(e)
|
86,186
|
|
||||
Operating (loss) income
|
(229,315
|
)
|
|
169,713
|
|
|
457,501
|
|
|
397,899
|
|
||||
Interest expense, net
|
(521,491
|
)
|
|
(71,605
|
)
|
|
(156,910
|
)
|
1(f)
|
(750,006
|
)
|
||||
Other (expense) income
|
(51,932
|
)
|
|
244
|
|
|
—
|
|
|
(51,688
|
)
|
||||
(Loss) income before income taxes
|
(802,738
|
)
|
|
98,352
|
|
|
300,591
|
|
|
(403,795
|
)
|
||||
Income tax benefit (expense)
|
266,151
|
|
|
(31,869
|
)
|
|
(115,428
|
)
|
1(g)
|
118,854
|
|
||||
Net (loss) income
|
$
|
(536,587
|
)
|
|
$
|
66,483
|
|
|
$
|
185,163
|
|
|
$
|
(284,941
|
)
|
1(a)
|
The ADT Corporation’s historical combined statement of operations data for the period January 1, 2016 to May 1, 2016 has been derived by adding the historical consolidated statement of operations for the three months ended March 31, 2016 and the historical consolidated statement of operations data for the period April 1, 2016 to May 1, 2016. Certain expenses has been reclassified to conform to current period presentation.
|
1(b)
|
Reflects the impact of:
|
(i)
|
the reversal of a purchase accounting adjustment related to the write-down to fair value of deferred revenue associated with services not yet rendered of $63 million that is directly related to the ADT Acquisition, but does not have a continuing impact on the Company; and
|
(ii)
|
the elimination of The ADT Corporation historical amortization of deferred installation revenue of $58 million as a result of the purchase price allocation for the ADT Acquisition as if the acquisition had occurred on January 1, 2015 because the application of this purchase accounting adjustment has a continuing impact on the Company.
|
1(c)
|
Reflects the impact of:
|
(i)
|
the elimination of The ADT Corporation historical amortization of deferred subscriber acquisition costs of $52 million as a result of the purchase price allocation for the ADT Acquisition as if the acquisition had occurred on January 1, 2015 because the application of this purchase accounting adjustment has a continuing impact on the Company; and
|
(ii)
|
an increase in management fees of $7 million associated with the Management Consulting Agreement directly related to the ADT Acquisition as if the acquisition had occurred on January 1, 2015 because it has a continuing impact on the Company due to the term of the agreement (see “Item 13. Certain Relationships and Related Party Transactions and Director Independence—Management Consulting Agreement”).
|
1(d)
|
To record the following net decrease in depreciation and intangible asset amortization as a result of the purchase price allocation associated with the ADT Acquisition:
|
in thousands
|
Year Ended
December 31,
2016
|
|||
Amortization of intangible assets
(i)
|
$
|
234,284
|
|
|
Subscriber system asset and property and equipment depreciation
(ii)
|
106,968
|
|
||
Elimination of historical The ADT Corporation depreciation and amortization expense
|
(394,827
|
)
|
||
Net supplemental pro forma adjustment
|
$
|
(53,575
|
)
|
(i)
|
Primarily consists of amortization of customer relationships and dealer relationships under the ADT Authorized Dealer Program. As of the acquisition date, customer relationships have a weighted-average remaining useful life of approximately 6 years, and are amortized on an accelerated basis.
|
(ii)
|
As of the acquisition date, subscriber system assets have a weighted-average remaining useful life of approximately 7 years, and are depreciated on an accelerated basis. Property and equipment depreciation has a remaining average life of 3 years and are depreciated on a straight-line basis.
|
1(e)
|
To remove transaction costs associated with the ADT Acquisition, as these costs will not have a continuing impact on the Company’s results.
|
1(f)
|
To record incremental interest expense (including related amortization of debt issuance costs and discount) of $168 million associated with borrowings to fund the ADT Acquisition as a result of: (1) the incremental first lien term loan facility of $1,555 million; (2) the issuance of $3,140 million of Prime Notes; (3) the amortization of issuance costs and fees associated with the $255 million 2021 Revolving Credit Facility; (4) the Koch Preferred Securities, which have an aggregate stated value of $750 million (dividends for the Koch Preferred Securities are recorded as interest expense); and (5) the amortization of the fair value adjustment made to the ADT Notes assumed as a result of the acquisition. These increases are net of the removal of interest expense of $11 million on The ADT Corporation debt repaid (including related amortization of capitalized debt acquisition costs) in connection with the consummation of the acquisition.
|
1(g)
|
To record the income tax expense impact of the supplemental pro forma adjustments at the blended statutory rate of 38.4%.
|
|
Predecessor
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
(in thousands)
|
January 1,
2015 |
|
|
December 31,
2015 |
|
ASG
Six Months Ended June 30, 2015
After Reclassifications 1(a)
|
|
Formation Transaction Adjustments (Note 1 to this Note 2)
|
|
Subtotal
|
|
The ADT Corporation Twelve Months Ended December 31, 2015 After Reclassifications
2(a)
|
|
ADT Acquisition Adjustments (Note 2 to Note 2)
|
|
Pro Forma Year Ended December 31,
2015
|
||||||||||||||||
Monitoring and related services
|
$
|
189,028
|
|
|
|
$
|
238,257
|
|
|
$
|
59,697
|
|
|
$
|
18,573
|
|
1(b)
|
$
|
505,555
|
|
|
$
|
3,391,552
|
|
|
$
|
—
|
|
2(b)
|
$
|
3,897,107
|
|
Installation and other
|
48,681
|
|
|
|
73,310
|
|
|
12,064
|
|
|
(2,936
|
)
|
1(b)
|
131,119
|
|
|
195,293
|
|
|
(166,277
|
)
|
2(b)
|
160,135
|
|
||||||||
Total revenue
|
237,709
|
|
|
|
311,567
|
|
|
71,761
|
|
|
15,637
|
|
1(b)
|
636,674
|
|
|
3,586,845
|
|
|
(166,277
|
)
|
2(b)
|
4,057,242
|
|
||||||||
Cost of revenue
|
100,591
|
|
|
|
148,521
|
|
|
31,672
|
|
|
1,228
|
|
1(c)
|
282,012
|
|
|
525,524
|
|
|
—
|
|
|
807,536
|
|
||||||||
Selling, general and administrative expenses
|
74,977
|
|
|
|
84,134
|
|
|
24,354
|
|
|
(12,656
|
)
|
1(d)
|
170,809
|
|
|
1,285,356
|
|
|
(124,839
|
)
|
2(c)
|
1,331,326
|
|
||||||||
Depreciation and intangible asset amortization
|
41,548
|
|
|
|
83,650
|
|
|
26,038
|
|
|
8,295
|
|
1(e)
|
159,531
|
|
|
1,139,166
|
|
|
292,713
|
|
2(d)
|
1,591,410
|
|
||||||||
Merger, restructuring, integration, and other costs
|
9,361
|
|
|
|
35,036
|
|
|
925
|
|
|
(23,951
|
)
|
1(f)
|
21,371
|
|
|
11,853
|
|
|
—
|
|
|
33,224
|
|
||||||||
Operating income (loss)
|
11,232
|
|
|
|
(39,774
|
)
|
|
(11,228
|
)
|
|
42,721
|
|
|
2,951
|
|
|
624,946
|
|
|
(334,151
|
)
|
|
293,746
|
|
||||||||
Interest expense, net
|
(29,129
|
)
|
|
|
(45,169
|
)
|
|
(10,844
|
)
|
|
(5,706
|
)
|
1(g)
|
(90,848
|
)
|
|
(207,257
|
)
|
|
(470,684
|
)
|
2(e)
|
(768,789
|
)
|
||||||||
Other (expense) income
|
331
|
|
|
|
325
|
|
|
—
|
|
|
—
|
|
|
656
|
|
|
3,766
|
|
|
—
|
|
|
4,422
|
|
||||||||
(Loss) income before income taxes
|
(17,566
|
)
|
|
|
(84,618
|
)
|
|
(22,072
|
)
|
|
37,015
|
|
|
(87,241
|
)
|
|
421,455
|
|
|
(804,835
|
)
|
|
(470,621
|
)
|
||||||||
Income tax (expense) benefit
|
(1,025
|
)
|
|
|
30,365
|
|
|
(584
|
)
|
|
(14,214
|
)
|
1(h)
|
14,542
|
|
|
(134,348
|
)
|
|
309,057
|
|
2(f)
|
189,251
|
|
||||||||
Net (loss) income
|
$
|
(18,591
|
)
|
|
|
$
|
(54,253
|
)
|
|
$
|
(22,656
|
)
|
|
$
|
22,801
|
|
|
$
|
(72,699
|
)
|
|
$
|
287,107
|
|
|
$
|
(495,778
|
)
|
|
$
|
(281,370
|
)
|
1(a)
|
ASG’s historical presentation of its revenues and certain expenses contained within its historical consolidated statement of operations for the six months ended June 30, 2015 have been reclassified to conform to the current period presentation.
|
1(b)
|
To record an increase to revenue consisting of: (i) the reversal of a purchase accounting adjustment related to the write-down to fair value of deferred revenue associated with services not yet rendered of $19 million that is directly related to the Formation Transactions, but does not have a continuing impact on the Company; (ii) the elimination of historical amortization of deferred installation revenue of $7 million as a result of the purchase price allocation for the Formation Transactions as if they had occurred on January 1, 2015 because the application of the purchase accounting adjustment has a continuing impact on the Company; and (iii) an accounting policy adjustment increasing revenue by $4 million to conform ASG’s revenue accounting policy to the Company’s policy. For certain types of sales, ASG used the percentage-of-completion method to recognize revenue and cost. In contrast, the Company recognized all revenue and costs for the same types of sales upon project completion (“completed contract method”). In addition to revenue, the accounting policy adjustment impacts both the cost of revenue and selling, general and administrative expenses line items as noted below.
|
1(c)
|
To record an increase to cost of revenue for an accounting policy adjustment to conform ASG’s revenue accounting policy to the Company’s policy, as noted above in note 1(b).
|
1(d)
|
To record a decrease in selling, general and administrative expenses as follows:
|
(in thousands)
|
Year Ended
December 31,
2015
|
||
Protection One and ASG historical amortization of deferred subscriber acquisition costs
(i)
|
$
|
(14,127
|
)
|
ADT Inc.’s share based award expenses
(ii)
|
1,490
|
|
|
ASG equity compensation plan expenses
(iii)
|
1,694
|
|
|
Accounting policy adjustment
(iv)
|
(992
|
)
|
|
Management fees
(v)
|
(721
|
)
|
|
Net supplemental pro forma adjustment
|
$
|
(12,656
|
)
|
(i)
|
To eliminate Protection One and ASG historical amortization of deferred subscriber acquisition costs as a result of purchase accounting associated with the Formation Transactions.
|
(ii)
|
ADT Inc.’s share based award expenses reflects the incremental expense related to the new executive compensation plan entered into as a result of ADT Inc.’s acquisition of Protection One, Inc.
|
(iii)
|
ASG equity compensation plan expenses reflect the elimination of the historical benefit that was recorded by ASG as presented in the statement of operations of the consolidated financial statements of ASG for the six months ended June 30, 2015. Final payout was made in conjunction with ADT Inc.’s acquisition of ASG as of July 1, 2015.
|
(iv)
|
The accounting policy adjustment conforms ASG’s revenue accounting policy to the Company’s accounting policy, as noted above in footnote (b).
|
(v)
|
Management fees reflects the elimination of the historical fees paid to affiliates of GTCR Golder Rauner II, L.L.C. and PCap L.P., respectively, by Protection One, Inc. and ASG. Subsequent to the Formation Transactions (and prior to the ADT Acquisition), there were no management fees in place with respect to Protection One, Inc. and ASG payable to our Sponsor.
|
1(e)
|
To record the following net increase in depreciation and intangible asset amortization as a result of the purchase price allocation associated with the Formation Transactions:
|
(in thousands)
|
Year Ended
December 31,
2015
|
||
Amortization of intangible assets
(i)
|
$
|
145,243
|
|
Property and equipment depreciation
(i)
|
14,288
|
|
|
Elimination of historical Protection One and ASG depreciation and amortization expense
|
(151,236
|
)
|
|
Net supplemental pro forma adjustment
|
$
|
8,295
|
|
(i)
|
Reflects amortization and depreciation as a result of the purchase price allocation associated with the Formation Transactions.
|
1(f)
|
Transaction fees reflect the elimination of historical acquisition-related transaction costs that were non-recurring, expensed as incurred and are directly attributable to the Formation Transactions.
|
1(g)
|
To record the incremental interest expense (including amortization of discount and debt issuance costs) due to the new debt acquired to finance the Formation Transactions.
|
1(h)
|
To record the income tax expense impact of the supplemental pro forma adjustments at the statutory rate of 38.4%. The Company operates in multiple jurisdictions, and as such the statutory rate may not be reflective of the actual impact of the tax effects of the adjustments.
|
2(a)
|
The ADT Corporation’s historical consolidated statement of operations data for the twelve months ended December 31, 2015 has been derived by deducting the historical unaudited consolidated statement of operations data for the three months ended December 26, 2014 from the historical audited statement of operations data for the fiscal year ended September 25, 2015, and then adding thereto the historical unaudited consolidated statement of operations data from the three months ended December 31, 2015. Certain expenses have been reclassified to conform to the current presentation.
|
2(b)
|
Reflects the impact of the elimination of The ADT Corporation historical amortization of deferred installation revenue of $166 million as a result of the purchase price allocation for the ADT Acquisition as if the acquisition had occurred on January 1, 2015 because the application of this purchase accounting adjustment has a continuing impact on the Company.
|
2(c)
|
Reflects the impact of:
|
(i)
|
the elimination of The ADT Corporation historical amortization of deferred subscriber acquisition costs of $145 million as a result of the purchase price allocation for the ADT Acquisition as if the acquisition had occurred on January 1, 2015 because the application of this purchase accounting adjustment has a continuing impact on the Company; and
|
(ii)
|
an increase in management fees of $20 million associated with the Management Consulting Agreement directly related to the ADT Acquisition as if the acquisition had occurred on January 1, 2015 because it has a continuing impact on the Company due to the term of the agreement (see “Certain Relationships and Related Party Transactions—Management Consulting Agreement”).
|
2(d)
|
To record the following net increase in depreciation and intangible asset amortization as a result of the purchase price allocation associated with the ADT Acquisition:
|
(in thousands)
|
Year Ended
December 31,
2015
|
||
Amortization of intangible assets
(i)
|
$
|
881,929
|
|
Subscriber system asset and property and equipment depreciation
(ii)
|
549,950
|
|
|
Elimination of historical The ADT Corporation depreciation and amortization expense
|
(1,139,166
|
)
|
|
Net supplemental pro forma adjustment
|
$
|
292,713
|
|
(i)
|
Primarily consists of amortization of customer relationships and dealer relationships under the ADT Authorized Dealer Program. As of the acquisition date, customer relationships have a weighted average remaining useful life of approximately 6 years, and are amortized on an accelerated basis.
|
(ii)
|
As of the acquisition date, subscriber system asset have a weighted average remaining useful life of approximately 7 years, and are amortized on an accelerated basis. Property and equipment have a remaining average life of 3 years and are depreciated on a straight-line basis.
|
2(e)
|
To record incremental interest expense (including related amortization of debt issuance costs and discount) of $518 million associated with borrowings to fund the ADT Acquisition as a result of: (1) the incremental first lien term loan facility of $1,555 million; (2) the issuance of $3,140 million second priority senior secured notes; (3) the amortization of issuance costs and fees associated with the $255 million 2021 Revolving Credit Facility; (4) the Koch Preferred Securities, which have an aggregate stated value of $750 million (dividends for the Koch Preferred Securities are recorded as interest expense); and (5) the amortization of the fair value adjustment made to the ADT Notes assumed as a result of the acquisition. These increases are net of the removal of interest expense of $47 million on The ADT Corporation debt repaid (including related amortization of capitalized debt acquisition costs) in connection with the consummation of the acquisition.
|
2(f)
|
To record the income tax expense impact of the supplemental pro forma adjustments at the blended statutory rate of 38.4%. The Company operates in multiple jurisdictions, and as such the statutory rate may not be reflective of the actual impact of the tax effects of the adjustments.
|
(in thousands)
|
ADT Inc. Historical
Year Ended
December 31,
2016
|
|
The ADT Corporation
Historical
|
|
Pro Forma
Adjustments
|
|
Supplemental
Pro Forma
December 31,
2016
|
||||||||
Net (loss) income
|
$
|
(536,587
|
)
|
|
$
|
66,483
|
|
|
$
|
185,163
|
|
|
$
|
(284,941
|
)
|
Interest expense, net
|
521,491
|
|
|
71,605
|
|
|
156,910
|
|
|
750,006
|
|
||||
Income tax (benefit) expense
|
(266,151
|
)
|
|
31,869
|
|
|
115,428
|
|
|
(118,854
|
)
|
||||
Depreciation and intangible asset amortization
|
1,232,967
|
|
|
394,827
|
|
|
(53,575
|
)
|
|
1,574,219
|
|
||||
Merger, restructuring, integration and other costs
|
393,788
|
|
|
46,595
|
|
|
(354,197
|
)
|
|
86,186
|
|
||||
Financing and consent fees
|
5,302
|
|
|
—
|
|
|
—
|
|
|
5,302
|
|
||||
Foreign currency losses
|
16,042
|
|
|
—
|
|
|
—
|
|
|
16,042
|
|
||||
Loss on extinguishment of debt
|
28,293
|
|
|
—
|
|
|
—
|
|
|
28,293
|
|
||||
Purchase accounting deferred revenue fair value adjustment
|
62,845
|
|
|
—
|
|
|
(62,845
|
)
|
|
—
|
|
||||
Other non-cash items
|
16,276
|
|
|
—
|
|
|
—
|
|
|
16,276
|
|
||||
Radio conversion costs
|
34,405
|
|
|
33,411
|
|
|
—
|
|
|
67,816
|
|
||||
Amortization of deferred subscriber acquisition costs and revenue, net
|
6,052
|
|
|
(6,395
|
)
|
|
6,395
|
|
|
6,052
|
|
||||
Share-based compensation expense
|
4,625
|
|
|
5,483
|
|
|
—
|
|
|
10,108
|
|
||||
Management fees and other charges
|
13,541
|
|
|
176
|
|
|
6,721
|
|
|
20,438
|
|
||||
Supplemental Pro Forma Adjusted EBITDA
|
$
|
1,532,889
|
|
|
$
|
644,054
|
|
|
$
|
—
|
|
|
$
|
2,176,943
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
(in thousands)
|
Period from January 1, 2015 through June 30,
2015
|
|
|
From Inception through December 31,
2015
|
|
ASG Six Months Historical Ended June 30,
2015
|
|
Other Pro Forma Adjustments
|
|
Subtotal
|
|
The ADT Corporation Twelve Months Ended December 31,
2015
(a)
|
|
ADT Acquisition Adjustments
|
|
Supplemental Pro Forma
Year Ended December 31,
2015
|
||||||||||||||||
Net (loss) income
|
$
|
(18,591
|
)
|
|
|
$
|
(54,253
|
)
|
|
$
|
(22,656
|
)
|
|
$
|
22,801
|
|
|
$
|
(72,699
|
)
|
|
$
|
287,107
|
|
|
$
|
(495,778
|
)
|
|
$
|
(281,370
|
)
|
Interest expense, net
|
29,129
|
|
|
|
45,169
|
|
|
10,844
|
|
|
5,706
|
|
|
90,848
|
|
|
207,257
|
|
|
470,684
|
|
|
768,789
|
|
||||||||
Income tax (benefit) expense
|
1,025
|
|
|
|
(30,365
|
)
|
|
584
|
|
|
14,214
|
|
|
(14,542
|
)
|
|
134,348
|
|
|
(309,057
|
)
|
|
(189,251
|
)
|
||||||||
Depreciation and intangible asset amortization
|
41,548
|
|
|
|
83,650
|
|
|
26,038
|
|
|
8,295
|
|
|
159,531
|
|
|
1,139,166
|
|
|
292,713
|
|
|
1,591,410
|
|
||||||||
Merger, restructuring, integration and other costs
|
9,361
|
|
|
|
35,036
|
|
|
925
|
|
|
(23,951
|
)
|
|
21,371
|
|
|
11,853
|
|
|
—
|
|
|
33,224
|
|
||||||||
Purchase accounting deferred revenue fair value adjustment
|
—
|
|
|
|
18,574
|
|
|
—
|
|
|
(18,574
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Radio conversion costs
|
1,014
|
|
|
|
4,312
|
|
|
—
|
|
|
—
|
|
|
5,326
|
|
|
55,084
|
|
|
—
|
|
|
60,410
|
|
||||||||
Amortization of deferred subscriber acquisition costs and revenue, net
|
7,578
|
|
|
|
770
|
|
|
(571
|
)
|
|
(6,714
|
)
|
|
1,063
|
|
|
(21,438
|
)
|
|
21,438
|
|
|
1,063
|
|
||||||||
Share-based compensation expense
|
781
|
|
|
|
2,259
|
|
|
(1,694
|
)
|
|
3,184
|
|
|
4,530
|
|
|
23,573
|
|
|
—
|
|
|
28,103
|
|
||||||||
Management fees and other charges
|
481
|
|
|
|
(324
|
)
|
|
221
|
|
|
(720
|
)
|
|
(342
|
)
|
|
(755
|
)
|
|
20,000
|
|
|
18,903
|
|
||||||||
Supplemental Pro Forma Adjusted EBITDA
|
$
|
72,326
|
|
|
|
$
|
104,828
|
|
|
$
|
13,691
|
|
|
$
|
4,241
|
|
|
$
|
195,086
|
|
|
$
|
1,836,195
|
|
|
$
|
—
|
|
|
$
|
2,031,281
|
|
(a)
|
The ADT Corporation’s historical consolidated financial information for the twelve months ended December 31, 2015 has been derived by deducting the historical consolidated financial information for the three months ended December 26, 2014 from the historical consolidated financial information for the fiscal year ended September 25, 2015, and then adding thereto the historical consolidated financial information for the three months ended December 31, 2015.
|
Name
|
|
Age
|
|
Position
|
Timothy J. Whall
|
|
56
|
|
Chief Executive Officer, Director
|
James D. DeVries
|
|
54
|
|
President
|
Daniel M. Bresingham
|
|
46
|
|
Executive Vice President and Chief Administrative Officer
|
P. Gray Finney
|
|
59
|
|
Senior Vice President, Chief Legal Officer and Secretary
|
Jeffrey Likosar
|
|
47
|
|
Executive Vice President, Chief Financial Officer and Treasurer
|
Jamie E. Haenggi
|
|
48
|
|
Senior Vice President and Chief Growth Officer
|
Donald Young
|
|
53
|
|
Senior Vice President and Chief Information Officer
|
Jay Darfler
|
|
41
|
|
Senior Vice President, Emerging Growth Markets
|
Robert M. Dale
|
|
60
|
|
Senior Vice President, National Account Sales
|
Zachary Susil
|
|
35
|
|
Vice President, Controller
|
Amelia O. Pulliam
|
|
46
|
|
Senior Vice President, Chief Human Resources Officer
|
Andrew D. Africk
|
|
51
|
|
Director
|
Marc E. Becker
|
|
45
|
|
Director (Chairman)
|
Matthew H. Nord
|
|
38
|
|
Director
|
Reed B. Rayman
|
|
31
|
|
Director
|
Eric L. Press
|
|
52
|
|
Director
|
Lee J. Solomon
|
|
46
|
|
Director
|
Stephanie Drescher
|
|
44
|
|
Director
|
Brett Watson
|
|
37
|
|
Director
|
David Ryan
|
|
48
|
|
Director
|
Matthew E. Winter
|
|
61
|
|
Director
|
•
|
to prepare the annual Audit Committee report to be included in our annual proxy statement;
|
•
|
to oversee and monitor our financial reporting process;
|
•
|
to oversee and monitor the integrity of our financial statements and internal control system;
|
•
|
to oversee and monitor the independence, retention, performance, and compensation of our independent auditor;
|
•
|
to oversee and monitor the performance, appointment, and retention of our senior internal audit staff person;
|
•
|
to discuss, oversee, and monitor policies with respect to risk assessment and risk management;
|
•
|
to oversee and monitor our compliance with legal and regulatory matters; and
|
•
|
to provide regular reports to the board of directors.
|
•
|
to review, evaluate, and make recommendations to the full board of directors regarding our compensation policies and programs;
|
•
|
to review and approve the compensation of our chief executive officer, other officers, and key employees, including all material benefits, option or stock award grants, and perquisites and all material employment agreements, and confidentiality and non-competition agreements;
|
•
|
to review and recommend to the board of directors a succession plan for the chief executive officer and development plans for other key corporate positions as shall be deemed necessary from time to time;
|
•
|
to review and make recommendations to the board of directors with respect to our incentive compensation plans and equity-based compensation plans;
|
•
|
to administer incentive compensation and equity-related plans;
|
•
|
to review and make recommendations to the board of directors with respect to the financial and other performance targets that must be met;
|
•
|
to set and review the compensation of members of the board of directors; and
|
•
|
to prepare an annual compensation committee report and take such other actions as are necessary and consistent with the governing law and our organizational documents.
|
•
|
to identify candidates qualified to become directors of the Company, consistent with criteria approved by our board of directors;
|
•
|
to recommend to our board of directors nominees for election as directors at the next annual meeting of stockholders or a special meeting of stockholders at which directors are to be elected, as well as to recommend directors to serve on the other committees of the board;
|
•
|
to recommend to our board of directors candidates to fill vacancies and newly created directorships on the board of directors;
|
•
|
to identify best practices and recommend corporate governance principles, including giving proper attention and making effective responses to stockholder concerns regarding corporate governance;
|
•
|
to develop and recommend to our board of directors guidelines setting forth corporate governance principles applicable to the Company; and
|
•
|
to oversee the evaluation of our board of directors and senior management.
|
Name
|
|
Title
|
Timothy J. Whall
|
|
President and Chief Executive Officer (“CEO”) (until September 2017) and, since September 2017, CEO
|
Jeffrey Likosar
|
|
Executive Vice President and Chief Financial Officer (until March 2018) and, since March 2018, Executive Vice President, Chief Financial Officer and Treasurer
|
Daniel M. Bresingham
|
|
Former Chief Financial Officer (until February 2017), Executive Vice President, Treasurer, and former Chief of Staff (until August 2017), Executive Vice President, Treasurer, and Chief Administrative Officer (until March 2018) and, since March 2018, Executive Vice President and Chief Administrative Officer
|
James D. DeVries
|
|
Executive Vice President and Chief Operating Officer (until September 2017) and, since September 2017, President
|
Jamie E. Haenggi
|
|
Senior Vice President and Chief Marketing Officer (until September 2017) and, Senior Vice President and Chief Sales and Marketing Officer (until March 2018), and, since March 2018, Senior Vice President and Chief Growth Officer
|
Donald Young
|
|
Senior Vice President and Chief Information Officer
|
•
|
Pay for Performance
. Compensation opportunities are designed to align executives’ pay with the Company’s performance and are focused on producing sustainable long-term growth.
|
•
|
Attract, Promote, and Retain Talented Management Team
. We compete for talent with other companies of similar size in our market. To attract and retain executives with the experience necessary to achieve our business goals, compensation must be competitive and appropriately balanced between fixed compensation and at-risk compensation.
|
•
|
Align Interests with Interests of Shareholders
. We believe that management should have a significant financial stake in the Company to align their interests with those of the shareholders and to encourage the creation of long-term value. Therefore, equity awards make up a substantial component of executive compensation.
|
Compensation Element
|
|
Brief Description
|
|
Objectives
|
|
Base Salary
|
|
Fixed compensation
|
|
*
|
To attract and retain top talent with the experience, skills, and abilities critical to the long-term success of the Company
|
|
|
|
|
*
|
To reward sustained success in meeting or exceeding key corporate or business objectives through merit increases
|
Annual Cash Incentive Bonuses
|
|
Variable, performance-based cash compensation
|
|
*
|
To drive Company performance against key strategic goals that are aligned with the interests of stockholders, including our Sponsor
|
|
|
|
|
*
|
To recognize individuals based upon their performance against goals and objectives aligned to the delivery of key strategic priorities
|
|
|
|
|
*
|
Performance-based and not guaranteed
|
Long-Term Incentives—Equity Based
|
|
Variable, equity-based compensation (based in the equity of Ultimate Parent) to promote achievement of longer-term performance objectives
|
|
*
|
To directly align the interests of executives with the interests of stockholders, including our Sponsor
|
|
|
|
*
|
To support focus on long-term, sustainable Company performance, and to drive retention of key talent
|
|
Investment Requirement
|
|
Ability to make a direct investment in Ultimate Parent alongside our Sponsor
|
|
*
|
To align executives’ and our Sponsor’s interests and to encourage executives to have “skin in the game” through direct ownership
|
Employee Benefits and Perquisites
|
|
Includes medical, dental, and disability plans, as well as relocation programs and limited perquisites
|
|
*
|
To promote health, wellness, and well-being of executives
|
Retirement Programs
|
|
Includes both retirement savings plan and deferred compensation plan, as applicable
|
|
*
|
To provide for basic retirement for our executives
|
Name
|
|
2016
Base Salary
|
|
2017
Base Salary
(effective 04/30/2017)
|
|
Increase %
|
Timothy J. Whall
|
|
$700,000
|
|
$707,000
|
|
1.0%
|
Jeffrey Likosar
|
|
$500,000
|
|
$504,548
|
|
0.9%
|
Daniel M. Bresingham
|
|
$500,000
|
|
$510,000
|
|
2.0%
|
James D. DeVries
|
|
$500,000
|
|
$520,000
|
|
4.0%
|
Jamie E. Haenggi
|
|
$430,000
|
|
$440,750
|
|
2.5%
|
Donald Young
|
|
$500,000
|
|
$510,000
|
|
2.0%
|
Name
|
|
January 1,
2017 Target Bonus %
|
Timothy J. Whall
|
|
125%
|
Jeffrey Likosar
|
|
100%
|
Daniel M. Bresingham
|
|
100%
|
James D. DeVries
|
|
100%
|
Jamie E. Haenggi
|
|
60%
|
Donald Young
|
|
100%
|
(in millions, unless otherwise noted)
|
|
|
|
|
|
|
|
|
|
|
Performance Metric
|
|
Weighting
|
|
Performance
Target
|
|
Actual
Performance
|
|
Payout as a % of Target
|
|
Overall
Weighted
Business
Performance
|
Covenant Adjusted EBITDA
(a)
|
|
25%
|
|
$2,715
|
|
$2,688
|
|
89.9%
|
|
22.5%
|
Gross Customer Revenue Attrition
|
|
25%
|
|
14.0%
|
|
13.7%
|
|
123.7%
|
|
30.9%
|
Revenue Payback Period
|
|
25%
|
|
30.9x
|
|
30.1x
|
|
159.0%
|
|
39.8%
|
New Recurring Monthly Revenue
|
|
25%
|
|
$50
|
|
$48
|
|
60.5%
|
|
15.1%
|
|
|
|
|
|
|
|
|
TOTAL
|
|
108.3%
|
(a)
|
Covenant Adjusted EBITDA is defined as Adjusted EBITDA provided under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures” adjusted for gross subscriber acquisitions costs in our Statement of Operations associated with the acquisition of our customers, net of related revenue associated with the sale of equipment.
|
Name
|
|
Base Salary
|
|
Bonus
Target
%
|
|
Bonus Target
|
|
Business
Performance
|
|
Actual Bonus Paid for Fiscal Year 2017
|
Timothy J. Whall
|
|
$707,000
|
|
125%
|
|
$883,750
|
|
108.3%
|
|
$957,101
|
Jeffrey Likosar
|
|
$504,548
|
|
100%
|
|
$504,548
|
|
108.3%
|
|
$546,425
|
Daniel M. Bresingham
|
|
$510,000
|
|
100%
|
|
$510,000
|
|
108.3%
|
|
$552,330
|
James D. DeVries
|
|
$520,000
|
|
100%
|
|
$520,000
|
|
108.3%
|
|
$563,160
|
Jamie E. Haenggi
|
|
$440,750
|
|
60%
|
|
$264,450
|
|
108.3%
|
|
$286,399
|
Donald Young
|
|
$510,000
|
|
100%
|
|
$510,000
|
|
108.3%
|
|
$552,330
|
|
|
Distributed Shares
|
|
Stock Options
|
||||||
Name
|
|
Vested
|
|
Unvested
|
|
Vested
|
|
Unvested
|
|
Exercise Price Per Share of Common Stock
|
Timothy J. Whall
|
|
572,282
|
|
3,159,448
|
|
311,837
|
|
1,850,562
|
|
$14.00
|
Jeffrey Likosar
|
|
229,355
|
|
2,064,193
|
|
158,964
|
|
1,430,679
|
|
$14.00
|
Daniel M. Bresingham
|
|
377,033
|
|
2,081,518
|
|
205,446
|
|
1,219,193
|
|
$14.00
|
James D. DeVries
|
|
223,839
|
|
2,014,550
|
|
155,141
|
|
1,396,272
|
|
$14.00
|
Jamie E. Haenggi
|
|
323,171
|
|
1,784,158
|
|
176,096
|
|
1,045,023
|
|
$14.00
|
Donald Young
|
|
377,033
|
|
2,081,518
|
|
205,446
|
|
1,219,193
|
|
$14.00
|
Timothy J. Whall
|
|
|
|
|
||
Base Salary
|
|
|
|
$
|
1,000,000
|
|
Target Bonus
|
|
|
|
1,250,000
|
|
|
Target Long-Term Incentives
|
|
|
|
4,500,000
|
|
|
|
|
Total
|
|
$
|
6,750,000
|
|
|
|
|
|
|
||
Jeffrey Likosar
|
|
|
|
|
||
Base Salary
|
|
|
|
$
|
520,000
|
|
Target Bonus
|
|
|
|
520,000
|
|
|
Target Long-Term Incentives
|
|
|
|
1,000,000
|
|
|
|
|
Total
|
|
$
|
2,040,000
|
|
|
|
|
|
|
||
Daniel M. Bresingham
|
|
|
|
|
||
Base Salary
|
|
|
|
$
|
510,000
|
|
Target Bonus
|
|
|
|
510,000
|
|
|
Target Long-Term Incentives
|
|
|
|
600,000
|
|
|
|
|
Total
|
|
$
|
1,620,000
|
|
|
|
|
|
|
||
James D. DeVries
|
|
|
|
|
||
Base Salary
|
|
|
|
$
|
675,000
|
|
Target Bonus
|
|
|
|
675,000
|
|
|
Target Long-Term Incentives
|
|
|
|
2,200,000
|
|
|
|
|
Total
|
|
$
|
3,550,000
|
|
|
|
|
|
|
||
Jamie E. Haenggi
|
|
|
|
|
||
Base Salary
|
|
|
|
$
|
441,000
|
|
Target Bonus
|
|
|
|
308,700
|
|
|
Target Long-Term Incentives
|
|
|
|
600,000
|
|
|
|
|
Total
|
|
$
|
1,349,700
|
|
|
|
|
|
|
||
Donald Young
|
|
|
|
|
||
Base Salary
|
|
|
|
$
|
510,000
|
|
Target Bonus
|
|
|
|
510,000
|
|
|
Target Long-Term Incentives
|
|
|
|
600,000
|
|
|
|
|
Total
|
|
$
|
1,620,000
|
|
Metric
|
|
Weighting
|
|
Adjusted EBITDA
(a)
|
|
40
|
%
|
Net Recurring Monthly Revenue
|
|
40
|
%
|
Revenue Payback Period
|
|
20
|
%
|
(a)
|
We define Adjusted EBITDA as net income or loss adjusted for (i) interest, (ii) taxes, (iii) depreciation and amortization, including depreciation of subscriber system assets and other fixed assets, amortization of dealer and other intangible assets, (iv) amortization of deferred costs and deferred revenue associated with subscriber acquisitions, (v) share-based compensation expense, (vi) purchase accounting adjustments related to fair value of deferred revenue under GAAP, (vii) merger, restructuring, integration, and other costs, (viii) financing and consent fees, (ix) foreign currency gains/losses, (x) loss on extinguishment of debt, (xi) radio conversion costs, (xii) management fees and other charges, and (xiii) other non-cash items.
|
Grant Type
|
|
Weighting
|
|
Stock Options
|
|
50
|
%
|
Restricted Stock Units
|
|
50
|
%
|
•
|
contribute retirement savings in addition to amounts permitted under the ADT Retirement Savings and Investment Plan (the “RSIP”);
|
•
|
defer compensation on a tax-deferred basis and receive tax-deferred market-based growth; and
|
•
|
receive any Company contributions that were reduced under the RSIP due to IRS compensation limits.
|
Name and
Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
(1)
($)
|
|
Stock
Awards
(2)
($)
|
|
Non-Equity
Incentive Plan
Compensation
(3)
($)
|
|
All Other Compensation
(4)
($)
|
|
Total
($)
|
Timothy J. Whall
|
|
2017
|
|
705,386
|
|
|
|
254,208
|
|
957,101
|
|
20,724
|
|
1,937,419
|
President and CEO (until September 2017) and, since Sept 2017, CEO
|
|
2016
|
|
572,727
|
|
857,500
|
|
3,523,855
|
|
|
|
15,748
|
|
4,969,830
|
Jeffrey Likosar
|
|
2017
|
|
502,974
|
|
537,078
|
|
173,254
|
|
546,425
|
|
143,480
|
|
1,903,211
|
Executive Vice President and Chief Financial Officer
|
|
2016
|
|
102,865
|
|
101,749
|
|
5,082,107
|
|
|
|
71,037
|
|
5,357,758
|
Daniel M. Bresingham
|
|
2017
|
|
504,617
|
|
|
|
167,479
|
|
552,330
|
|
20,529
|
|
1,244,955
|
Former Chief Financial Officer (until February 2017), Executive Vice President, Treasurer, and former Chief of Staff (until August 2017), Executive Vice President, Treasurer, and Chief Administrative Officer
|
|
2016
|
|
446,667
|
|
411,633
|
|
2,321,599
|
|
|
|
15,748
|
|
3,195,647
|
James D. DeVries
|
|
2017
|
|
513,078
|
|
466,299
|
|
169,087
|
|
563,160
|
|
14,526
|
|
1,726,150
|
Executive Vice President and COO (until September 2017) and, since September 2017, President
|
|
2016
|
|
303,387
|
|
298,552
|
|
4,959,885
|
|
|
|
|
|
5,561,824
|
Jamie E. Haenggi
|
|
2017
|
|
437,030
|
|
|
|
143,553
|
|
286,399
|
|
8,574
|
|
875,556
|
Senior Vice President and Chief Marketing Officer (until September 2017) and, Senior Vice President and Chief Sales and Marketing Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald Young
|
|
2017
|
|
498,848
|
|
|
|
167,479
|
|
552,330
|
|
13,511
|
|
1,232,168
|
Senior Vice President and Chief Information Officer
|
|
2016
|
|
456,667
|
|
419,130
|
|
2,321,599
|
|
|
|
15,748
|
|
3,213,144
|
(1)
|
The amounts in this column represent the first installment of the retention bonus opportunity paid to each of Mr. Likosar and Mr. DeVries in accordance with the terms of their respective employment agreements.
|
(2)
|
The values in the “Stock Awards” column for fiscal year 2017 reflects the incremental fair value associated with the April 17, 2017, modification of the service-based vesting Class B Units in Ultimate Parent, profit interest unit awards previously awarded to our NEOs computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Stock Compensation,” (“FASB ASC Topic 718”). The table
above does not include performance-based vesting Class B Units as the achievement of the performance conditions was not deemed probable on the date of the modification. See below for further discussion. The increase in fair value associated with the April 17, 2017 modification for all granted performance-based vesting Class B units assuming achievement of the performance-based vesting conditions was as follows: Mr. Whall $2,226,516; Mr. Bresingham $1,466,881; Mr. DeVries $270,539; Mr. Likosar $277,206; Mr. Young $1,466,881; and Ms. Haenggi $1,257,326.
The values in the “Stock Awards” column for fiscal year 2016 reflect the aggregate grant date fair value of the service-based vesting Class B Units in Ultimate Parent, profits interests unit awards, in the year they were granted, computed in accordance with the FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a discussion of the valuation assumptions and methodologies used to calculate the amounts referred to above, please see the discussion of the Class B Unit awards contained in Note 12 “Share-based Compensation” in the accompanying consolidated financial statements for the year ended December 31, 2016, included elsewhere in this document. Achievement of the performance conditions for the performance-based vesting Class B Units was not deemed probable on the date of grant, and, accordingly, pursuant to the SEC’s disclosure rules, no value is included in this table for those portions of the awards. The fair value at the grant date of the performance-based vesting Class B Units granted in 2016 assuming achievement of the performance-based vesting conditions was as follows: Mr. Whall $2,923,398; Mr. Bresingham $1,926,003; Mr. DeVries $4,018,634; Mr. Likosar $4,117,662; and Mr. Young $1,926,003.
|
(3)
|
The amounts reported in this column were earned under our annual cash incentive bonus program for the applicable year, which is described above. See “—2017 Annual Bonus Program.”
|
(4)
|
Details with respect to the amounts in this column are set forth, in the All Other Compensation table below.
|
Named Executive
|
|
Fiscal
Year
|
|
Retirement Plan
Contributions
(a)
($)
|
|
Miscellaneous
(b)
($)
|
|
Total All Other
Compensation
($)
|
Timothy J. Whall
|
|
2017
|
|
13,500
|
|
7,224
|
|
20,724
|
|
|
2016
|
|
7,950
|
|
7,798
|
|
15,748
|
Jeffrey Likosar
|
|
2017
|
|
13,500
|
|
129,980
|
|
143,480
|
|
|
2016
|
|
—
|
|
71,037
|
|
71,037
|
Daniel M. Bresingham
|
|
2017
|
|
13,500
|
|
7,029
|
|
20,529
|
|
|
2016
|
|
7,950
|
|
7,798
|
|
15,748
|
James D. DeVries
|
|
2017
|
|
14,021
|
|
505
|
|
14,526
|
|
|
2016
|
|
—
|
|
—
|
|
—
|
Jamie E. Haenggi
|
|
2017
|
|
1,613
|
|
6,961
|
|
8,574
|
Donald Young
|
|
2017
|
|
6,481
|
|
7,029
|
|
13,510
|
|
|
2016
|
|
7,950
|
|
7,798
|
|
15,748
|
(a)
|
The amounts shown in this column represent matching contributions made by the Company on behalf of each NEO to its tax-qualified retirement plans. For Mr. DeVries only, $13,500 of the amount in this column is in respect of Company contributions to the RSIP, a tax-qualified retirement plan, and $521 is in respect of Company contributions to the SSRP, a nonqualified deferred compensation plan, in fiscal year 2017.
|
(b)
|
Miscellaneous compensation in fiscal year 2017 includes the value of a monthly auto allowance and Company-paid contributions for life insurance benefits for Messrs. Whall, Bresingham, and Young, and Ms. Haenggi, and relocation benefits valued at $129,980 for Mr. Likosar. Miscellaneous compensation in fiscal year 2016 includes the value of a monthly auto allowance and Company-paid contributions for supplemental long-term disability insurance benefits for Messrs. Whall, Bresingham, and Young, and relocation benefits for Mr. Likosar.
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
(1)
|
|
|
||||
Name
|
|
Award Type
|
|
Threshold
(a)
|
|
Target
(b)
|
|
Maximum
(c)
|
|
Grant Date
Fair Value of Stock Awards
(2)
($)
|
Timothy J. Whall
|
|
2017 AIP
|
|
441,875
|
|
883,750
|
|
1,767,500
|
|
|
|
|
Class B Units
|
|
|
|
|
|
|
|
254,208
|
Jeffrey Likosar
|
|
2017 AIP
|
|
252,274
|
|
504,548
|
|
1,009,096
|
|
|
|
|
Class B Units
|
|
|
|
|
|
|
|
173,254
|
Daniel M. Bresingham
|
|
2017 AIP
|
|
255,000
|
|
510,000
|
|
1,020,000
|
|
|
|
|
Class B Units
|
|
|
|
|
|
|
|
167,479
|
James D. DeVries
|
|
2017 AIP
|
|
260,000
|
|
520,000
|
|
1,040,000
|
|
|
|
|
Class B Units
|
|
|
|
|
|
|
|
169,087
|
Jamie E. Haenggi
|
|
2017 AIP
|
|
132,225
|
|
264,450
|
|
528,900
|
|
|
|
|
Class B Units
|
|
|
|
|
|
|
|
143,553
|
Donald Young
|
|
2017 AIP
|
|
255,000
|
|
510,000
|
|
1,020,000
|
|
|
|
|
Class B Units
|
|
|
|
|
|
|
|
167,479
|
(1)
|
Under our 2017 AIP, each NEO is eligible to receive an annual cash incentive bonus for the fiscal year, the amount of which will vary depending on the degree of attainment of certain performance goals, as described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Annual Incentive Compensation.” Amounts reported in columns (a) through (c) represent the potential amount of the bonus if performance goals were attained at certain threshold, target, or maximum levels.
|
(2)
|
The amounts reflected in the “Grant Date Fair Value of Stock Awards” column reflect the incremental fair value associated with the April 17, 2017, modification of the Class B Units in Ultimate Parent, profits interests unit awards to previously awarded to our NEOs computed in accordance with FASB ASC Topic 718. See footnote (2) to the “Stock Awards” column of the “—Summary Compensation Table” above for additional information.
|
|
|
Stock Awards
|
||||||||
Name
|
|
Grant Date
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)
(1)(4)
|
|
Market Value of Shares or Units of Stock that Have Not Vested
($)
(2)
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have not Vested
(#)
(3)
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
(2)
|
Timothy J. Whall
|
|
08/11/2016
|
|
701,265
|
|
9,747,580
|
|
876,581
|
|
12,184,475
|
|
|
07/01/2015
|
|
525,949
|
|
8,362,582
|
|
876,581
|
|
13,937,637
|
Jeffrey Likosar
|
|
11/21/2016
|
|
924,020
|
|
12,843,871
|
|
1,155,024
|
|
16,054,838
|
Daniel M. Bresingham
|
|
08/11/2016
|
|
462,010
|
|
6,421,935
|
|
577,512
|
|
8,027,419
|
|
|
07/01/2015
|
|
346,508
|
|
5,509,466
|
|
577,512
|
|
9,182,443
|
James D. DeVries
|
|
11/21/2016
|
|
901,798
|
|
12,534,982
|
|
1,127,247
|
|
15,668,727
|
Jamie E. Haenggi
|
|
08/11/2016
|
|
396,008
|
|
5,504,516
|
|
495,010
|
|
6,880,645
|
|
|
07/01/2015
|
|
297,006
|
|
4,722,399
|
|
495,010
|
|
7,870,666
|
Donald Young
|
|
08/11/2016
|
|
462,010
|
|
6,421,935
|
|
577,512
|
|
8,027,419
|
|
|
07/01/2015
|
|
346,508
|
|
5,509,466
|
|
577,512
|
|
9,182,443
|
(1)
|
Represents unvested Class B Units subject to service-based vesting requirements (i.e., the Service Tranche). See footnote 4 for Service Tranche vesting dates.
|
(2)
|
The Class B Units represent profit interests in Ultimate Parent, which will have value only if the value of Ultimate Parent increases following the date on which the awards of such Class B Units are granted and only after the aggregate amount of capital contributions in respect of all Class A Units have been repaid to the holders of the Class A Units. There is no public market for the Class B Units, accordingly, the market or payout value of the unvested B Units is based on the value of the underlying shares of our common stock that are held by Ultimate Parent as of December 31, 2017. For purposes of this table, the shares of our common stock were valued using an initial public offering price of $14.00 per share of our common stock.
|
(3)
|
Represents unvested Class B Units subject to performance-based vesting requirements (i.e., the Performance Tranche). These performance-based Class B Units will vest upon a “Realization Event” if, and to the extent that, our Sponsor receives specified levels of its invested capital in the Company in connection with the Realization Event. See “Elements of Compensation—Long-Term Equity Compensation” above for a discussion of the Performance Tranche vesting criteria.
|
(4)
|
The vesting schedules of the Class B Units designated as the Service Tranche are as follows (subject to the NEO’s continued employment through each applicable vesting date):
|
Name
|
|
Grant Date
|
|
Vesting Schedule
|
Timothy J. Whall
|
|
08/11/2016
|
|
Vests 20% per year over 5 years. Approximately 175,316 Class B Units are scheduled to vest on each of May 2, 2018, 2019, 2020, and 2021.
|
|
|
07/01/2015
|
|
Vests 20% per year over 5 years. Approximately 175,316 Class B Units are scheduled to vest on each of July 1, 2018, 2019, and 2020.
|
Jeffrey Likosar
|
|
11/21/2016
|
|
Vests 20% per year over 5 years. Approximately 231,004 Class B Units are scheduled to vest on each of May 2, 2018, 2019, 2020, and 2021.
|
Daniel M. Bresingham
|
|
08/11/2016
|
|
Vests 20% per year over 5 years. Approximately 115,502 Class B Units are scheduled to vest on each of May 2, 2018, 2019, 2020, and 2021.
|
|
|
07/01/2015
|
|
Vests 20% per year over 5 years. Approximately 115,502 Class B Units are scheduled to vest on each of July 1, 2018, 2019, and 2020.
|
James D. DeVries
|
|
11/21/2016
|
|
Vests 20% per year over 5 years. Approximately 225,449 Class B Units are scheduled to vest on each of May 2, 2018, 2019, 2020, and 2021.
|
Jamie E. Haenggi
|
|
08/11/2016
|
|
Vests 20% per year over 5 years. Approximately 99,002 Class B Units are scheduled to vest on each of May 2, 2018, 2019, 2020, and 2021.
|
|
|
07/01/2015
|
|
Vests 20% per year over 5 years. Approximately 99,002 Class B Units are scheduled to vest on each of July 1, 2018, 2019, and 2020.
|
Donald Young
|
|
08/11/2016
|
|
Vests 20% per year over 5 years. Approximately 115,502 Class B Units are scheduled to vest on each of May 2, 2018, 2019, 2020, and 2021.
|
|
|
07/01/2015
|
|
Vests 20% per year over 5 years. Approximately 115,502 Class B Units are scheduled to vest on each of July 1, 2018, 2019, and 2020.
|
|
|
|
|
Stock Awards
|
||
Name
|
|
Vesting Date
|
|
Number of Shares
Acquired on Vesting (#)
(1)
|
|
Value Realized on
Vesting ($)
(2)
|
Timothy J. Whall
|
|
05/02/2017
|
|
175,316
|
|
419,005
|
|
|
07/01/2017
|
|
175,316
|
|
987,029
|
Jeffrey Likosar
|
|
05/02/2017
|
|
231,004
|
|
552,100
|
Daniel M. Bresingham
|
|
05/02/2017
|
|
115,502
|
|
276,050
|
|
|
07/01/2017
|
|
115,502
|
|
650,276
|
James D. DeVries
|
|
05/02/2017
|
|
225,449
|
|
538,823
|
Jamie E. Haenggi
|
|
05/02/2017
|
|
99,002
|
|
236,614
|
|
|
07/01/2017
|
|
99,002
|
|
557,381
|
Donald Young
|
|
05/02/2017
|
|
115,502
|
|
276,050
|
|
|
07/01/2017
|
|
115,502
|
|
650,276
|
(1)
|
Awards of Class B Units (i.e., the Service Tranche), which generally vest in five annual installments of 20% each. See footnote 4 to the “Outstanding Equity Awards at Fiscal 2017 Year-End Table and Elements of Compensation—Long-Term Equity Compensation” for additional vesting details.
|
(2)
|
The Class B Units represent profit interests in Ultimate Parent, which will have value only if the value of Ultimate Parent increases following the date on which the awards of such Class B Units are granted and only after the aggregate amount of capital contributions in respect of all Class A Units have been repaid to the holders of the Class A Units. There is no public market for the Class B Units, accordingly, the market or payout value of the unvested B Units represents the value of each such B Unit based on the value of the business as of the vesting date (i.e. $12.02 per Class A Unit and $13.26 per Class A Unit, which was the fair market value of a Class A Unit on May 2, 2017 and July 1, 2017, respectively, as determined by the Executive Committee of Ultimate Parent).
|
Name
|
|
Executive Contributions
in Last FY
(1)
($)
(a)
|
|
Registrant Contributions in Last FY
(1)
($)
(b)
|
|
Aggregate Earnings in Last FY
(2)
($)
|
|
Aggregate Withdrawals/Distributions
($)
|
|
Aggregate
Balance at
Last FYE
(3)
($)
|
Jeffrey Likosar
|
|
16,736
|
|
—
|
|
1,465
|
|
—
|
|
18,201
|
James D. DeVries
|
|
32,498
|
|
521
|
|
223
|
|
—
|
|
43,664
|
Donald Young
|
|
18,010
|
|
—
|
|
1,693
|
|
—
|
|
19,703
|
(1)
|
The amounts shown in columns (a) and (b) reflect employee and Company contributions, respectively, under the SSRP, the Company’s non-qualified retirement savings plan during fiscal 2017. All of the amounts in columns (a) and (b) are included in the Summary Compensation Table under the column heading “Salary” and “All Other Compensation,” respectively.
|
(2)
|
The amounts shown in this column include earnings (or losses) on the NEO’s notional account in the SSRP.
|
(3)
|
For Mr. DeVries, the amounts reflected in this column are inclusive of amounts in respect of his contributions to the SSRP for fiscal 2016 ($10,417) which contributions are included in the aggregate amount reported in the Summary Compensation Table under the column heading “Salary” for fiscal 2016.
|
•
|
Is convicted of, or pleads nolo contendere to, a crime that constitutes a felony or involves fraud or a breach of the executive’s duty of loyalty with respect to the Company, or any of its customers or suppliers that results in material injury to the Company,
|
•
|
Repeatedly fails to perform reasonably assigned duties which remains uncured for ten (10) days after receiving written notice,
|
•
|
Commits an act of fraud, misappropriation, embezzlement, or materially misuses funds or property belonging to the Company,
|
•
|
Commits a willful violation of the Company’s written policies, or other willful misconduct that results in material injury to the Company, which remains uncured for ten (10) days after receiving written notice,
|
•
|
Materially breaches his employment agreement resulting in material injury to the Company, which remains uncured for ten (10) days after receiving written notice, or
|
•
|
Violates the terms of his confidentiality, non-disparagement, non-competition and non-solicitation provisions.
|
•
|
The executive’s annual base salary or target bonus are decreased,
|
•
|
The Company (for purposes of this definition, means The ADT Corporation or ADT LLC) fails to pay any material compensation due and payable to the executive in connection with his employment or employment agreement,
|
•
|
The executive’s duties, responsibilities, authority, positions, or titles are materially diminished,
|
•
|
The Company requires the executive to be relocated more than thirty (30) miles from a specified location (the Romeoville, Illinois, area for Messrs. Whall and Bresingham, the Longwood, Florida, area for Mr. Young, the Wichita, Kansas, area for Ms. Haenggi, and the Boca Raton, Florida, area for Messrs. DeVries and Likosar), or
|
•
|
The Company breaches its obligations under the executive’s employment agreement.
|
•
|
Termination of Employment—Pursuant to the terms for the Class B Unit award agreements, other than in the case of a change in control, if an NEO experiences a Qualifying Termination before the Service Tranche is fully vested, an additional 20% of the Service Tranche will immediately vest on the Qualifying Termination Date (the cumulative vested percentage of the Service Tranche after giving effect to such additional vesting is referred to as the “Vested Percentage at Termination”) and the unvested Class B Units attributed to the Service Tranche will be forfeited immediately. If an NEO experiences a Qualifying Termination and during the one (1) year period following the Qualifying Termination Date all or any portion of the Performance Tranche would have vested had the NEO’s employment not been terminated, then the NEO will also be deemed vested in a percentage of the Performance Trance equal to the product of (i) the percentage of the Performance Tranche (e.g., 50% or 100%) that would have vested had the NEO’s employment not been terminated multiplied by (ii) the Vested Percentage at Termination.
|
•
|
In the event the NEO’s employment is terminated for Cause all Class B Units (whether vested or unvested) then held by the NEO are immediately forfeited. Other than as described in the immediately preceding paragraph and the following paragraph, if the NEO experiences a termination of employment, all unvested Class B Units then held by the NEO are immediately forfeited.
|
•
|
Change in Control. Pursuant to the terms for the Class B Unit award agreements, the Service Tranche will vest in full on the earlier of (i) the six (6) month anniversary of a change in control and (ii) a Qualifying Termination of the NEO following a change in control. The proceeds from any transaction resulting in a change in control that related to the unvested portion of the Service Tranche will be held in escrow for the NEO’s benefit from the date of the change in control through the date on which the NEO either vests in or forfeits the unvested portion of the Service Tranche.
|
|
|
Change in Control
|
|
Termination of Employment
|
||||||||||||||
Name and
Form of Compensation
|
|
Without Qualified Termination
($)
(1)
|
|
With Qualified Termination
($)
(1)
|
|
With Cause
($)
|
|
With Qualified Termination
($)
(2)
|
|
Retirement
($)
|
|
Death or Disability
($)
|
||||||
Timothy J. Whall
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Salary Continuation
|
|
—
|
|
|
1,414,000
|
|
|
—
|
|
|
1,414,000
|
|
|
—
|
|
—
|
|
|
Prorated Bonus
|
|
—
|
|
|
883,750
|
|
|
—
|
|
|
883,750
|
|
|
—
|
|
—
|
|
|
Benefit Continuation
|
|
—
|
|
|
18,882
|
|
|
—
|
|
|
18,882
|
|
|
—
|
|
—
|
|
|
Accelerated Vesting of Class B Unit Awards
|
|
44,232,274
|
|
|
44,232,274
|
|
|
—
|
|
|
5,224,417
|
|
|
—
|
|
—
|
|
|
Total
|
|
44,232,274
|
|
|
46,548,906
|
|
|
—
|
|
|
7,541,049
|
|
|
—
|
|
|
—
|
|
Jeffrey Likosar
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Salary Continuation
|
|
—
|
|
|
1,009,096
|
|
|
—
|
|
|
1,009,096
|
|
|
—
|
|
|
—
|
|
Prorated Bonus
|
|
—
|
|
|
504,548
|
|
|
—
|
|
|
504,548
|
|
|
—
|
|
|
—
|
|
Benefit Continuation
|
|
—
|
|
|
22,722
|
|
|
—
|
|
|
22,722
|
|
|
—
|
|
|
—
|
|
Accelerated Vesting of Class B Unit Awards
|
|
28,898,709
|
|
|
28,898,709
|
|
|
—
|
|
|
3,210,970
|
|
|
—
|
|
|
—
|
|
Accelerated Vesting of Retention Bonus
(3)
|
|
—
|
|
|
1,700,047
|
|
|
—
|
|
|
1,700,047
|
|
|
—
|
|
|
1,700,047
|
|
Accelerated Vesting of SSRP Account
(4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
28,898,709
|
|
|
32,135,122
|
|
|
—
|
|
|
6,447,383
|
|
|
—
|
|
|
1,700,047
|
|
Daniel M. Bresingham
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Salary Continuation
|
|
—
|
|
|
1,020,000
|
|
|
—
|
|
|
1,020,000
|
|
|
—
|
|
|
—
|
|
Prorated Bonus
|
|
—
|
|
|
510,000
|
|
|
—
|
|
|
510,000
|
|
|
—
|
|
|
—
|
|
Benefit Continuation
|
|
—
|
|
|
25,241
|
|
|
—
|
|
|
25,241
|
|
|
—
|
|
|
—
|
|
Accelerated Vesting of Class B Unit Awards
|
|
29,141,263
|
|
|
29,141,263
|
|
|
—
|
|
|
3,441,960
|
|
|
—
|
|
|
—
|
|
Total
|
|
29,141,263
|
|
|
30,696,504
|
|
|
—
|
|
|
4,997,201
|
|
|
—
|
|
|
—
|
|
James D. DeVries
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Salary Continuation
|
|
—
|
|
|
1,040,000
|
|
|
—
|
|
|
1,040,000
|
|
|
—
|
|
|
—
|
|
Prorated Bonus
|
|
—
|
|
|
520,000
|
|
|
—
|
|
|
520,000
|
|
|
—
|
|
|
—
|
|
Benefit Continuation
|
|
—
|
|
|
22,722
|
|
|
—
|
|
|
22,722
|
|
|
—
|
|
|
—
|
|
Accelerated Vesting of Class B Unit Awards
|
|
28,203,709
|
|
|
28,203,709
|
|
|
—
|
|
|
3,133,741
|
|
|
—
|
|
|
—
|
|
Accelerated Vesting of Retention Bonus
(3)
|
|
3,400,093
|
|
|
3,400,093
|
|
|
—
|
|
|
3,400,093
|
|
|
—
|
|
|
3,400,093
|
|
Accelerated Vesting of SSRP Account
(4)
|
|
521
|
|
|
521
|
|
|
—
|
|
|
—
|
|
|
521
|
|
|
521
|
|
Total
|
|
31,604,323
|
|
|
33,187,045
|
|
|
—
|
|
|
8,116,556
|
|
|
521
|
|
|
3,400,614
|
|
Jamie E. Haenggi
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Salary Continuation
|
|
—
|
|
|
882,000
|
|
|
—
|
|
|
882,000
|
|
|
—
|
|
|
—
|
|
Prorated Bonus
|
|
—
|
|
|
264,450
|
|
|
—
|
|
|
264,450
|
|
|
—
|
|
|
—
|
|
Benefit Continuation
|
|
—
|
|
|
25,644
|
|
|
—
|
|
|
25,644
|
|
|
—
|
|
|
—
|
|
Accelerated Vesting of Class B Unit Awards
|
|
24,978,226
|
|
|
24,978,226
|
|
|
—
|
|
|
2,950,260
|
|
|
—
|
|
|
—
|
|
Total
|
|
24,978,226
|
|
|
26,150,320
|
|
|
—
|
|
|
4,122,354
|
|
|
—
|
|
|
—
|
|
Donald Young
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Salary Continuation
(5)
|
|
—
|
|
|
1,020,000
|
|
|
—
|
|
|
1,020,000
|
|
|
—
|
|
|
—
|
|
Prorated Bonus
|
|
—
|
|
|
510,000
|
|
|
—
|
|
|
510,000
|
|
|
—
|
|
|
—
|
|
Benefit Continuation
|
|
—
|
|
|
17,639
|
|
|
—
|
|
|
17,639
|
|
|
—
|
|
|
—
|
|
Accelerated Vesting of Class B Unit Awards
|
|
29,141,263
|
|
|
29,141,263
|
|
|
—
|
|
|
3,441,960
|
|
|
—
|
|
|
—
|
|
Accelerated Vesting of SSRP Account
(4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
29,141,263
|
|
|
30,688,902
|
|
|
—
|
|
|
4,989,599
|
|
|
—
|
|
|
—
|
|
(1)
|
Class B Units represent profit interests in Ultimate Parent, which will have value only if the value of Ultimate Parent increases following the date on which the awards of such Class B Units are granted and only after the aggregate amount of capital contributions in respect of all Class A Units
|
(2)
|
Class B Units represent profit interests in Ultimate Parent, which will have value only if the value of Ultimate Parent increases following the date on which the awards of such Class B Units are granted and only after the aggregate amount of capital contributions in respect of all Class A Units have been repaid to the holders of the Class A Units. In accordance with the terms of the Class B Unit award agreements, absent a change in control, upon a qualified termination of employment the executive would vest in an additional 20% of the Class B Units in respect of the Service Tranche, as described in this section under the heading “—Equity Awards.” Based on the value of the business at the end of fiscal year 2017, using an initial public offering price of $14.00 per share of common stock, the value attributed to the Accelerated Vesting of Class B Unit Awards with respect to the Service Tranche is reflected in the table above.
|
(3)
|
There is no public market for the Class A Units, accordingly, amounts with respect to Messrs. DeVries’ and Likosar’s retention bonuses are calculated based on an initial public offering price of $14.00 per share of common stock multiplied by 1.681, assuming that this was the fair market value of a Class A Unit on December 31, 2017, multiplied by the number of Class A-2 Units in respect of the bonus tranche that vests on such date. The amounts reflected also include the value of the additional cash payment that each of Mr. DeVries and Mr. Liksoar is entitled to receive for previous accrued but unpaid distributions in respect of the Class A-2 Units comprising the retention bonus tranche that vests on such date (for Mr. DeVries $262,227, and for Mr. Likosar, $131,113).
|
(4)
|
While each of Messrs. Likosar, DeVries, and Young participated in the Company’s SSRP in fiscal year 2017, only Mr. DeVries had any unvested Company contributions in his SSRP account that would be subject to accelerated vesting upon a qualifying event as of December 31, 2017.
|
(5)
|
If Mr. Young’s employment is terminated following a change in control that also qualifies as a Realization Event, then Mr. Young’s salary continuation will be decreased to $255,000
.
|
Name
|
|
Fees Earned
or Paid in Cash
($)
|
|
Stock
Awards
(1)
($)
|
|
Total
($)
|
Andrew D. Africk
|
|
50,000
|
|
50,000
|
|
100,000
|
(1)
|
On July 27, 2017, Mr. Africk received a grant of 3,770.74 Class A-2 Units which shall vest subject to his continued service, as to one-third of the Class A-2 Units on each of the first three anniversaries of July 1, 2017. The amount reported in this column reflects the aggregate grant date fair value calculated in accordance with FASB ASC Topic 718, excluding estimated forfeitures. The fair value of Class A-2 Units is computed by multiplying the total number of Class A-2 Units subject to the award by the fair market value of a Class A Unit, as determined by the Executive Committee of Ultimate Parent, on the date of grant. Mr. Africk was previously granted 4,166.67 Class A-2 Units on August 11, 2016, which shall vest, subject to his continued service, as to one-third of the Class A-2 Units on each of the first three anniversaries of August 11, 2016. Mr. Africk was previously granted 10,000 Class A-2 Units on November 30, 2015, which shall vest, subject to his continued service, one-third of the Class A-2 Units on each of the first three anniversaries of November 30, 2015.
|
•
|
each person, or group of affiliated persons, who we know to beneficially own more than 5% of our common stock;
|
•
|
each of our named executive officers;
|
•
|
each of our directors; and
|
•
|
all of our executive officers and directors as a group.
|
|
|
Vested Options
|
|
Shares Beneficially Owned
(1)
|
|
Total
|
|
|
||||
|
|
Number
|
|
Number
|
|
Number
|
|
Percent
|
||||
More than 5% Stockholders
|
|
|
|
|
|
|
|
|||||
|
Apollo Funds
(2)
|
—
|
|
|
641,114,368
|
|
|
641,114,368
|
|
|
85.6
|
%
|
Named Executive Officers and Directors
(3)
|
|
|
|
|
|
|
|
|||||
|
Timothy J. Whall
|
311,837
|
|
|
572,282
|
|
|
884,119
|
|
|
*
|
|
|
Daniel M. Bresingham
|
205,446
|
|
|
377,033
|
|
|
582,479
|
|
|
*
|
|
|
James D. DeVries
|
155,141
|
|
|
371,459
|
|
|
526,600
|
|
|
*
|
|
|
Jamie E. Haenggi
|
176,096
|
|
|
323,171
|
|
|
499,267
|
|
|
*
|
|
|
Jeffrey Likosar
|
158,964
|
|
|
229,355
|
|
|
388,319
|
|
|
*
|
|
|
Donald Young
|
205,446
|
|
|
377,033
|
|
|
582,479
|
|
|
*
|
|
|
Andrew D. Africk
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
Marc E. Becker
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
Matthew H. Nord
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
Reed B. Rayman
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
Eric L. Press
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
Lee J. Solomon
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
Stephanie Drescher
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
Brett Watson
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
David Ryan
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
Matthew E. Winter
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
%
|
|
All current directors and executive officers as a group (20 persons)
|
1,212,930
|
|
|
2,371,453
|
|
|
3,584,383
|
|
|
0.5
|
%
|
*
|
Represents less than one percent of shares outstanding.
|
(1)
|
Percentage of shares beneficially owned is based on
749,131,653
shares of common stock outstanding as of March 8, 2018, which excludes unvested common shares and assumes no options are exercised by any holder in accordance with Rule 13d-3(d)(1)(i) of the Exchange Act.
|
(2)
|
Represents shares of our common stock held of record by Ultimate Parent. Prime Security Services TopCo Parent GP, LLC (“Parent GP”) is the general partner of Ultimate Parent. AP VIII Prime Security Services Holdings, L.P. (“AP VIII Prime Security LP”) is the sole member of Parent GP and a limited partner of TopCo Parent. AP VIII Prime Security Services Management, LLC (“AP VIII Prime Security Management”) is the investment manager of AP VIII Prime Security LP. Apollo Management, L.P. (“Apollo Management”) is the sole member of AP VIII Prime Security Management, and Apollo Management GP, LLC (“Management GP”) is the general partner of Apollo Management. Apollo Management Holdings, L.P. (“Management Holdings”) is the sole member and manager of Management GP. Apollo Management Holdings GP, LLC (“Management Holdings GP”) is the general partner of Management Holdings. Leon Black, Joshua Harris and Marc Rowan are the managers, as well as executive officers, of Management Holdings GP, and as such may be deemed to have voting and dispositive control of the shares of common stock held of record by Ultimate Parent. The address of Ultimate Parent, Parent GP, and AP VIII Prime Security LP is One Manhattanville Road, Suite 201, Purchase, New
|
(3)
|
None of our named executive officers and directors beneficially own shares of common stock issuable upon the exercise of options within 60 days.
|
•
|
each of our named executive officers;
|
•
|
each of our directors; and
|
•
|
all of our executive officers and directors as a group.
|
|
Class A-2 Units
Beneficially Owned (1) |
||||
|
Number
|
|
Percent
|
||
Named Executive Officers and Directors
(2)
|
|
|
|
||
Timothy J. Whall
|
672,351
|
|
|
28.60
|
%
|
Daniel M. Bresingham
|
196,613
|
|
|
8.36
|
%
|
James D. DeVries
|
100,903
|
|
|
4.29
|
%
|
Jamie E. Haenggi
|
196,613
|
|
|
8.36
|
%
|
Jeffrey Likosar
|
88,795
|
|
|
3.78
|
%
|
Donald Young
|
436,427
|
|
|
18.56
|
%
|
Andrew D. Africk
|
17,937
|
|
|
0.76
|
%
|
Marc E. Becker
|
—
|
|
|
—
|
%
|
Matthew H. Nord
|
—
|
|
|
—
|
%
|
Reed B. Rayman
|
—
|
|
|
—
|
%
|
Eric L. Press
|
—
|
|
|
—
|
%
|
Lee J. Solomon
|
—
|
|
|
—
|
%
|
Stephanie Drescher
|
—
|
|
|
—
|
%
|
Brett Watson
|
—
|
|
|
—
|
%
|
David Ryan
|
—
|
|
|
—
|
%
|
Matthew E. Winter
|
—
|
|
|
—
|
%
|
All current directors and executive officers as a group (20 persons)
|
2,196,726
|
|
|
93.43
|
%
|
(1)
|
Percentage of shares beneficially owned is calculated using 2,351,282 Class A-2 Units outstanding.
|
(2)
|
None of our named executive officers and directors beneficially own Class A-2 Units issuable upon the exercise of options.
|
•
|
amendments or modifications to our Company’s or our Company’s subsidiaries’ organizational documents in a manner that adversely affects Ultimate Parent or our Sponsor;
|
•
|
issuances of our Company’s or our Company’s subsidiaries’ equity other than pursuant to an equity compensation plan approved by the stockholders or a majority of the Apollo Designees (as defined below), or intra-company issuances among our Company and its wholly-owned subsidiaries;
|
•
|
making any payment or declaration of any dividend or other distribution on any shares of our common stock;
|
•
|
merging or consolidating with or into any other entity, or transferring all or substantially all of our Company’s or our Company’s Subsidiaries’ assets, taken as a whole, to another entity, or undertaking any transaction that would constitute a “Change of Control” as defined in our Company’s or our Company’s subsidiaries’ credit facilities or note indentures;
|
•
|
incurring financial indebtedness in a single or a series of related transactions aggregating to more than $25 million;
|
•
|
hiring or terminating any Executive Officer of our Company or designating any new Executive Officer of the Company; and
|
•
|
changing the size of the board of directors.
|
•
|
if we propose to file certain types of registration statements under the Securities Act with respect to an offering of equity securities, we will be required to use our reasonable best efforts to offer the other parties to the Registration Rights Agreement, if any, the opportunity to register the sale of all or part of their shares on the terms and conditions set forth in the Registration Rights Agreement (customarily known as “piggyback rights”); and
|
•
|
Ultimate Parent has the right, subject to certain conditions and exceptions, to request that we file registration statements with the Commission for one or more underwritten offerings of all or part of our common stock that it beneficially owns
|
(in thousands)
|
December 31, 2017
|
|
December 31, 2016
|
||||
Audit fees
|
$
|
4,294
|
|
|
$
|
2,827
|
|
Audit-related fees
|
220
|
|
|
—
|
|
||
Tax fees
|
455
|
|
|
469
|
|
||
All other fees
|
142
|
|
|
10
|
|
||
Total
|
$
|
5,111
|
|
|
$
|
3,306
|
|
|
|
|
|
Incorporated
by Reference
|
||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
S-1
|
|
4.1
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.2
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.3
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.4
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.5
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.6
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.7
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.8
|
|
12/21/2017
|
|
|
S-1
|
|
4.9
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.10
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.11
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.12
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.13
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.14
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.15
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.16
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.17
|
|
12/21/2017
|
||
|
|
S-1
|
|
4.18
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.1
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.2
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.3
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.4
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.5
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.6
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.7
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.8
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.9
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.10
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.11
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.12
|
|
12/21/2017
|
|
|
S-1
|
|
10.13
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.14
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.15
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.16
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.17
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.18
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.19
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.20
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.21
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.22
|
|
12/21/2017
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
S-1
|
|
10.25
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.26
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.27
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.28
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.29
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.30
|
|
12/21/2017
|
||
|
|
S-1
|
|
10.31
|
|
12/21/2017
|
||
|
|
S-1/A
|
|
10.32
|
|
01/08/2018
|
||
|
|
S-1/A
|
|
10.33
|
|
01/08/2018
|
||
|
|
S-1/A
|
|
10.34
|
|
01/08/2018
|
||
|
|
S-1/A
|
|
10.35
|
|
01/08/2018
|
||
|
|
S-1/A
|
|
10.36
|
|
01/08/2018
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
ADT Inc.
|
|
|
|
|
|
Date:
|
March 15, 2018
|
By:
|
/s/ Timothy J. Whall
|
|
|
|
|
|
|
Name:
|
Timothy J. Whall
|
|
|
Title:
|
Chief Executive Officer
|
Name
|
|
Title
|
|
|
|
/s/ Timothy J. Whall
|
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
Timothy J. Whall
|
|
|
|
|
|
/s/ Jeffrey Likosar
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
Jeffrey Likosar
|
|
|
|
|
|
/s/ Marc E. Becker
|
|
Director
(Chairman)
|
Marc E. Becker
|
|
|
|
|
|
/s/ Reed B. Rayman
|
|
Director
|
Reed B. Rayman
|
|
|
|
|
|
/s/ Matthew H. Nord
|
|
Director
|
Matthew H. Nord
|
|
|
|
|
|
/s/ Andrew D. Africk
|
|
Director
|
Andrew D. Africk
|
|
|
|
|
|
/s/ Eric L. Press
|
|
Director
|
Eric L. Press
|
|
|
|
|
|
/s/ Lee J. Solomon
|
|
Director
|
Lee J. Solomon
|
|
|
|
|
|
/s/ Stephanie Drescher
|
|
Director
|
Stephanie Drescher
|
|
|
|
|
|
/s/ Brett Watson
|
|
Director
|
Brett Watson
|
|
|
|
|
|
/s/ David Ryan
|
|
Director
|
David Ryan
|
|
|
|
|
|
/s/ Matthew E. Winter
|
|
Director
|
Matthew E. Winter
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||
Assets
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
122,899
|
|
|
$
|
75,891
|
|
Current portion of restricted cash and cash equivalents
|
3,883
|
|
|
14,932
|
|
||
Accounts receivable trade, less allowance for doubtful accounts of $34,042 and $28,109, respectively
|
148,822
|
|
|
135,218
|
|
||
Inventories
|
85,672
|
|
|
89,513
|
|
||
Work-in-progress
|
21,252
|
|
|
19,376
|
|
||
Prepaid expenses and other current assets
|
73,358
|
|
|
53,426
|
|
||
Total current assets
|
455,886
|
|
|
388,356
|
|
||
Property and equipment, net
|
332,445
|
|
|
342,994
|
|
||
Subscriber system assets, net
|
2,892,683
|
|
|
2,836,733
|
|
||
Intangible assets, net
|
7,856,775
|
|
|
8,308,749
|
|
||
Goodwill
|
5,070,586
|
|
|
5,013,376
|
|
||
Deferred subscriber acquisition costs, net
|
282,478
|
|
|
179,100
|
|
||
Other assets
|
123,967
|
|
|
107,173
|
|
||
Total Assets
|
$
|
17,014,820
|
|
|
$
|
17,176,481
|
|
|
|
|
|
||||
Liabilities and Stockholders' Equity
|
|
|
|
||||
Current Liabilities:
|
|
|
|
||||
Current maturities of long-term debt
|
$
|
48,060
|
|
|
$
|
40,288
|
|
Accounts payable
|
187,695
|
|
|
212,239
|
|
||
Deferred revenue
|
309,157
|
|
|
313,278
|
|
||
Accrued expenses and other current liabilities
|
351,340
|
|
|
286,734
|
|
||
Total current liabilities
|
896,252
|
|
|
852,539
|
|
||
Long-term debt
|
10,121,126
|
|
|
9,469,682
|
|
||
Mandatorily redeemable preferred securities—authorized 1,000,000 shares Series A of $0.01 par value; issued and outstanding 750,000 shares as of December 31, 2017 and 2016
|
682,449
|
|
|
633,691
|
|
||
Deferred subscriber acquisition revenue
|
368,669
|
|
|
167,075
|
|
||
Deferred tax liabilities
|
1,376,708
|
|
|
2,117,943
|
|
||
Other liabilities
|
136,504
|
|
|
130,575
|
|
||
Total Liabilities
|
13,581,708
|
|
|
13,371,505
|
|
||
|
|
|
|
||||
Commitments and contingencies (See Note 8)
|
|
|
|
||||
|
|
|
|
||||
Stockholders' Equity:
|
|
|
|
||||
Common stock—authorized 3,999,000,000 shares of $0.01 par value; issued and outstanding shares of 641,118,571 and 641,046,968 as of December 31, 2017 and 2016, respectively
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
4,435,329
|
|
|
4,424,321
|
|
||
Accumulated deficit
|
(998,212
|
)
|
|
(590,840
|
)
|
||
Accumulated other comprehensive loss
|
(4,007
|
)
|
|
(28,507
|
)
|
||
Total Stockholders' Equity
|
3,433,112
|
|
|
3,804,976
|
|
||
Total Liabilities and Stockholders' Equity
|
$
|
17,014,820
|
|
|
$
|
17,176,481
|
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
||||||||
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through
December 31, 2015 |
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Monitoring and related services
|
$
|
4,029,279
|
|
|
$
|
2,748,222
|
|
|
$
|
238,257
|
|
|
|
$
|
189,028
|
|
Installation and other
|
286,223
|
|
|
201,544
|
|
|
73,310
|
|
|
|
48,681
|
|
||||
Total Revenue
|
4,315,502
|
|
|
2,949,766
|
|
|
311,567
|
|
|
|
237,709
|
|
||||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
895,736
|
|
|
693,430
|
|
|
148,521
|
|
|
|
100,591
|
|
||||
Selling, general and administrative expenses
|
1,209,200
|
|
|
858,896
|
|
|
84,134
|
|
|
|
74,977
|
|
||||
Depreciation and intangible asset amortization
|
1,863,299
|
|
|
1,232,967
|
|
|
83,650
|
|
|
|
41,548
|
|
||||
Merger, restructuring, integration, and other costs
|
64,828
|
|
|
393,788
|
|
|
35,036
|
|
|
|
9,361
|
|
||||
Operating income (loss)
|
282,439
|
|
|
(229,315
|
)
|
|
(39,774
|
)
|
|
|
11,232
|
|
||||
Interest expense, net
|
(732,841
|
)
|
|
(521,491
|
)
|
|
(45,169
|
)
|
|
|
(29,129
|
)
|
||||
Other income (expense)
|
28,716
|
|
|
(51,932
|
)
|
|
325
|
|
|
|
331
|
|
||||
Loss before income taxes
|
(421,686
|
)
|
|
(802,738
|
)
|
|
(84,618
|
)
|
|
|
(17,566
|
)
|
||||
Income tax benefit (expense)
|
764,313
|
|
|
266,151
|
|
|
30,365
|
|
|
|
(1,025
|
)
|
||||
Net income (loss)
|
$
|
342,627
|
|
|
$
|
(536,587
|
)
|
|
$
|
(54,253
|
)
|
|
|
$
|
(18,591
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.53
|
|
|
$
|
(0.84
|
)
|
|
$
|
(0.08
|
)
|
|
|
$
|
(185,910
|
)
|
Diluted
|
$
|
0.53
|
|
|
$
|
(0.84
|
)
|
|
$
|
(0.08
|
)
|
|
|
$
|
(185,910
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of shares:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
641,074
|
|
|
640,725
|
|
|
640,723
|
|
|
|
0.1
|
|
||||
Diluted
|
641,074
|
|
|
640,725
|
|
|
640,723
|
|
|
|
0.1
|
|
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
||||||||
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through
December 31, 2015 |
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Net income (loss)
|
|
$
|
342,627
|
|
|
$
|
(536,587
|
)
|
|
$
|
(54,253
|
)
|
|
|
$
|
(18,591
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation and other
|
|
24,500
|
|
|
(28,507
|
)
|
|
—
|
|
|
|
—
|
|
||||
Total other comprehensive income (loss), net of tax
|
|
24,500
|
|
|
(28,507
|
)
|
|
—
|
|
|
|
—
|
|
||||
Comprehensive income (loss)
|
|
$
|
367,127
|
|
|
$
|
(565,094
|
)
|
|
$
|
(54,253
|
)
|
|
|
$
|
(18,591
|
)
|
|
Number of Common Shares
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Total
Stockholder’s Equity |
|||||||||
Predecessor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance as of December 31, 2014
|
100
|
|
|
$
|
—
|
|
|
$
|
132,493
|
|
|
$
|
(90,601
|
)
|
|
$
|
41,892
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,591
|
)
|
|
(18,591
|
)
|
||||
Share-based compensation expense
|
—
|
|
|
—
|
|
|
781
|
|
|
—
|
|
|
781
|
|
||||
Balance as of June 30, 2015
|
100
|
|
|
$
|
—
|
|
|
$
|
133,274
|
|
|
$
|
(109,192
|
)
|
|
$
|
24,082
|
|
|
Number of Common Shares
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Accumulated
Other Comprehensive Loss |
|
Total
Stockholders' Equity |
|||||||||||
Balance as of May 15, 2015 ("Inception")
|
640,723
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity capital contributions
|
—
|
|
|
—
|
|
|
754,891
|
|
|
—
|
|
|
—
|
|
|
754,891
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(54,253
|
)
|
|
—
|
|
|
(54,253
|
)
|
|||||
Share-based compensation expense
|
—
|
|
|
—
|
|
|
2,259
|
|
|
—
|
|
|
—
|
|
|
2,259
|
|
|||||
Balance as of December 31, 2015
|
640,723
|
|
|
—
|
|
|
757,150
|
|
|
(54,253
|
)
|
|
—
|
|
|
702,897
|
|
|||||
Issuance of shares
|
324
|
|
|
2
|
|
|
4,013
|
|
|
—
|
|
|
—
|
|
|
4,015
|
|
|||||
Equity capital contributions
|
—
|
|
|
—
|
|
|
3,658,186
|
|
|
—
|
|
|
—
|
|
|
3,658,186
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(536,587
|
)
|
|
—
|
|
|
(536,587
|
)
|
|||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28,507
|
)
|
|
(28,507
|
)
|
|||||
Share-based compensation expense
|
—
|
|
|
—
|
|
|
4,625
|
|
|
—
|
|
|
—
|
|
|
4,625
|
|
|||||
Other
|
—
|
|
|
—
|
|
|
347
|
|
|
—
|
|
|
—
|
|
|
347
|
|
|||||
Balance as of December 31, 2016
|
641,047
|
|
|
2
|
|
|
4,424,321
|
|
|
(590,840
|
)
|
|
(28,507
|
)
|
|
3,804,976
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
342,627
|
|
|
—
|
|
|
342,627
|
|
|||||
Dividend
|
—
|
|
|
—
|
|
|
—
|
|
|
(749,999
|
)
|
|
—
|
|
|
(749,999
|
)
|
|||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,500
|
|
|
24,500
|
|
|||||
Share-based compensation expense
|
68
|
|
|
—
|
|
|
11,276
|
|
|
—
|
|
|
—
|
|
|
11,276
|
|
|||||
Other
|
4
|
|
|
—
|
|
|
(268
|
)
|
|
—
|
|
|
—
|
|
|
(268
|
)
|
|||||
Balance as of December 31, 2017
|
641,119
|
|
|
$
|
2
|
|
|
$
|
4,435,329
|
|
|
$
|
(998,212
|
)
|
|
$
|
(4,007
|
)
|
|
$
|
3,433,112
|
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through
December 31, 2015 |
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
342,627
|
|
|
$
|
(536,587
|
)
|
|
$
|
(54,253
|
)
|
|
|
$
|
(18,591
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and intangible asset amortization
|
1,863,299
|
|
|
1,232,967
|
|
|
83,650
|
|
|
|
41,548
|
|
||||
Amortization of deferred subscriber acquisition costs and revenue, net
|
5,037
|
|
|
6,052
|
|
|
770
|
|
|
|
7,578
|
|
||||
Amortization of unearned revenue fair value adjustment
|
—
|
|
|
62,845
|
|
|
18,574
|
|
|
|
—
|
|
||||
Share-based compensation expense
|
11,276
|
|
|
4,625
|
|
|
2,259
|
|
|
|
781
|
|
||||
Deferred income taxes
|
(776,683
|
)
|
|
(272,512
|
)
|
|
(30,491
|
)
|
|
|
958
|
|
||||
Provision for losses on accounts receivable and inventory
|
56,687
|
|
|
37,620
|
|
|
2,141
|
|
|
|
862
|
|
||||
Loss on extinguishment of debt
|
4,325
|
|
|
24,787
|
|
|
—
|
|
|
|
—
|
|
||||
Other non-cash items, net
|
43,107
|
|
|
60,038
|
|
|
3,435
|
|
|
|
2,508
|
|
||||
Changes in operating assets and liabilities, net of the effects of acquisitions:
|
|
|
|
|
|
|
|
|
||||||||
Accounts receivable, net
|
(60,113
|
)
|
|
(34,221
|
)
|
|
(7,741
|
)
|
|
|
(1,495
|
)
|
||||
Inventories and work-in-progress
|
4,944
|
|
|
(8,797
|
)
|
|
(1,941
|
)
|
|
|
(3,912
|
)
|
||||
Accounts payable
|
(30,695
|
)
|
|
(9,103
|
)
|
|
(12,176
|
)
|
|
|
9,753
|
|
||||
Deferred subscriber acquisition costs
|
(165,120
|
)
|
|
(144,583
|
)
|
|
(16,615
|
)
|
|
|
(19,634
|
)
|
||||
Deferred subscriber acquisition revenue
|
247,479
|
|
|
167,784
|
|
|
10,345
|
|
|
|
6,827
|
|
||||
Other, net
|
45,760
|
|
|
26,608
|
|
|
3,797
|
|
|
|
7,373
|
|
||||
Net cash provided by operating activities
|
1,591,930
|
|
|
617,523
|
|
|
1,754
|
|
|
|
34,556
|
|
||||
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
||||||||
Dealer generated customer accounts and bulk account purchases
|
(653,222
|
)
|
|
(407,102
|
)
|
|
—
|
|
|
|
—
|
|
||||
Subscriber system assets and deferred subscriber installation costs
|
(582,723
|
)
|
|
(468,594
|
)
|
|
(29,556
|
)
|
|
|
(24,527
|
)
|
||||
Capital expenditures
|
(130,624
|
)
|
|
(78,499
|
)
|
|
(4,490
|
)
|
|
|
(6,095
|
)
|
||||
Acquisition of businesses, net of cash acquired
|
(63,518
|
)
|
|
(8,501,542
|
)
|
|
(1,988,126
|
)
|
|
|
(9,377
|
)
|
||||
Proceeds received from settlement of derivative contracts, net
|
—
|
|
|
41,586
|
|
|
—
|
|
|
|
—
|
|
||||
Other investing
|
27,896
|
|
|
29,282
|
|
|
(39,850
|
)
|
|
|
361
|
|
||||
Net cash used in investing activities
|
(1,402,191
|
)
|
|
(9,384,869
|
)
|
|
(2,062,022
|
)
|
|
|
(39,638
|
)
|
||||
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
||||||||
Proceeds from long-term borrowings
|
1,344,126
|
|
|
6,040,019
|
|
|
1,367,625
|
|
|
|
—
|
|
||||
Proceeds received from issuance of preferred securities
|
—
|
|
|
658,551
|
|
|
—
|
|
|
|
—
|
|
||||
Repayment of long-term borrowings
|
(724,999
|
)
|
|
(1,392,549
|
)
|
|
(6,393
|
)
|
|
|
(5,932
|
)
|
||||
Equity capital contributions
|
—
|
|
|
3,662,201
|
|
|
754,891
|
|
|
|
—
|
|
||||
Dividends
|
(749,999
|
)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
||||
Deferred financing costs
|
(400
|
)
|
|
(104,205
|
)
|
|
(38,727
|
)
|
|
|
—
|
|
||||
Other financing
|
(11,797
|
)
|
|
(35,242
|
)
|
|
(1,369
|
)
|
|
|
(280
|
)
|
||||
Net cash (used in) provided by financing activities
|
(143,069
|
)
|
|
8,828,775
|
|
|
2,076,027
|
|
|
|
(6,212
|
)
|
||||
Effect of currency translation on cash
|
338
|
|
|
(1,297
|
)
|
|
—
|
|
|
|
—
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
47,008
|
|
|
60,132
|
|
|
15,759
|
|
|
|
(11,294
|
)
|
||||
Cash and cash equivalents at beginning of period
|
75,891
|
|
|
15,759
|
|
|
—
|
|
|
|
89,834
|
|
||||
Cash and cash equivalents at end of period
|
$
|
122,899
|
|
|
$
|
75,891
|
|
|
$
|
15,759
|
|
|
|
$
|
78,540
|
|
|
|
|
|
|
|
|
|
|
||||||||
Supplementary Cash Flow Information:
|
|
|
|
|
|
|
|
|
||||||||
Interest paid, net of interest income
|
$
|
661,250
|
|
|
$
|
430,686
|
|
|
$
|
42,320
|
|
|
|
$
|
26,667
|
|
Income taxes paid, net of refunds
|
$
|
19,433
|
|
|
$
|
5,446
|
|
|
$
|
(38
|
)
|
|
|
$
|
87
|
|
Buildings and related improvements
|
Up to 40 years
|
Leasehold improvements
|
Lesser of remaining term of the lease or economic useful life
|
Capitalized software
|
3 to 10 years
|
Machinery, equipment, and other
|
Up to 14 years
|
(in thousands)
|
December 31,
2017 |
|
December 31,
2016 |
||||
Land
|
$
|
13,381
|
|
|
$
|
13,448
|
|
Buildings and leasehold improvements
|
78,298
|
|
|
73,353
|
|
||
Capitalized software
|
247,661
|
|
|
135,439
|
|
||
Machinery, equipment, and other
|
122,748
|
|
|
96,844
|
|
||
Construction in progress
|
52,610
|
|
|
64,146
|
|
||
Capital leases
|
49,740
|
|
|
44,385
|
|
||
Accumulated depreciation
|
(231,993
|
)
|
|
(84,621
|
)
|
||
Property and equipment, net
|
$
|
332,445
|
|
|
$
|
342,994
|
|
(in thousands)
|
December 31,
2017 |
|
December 31,
2016 |
||||
Accrued interest
|
$
|
91,592
|
|
|
$
|
92,901
|
|
Payroll-related accruals
|
94,501
|
|
|
44,253
|
|
||
Other accrued liabilities
|
165,247
|
|
|
149,580
|
|
||
Total accrued expenses and other current liabilities
|
$
|
351,340
|
|
|
$
|
286,734
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||
(in thousands)
|
Carrying
Value |
|
Fair
Value |
|
Carrying
Value |
|
Fair
Value |
||||||||
Debt instruments, excluding capital lease obligations
|
$
|
10,128,020
|
|
|
$
|
10,868,626
|
|
|
$
|
9,464,251
|
|
|
$
|
10,014,292
|
|
Koch Preferred Securities
|
$
|
682,449
|
|
|
$
|
924,700
|
|
|
$
|
633,691
|
|
|
$
|
776,800
|
|
(i)
|
equity proceeds of
$3,571 million
, net of issuance costs, which resulted from equity issuances by the Company and Ultimate Parent to the Company’s Sponsor and certain other investors;
|
(ii)
|
incremental first lien term loan borrowings of $1,555 million and issuance of $3,140 million aggregate principal amount of second-priority secured notes (the “Prime Notes”); and
|
(iii)
|
issuance by ADT Inc. of 750,000 shares of Series A preferred securities (“the Koch Preferred Securities”) and issuance by Ultimate Parent of detachable warrants for the purchase of Class A-1 Units in Ultimate Parent (the “Warrants”) to an affiliate of Koch Industries, Inc. (the “Koch Investor”) for an aggregate amount of $750 million. The Company allocated $659 million to the Koch Preferred Securities, which is reflected net of issuance costs of $27 million as a liability in the Company’s Consolidated Balance Sheets. The Company allocated the remaining $91 million in proceeds to the Warrants, which was contributed by Ultimate Parent in the form of common equity to the Company, net of $4 million in issuance costs.
|
(in thousands)
|
Year Ended December 31, 2016
|
|
Year Ended December 31, 2015
|
||||
Total Revenue
|
$
|
4,104,071
|
|
|
$
|
3,975,173
|
|
Net loss
|
(541,840
|
)
|
|
(552,582
|
)
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||
(in thousands)
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||||
Contracts and related customer relationships
|
$
|
6,748,355
|
|
|
$
|
(1,749,327
|
)
|
|
$
|
6,046,702
|
|
|
$
|
(756,068
|
)
|
Dealer relationships
|
1,605,910
|
|
|
(146,299
|
)
|
|
1,600,231
|
|
|
(60,570
|
)
|
||||
Other
|
195,363
|
|
|
(130,227
|
)
|
|
202,502
|
|
|
(57,048
|
)
|
||||
Total amortizable intangible assets
|
8,549,628
|
|
|
(2,025,853
|
)
|
|
7,849,435
|
|
|
(873,686
|
)
|
||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||||
Trade names
|
1,333,000
|
|
|
—
|
|
|
1,333,000
|
|
|
—
|
|
||||
Total intangible assets
|
$
|
9,882,628
|
|
|
$
|
(2,025,853
|
)
|
|
$
|
9,182,435
|
|
|
$
|
(873,686
|
)
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
(in thousands)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through December 31,
2015 |
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Definite-lived intangible asset amortization expense
|
$
|
1,164,283
|
|
|
$
|
800,203
|
|
|
$
|
74,126
|
|
|
|
$
|
17,157
|
|
(in thousands)
|
December 31, 2017
|
|
December 31, 2016
|
||||
Current maturities of long-term debt:
|
|
|
|
||||
First Lien Term B-1 Loan due 2022
|
$
|
35,537
|
|
|
$
|
27,626
|
|
Capital lease obligations
|
12,523
|
|
|
12,662
|
|
||
Current maturities of long-term debt
|
48,060
|
|
|
40,288
|
|
||
|
|
|
|
||||
Long-term debt:
|
|
|
|
||||
First Lien Term B-1 Loan due 2022
|
3,500,567
|
|
|
2,734,975
|
|
||
Prime Notes due 2023
|
3,140,000
|
|
|
3,140,000
|
|
||
4.875% First-Priority Senior Secured Notes due 2032
|
547,832
|
|
|
547,832
|
|
||
5.250% Notes due 2020
|
313,506
|
|
|
313,506
|
|
||
6.250% Notes due 2021
|
1,050,000
|
|
|
1,050,000
|
|
||
3.500% Notes due 2022
|
940,470
|
|
|
940,470
|
|
||
4.125% Notes due 2023
|
651,000
|
|
|
651,000
|
|
||
4.875% Notes due 2042
|
16,543
|
|
|
16,543
|
|
||
Revolving Credit Facilities
|
—
|
|
|
140,000
|
|
||
Unamortized discount and deferred financing costs
|
(82,610
|
)
|
|
(103,564
|
)
|
||
Accretion of purchase accounting fair value adjustment
|
15,175
|
|
|
5,863
|
|
||
Capital lease obligations
|
28,643
|
|
|
33,057
|
|
||
Total long-term debt
|
10,121,126
|
|
|
9,469,682
|
|
||
Total debt
|
$
|
10,169,186
|
|
|
$
|
9,509,970
|
|
•
|
The Company issued an incremental first lien term loan facility in an aggregate principal amount of $1,555 million, maturing on May 2, 2022 (the “First Lien Term B-1 Loan”) and received net cash proceeds totaling $1,516 million. The interest rate for the First Lien Term B-1 Loan is calculated as a margin of 4.50% (subsequently reduced following amendments and restatements of the First Lien Credit Agreement described below) over the greater of LIBOR or a floor of 1.00% and is payable on each interest payment date, at least quarterly, in arrears.
|
•
|
The Company entered into an incremental first lien revolving credit facility, with an aggregate commitment of up to $255 million, maturing on May 2, 2021 (the “2021 Revolving Credit Facility”) (collectively, with the 2020 Revolving Credit Facility, the “Revolving Credit Facilities”).
|
•
|
ADT and its domestic subsidiaries were added as guarantors under the First Lien Credit Agreement.
|
•
|
In connection with the amendment and restatement, the applicable margins utilized for the First Lien Term B Loan and the 2020 Revolving Credit Facility were increased from 4.00% to 4.50%.
|
•
|
The Company issued an incremental first lien term loan facility, in an aggregate principal amount of $125 million, maturing on May 2, 2022 (the “Incremental First Lien Term B-1 Loan”) and received net cash proceeds totaling $108 million. The proceeds were used to pay down a portion of the outstanding principal balance on the Second Lien Term B Loan on July 1, 2016, see below for further discussion. The interest rate for the Incremental First Lien Term B-1 Loan is calculated as a margin of 3.75% over the greater of LIBOR or a floor of 1.00% and is payable on each interest payment date, at least quarterly, in arrears.
|
•
|
The Company reallocated an aggregate principal amount of $172 million from the First Lien Term B Loan to the First Lien Term B-1 Loan.
|
•
|
The applicable margin utilized in the calculation of interest for all term borrowings under the First Lien Credit Agreement was decreased from 4.50% to 3.75%, and the applicable margin with respect to borrowings under the Revolving Credit Facilities remained at 4.50%, subject to adjustment to 4.25% pursuant to a leverage-based pricing grid.
|
•
|
The Company allocated the remaining outstanding principal amount of $916 million from the First Lien Term B Loan to the First Lien Term B-1 Loan.
|
•
|
The applicable margin utilized in the calculation of interest for all Eurocurrency borrowings under the First Lien Credit Agreement was decreased from 3.75% to 3.25%, and the applicable margin with respect to Eurocurrency borrowings under the Revolving Credit Facilities remained at 4.50%, subject to adjustment to 4.25% pursuant to a leverage-based pricing grid.
|
•
|
The Company issued an incremental first lien term loan facility under the First Lien Credit Agreement in an aggregate principal amount of $800 million (the “2017 Incremental First Lien Term B-1 Loan”). The 2017 Incremental First Lien Term B-1 Loan has the same terms as the existing first lien term loan under the First Lien Credit Agreement.
|
•
|
Certain covenants under the First Lien Credit Agreement governing restricted payments were amended to permit the Company to fund one or more distributions to the Company’s equity holders and Ultimate Parent in an aggregate amount not to exceed $795 million (collectively, the “Special Dividend”).
|
•
|
$300 million aggregate principal amount of 5.250% Senior Notes due 2020, which will mature on March 15, 2020. Interest is payable on March 15 and September 15 of each year;
|
•
|
$1,000 million aggregate principal amount of 6.250% Senior Notes due 2021, which will mature on October 15, 2021. Interest is payable on April 15 and October 15 of each year;
|
•
|
$1,000 million aggregate principal amount of 3.500% Notes due 2022, which will mature on July 15, 2022. Interest is payable on January 15 and July 15 of each year;
|
•
|
$700 million aggregate principal amount of 4.125% Senior Notes due 2023, which will mature on June 15, 2023. Interest is payable on June 15 and December 15 of each year;
|
•
|
$32 million aggregate principal amount of 4.875% Senior Notes due 2042, which will mature on July 15, 2042. Interest is payable on January 15 and July 15 of each year. As discussed above, in August 2016, an additional $10 million of 2042 Notes were exchanged for 2032 Notes pursuant to a second supplemental indenture.
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
||||||||
(in thousands)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through
December 31, 2015 |
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Interest expense
|
$
|
644,830
|
|
|
$
|
467,995
|
|
|
$
|
45,184
|
|
|
|
$
|
29,178
|
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
(in thousands)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through December 31, 2015
|
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
United States
|
$
|
(386,894
|
)
|
|
$
|
(792,118
|
)
|
|
$
|
(84,618
|
)
|
|
|
$
|
(17,566
|
)
|
Non-U.S.
|
(34,792
|
)
|
|
(10,620
|
)
|
|
—
|
|
|
|
—
|
|
||||
Loss before income taxes
|
$
|
(421,686
|
)
|
|
$
|
(802,738
|
)
|
|
$
|
(84,618
|
)
|
|
|
$
|
(17,566
|
)
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
(in thousands)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through December 31, 2015
|
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Current:
|
|
|
|
|
|
|
|
|
||||||||
United States:
|
|
|
|
|
|
|
|
|
||||||||
Federal
|
$
|
3,924
|
|
|
$
|
(261
|
)
|
|
$
|
—
|
|
|
|
$
|
—
|
|
State
|
(2,980
|
)
|
|
1,630
|
|
|
126
|
|
|
|
67
|
|
||||
Non-U.S.
|
11,426
|
|
|
4,992
|
|
|
—
|
|
|
|
—
|
|
||||
Current income tax expense
|
12,370
|
|
|
6,361
|
|
|
126
|
|
|
|
67
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Deferred:
|
|
|
|
|
|
|
|
|
||||||||
United States:
|
|
|
|
|
|
|
|
|
||||||||
Federal
|
(767,901
|
)
|
|
(246,089
|
)
|
|
(28,165
|
)
|
|
|
663
|
|
||||
State
|
8,176
|
|
|
(19,347
|
)
|
|
(2,326
|
)
|
|
|
295
|
|
||||
Non-U.S.
|
(16,958
|
)
|
|
(7,076
|
)
|
|
—
|
|
|
|
—
|
|
||||
Deferred income tax (benefit) expense
|
(776,683
|
)
|
|
(272,512
|
)
|
|
(30,491
|
)
|
|
|
958
|
|
||||
Income tax (benefit) expense
|
$
|
(764,313
|
)
|
|
$
|
(266,151
|
)
|
|
$
|
(30,365
|
)
|
|
|
$
|
1,025
|
|
|
Successor
|
|
|
Predecessor
|
||||||||
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through December 31, 2015
|
|
|
Period from January 1, 2015 through June 30,
2015 |
||||
Federal statutory tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Increases (reductions) in taxes due to:
|
|
|
|
|
|
|
|
|
||||
State income taxes, net of federal benefits
|
(1.4
|
)%
|
|
1.5
|
%
|
|
3.8
|
%
|
|
|
5.0
|
%
|
Non-U.S. net earnings
|
(0.3
|
)%
|
|
0.6
|
%
|
|
—
|
%
|
|
|
—
|
%
|
Nondeductible charges
|
(11.3
|
)%
|
|
(4.1
|
)%
|
|
(1.9
|
)%
|
|
|
14.0
|
%
|
Valuation Allowance
|
(2.1
|
)%
|
|
—
|
%
|
|
(1.0
|
)%
|
|
|
(60.0
|
)%
|
Unrecognized Tax Benefits
|
(1.9
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
|
—
|
%
|
Tax Reform
|
163.7
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
—
|
%
|
Other
|
(0.4
|
)%
|
|
0.2
|
%
|
|
—
|
%
|
|
|
0.2
|
%
|
Provision for income taxes
|
181.3
|
%
|
|
33.2
|
%
|
|
35.9
|
%
|
|
|
(5.8
|
)%
|
(in thousands)
|
December 31, 2017
|
|
December 31, 2016
|
||||
Deferred tax assets:
|
|
|
|
||||
Accrued liabilities and reserves
|
$
|
50,712
|
|
|
$
|
56,649
|
|
Tax loss and credit carryforwards
|
901,326
|
|
|
1,313,756
|
|
||
Postretirement benefits
|
11,574
|
|
|
19,373
|
|
||
Deferred revenue
|
56,487
|
|
|
52,058
|
|
||
Other
|
13,557
|
|
|
7,911
|
|
||
Total deferred tax assets
|
1,033,656
|
|
|
1,449,747
|
|
||
Valuation allowance
|
(16,730
|
)
|
|
(10,948
|
)
|
||
Deferred tax assets net of valuation allowance
|
$
|
1,016,926
|
|
|
$
|
1,438,799
|
|
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
||||
Subscriber system assets
|
$
|
(632,789
|
)
|
|
$
|
(734,327
|
)
|
Intangible assets
|
(1,734,396
|
)
|
|
(2,743,186
|
)
|
||
Other
|
(23,235
|
)
|
|
(76,196
|
)
|
||
Total deferred tax liabilities
|
(2,390,420
|
)
|
|
(3,553,709
|
)
|
||
Net deferred tax liability
|
$
|
(1,373,494
|
)
|
|
$
|
(2,114,910
|
)
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
(in thousands)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through December 31, 2015
|
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Beginning balance
|
$
|
101,550
|
|
|
$
|
109
|
|
|
$
|
150
|
|
|
|
$
|
3,619
|
|
Gross increase related to prior year tax positions
|
70,040
|
|
|
(470
|
)
|
|
(41
|
)
|
|
|
(21
|
)
|
||||
Gross decrease related to prior year tax positions
|
(42,883
|
)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
||||
Increases related to acquisitions
|
—
|
|
|
102,822
|
|
|
—
|
|
|
|
—
|
|
||||
Decrease related to settlements with taxing authorities
|
(38,488
|
)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
||||
Other changes not impacting the statement of operations
|
8,137
|
|
|
(911
|
)
|
|
—
|
|
|
|
—
|
|
||||
Change in rate due to U.S. Tax Reform
|
(27,026
|
)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
||||
Ending balance
|
$
|
71,330
|
|
|
$
|
101,550
|
|
|
$
|
109
|
|
|
|
$
|
3,598
|
|
Jurisdiction
|
Years
Open To Audit
|
Canada
|
2012 – 2016
|
United States
|
2009 – 2016
|
2018
|
$
|
60,379
|
|
2019
|
51,283
|
|
|
2020
|
40,303
|
|
|
2021
|
24,948
|
|
|
2022
|
16,414
|
|
|
Thereafter
|
16,643
|
|
|
|
209,970
|
|
|
Less sublease income
|
13,523
|
|
|
Total
|
$
|
196,447
|
|
2018
|
$
|
40,620
|
|
2019
|
6,708
|
|
|
Total
|
$
|
47,328
|
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
Risk-free interest rate
|
1.07% - 1.61%
|
|
0.93% - 1.58%
|
Expected exercise term (years)
|
1.20 - 4.00
|
|
1.50 - 4.00
|
Expected dividend yield
|
—%
|
|
—%
|
Expected volatility
|
45% - 50%
|
|
40% - 55%
|
|
Number of Options
|
|
Weighted-Average Exercise Price
|
|||
Outstanding as of December 31, 2016
|
3,193,900
|
|
|
$
|
6.59
|
|
Granted
|
1,991,664
|
|
|
7.08
|
|
|
Exercised
|
(4,203
|
)
|
|
6.59
|
|
|
Canceled
|
(338,534
|
)
|
|
6.63
|
|
|
Outstanding as of December 31, 2017
|
4,842,827
|
|
|
$
|
6.79
|
|
|
Number of Options
|
|
Weighted-Average Exercise Price
|
|||
Vested stock options (time-based vesting)
|
288,105
|
|
|
$
|
6.59
|
|
Unvested stock options (time-based vesting)
|
2,115,565
|
|
|
6.81
|
|
|
Unvested stock options (performance-based vesting)
|
2,439,157
|
|
|
6.78
|
|
|
Total
|
4,842,827
|
|
|
$
|
6.79
|
|
|
Successor
|
||||
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through
December 31, 2015 |
Risk-free interest rate
|
1.07% - 1.61%
|
|
0.76% - 1.58%
|
|
0.59% - 1.39%
|
Expected exercise term (years)
|
1.20 - 4.00
|
|
1.50 - 4.00
|
|
1.75 - 4.00
|
Expected dividend yield
|
—%
|
|
—%
|
|
—%
|
Expected volatility
|
45% - 50%
|
|
40% - 55%
|
|
60%
|
|
Number of Class B Units
|
|
Weighted-Average Grant Date Fair Value
|
|||
As of December 31, 2016
|
20,078,692
|
|
|
$
|
3.63
|
|
Granted
|
180,556
|
|
|
4.07
|
|
|
Canceled
|
(362,891
|
)
|
|
3.74
|
|
|
As of December 31, 2017
|
19,896,357
|
|
|
$
|
3.63
|
|
•
|
The Company issued
67,400
shares of common stock to Ultimate Parent for total proceeds of approximately $490 thousand.
|
•
|
The Company issued
4,203
shares of common stock to former employees upon such former employees’ exercise of vested options.
|
(in thousands)
|
Currency Translation Adjustments
|
|
Deferred Pension Gains
|
|
Accumulated Other Comprehensive Loss
|
||||||
Balance as of December 31, 2015
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Pre-tax current period change
|
(30,663
|
)
|
|
3,433
|
|
|
(27,230
|
)
|
|||
Income tax expense
|
—
|
|
|
(1,277
|
)
|
|
(1,277
|
)
|
|||
Balance as of December 31, 2016
|
(30,663
|
)
|
|
2,156
|
|
|
(28,507
|
)
|
|||
Pre-tax current period change
|
25,889
|
|
|
1,115
|
|
|
27,004
|
|
|||
Income tax expense
|
(2,169
|
)
|
|
(335
|
)
|
|
(2,504
|
)
|
|||
Balance as of December 31, 2017
|
$
|
(6,943
|
)
|
|
$
|
2,936
|
|
|
$
|
(4,007
|
)
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
(in thousands, except per share amounts)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through
December 31, 2015 |
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
342,627
|
|
|
$
|
(536,587
|
)
|
|
$
|
(54,253
|
)
|
|
|
$
|
(18,591
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted-average shares outstanding
|
641,074
|
|
|
640,725
|
|
|
640,723
|
|
|
|
0.1
|
|
||||
Dilutive effect of stock options
|
—
|
|
|
—
|
|
|
N/A
|
|
|
|
N/A
|
|
||||
Diluted weighted-average shares outstanding
|
641,074
|
|
|
640,725
|
|
|
640,723
|
|
|
|
0.1
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.53
|
|
|
$
|
(0.84
|
)
|
|
$
|
(0.08
|
)
|
|
|
$
|
(185,910
|
)
|
Diluted
|
$
|
0.53
|
|
|
$
|
(0.84
|
)
|
|
$
|
(0.08
|
)
|
|
|
$
|
(185,910
|
)
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
(in thousands)
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through
December 31, 2015 |
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
United States
|
$
|
4,076,420
|
|
|
$
|
2,791,233
|
|
|
$
|
311,567
|
|
|
|
$
|
237,709
|
|
Canada
|
239,082
|
|
|
158,533
|
|
|
—
|
|
|
|
—
|
|
||||
Total Revenue
|
$
|
4,315,502
|
|
|
$
|
2,949,766
|
|
|
$
|
311,567
|
|
|
|
$
|
237,709
|
|
|
For the Quarters Ended
|
||||||||||||||
|
March 31,
2017
|
|
June 30,
2017
|
|
September 30,
2017
|
|
December 31,
2017
|
||||||||
Total Revenue
|
$
|
1,059,228
|
|
|
$
|
1,067,780
|
|
|
$
|
1,082,962
|
|
|
$
|
1,105,532
|
|
Operating income
|
5,534
|
|
|
89,627
|
|
|
92,251
|
|
|
95,027
|
|
||||
Net income (loss)
|
(140,875
|
)
|
|
(92,656
|
)
|
|
(62,030
|
)
|
|
638,188
|
|
||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.22
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
1.00
|
|
Diluted
|
$
|
(0.22
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
0.99
|
|
|
For the Quarters Ended
|
||||||||||||||
|
March 31,
2016
|
|
June 30,
2016
|
|
September 30,
2016
|
|
December 31,
2016
|
||||||||
Total Revenue
|
$
|
170,419
|
|
|
$
|
690,688
|
|
|
$
|
1,037,507
|
|
|
$
|
1,051,152
|
|
Operating income (loss)
|
(1,602
|
)
|
|
(332,579
|
)
|
|
29,852
|
|
|
75,014
|
|
||||
Net loss
|
(22,931
|
)
|
|
(337,294
|
)
|
|
(91,417
|
)
|
|
(84,945
|
)
|
||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.04
|
)
|
|
$
|
(0.53
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.13
|
)
|
Diluted
|
$
|
(0.04
|
)
|
|
$
|
(0.53
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.13
|
)
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
Assets
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Prepaid expenses and other current assets
|
$
|
5,551
|
|
|
$
|
—
|
|
Total current assets
|
5,551
|
|
|
—
|
|
||
Investment in subsidiaries
|
4,110,010
|
|
|
4,438,667
|
|
||
Total Assets
|
$
|
4,115,561
|
|
|
$
|
4,438,667
|
|
Liabilities and Stockholders' Equity
|
|
|
|
||||
Mandatorily redeemable preferred securities
|
$
|
682,449
|
|
|
$
|
633,691
|
|
Total Stockholders' Equity
|
3,433,112
|
|
|
3,804,976
|
|
||
Total Liabilities and Stockholders' Equity
|
$
|
4,115,561
|
|
|
$
|
4,438,667
|
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
From Inception through
December 31, 2015 |
||||||
Selling, general and administrative expenses
|
$
|
(45,000
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating loss
|
(45,000
|
)
|
|
—
|
|
|
—
|
|
|||
Interest expense, net
|
(89,775
|
)
|
|
(54,907
|
)
|
|
—
|
|
|||
Equity in net income (loss) of subsidiaries
|
451,901
|
|
|
(481,680
|
)
|
|
(54,253
|
)
|
|||
Income (loss) before income taxes
|
317,126
|
|
|
(536,587
|
)
|
|
(54,253
|
)
|
|||
Income tax benefit
|
25,501
|
|
|
—
|
|
|
—
|
|
|||
Net income (loss) and total comprehensive income (loss)
|
$
|
342,627
|
|
|
$
|
(536,587
|
)
|
|
$
|
(54,253
|
)
|
|
|
|
|
|
|
||||||
Net income (loss) per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.53
|
|
|
$
|
(0.84
|
)
|
|
$
|
(0.08
|
)
|
Diluted
|
$
|
0.53
|
|
|
$
|
(0.84
|
)
|
|
$
|
(0.08
|
)
|
Weighted average number of shares:
|
|
|
|
|
|
||||||
Basic
|
641,074
|
|
|
640,725
|
|
|
640,723
|
|
|||
Diluted
|
641,074
|
|
|
640,725
|
|
|
640,723
|
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
(thousands)
|
December 31,
2017 |
|
December 31,
2016 |
|
From Inception through December 31,
2015 |
|
|
Period from January 1, 2015 through June 30,
2015 |
||||||||
Allowance for Doubtful Accounts:
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
$
|
28,109
|
|
|
$
|
1,498
|
|
|
$
|
—
|
|
|
|
$
|
5,692
|
|
Additions charged to income
|
54,074
|
|
|
37,407
|
|
|
2,141
|
|
|
|
862
|
|
||||
Deductions
|
(48,141
|
)
|
|
(10,796
|
)
|
|
(643
|
)
|
|
|
(1,027
|
)
|
||||
Ending balance
|
$
|
34,042
|
|
|
$
|
28,109
|
|
|
$
|
1,498
|
|
|
|
$
|
5,527
|
|
By:
|
/s/ Timothy J. Whall
|
Period In Which Such Date Occurs
|
Redemption Percentage
|
If such date occurs during the period from and including the First Call Date to, but not including,
May 2
, 2020
|
105.50%
|
If such date occurs during the period from and including
May 2
, 2020 to, but not including,
May 2
, 2021
|
102.75%
|
If such date occurs on or after
May 2
, 2021
|
100%
|
Period In Which Such Date Occurs
|
Redemption Percentage
|
If such date occurs during the period from and including the First Call Date to, but not including,
May 2
, 2020
|
105.50%
|
If such date occurs during the period from and including
May 2
, 2020 to, but not including,
May 2
, 2021
|
102.75%
|
If such date occurs on or after
May 2
, 2021
|
100%
|
By:
|
/s/ Timothy J. Whall
|
|
Page
|
|
|
|
|
ARTICLE I. INTRODUCTORY MATTERS
|
1
|
|
1.1
|
Defined Terms
|
1
|
1.2
|
Construction
|
4
|
ARTICLE II. BOARD OF DIRECTORS
|
4
|
|
2.1
|
Election of Directors
|
4
|
ARTICLE III. INFORMATION
|
6
|
|
3.1
|
Books and Records; Access
|
6
|
3.2
|
Sharing of Information
|
7
|
ARTICLE IV. OTHER RIGHTS
|
7
|
|
4.1
|
Consent to Certain Actions.
|
7
|
ARTICLE V. GENERAL PROVISIONS
|
8
|
|
5.1
|
Termination
|
8
|
5.2
|
Notices
|
9
|
5.3
|
Amendment; Waiver
|
9
|
5.4
|
Further Assurances
|
10
|
5.5
|
Assignment
|
10
|
5.6
|
Third Parties
|
10
|
5.7
|
Governing Law
|
10
|
5.8
|
Jurisdiction; Waiver of Jury Trial
|
10
|
5.9
|
Specific Performance
|
11
|
5.1
|
Entire Agreement
|
11
|
5.11
|
Severability
|
11
|
5.12
|
Table of Contents, Headings and Captions
|
11
|
5.13
|
Counterparts
|
11
|
5.14
|
Effectiveness
|
11
|
5.15
|
No Recourse
|
11
|
By:
|
/s/ Timothy J. Whall
|
By:
|
Prime Security Services TopCo Parent GP, LLC,
its general partner |
By:
|
/s/ Timothy J. Whall
|
By:
|
/s/ Timothy J. Whall
|
By:
|
/s/ Hena Paul Ling
|
By:
|
/s/ Brett D. Watson
|
Investor
|
Amount of Interest Beneficially Owned
|
Birchtree Fund Investments Private Limited
|
30,258,000 shares of Common Stock (adjusted to take into account any stock split, reverse stock split, stock dividend, reorganization or similar event effected with respect to the shares of Common Stock)
|
TABLE OF CONTENTS
|
||||
|
|
|
Page
|
|
ARTICLE I DEFINITIONS
|
1
|
|
||
|
Section 1.1
|
Definitions
|
1
|
|
|
Section 1.2
|
Interpretation
|
4
|
|
ARTICLE II REGISTRATION RIGHTS
|
5
|
|
||
|
Section 2.1
|
Demand Registration
|
5
|
|
|
Section 2.2
|
Piggyback Registration
|
9
|
|
|
Section 2.3
|
Shelf Registration
|
11
|
|
|
Section 2.4
|
Withdrawal Rights
|
12
|
|
|
Section 2.5
|
Holdback Agreements
|
12
|
|
|
Section 2.6
|
Registration Procedures
|
13
|
|
|
Section 2.7
|
Registration Expenses
|
18
|
|
|
Section 2.8
|
Registration Indemnification
|
19
|
|
|
Section 2.9
|
Request for Information; Certain Rights
|
21
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES
|
22
|
|
||
|
Section 3.1
|
Representations and Warranties of Prime Parent
|
22
|
|
|
Section 3.2
|
Representations and Warranties of the Company
|
22
|
|
ARTICLE IV MISCELLANEOUS
|
23
|
|
||
|
Section 4.1
|
Notices
|
23
|
|
|
Section 4.2
|
Severability
|
23
|
|
|
Section 4.3
|
Counterparts
|
23
|
|
|
Section 4.4
|
Entire Agreement; No Third Party Beneficiaries
|
24
|
|
|
Section 4.5
|
Further Assurances
|
24
|
|
|
Section 4.6
|
Governing Law; Equitable Remedies
|
24
|
|
|
Section 4.7
|
Consent To Jurisdiction
|
24
|
|
|
Section 4.8
|
Amendments; Waivers
|
25
|
|
|
Section 4.9
|
Assignment
|
25
|
|
|
Section 4.10
|
Effectiveness
|
25
|
|
|
Section 4.11
|
Term
|
25
|
|
By:
|
Prime Security Services TopCo Parent GP, LLC,
its general partner |
By:
|
/s/ Timothy J. Whall
|
By:
|
/s/ P. Gray Finney
|
By:
|
Prime Security Services TopCo Parent GP, LLC,
its general partner |
By:
|
|
By:
|
/s/ P. Gray Finney
|
Table of Contents
|
|
Page
|
|
||
ARTICLE I ADDITIONAL RIGHTS, PREFERENCES, POWERS, AND
|
|
||||
|
|
QUALIFICATIONS, RESTRICTIONS AND LIMITATIONS, OF THE
|
|
||
|
|
SERIES A PREFERRED SECURITIES
|
1
|
|
|
|
SECTION 1.1 DRD Gross-Up; Extraordinary Dividends
|
1
|
|
||
|
SECTION 1.2 Affirmative Covenants
|
3
|
|
||
|
SECTION 1.3 Manager Appointment Rights; Observer Designation Rights
|
7
|
|
||
|
SECTION 1.4 Affiliate Joinder
|
8
|
|
||
|
SECTION 1.5 Segregated Account
|
8
|
|
||
|
SECTION 1.6 Transfers
|
9
|
|
||
|
SECTION 1.7 Confidentiality
|
11
|
|
||
|
SECTION 1.8 Expenses; Indemnity
|
15
|
|
||
ARTICLE II MISCELLANEOUS
|
17
|
|
|||
|
SECTION 2.1 Survival
|
17
|
|
||
|
SECTION 2.2 Release
|
17
|
|
||
|
SECTION 2.3 Entire Agreement; Parties in Interest
|
18
|
|
||
|
SECTION 2.4 No Recourse
|
18
|
|
||
|
SECTION 2.5 Governing Law
|
18
|
|
||
|
SECTION 2.6 Jurisdiction
|
19
|
|
||
|
SECTION 2.7 Waiver of Jury Trial
|
19
|
|
||
|
SECTION 2.8 Specific Performance; Remedies
|
19
|
|
||
|
SECTION 2.9 Notice
|
20
|
|
||
|
SECTION 2.10 Amendments; Waivers
|
21
|
|
||
|
SECTION 2.11 Counterparts
|
21
|
|
||
|
SECTION 2.12 Assignment
|
21
|
|
||
|
SECTION 2.13 Severability
|
21
|
|
||
|
SECTION 2.14 Certain Acknowledgments
|
22
|
|
||
|
SECTION 2.15 Termination
|
22
|
|
||
|
SECTION 2.16 LLC Agreement
|
22
|
|
||
ARTICLE III DEFINITIONS
|
23
|
|
|||
|
SECTION 3.1 Defined Terms
|
23
|
|
||
|
SECTION 3.2 Construction
|
27
|
|
COMPANY:
|
|
ADT INC.
|
|
By:
|
/s/ Timothy J. Whall
|
|
Name: Timothy J. Whall
|
|
Title: Chief Executive Officer
|
|
PARENT:
|
|
PRIME SECURITY SERVICES TOPCO PARENT, L.P.
By: Prime Security Services TopCo Parent GP, LLC, its general partner
|
|
By:
|
/s/ Timothy J. Whall
|
|
Name: Timothy J. Whall
|
|
Title: Chief Executive Officer
|
GENERAL PARTNER:
|
|
PRIME SECURITY SERVICES TOPCO PARENT GP, LLC
|
|
By:
|
/s/ Timothy J. Whall
|
|
Name: Timothy J. Whall
|
|
Title: Chief Executive Officer
|
MEMBER (SOLELY FOR PURPOSES OF
SECTIONS 1.3
,
1.7
,
1.8
AND
ARTICLES II
AND
III
):
|
|
AP VIII PRIME SECURITY SERVICES HOLDINGS, L.P.
By: Prime Security Services GP, LLC, its general partner
|
|
By:
|
/s/ Laurie D. Medley
|
|
Name: Laurie D. Medley
|
|
Title: Vice President
|
PURCHASER:
|
|
KOCH SV INVESTMENTS, LLC
|
|
By:
|
/s/ Brett D. Watson
|
|
Name: Brett D. Watson
|
|
Title: Vice President
|
|
|
1.
|
Highland Capital Management, L.P.
|
2.
|
Davidson Kempner Capital Management, LLC
|
3.
|
Black Diamond Capital Management, LLC
|
4.
|
Icahn & Co., Inc. / High River L.P.
|
5.
|
Aurelius Capital Management
|
6.
|
Elliott Management
|
7.
|
Cyrus Capital Partners, L.P.
|
8.
|
Vivint Inc.
|
9.
|
Monitronics International, Inc.
|
10.
|
Comcast Corporation
|
11.
|
AT&T Inc.
|
12.
|
Any reasonably identifiable affiliate (reasonably identifiable by their name) of, and, if applicable, any reasonably identifiable fund or other entity managed by (in the case of such fund or such other entity, reasonably identifiable by their name), any of the entities listed above (other than, in the case of 8, 9, 10 or 11 above, any affiliates that are bona fide equity or debt funds that are primarily engaged in investing in commercial loans, bonds and similar extensions of credit or equity or debt securities in the ordinary course and for which no personnel making investment decisions in respect of any equity fund which has a direct or indirect equity investment in the companies listed in 8, 9, 10 or 11 above has the right to make any investment decisions).
|
By:
|
/s/ Brett D. Watson
|
|
Name: Brett D. Watson
|
|
Title: Vice President
|
|
TABLE OF CONTENTS
|
|
|
|
|
Page
|
|
Section 1.
|
Definitions.
|
1
|
|
Section 2.
|
General Rule.
|
8
|
|
Section 3.
|
Procedures; Price.
|
12
|
|
Section 4.
|
Certain Dispositions.
|
13
|
|
Section 5.
|
Permitted Dispositions; Pledges; Voting Trusts.
|
14
|
|
Section 6.
|
Conditions; Additional Parties.
|
15
|
|
Section 7.
|
Restriction on Transfer.
|
16
|
|
Section 8.
|
Notices.
|
18
|
|
Section 9.
|
Repurchase Rights.
|
19
|
|
Section 10.
|
Piggy-Back Registration Rights.
|
21
|
|
Section 11.
|
Reserved.
|
27
|
|
Section 12.
|
Confidentiality.
|
27
|
|
Section 13.
|
Distributions in Connection with Merger or Qualified Public Offering; Cooperation with Qualified Public Offering Reorganization and SEC Filings
|
27
|
|
Section 14.
|
Representations and Warranties.
|
28
|
|
Section 15.
|
Miscellaneous Provisions.
|
28
|
|
2.3
|
Bankruptcy
.
|
2.6
|
Right of First Refusal
.
|
By:
|
/s/ Timothy J. Whall
|
|
Name: Timothy J. Whall
|
|
Title: Chief Executive Officer
|
By:
|
Prime Security Services TopCo Parent GP, LLC,
its general partner
|
By:
|
/s/ Timothy J. Whall
|
|
Name: Timothy J. Whall
|
|
Title: Chief Executive Officer
|
(1)
|
Acknowledgement
. Transferee acknowledges that Transferee is acquiring certain Common Stock of ADT Inc., a Delaware corporation (the “
Company
”), subject to the terms and conditions of the Management Investor Rights Agreement among the Company and the Holders party thereto. Capitalized terms used herein without definition are defined in the Management Investor Rights Agreement and are used herein with the same meanings set forth therein.
|
(2)
|
Agreement
. Transferee (i) agrees that the Common Stock acquired by Transferee, and certain other Common Stock and other securities that may be acquired by Transferee in the future, shall be bound by and subject to the terms and conditions of the Management Investor Rights Agreement, pursuant to the terms and conditions thereof and (ii) hereby adopts the Management Investor Rights Agreement with the same force and effect as if he or she were originally a party thereto.
|
(3)
|
Notice
. Any notice required or permitted by the Management Investor Rights Agreement or under the Certificate of Incorporation, the Bylaws, the Delaware General Corporation Law or other applicable law may be given to Transferee at the address or by means of electronic transmission set forth beside Transferee’s signature below. Transferee further agrees to notify the Company of any change to Transferee’s electronic mail address, and further agrees that the provision of such notice to the Company shall constitute the consent of Transferee to receive notice at such electronic mail address. In the event that the Company is unable to deliver notice to Transferee at the electronic mail address so provided by Transferee, Transferee shall, within two (2) Business Days after a request by the Company, provide the Company with a valid electronic mail address to which Transferee consents to receive notice at such electronic mail address.
|
(4)
|
Joinder
. Transferee agrees that, unless otherwise determined by the Company or TopCo Parent, the spouse of Transferee (and any subsequent spouse) shall execute and deliver a Spousal Consent or, if unmarried, personally execute and deliver a Spousal Consent, in each case substantially in the form of
Exhibit C
attached to the Management Investor Rights Agreement or in a form otherwise satisfactory to the Company.
|
1.
|
Holder has the requisite power and authority, is of legal age and has the requisite legal capacity to execute and deliver the Management Investor Rights Agreement or, as applicable, an Adoption Agreement (each, a “
Transaction Document
”), to carry out his, her or its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Holder of a Transaction Document, the performance by Holder of his, her or its obligations thereunder and the consummation by Holder of the transactions contemplated thereby have been duly authorized by Holder. The Transaction Document has been duly and validly executed and delivered by Holder and is a legal, valid and binding obligation of Holder, enforceable against Holder in accordance with its terms, except as the enforceability may be limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors’ rights generally or (b) general principles of equity.
|
2.
|
The execution and delivery of a Transaction Document by Holder, the performance by Holder of his, her or its obligations thereunder and the consummation by Holder of the transactions contemplated thereby do not and will not (a) materially violate or materially conflict with any law or governmental order applicable to Holder or any of Holder’s assets or properties or (b) violate or conflict with in any material respect, result in any material breach of, or constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a default) under, any agreement to which Holder is a party or by which any of its assets or properties is bound.
|
3.
|
Holder is an “accredited investor” as defined in Rule 501 under the Act.
|
4.
|
Holder has such knowledge and experience in financial and business matters that it is capable of utilizing the information made available to Holder to evaluate the merits and risks of an investment in the Company and to make an informed investment decision with respect thereto. Holder is aware that his, her or its purchase of Common Stock is highly speculative and he, she or it is able, without impairing his, her or its financial condition, to hold the Common Stock for an indefinite period of time and to suffer a complete loss of its investment.
|
5.
|
The Common Stock is being purchased by Holder for his, her or its own account only for investment and is not being purchased with a view towards their resale or further distribution.
|
6.
|
Holder acknowledges that he, she or it is not subscribing for Common Stock as a result of or subsequent to (a) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or the interest or (b) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
|
7.
|
No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (each, a “
Governmental Entity
”), with respect to Holder is required in connection with the execution, delivery or performance by Holder of a Transaction Document or the consummation by Holder of the transactions contemplated by such Transaction Document.
|
8.
|
There are no suits, actions, claims, proceedings or investigations pending or, to the knowledge of Holder, threatened against, relating to or involving Holder before any Governmental Entity. Holder is not subject to any judgment, decree, injunction, rule or order of any court.
|
9.
|
Holder acknowledges that neither the Company, any of its Affiliates nor any of their respective representatives has rendered any investment advice or securities valuation advice to Holder, and that Holder is neither subscribing for nor acquiring any interest in the Company in reliance upon or with the expectation of, any such advice.
|
10.
|
Holder has been given the opportunity to ask questions of, and receive answers from, the Company concerning the terms and conditions of, and other matters pertaining to, this investment, and has had or been given an opportunity to access such financial and other information concerning the Company as it has considered necessary to make a decision to invest in the Company and has availed itself of this opportunity to the full extent desired.
|
11.
|
Holder is acquiring the Common Stock in compliance with all applicable laws, rules, regulations and other legal requirements including without limitation the legal requirements of jurisdictions in which such Holder is resident and in which such acquisition is being consummated.
|
12.
|
If Holder is a Non-U.S. Person, Holder has not been solicited to purchase and has not and shall not acquire his, her or its Common Stock, directly or indirectly, while present in the United States.
|
13.
|
If Holder is a Non-U.S. Person, the Holder shall notify the Company promptly after it ceases to be a Non-U.S. Person.
|
14.
|
Holder agrees to deliver to the Company such information as to certain matters under the Act as the Company may request in order to ensure compliance with the Act and the availability of any exemptions thereunder.
|
15.
|
All information provided by Holder in connection with the Common Stock is true and correct in all material respects.
|
16.
|
Holder acknowledges and agrees that the Company has relied and will rely on the representations and warranties of Holder set forth in this
Exhibit B
and that all such representations and warranties shall survive the date hereof. Without limiting the foregoing, each Holder agrees to give the Company prompt written notice in the event that any representations of such Holder contained herein ceases to be true at any time following the date hereof.
|
17.
|
If any answer provided or background documentation required in connection herewith is found to be false, forged or misleading, Holder understands that the Company may require Holder to fully redeem its shares.
|
18.
|
Holder is the sole record and beneficial owner of the Common Stock.
|
(i)
|
ADT Inc. Amended and Restated Management Investor Rights Agreement, dated and effective as of January [●], 2018 (as amended from time to time, the “
Agreement
”); and
|
(ii)
|
[
Title of applicable award agreement
] by and between the Company and [
full name of Options recipient
]
(the “
Participant
”), dated and effective as of [●], 201[●] (the “
Award Agreement
”).
|
1.
|
that I have full knowledge of the terms and conditions of the Agreement;
|
2.
|
that I confirm, acknowledge, approve of and hereby give my irrevocable and unconditional consent to the Participant and the Company in respect of the transfer of all securities of the Company held by the Participant at any time, as well as the exercise of all rights and obligations attached thereto (including pursuant to
Sections 2(b)
,
2.2
,
2.3
,
2.4
and
15.7
) and, under the terms and conditions of the Agreement and/or any other related agreements or documents;
|
3.
|
that this Spousal Consent shall be valid and effective upon the signing hereof and I, whether now or in the future, shall accept, agree and ratify all actions taken by the Participant in connection with the above matter;
|
4.
|
that this Spousal Consent shall be valid and effective for the transfer of the abovementioned securities of the Company in one or more times; and
|
5.
|
that I grant to the Participant all power and authority to, in my behalf and representation, perform all acts and execute, in the terms that my spouse deems appropriate, all agreements, instruments, minutes, communications, endorsements and other documents related to the implementation of the above.
|
Country
|
|
Entity
|
|
State
|
United States
|
|
ADT Holdings, Inc.
|
|
DE
|
United States
|
|
ADT LLC
|
|
DE
|
United States
|
|
ADT US Holdings, Inc.
|
|
DE
|
United States
|
|
Prime Security Services Borrower, LLC
|
|
DE
|
United States
|
|
Prime Security Services Holdings, LLC
|
|
DE
|
United States
|
|
The ADT Security Corporation
|
|
DE
|
1.
|
I have reviewed this Annual Report on Form 10-K of ADT Inc.:
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Omitted pursuant to SEC Release No. 34-54942
;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
/s/ Timothy J. Whall
|
|
|
Timothy J. Whall
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of ADT Inc.:
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Omitted pursuant to SEC Release No. 34-54942
;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
/s/ Jeffrey Likosar
|
|
|
Jeffrey Likosar
|
|
|
Chief Financial Officer
|
/s/ Timothy J. Whall
|
|
|
Timothy J. Whall
|
|
|
Chief Executive Officer
|
|
|
March 15, 2018
|
|
|
|
|
|
/s/ Jeffrey Likosar
|
|
|
Jeffrey Likosar
|
|
|
Chief Financial Officer
|
|
|
March 15, 2018
|
|
|