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x
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Quarterly 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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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer x (Do not check if a smaller reporting company)
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Smaller reporting company ¨
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Emerging growth company ¨
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Page
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September 30, 2018
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December 31, 2017
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||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
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$
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256,917
|
|
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$
|
122,899
|
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Accounts receivable trade, less allowance for doubtful accounts of $41,144 and $34,042, respectively
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154,629
|
|
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148,822
|
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||
Inventories
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79,332
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|
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85,672
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||
Work-in-progress
|
28,481
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21,252
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Prepaid expenses and other current assets
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107,364
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77,241
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Total current assets
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626,723
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455,886
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Property and equipment, net
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308,671
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332,445
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Subscriber system assets, net
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2,906,559
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2,892,683
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Intangible assets, net
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7,488,118
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7,856,775
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Goodwill
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5,088,325
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5,070,586
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Deferred subscriber acquisition costs, net
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400,946
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282,478
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Other assets
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148,242
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123,967
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Total assets
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$
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16,967,584
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$
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17,014,820
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Liabilities and stockholders' equity
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||||
Current liabilities:
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||||
Current maturities of long-term debt
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$
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48,327
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$
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48,060
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Accounts payable
|
206,135
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|
|
187,695
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|
||
Deferred revenue
|
310,766
|
|
|
309,157
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||
Accrued expenses and other current liabilities
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444,572
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|
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351,340
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Total current liabilities
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1,009,800
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896,252
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Long-term debt
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9,519,504
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10,121,126
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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
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—
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682,449
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Deferred subscriber acquisition revenue
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505,188
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368,669
|
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Deferred tax liabilities
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1,370,142
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1,376,708
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Other liabilities
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126,956
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136,504
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Total liabilities
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12,531,590
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13,581,708
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Commitments and contingencies (See Note 8)
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Stockholders' equity:
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Common stock—authorized 3,999,000,000 shares of $0.01 par value; issued and outstanding shares of 766,772,382 and 641,118,571 as of September 30, 2018 and December 31, 2017, respectively
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7,668
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2
|
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Additional paid-in capital
|
5,947,280
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4,435,329
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Accumulated deficit
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(1,504,054
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)
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(998,212
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)
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Accumulated other comprehensive loss
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(14,900
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)
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(4,007
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)
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Total stockholders' equity
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4,435,994
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3,433,112
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Total liabilities and stockholders' equity
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$
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16,967,584
|
|
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$
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17,014,820
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|
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For the Quarters Ended
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For the Nine Months Ended
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||||||||||||
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September 30, 2018
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September 30, 2017
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September 30, 2018
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September 30, 2017
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||||||||
Monitoring and related services
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$
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1,029,399
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$
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1,012,292
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$
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3,069,817
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$
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3,017,026
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Installation and other
|
118,917
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70,670
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326,406
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192,944
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||||
Total revenue
|
1,148,316
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1,082,962
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3,396,223
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3,209,970
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Cost of revenue (exclusive of depreciation and amortization shown separately below)
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263,286
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224,140
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757,905
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658,095
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Selling, general and administrative expenses
|
295,119
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284,137
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922,627
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923,048
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|
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Depreciation and intangible asset amortization
|
474,772
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|
|
467,929
|
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1,446,768
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1,387,245
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|
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Merger, restructuring, integration, and other
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(6,708
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)
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14,505
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1,770
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|
54,170
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|
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Operating income
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121,847
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92,251
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267,153
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|
187,412
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Interest expense, net
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(152,405
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)
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(184,369
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)
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(501,217
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)
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(553,529
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)
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Loss on extinguishment of debt
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(213,239
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)
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—
|
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(274,836
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)
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(4,331
|
)
|
||||
Other income
|
552
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|
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22,960
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29,374
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35,965
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|
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Loss before income taxes
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(243,245
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)
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(69,158
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)
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(479,526
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)
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(334,483
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)
|
||||
Income tax benefit
|
7,701
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7,128
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19,840
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38,922
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|
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Net loss
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$
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(235,544
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)
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$
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(62,030
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)
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$
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(459,686
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)
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$
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(295,561
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)
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Net loss per share:
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Basic and diluted
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$
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(0.31
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)
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$
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(0.10
|
)
|
|
$
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(0.62
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)
|
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$
|
(0.46
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of shares:
|
|
|
|
|
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|
||||||||
Basic and diluted
|
755,277
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|
|
641,088
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744,720
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|
|
641,061
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||||
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared per common share
|
$
|
0.035
|
|
|
$
|
—
|
|
|
$
|
0.105
|
|
|
$
|
1.170
|
|
|
For the Quarters Ended
|
|
For the Nine Months Ended
|
||||||||||||
|
September 30,
2018 |
|
September 30,
2017 |
|
September 30,
2018 |
|
September 30,
2017 |
||||||||
Net loss
|
$
|
(235,544
|
)
|
|
$
|
(62,030
|
)
|
|
$
|
(459,686
|
)
|
|
$
|
(295,561
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Change in fair value of cash flow hedges
|
8,621
|
|
|
—
|
|
|
6,332
|
|
|
—
|
|
||||
Foreign currency translation and other
|
9,427
|
|
|
15,420
|
|
|
(17,225
|
)
|
|
29,008
|
|
||||
Total other comprehensive income (loss), net of tax
|
18,048
|
|
|
15,420
|
|
|
(10,893
|
)
|
|
29,008
|
|
||||
Comprehensive loss
|
$
|
(217,496
|
)
|
|
$
|
(46,610
|
)
|
|
$
|
(470,579
|
)
|
|
$
|
(266,553
|
)
|
|
Number of Common Shares
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Accumulated
Other Comprehensive Loss |
|
Total
Stockholders' Equity |
|||||||||||
Balance as of December 31, 2017
|
641,119
|
|
|
$
|
2
|
|
|
$
|
4,435,329
|
|
|
$
|
(998,212
|
)
|
|
$
|
(4,007
|
)
|
|
$
|
3,433,112
|
|
Adoption of accounting standard, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
34,430
|
|
|
—
|
|
|
34,430
|
|
|||||
Common stock issued for initial public offering proceeds, net of related fees and tax benefit
|
105,000
|
|
|
1,050
|
|
|
1,405,656
|
|
|
—
|
|
|
—
|
|
|
1,406,706
|
|
|||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,893
|
)
|
|
(10,893
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(459,686
|
)
|
|
—
|
|
|
(459,686
|
)
|
|||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(80,511
|
)
|
|
—
|
|
|
(80,511
|
)
|
|||||
Share-based compensation expense
|
20,655
|
|
|
—
|
|
|
112,905
|
|
|
—
|
|
|
—
|
|
|
112,905
|
|
|||||
Other
|
(2
|
)
|
|
6,616
|
|
|
(6,610
|
)
|
|
(75
|
)
|
|
—
|
|
|
(69
|
)
|
|||||
Balance as of September 30, 2018
|
766,772
|
|
|
$
|
7,668
|
|
|
$
|
5,947,280
|
|
|
$
|
(1,504,054
|
)
|
|
$
|
(14,900
|
)
|
|
$
|
4,435,994
|
|
|
For the Nine Months Ended
|
||||||
|
September 30, 2018
|
|
September 30, 2017
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(459,686
|
)
|
|
$
|
(295,561
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and intangible asset amortization
|
1,446,768
|
|
|
1,387,245
|
|
||
Amortization of deferred subscriber acquisition costs
|
42,876
|
|
|
35,457
|
|
||
Amortization of deferred subscriber acquisition revenue
|
(56,381
|
)
|
|
(31,470
|
)
|
||
Share-based compensation expense
|
112,905
|
|
|
8,498
|
|
||
Deferred income taxes
|
(18,883
|
)
|
|
(46,133
|
)
|
||
Provision for losses on accounts receivable and inventory
|
43,948
|
|
|
42,322
|
|
||
Loss on extinguishment of debt
|
274,836
|
|
|
4,331
|
|
||
Other non-cash items, net
|
(1,920
|
)
|
|
36,804
|
|
||
Changes in operating assets and liabilities, net of the effects of acquisitions:
|
|
|
|
||||
Deferred subscriber acquisition costs
|
(135,777
|
)
|
|
(122,225
|
)
|
||
Deferred subscriber acquisition revenue
|
193,357
|
|
|
188,345
|
|
||
Other, net
|
(36,079
|
)
|
|
54,727
|
|
||
Net cash provided by operating activities
|
1,405,964
|
|
|
1,262,340
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Dealer generated customer accounts and bulk account purchases
|
(526,654
|
)
|
|
(486,037
|
)
|
||
Subscriber system assets
|
(428,292
|
)
|
|
(445,201
|
)
|
||
Capital expenditures
|
(94,151
|
)
|
|
(102,671
|
)
|
||
Acquisition of businesses, net of cash acquired
|
(48,473
|
)
|
|
(31,810
|
)
|
||
Other investing, net
|
13,550
|
|
|
16,549
|
|
||
Net cash used in investing activities
|
(1,084,020
|
)
|
|
(1,049,170
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from initial public offering, net of related fees
|
1,406,019
|
|
|
—
|
|
||
Proceeds from long-term borrowings
|
—
|
|
|
1,344,126
|
|
||
Repayment of long-term borrowings, including call premiums
|
(686,333
|
)
|
|
(712,690
|
)
|
||
Repayment of mandatorily redeemable preferred securities, including redemption premium
|
(852,769
|
)
|
|
—
|
|
||
Dividends on common stock
|
(52,959
|
)
|
|
(749,999
|
)
|
||
Other financing
|
(1,441
|
)
|
|
(11,023
|
)
|
||
Net cash used in financing activities
|
(187,483
|
)
|
|
(129,586
|
)
|
||
|
|
|
|
||||
Effect of currency translation on cash
|
(441
|
)
|
|
61
|
|
||
|
|
|
|
||||
Net increase in cash and cash equivalents and restricted cash and cash equivalents
|
134,020
|
|
|
83,645
|
|
||
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period
|
126,782
|
|
|
90,893
|
|
||
Cash and cash equivalents and restricted cash and cash equivalents at end of period
|
$
|
260,802
|
|
|
$
|
174,538
|
|
(in thousands)
|
September 30,
2018 |
|
December 31,
2017 |
||||
Gross carrying amount
|
$
|
4,170,741
|
|
|
$
|
3,762,905
|
|
Accumulated depreciation
|
(1,264,182
|
)
|
|
(870,222
|
)
|
||
Subscriber system assets, net
|
$
|
2,906,559
|
|
|
$
|
2,892,683
|
|
|
For the Quarters Ended
|
|
For the Nine Months Ended
|
||||||||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
|
September 30,
2018 |
|
September 30,
2017 |
||||||||
Subscriber system assets depreciation expense
|
$
|
137,488
|
|
|
$
|
135,055
|
|
|
$
|
410,236
|
|
|
$
|
401,275
|
|
(in thousands)
|
September 30,
2018 |
|
December 31,
2017 |
||||
Accrued interest
|
$
|
144,886
|
|
|
$
|
91,592
|
|
Payroll-related accruals
|
77,944
|
|
|
94,501
|
|
||
Other accrued liabilities
|
221,742
|
|
|
165,247
|
|
||
Accrued expenses and other current liabilities
|
$
|
444,572
|
|
|
$
|
351,340
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||
(in thousands)
|
Carrying
Value |
|
Fair
Value |
|
Carrying
Value |
|
Fair
Value |
||||||||
Debt instruments, excluding capital lease obligations
|
$
|
9,532,794
|
|
|
$
|
9,840,892
|
|
|
$
|
10,128,020
|
|
|
$
|
10,868,626
|
|
|
|
Balance at
December 31, 2017
|
|
Revenue Standard Adoption Adjustment
|
|
Balance at
January 1, 2018
|
||||||
(in thousands)
|
|
|
|
|||||||||
Assets
|
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
|
$
|
77,241
|
|
|
$
|
6,615
|
|
|
$
|
83,856
|
|
Deferred subscriber acquisition costs, net
|
|
282,478
|
|
|
33,380
|
|
|
315,858
|
|
|||
Other assets
|
|
123,967
|
|
|
6,321
|
|
|
130,288
|
|
|||
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
|
||||||
Deferred tax liabilities
|
|
1,376,708
|
|
|
11,886
|
|
|
1,388,594
|
|
|||
|
|
|
|
|
|
|
||||||
Stockholders' equity
|
|
|
|
|
|
|
||||||
Accumulated deficit
|
|
(998,212
|
)
|
|
34,430
|
|
|
(963,782
|
)
|
(in thousands)
|
September 30, 2018
|
|
December 31, 2017
|
||||
Cash and cash equivalents
|
$
|
256,917
|
|
|
$
|
122,899
|
|
Restricted cash and cash equivalents in prepaid expenses and other current assets
|
3,885
|
|
|
3,883
|
|
||
Cash and cash equivalents and restricted cash and cash equivalents at end of period
|
$
|
260,802
|
|
|
$
|
126,782
|
|
|
|
For the Quarter Ended
September 30, 2018
|
|
For the Nine Months Ended
September 30, 2018
|
||||||||||||||||||||
|
|
As Reported
|
|
Balances without Adoption of Standard
|
|
Effect of Adoption
Increase / (Decrease) |
|
As Reported
|
|
Balances without Adoption of Standard
|
|
Effect of Adoption
Increase / (Decrease) |
||||||||||||
Statements of Operations (in thousands)
|
|
|
|
|
|
|
||||||||||||||||||
Monitoring and related services
|
|
$
|
1,029,399
|
|
|
$
|
1,031,006
|
|
|
$
|
(1,607
|
)
|
|
$
|
3,069,817
|
|
|
$
|
3,074,260
|
|
|
$
|
(4,443
|
)
|
Installation and other
|
|
118,917
|
|
|
117,288
|
|
|
1,629
|
|
|
326,406
|
|
|
320,635
|
|
|
5,771
|
|
||||||
Total revenue
|
|
1,148,316
|
|
|
1,148,294
|
|
|
22
|
|
|
3,396,223
|
|
|
3,394,895
|
|
|
1,328
|
|
||||||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
|
263,286
|
|
|
263,286
|
|
|
—
|
|
|
757,905
|
|
|
757,905
|
|
|
—
|
|
||||||
Selling, general and administrative expenses(1)
|
|
295,119
|
|
|
302,039
|
|
|
(6,920
|
)
|
|
922,627
|
|
|
943,010
|
|
|
(20,383
|
)
|
||||||
Depreciation and intangible asset amortization
|
|
474,772
|
|
|
474,772
|
|
|
—
|
|
|
1,446,768
|
|
|
1,446,768
|
|
|
—
|
|
||||||
Merger, restructuring, integration, and other
|
|
(6,708
|
)
|
|
(6,708
|
)
|
|
—
|
|
|
1,770
|
|
|
1,770
|
|
|
—
|
|
||||||
Operating income
|
|
121,847
|
|
|
114,905
|
|
|
6,942
|
|
|
267,153
|
|
|
245,442
|
|
|
21,711
|
|
||||||
Interest expense, net
|
|
(152,405
|
)
|
|
(152,405
|
)
|
|
—
|
|
|
(501,217
|
)
|
|
(501,217
|
)
|
|
—
|
|
||||||
Loss on extinguishment of debt
|
|
(213,239
|
)
|
|
(213,239
|
)
|
|
—
|
|
|
(274,836
|
)
|
|
(274,836
|
)
|
|
—
|
|
||||||
Other income
|
|
552
|
|
|
552
|
|
|
—
|
|
|
29,374
|
|
|
29,374
|
|
|
—
|
|
||||||
Loss before income taxes
|
|
(243,245
|
)
|
|
(250,187
|
)
|
|
6,942
|
|
|
(479,526
|
)
|
|
(501,237
|
)
|
|
21,711
|
|
||||||
Income tax benefit
|
|
7,701
|
|
|
9,123
|
|
|
(1,422
|
)
|
|
19,840
|
|
|
24,703
|
|
|
(4,863
|
)
|
||||||
Net loss
|
|
$
|
(235,544
|
)
|
|
$
|
(241,064
|
)
|
|
$
|
5,520
|
|
|
$
|
(459,686
|
)
|
|
$
|
(476,534
|
)
|
|
$
|
16,848
|
|
(1)
|
For the quarter and nine months ended September 30, 2018, the effect of adoption includes approximately $5 million and $14 million, respectively, associated with non-cash amortization expense of deferred subscriber acquisition costs.
|
|
|
As Reported
|
|
Balances without
Adoption of Standard |
|
Effect of Adoption
Increase / (Decrease) |
||||||
Balance Sheet (in thousands)
|
|
|
|
|||||||||
Assets
|
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
|
$
|
107,364
|
|
|
$
|
98,851
|
|
|
$
|
8,513
|
|
Deferred subscriber acquisition costs, net
|
|
400,946
|
|
|
346,067
|
|
|
54,879
|
|
|||
Other assets
|
|
148,242
|
|
|
143,607
|
|
|
4,635
|
|
|||
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
|
||||||
Deferred tax liabilities
|
|
1,370,142
|
|
|
1,353,393
|
|
|
16,749
|
|
|||
|
|
|
|
|
|
|
||||||
Stockholders' equity
|
|
|
|
|
|
|
||||||
Accumulated deficit
|
|
(1,504,054
|
)
|
|
(1,555,332
|
)
|
|
51,278
|
|
(in thousands)
|
|
For the Quarter Ended September 30, 2018
|
|
For the Nine Months Ended September 30, 2018
|
||||
Monitoring and related services
|
|
$
|
1,029,399
|
|
|
$
|
3,069,817
|
|
Installation and other
|
|
118,917
|
|
|
326,406
|
|
||
Total revenue
|
|
$
|
1,148,316
|
|
|
$
|
3,396,223
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
(in thousands)
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
||||||||||||
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Contracts and related customer relationships
|
$
|
7,284,196
|
|
|
$
|
(2,545,113
|
)
|
|
$
|
4,739,083
|
|
|
$
|
6,748,355
|
|
|
$
|
(1,749,327
|
)
|
|
$
|
4,999,028
|
|
Dealer relationships
|
1,603,490
|
|
|
(209,915
|
)
|
|
1,393,575
|
|
|
1,605,910
|
|
|
(146,299
|
)
|
|
1,459,611
|
|
||||||
Other
|
196,898
|
|
|
(174,438
|
)
|
|
22,460
|
|
|
195,363
|
|
|
(130,227
|
)
|
|
65,136
|
|
||||||
Total definite-lived intangible assets
|
9,084,584
|
|
|
(2,929,466
|
)
|
|
6,155,118
|
|
|
8,549,628
|
|
|
(2,025,853
|
)
|
|
6,523,775
|
|
||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trade name
|
1,333,000
|
|
|
—
|
|
|
1,333,000
|
|
|
1,333,000
|
|
|
—
|
|
|
1,333,000
|
|
||||||
Intangible assets
|
$
|
10,417,584
|
|
|
$
|
(2,929,466
|
)
|
|
$
|
7,488,118
|
|
|
$
|
9,882,628
|
|
|
$
|
(2,025,853
|
)
|
|
$
|
7,856,775
|
|
|
For the Quarters Ended
|
|
For the Nine Months Ended
|
||||||||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
|
September 30,
2018 |
|
September 30,
2017 |
||||||||
Definite-lived intangible asset amortization expense
|
$
|
293,535
|
|
|
$
|
292,023
|
|
|
$
|
906,233
|
|
|
$
|
864,918
|
|
(in thousands)
|
|
||
Remainder of 2018
|
$
|
295,632
|
|
2019
|
1,143,309
|
|
|
2020
|
1,089,492
|
|
|
2021
|
987,260
|
|
|
2022
|
640,412
|
|
|
2023
|
284,929
|
|
Declared Date
|
|
Dividend per Share
|
|
Record Date
|
|
Payment Date
|
March 15, 2018
|
|
$0.035
|
|
March 26, 2018
|
|
April 5, 2018
|
May 9, 2018
|
|
$0.035
|
|
June 25, 2018
|
|
July 10, 2018
|
August 8, 2018
|
|
$0.035
|
|
September 18, 2018
|
|
October 2, 2018
|
|
For the Quarters Ended
|
|
For the Nine Months Ended
|
||||||||||||
(in thousands, except per share amounts)
|
September 30,
2018 |
|
September 30,
2017 |
|
September 30,
2018 |
|
September 30,
2017 |
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(235,544
|
)
|
|
$
|
(62,030
|
)
|
|
$
|
(459,686
|
)
|
|
$
|
(295,561
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of shares outstanding,
basic and diluted |
755,277
|
|
|
641,088
|
|
|
744,720
|
|
|
641,061
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(0.31
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.62
|
)
|
|
$
|
(0.46
|
)
|
|
For the Quarters Ended
|
||||||
(in thousands, except as otherwise indicated)
|
September 30, 2018
|
|
September 30, 2017
|
||||
Results of Operations:
|
|
|
|
||||
Monitoring and related services
|
$
|
1,029,399
|
|
|
$
|
1,012,292
|
|
Installation and other
|
118,917
|
|
|
70,670
|
|
||
Total revenue
|
1,148,316
|
|
|
1,082,962
|
|
||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
263,286
|
|
|
224,140
|
|
||
Selling, general and administrative expenses
|
295,119
|
|
|
284,137
|
|
||
Depreciation and intangible asset amortization
|
474,772
|
|
|
467,929
|
|
||
Merger, restructuring, integration, and other
|
(6,708
|
)
|
|
14,505
|
|
||
Operating income
|
121,847
|
|
|
92,251
|
|
||
Interest expense, net
|
(152,405
|
)
|
|
(184,369
|
)
|
||
Loss on extinguishment of debt
|
(213,239
|
)
|
|
—
|
|
||
Other income
|
552
|
|
|
22,960
|
|
||
Loss before income taxes
|
(243,245
|
)
|
|
(69,158
|
)
|
||
Income tax benefit
|
7,701
|
|
|
7,128
|
|
||
Net loss
|
$
|
(235,544
|
)
|
|
$
|
(62,030
|
)
|
|
|
|
|
||||
Key Performance Indicators:(1)
|
|
|
|
||||
RMR
|
$
|
340,278
|
|
|
$
|
333,814
|
|
Gross customer revenue attrition (percent)
|
13.4
|
%
|
|
13.8
|
%
|
||
Adjusted EBITDA(2)
|
$
|
609,763
|
|
|
$
|
594,453
|
|
(1)
|
Refer to the “—Key Performance Indicators” section for the definitions of these key performance indicators.
|
(2)
|
Adjusted EBITDA is a non-GAAP measure. Refer to the “—Non-GAAP Measures” section for the definition of this term and reconciliation to the most comparable GAAP measure.
|
|
For the Nine Months Ended
|
||||||
(in thousands, except as otherwise indicated)
|
September 30, 2018
|
|
September 30, 2017
|
||||
Results of Operations:
|
|
|
|
||||
Monitoring and related services
|
$
|
3,069,817
|
|
|
$
|
3,017,026
|
|
Installation and other
|
326,406
|
|
|
192,944
|
|
||
Total revenue
|
3,396,223
|
|
|
3,209,970
|
|
||
Cost of revenue (exclusive of depreciation and amortization shown separately below)
|
757,905
|
|
|
658,095
|
|
||
Selling, general and administrative expenses
|
922,627
|
|
|
923,048
|
|
||
Depreciation and intangible asset amortization
|
1,446,768
|
|
|
1,387,245
|
|
||
Merger, restructuring, integration, and other
|
1,770
|
|
|
54,170
|
|
||
Operating income
|
267,153
|
|
|
187,412
|
|
||
Interest expense, net
|
(501,217
|
)
|
|
(553,529
|
)
|
||
Loss on extinguishment of debt
|
(274,836
|
)
|
|
(4,331
|
)
|
||
Other income
|
29,374
|
|
|
35,965
|
|
||
Loss before income taxes
|
(479,526
|
)
|
|
(334,483
|
)
|
||
Income tax benefit
|
19,840
|
|
|
38,922
|
|
||
Net loss
|
$
|
(459,686
|
)
|
|
$
|
(295,561
|
)
|
|
|
|
|
||||
Summary Cash Flow Data:
|
|
|
|
||||
Net cash provided by operating activities
|
$
|
1,405,964
|
|
|
$
|
1,262,340
|
|
Net cash used in investing activities
|
$
|
(1,084,020
|
)
|
|
$
|
(1,049,170
|
)
|
Net cash used in financing activities
|
$
|
(187,483
|
)
|
|
$
|
(129,586
|
)
|
|
|
|
|
||||
Key Performance Indicators:(1)
|
|
|
|
||||
RMR
|
$
|
340,278
|
|
|
$
|
333,814
|
|
Gross customer revenue attrition (percent)
|
13.4
|
%
|
|
13.8
|
%
|
||
Adjusted EBITDA(2)
|
$
|
1,839,917
|
|
|
$
|
1,754,383
|
|
Free Cash Flow(2)
|
$
|
356,867
|
|
|
$
|
228,431
|
|
(1)
|
Refer to the “—Key Performance Indicators” section for the definitions of these key performance indicators.
|
(2)
|
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.
|
|
For the Quarters Ended
|
|
For the Nine Months Ended
|
||||||||||||
(in thousands)
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
Net loss
|
$
|
(235,544
|
)
|
|
$
|
(62,030
|
)
|
|
$
|
(459,686
|
)
|
|
$
|
(295,561
|
)
|
Interest expense, net
|
152,405
|
|
|
184,369
|
|
|
501,217
|
|
|
553,529
|
|
||||
Income tax benefit(1)
|
(7,701
|
)
|
|
(7,128
|
)
|
|
(19,840
|
)
|
|
(38,922
|
)
|
||||
Depreciation and intangible asset amortization
|
474,772
|
|
|
467,929
|
|
|
1,446,768
|
|
|
1,387,245
|
|
||||
Merger, restructuring, integration, and other(2)
|
(6,708
|
)
|
|
14,505
|
|
|
1,770
|
|
|
54,170
|
|
||||
Financing and consent fees(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
63,593
|
|
||||
Foreign currency (gains)/losses(4)
|
(622
|
)
|
|
(14,116
|
)
|
|
1,117
|
|
|
(26,773
|
)
|
||||
Loss on extinguishment of debt(5)
|
213,239
|
|
|
—
|
|
|
274,836
|
|
|
4,331
|
|
||||
Other non-cash items(6)
|
414
|
|
|
(3,672
|
)
|
|
988
|
|
|
10,122
|
|
||||
Radio conversion costs(7)
|
1,725
|
|
|
3,006
|
|
|
4,751
|
|
|
9,597
|
|
||||
Amortization of deferred subscriber acquisition costs(8)
|
15,724
|
|
|
13,849
|
|
|
42,876
|
|
|
35,457
|
|
||||
Amortization of deferred subscriber acquisition revenue(9)
|
(20,826
|
)
|
|
(12,824
|
)
|
|
(56,381
|
)
|
|
(31,470
|
)
|
||||
Share-based compensation expense(10)
|
17,803
|
|
|
3,609
|
|
|
112,905
|
|
|
8,498
|
|
||||
Management fees and other charges(11)
|
5,082
|
|
|
6,956
|
|
|
(11,404
|
)
|
|
20,567
|
|
||||
Adjusted EBITDA
|
$
|
609,763
|
|
|
$
|
594,453
|
|
|
$
|
1,839,917
|
|
|
$
|
1,754,383
|
|
(1)
|
For 2018, reflects the impact of Tax Reform. Refer to Note 7 “Income Taxes” to the condensed consolidated financial statements for further discussion.
|
(2)
|
Represents certain direct and incremental costs resulting from acquisitions made by us and certain related restructuring and integration efforts as a result of those acquisitions, as well as fair value remeasurements and impairment charges on our strategic investments.
|
(3)
|
For 2017, includes fees incurred in connection with the Special Dividend, 2017 First Lien Credit Facilities Amendments, and the 2017 Incremental Term B-1 Loan.
|
(4)
|
Relates to the translation of monetary assets and liabilities that are denominated in Canadian dollars due to intercompany loans. In the first quarter of 2018, we designated certain of these intercompany loans to be of a long-term-investment nature and are recognizing foreign currency losses/(gains) on these loans in accumulated other comprehensive loss in the Condensed Consolidated Balance Sheet.
|
(5)
|
For 2018, loss on extinguishment of debt includes (i) $213 million associated with the Koch Redemption in July 2018, which is primarily related to the payment of the redemption premium as well as the write-off of unamortized discount and deferred financing costs and (ii) $62 million associated with the partial paydown of the Prime Notes in February 2018, which is primarily related to the payment of the call premium as well as the write-off of a portion of the unamortized deferred financing costs. For 2017, loss on extinguishment of debt relates to the write-off of a portion of the debt discount and deferred financing costs associated with the amendments and restatements to our First Lien Credit Facilities.
|
(6)
|
Represents other non-cash (gains)/losses associated with non-recurring items.
|
(7)
|
Represents costs associated with upgrading cellular technology used in many of our security systems.
|
(8)
|
Represents non-cash amortization expense associated with certain incremental contract costs that are deferred (referred to as deferred subscriber acquisition costs) including selling expenses (primarily commissions) related to acquiring customers.
|
(9)
|
Represents non-cash amortization associated with non-refundable fees that are deferred (referred to as deferred subscriber acquisition revenue) received in connection with the initiation of a monitoring contract.
|
(10)
|
Represents compensation expense associated with our equity compensation plans. Refer to Note 10 “Share-based Compensation” to the condensed consolidated financial statements for further discussion.
|
(11)
|
In 2018, primarily includes income of approximately $22 million of one-time licensing fees, as well as a gain of $7.5 million from the sale of equity in a third party that we received as part of a settlement during the second quarter of 2018. Refer to Note 1 “Basis of Presentation and
|
|
For the Nine Months Ended
|
||||||
(in thousands)
|
September 30, 2018
|
|
September 30, 2017
|
||||
Net cash provided by operating activities
|
$
|
1,405,964
|
|
|
$
|
1,262,340
|
|
Dealer generated customer accounts and bulk account purchases
|
(526,654
|
)
|
|
(486,037
|
)
|
||
Subscriber system assets
|
(428,292
|
)
|
|
(445,201
|
)
|
||
Capital expenditures
|
(94,151
|
)
|
|
(102,671
|
)
|
||
Free Cash Flow
|
$
|
356,867
|
|
|
$
|
228,431
|
|
Declared Date
|
|
Dividend per Share
|
|
Record Date
|
|
Payment Date
|
March 15, 2018
|
|
$0.035
|
|
March 26, 2018
|
|
April 5, 2018
|
May 9, 2018
|
|
$0.035
|
|
June 25, 2018
|
|
July 10, 2018
|
August 8, 2018
|
|
$0.035
|
|
September 18, 2018
|
|
October 2, 2018
|
|
For the Nine Months Ended
|
||||||
(in thousands)
|
September 30, 2018
|
|
September 30, 2017
|
||||
Net cash provided by operating activities
|
$
|
1,405,964
|
|
|
$
|
1,262,340
|
|
Net cash used in investing activities
|
$
|
(1,084,020
|
)
|
|
$
|
(1,049,170
|
)
|
Net cash used in financing activities
|
$
|
(187,483
|
)
|
|
$
|
(129,586
|
)
|
•
|
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.
|
•
|
On January 22, 2018, we issued 20,636,766 shares of common stock to Ultimate Parent.
|
•
|
On January 25, 2018, we issued 147,620 shares of common stock to an executive officer of the Company to satisfy the Company’s obligations under a retention agreement. The retention grant was fully vested upon issuance.
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price
Paid Per Share |
|||
July 1, 2018 - July 31, 2018
|
|
—
|
|
|
$
|
—
|
|
August 1, 2018 - August 31, 2018
|
|
—
|
|
|
$
|
—
|
|
September 1, 2018 - September 30, 2018
|
|
—
|
|
|
$
|
—
|
|
Total
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Incorporated
by Reference
|
||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
Exhibit
|
|
Filing Date
|
|
|
8-K
|
|
10.1
|
|
03/19/2018
|
||
|
|
10-Q
|
|
10.2
|
|
05/09/2018
|
||
|
|
10-Q
|
|
10.3
|
|
05/09/2018
|
||
|
|
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
|
||
|
|
10-Q
|
|
10.9
|
|
08/09/2018
|
||
|
|
10-Q
|
|
10.10
|
|
08/09/2018
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
101
|
|
XBRL Instant Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
|
|
|
|
|
|
ADT Inc.
|
|
|
|
|
|
Date:
|
November 8, 2018
|
By:
|
/s/ Jeffrey Likosar
|
|
|
Name:
|
Jeffrey Likosar
|
|
|
Title:
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
|
|
1.
|
Entire Agreement.
|
2.
|
Termination of Employment.
|
B.
|
Duties.
|
3.
|
Entitlements.
|
6.
|
Restrictive Covenants.
|
B.
|
Has carefully read and fully understands all of the provisions of this Agreement;
|
D.
|
Knowingly and voluntarily agrees to all of the terms set forth in this Agreement;
|
E.
|
Knowingly and voluntarily intends to be legally bound by the terms of this Agreement;
|
14.
|
Miscellaneous.
|
EXECUTIVE
|
|||||
|
|
|
|
|
|
Date:
|
September 4, 2018
|
|
/s/ Timothy J. Whall
|
|
|
|
|
|
TIMOTHY J. WHALL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADT
|
|||||
|
|
|
ADT INC.
|
|
|
|
|
|
|
|
|
Date:
|
September 4, 2018
|
|
By:
|
/s/ P. Gray Finney
|
|
|
|
|
|
Name: P. Gray Finney
|
|
|
|
|
|
Title: Senior Vice President, Chief
|
|
|
|
|
|
Legal Officer and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPANY
|
|||||
|
|
|
THE ADT SECURITY CORPORATION
|
||
|
|
|
|
|
|
Date:
|
September 4, 2018
|
|
By:
|
/s/ P. Gray Finney
|
|
|
|
|
|
Name: P. Gray Finney
|
|
|
|
|
|
Title: Senior Vice President, Chief
|
|
|
|
|
|
Legal Officer and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For purposes of Section 3.E, Section 11, Section 14.J, and Section 14.K only:
|
|||||
|
|
|
|
|
|
TOPCO
|
|||||
|
|
|
PRIME SECURITY SERVICES TOPCO
|
||
|
|
|
PARENT, L.P.
|
||
|
|
|
|
|
|
Date:
|
September 4, 2018
|
|
By:
|
/s/ P. Gray Finney
|
|
|
|
|
|
Name: P. Gray Finney
|
|
|
|
|
|
Title: Senior Vice President, Chief
|
|
|
|
|
|
Legal Officer and Secretary
|
|
|
|
|
|
|
|
B.
|
Has carefully read and fully understands all of the provisions of this Release;
|
D.
|
Knowingly and voluntarily agrees to all of the terms set forth in this Release;
|
E.
|
Knowingly and voluntarily intends to be legally bound by the terms of this Release;
|
8.
|
Miscellaneous. Section 14 of the Retirement Agreement is incorporated into this Release,
|
WHALL
|
|||||
|
|
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
TIMOTHY J. WHALL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADT
|
|||||
|
|
|
ADT INC.
|
|
|
|
|
|
|
|
|
Date:
|
|
|
By:
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPANY
|
|||||
|
|
|
THE ADT SECURITY CORPORATION
|
||
|
|
|
|
|
|
Date:
|
|
|
By:
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOPCO
|
|||||
|
|
|
PRIME SECURITY SERVICES TOPCO
|
||
|
|
|
PARENT, L.P.
|
||
|
|
|
|
|
|
Date:
|
|
|
By:
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
“Agreement” shall have the meaning set forth in the preamble hereto.
|
(e)
|
“Annual Base Salary” shall have the meaning set forth in Section 3(a).
|
(f)
|
“Annual Bonus” shall have the meaning set forth in Section 3(b).
|
(g)
|
“Board” shall mean the Board of Directors of ADT Inc.
|
(i)
|
“Code” shall mean the Internal Revenue Code of 1986, as amended.
|
(n)
|
“Executive” shall have the meaning set forth in the preamble hereto.
|
(o)
|
“Initial Term” shall have the meaning set forth in Section 2(b).
|
(p)
|
“Notice of Termination” shall have the meaning set forth in Section 4(b).
|
(r)
|
“Proprietary Information” shall have the meaning set forth in Section 7(a).
|
(s)
|
“Severance Period” shall have the meaning set forth in Section 5(b)(i).
|
(t)
|
“Target Bonus” shall have the meaning set forth in Section 3(b).
|
(u)
|
“Term” shall have the meaning set forth in Section 2(b).
|
2.
|
Employment.
|
(c)
|
Position and Duties.
|
3.
|
Compensation and Related Matters.
|
5.
|
Company Obligations upon Termination of Employment.
|
6.
|
Non-Competition; Non-Solicitation; Non-Hire.
|
7.
|
Nondisclosure of Proprietary Information; Nondisparagement.
|
11.
|
Section 409A of the Code.
|
12.
|
Section 280G of the Code.
|
|
COMPANY
|
|
|
|
|
|
ADT LLC
|
|
|
|
|
|
By:
|
/s/ P. Gray Finney
|
|
|
Name: P. Gray Finney
|
|
|
Title: Senior Vice President, Chief
|
|
|
Legal Officer and Secretary
|
|
|
|
|
|
|
|
EXECUTIVE
|
|
|
/s/ James D. DeVries
|
|
|
James D. DeVries
|
|
|
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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
|
|
|
November 8, 2018
|
|
|
/s/ Jeffrey Likosar
|
|
|
Jeffrey Likosar
|
|
|
Chief Financial Officer
|
|
|
November 8, 2018
|
|
|