0001703056 false 0001703056 2020-08-06 2020-08-06 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 6, 2020

 

ADT Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware   001-38352   47-4116383

(State of

Incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

1501 Yamato Road

Boca Raton, Florida

  33431
(Address of principal executive offices)   (Zip Code)

 

(561) 988-3600

(Registrant’s telephone number, including area code)

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

         
Title of each class  

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.01 per share   ADT   New York Stock Exchange

 

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

  

 

 

Item 7.01 Regulation FD Disclosure.

ADT Inc. (the “Company”) is disclosing under Item 7.01 of this Current Report on Form 8-K the information attached to this report as Exhibit 99.1, which information is incorporated by reference herein. This information, which has not been previously reported, was provided on August 6, 2020, to potential investors in the Offering (as defined below).

The information in this Item 7.01 and Exhibit 99.1 hereto is furnished solely pursuant to Item 7.01 of this Form 8-K. Consequently, it is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or otherwise subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Exchange Act or Securities Act, if such subsequent filing specifically references this Form 8-K.

Item 8.01 Other Events.

Notes Offering

On August 6, 2020, the Company announced that Prime Security Services Borrower, LLC (the “Issuer”) and Prime Finance Inc. (the “Co-Issuer” and, collectively with the Issuer, the “Issuers”), its indirect wholly owned subsidiaries, are offering $750 million aggregate principal amount of first-priority senior secured notes due 2027 in a private transaction pursuant to Rule 144A and/or Regulation S under the Securities Act of 1933, as amended (the “Securities Act”) (the “Offering”). The Offering is subject to market and other conditions, may be delayed or may not occur as described or at all.

Intention to Redeem the 2021 Notes

On August 6, 2020, the Company further announced that subject to, and upon, the completion of the Offering, The ADT Security Corporation (“ADTSC”), an indirect wholly owned subsidiary of the Company, intends to redeem (the “Redemption”) $750 million aggregate principal amount of ADTSC’s outstanding 6.250% Senior Notes due 2021 (the “2021 Notes”).

Following the Redemption, $250 million aggregate principal amount of 2021 Notes will remain outstanding. The Company intends to repay this amount on, or prior to, October 15, 2021, the maturity date of the 2021 Notes, with cash on hand and/or borrowings under its revolving credit facility.  As a reminder, as disclosed in the Company’s Current Report on Form 8-K, filed on August 3, 2020 with the Securities and Exchange Commission, the Company expects to receive $450 million in proceeds upon the consummation of the recently announced transaction with Google LLC (“Google”) in the third quarter of 2020.

A copy of the press release announcing the Offering and the Redemption is attached to this report as Exhibit 99.2 and incorporated by reference herein.

Forward Looking Statements

The Company has made statements in this filing and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties. All statements, other than statements of historical fact, included in this document are, or could be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to, among other things, our recently executed long-term, strategic partnership with Google and any stated or implied outcomes with respect thereto, our future growth prospects, our success with respect to product innovation and the market acceptance thereof, the current or future market size for our products, our ability to meet the milestones we have established with respect to our strategic partnership with Google, our ability to effectively utilize any of the amounts invested in us by Google, our anticipated financial performance, management’s plans and objectives for future operations, business prospects, the outcome of regulatory proceedings, market conditions, our ability to successfully respond to the challenges posed by the COVID-19 pandemic, and other matters. Any forward-looking statement made in this filing speaks

 2

 

 

only as of the date on which it is made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. Forward-looking statements can be identified by various words such as “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions. These forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to management. The Company cautions that these statements are subject to risks and uncertainties, many of which are outside of the Company’s control, and could cause future events or results to be materially different from those stated or implied in this document, or to not occur at all, including among others, risk factors that are described in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.

 

Document

99.1   Disclosure provided to potential investors
99.2   Press Release, dated August 6, 2020, announcing the Offering and the Redemption
104   Cover page Interactive Data File (embedded with the Inline XBRL document)

 

  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

Date: August 6, 2020 ADT Inc.  
       
  By: /s/ Jeffrey Likosar  
    Jeffrey Likosar  
    Chief Financial Officer  

 

 

 

 

EXHIBIT 99.1

Adjusted EBITDA and Covenant Adjusted EBITDA (Pre-SAC) are non-GAAP measures that we believe are useful to investors to measure the operational strength and performance of our business and to provide additional information to investors about certain non-cash items and about unusual items that we do not expect to continue at the same level in the future, as well as other items that are not core to our operations. Further, we believe Adjusted EBITDA and Covenant Adjusted EBITDA (Pre-SAC) provide a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against that of other peer companies using similar measures.
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 and amortization of dealer and other intangible assets, (iv) amortization of deferred costs and deferred revenue associated with subscriber acquisitions, (vi) merger, restructuring, integration, and other, (vii) losses on extinguishment of debt, (viii) radio conversion costs, (ix) financing and consent fees, (x) foreign currency gains/losses, (xi) acquisition related adjustments, and (xii) other charges and non-cash items. We define Covenant Adjusted EBITDA (Pre-SAC) as Adjusted EBITDA adjusted for costs in our statement of operations associated with the acquisition of customers, net of revenue associated with the sale of equipment (expensed net SAC).
There are material limitations to using Adjusted EBITDA and Covenant Adjusted EBITDA (Pre-SAC). Adjusted EBITDA and Covenant Adjusted EBITDA do not take into account certain significant items, including depreciation and amortization, interest, taxes, and other adjustments, including subscriber acquisition costs, which directly affect our net income or loss. These limitations are best addressed by considering the economic effects of the excluded items independently and by considering Adjusted EBITDA and Covenant Adjusted EBITDA (Pre-SAC) in conjunction with net income or loss as calculated in accordance with GAAP.
The table below reconciles net (loss) income to Adjusted EBITDA and Covenant Adjusted EBITDA (Pre-SAC) for the periods presented.
         
Six Months Ended
June 30,
   
Years Ended December 31,
 
(in thousands)
 
Twelve Months Ended
June 30, 2020
   
2020
   
2019
   
2019
   
2018
   
2017
 
Net (loss) income          
 
$
(660,657
)
 
$
(407,034
)
 
$
(170,527
)
 
$
(424,150
)
 
$
(609,155
)
 
$
342,627
 
Interest expense, net          
   
718,659
     
412,632
     
313,546
     
619,573
     
663,204
     
732,841
 
Income tax benefit          
   
(158,628
)
   
(105,795
)
   
(45,209
)
   
(98,042
)
   
(23,463
)
   
(764,313
)
Depreciation and intangible asset amortization          
   
1,959,233
     
966,893
     
996,742
     
1,989,082
     
1,930,929
     
1,863,299
 
Amortization of deferred subscriber acquisition costs          
   
87,784
     
45,416
     
37,760
     
80,128
     
59,928
     
51,491
 
Amortization of deferred subscriber acquisition revenue          
   
(115,829
)
   
(59,017
)
   
(50,472
)
   
(107,284
)
   
(79,136
)
   
(46,454
)
Share based compensation expense          
   
87,703
     
48,327
     
46,250
     
85,626
     
135,012
     
11,276
 
Merger, restructuring, integration and other          
   
143,445
     
120,832
     
13,269
     
35,882
     
(3,344
)
   
64,828
 
Goodwill impairment          
   
45,482
     
     
     
45,482
     
87,962
     
 
Loss on sale of business          
   
62,708
     
757
     
     
61,951
     
     
 
Loss on extinguishment of debt          
   
81,446
     
65,843
     
88,472
     
104,075
     
274,836
     
4,331
 
Radio conversion costs, net(a)          
   
35,734
     
11,670
     
919
     
24,983
     
5,099
     
12,244
 
Financing and consent fees(b)          
   
27,123
     
5,260
     
1,387
     
23,250
     
8,857
     
63,593
 
Foreign currency (gains)/losses(c)          
   
(512
)
   
     
(738
)
   
(1,250
)
   
3,228
     
(23,804
)
Acquisition related adjustments(d)          
   
11,030
     
1,444
     
12,699
     
22,285
     
16,178
     
2,588
 
Licensing Fees(e)          
   
     
     
     
     
(21,533
)
   
 
Other(f)          
   
9,514
     
(4,629
)
   
7,476
     
21,619
     
4,895
     
38,256
 
Adjusted EBITDA          
 
$
2,334,235
   
$
1,102,599
   
$
1,251,574
   
$
2,483,210
   
$
2,453,497
   
$
2,352,803
 
Expensed Net SAC(g)     
   
305,391
     
167,449
     
145,166
     
283,108
     
295,717
     
334,764
 
Covenant Adjusted EBITDA (Pre-SAC)          
 
$
2,639,626
   
$
1,270,048
   
$
1,396,740
   
$
2,766,318
   
$
2,749,214
   
$
2,687,567
 


(a)
Represents costs, net of any incremental revenue earned, associated with replacing cellular technology used in many of our security systems pursuant to a replacement program.

(b)
Represents fees expensed associated with financing transaction.

(c)
Relates to the conversion of intercompany loans that are denominated in Canadian dollars to U.S. dollars.

(d)
Represents amortization of purchase accounting adjustments and compensation arrangements related to acquisitions.

(e)
Represents other income related to $22 million of one-time licensing fees.

(f)
Represents other charges and non-cash items as well as certain advisory and other costs associated with our transition to a public company. During 2019, includes a $10 million write-off of notes receivable from a strategic investment. During 2018, includes a gain of $7.5 million from the sale of equity in a third-party that we received as part of a settlement. During 2017, includes fees of $20 million related to a management consulting agreement, which was terminated in connection with the consummation of the initial public offering.
 
(g)
Represents expensed costs associated with the acquisition of new customers, net of revenue associated with the sale of equipment.

EXHIBIT 99.2

ADT Announces Notes Offering
BOCA RATON, Fla., Aug. 6, 2020 – ADT Inc. (NYSE: ADT) (the “Company” or “ADT”), a leading provider of security, automation, and smart home solutions serving consumer and business customers in the United States, announced that Prime Security Services Borrower, LLC (the “Issuer”) and Prime Finance Inc. (the “Co-Issuer” and, together with the Issuer, the “Issuers”), its indirect wholly owned subsidiaries, are proposing to issue and sell $750 million aggregate principal amount of first-priority senior secured notes due 2027 (the “Notes”) in an offering that will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) (the “Offering”).
Upon the satisfactory consummation of the Offering, The ADT Security Corporation (“ADTSC”), an indirect wholly owned subsidiary of the Company, intends to deliver a Notice of Redemption to holders of its 6.250% Senior Notes due 2021 (the “2021 Notes”), which will provide for the redemption by ADTSC of $750 million aggregate principal amount of the outstanding 2021 Notes (the “Redemption”).
The Issuers expect to use the proceeds from the Offering, along with cash on hand, to (i) redeem $750 million outstanding aggregate principal amount of the 2021 Notes in the Redemption and (ii) pay related fees and expenses in connection with the transactions.
The Notes are being offered only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act, and outside the United States, only to non-U.S. investors pursuant to Regulation S. The Notes will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from registration requirements or a transaction not subject to the registration requirements of the Securities Act or any state securities laws.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering, solicitation or sale would be unlawful. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.
Nothing in this press release should be construed as a notice to redeem any 2021 Notes. Any such notice will be made separately pursuant to and in accordance with the terms of the indenture governing the 2021 Notes.

About ADT Inc.
ADT is a leading provider of security, automation, and smart home solutions serving consumer and business customers through more than 300 locations, 9 owned and operated monitoring centers, and the largest network of security professionals in the United States. The Company offers many ways to help protect customers by delivering lifestyle-driven solutions via professionally installed, do-it-yourself, mobile, and digital-based offerings for residential, small business, and larger commercial customers. For more information, please visit www.adt.com or follow us on TwitterLinkedInFacebook, and Instagram.
Forward-Looking Statements
The Company has made statements in this press release and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties. All statements, other than statements of historical fact, included in this document are, or could be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to, among other things, our recently executed long-term, strategic partnership with Google LLC (“Google”) and any stated or implied outcomes with respect thereto, our future growth prospects, our success with respect to product innovation and the market acceptance thereof, the current or future market size for our products, our ability to meet the milestones we have established with respect to our strategic partnership with Google, our ability to effectively utilize any of the amounts invested in us by Google, our anticipated financial performance, management’s plans and objectives for future operations, business prospects, the outcome of regulatory proceedings, market conditions, our ability to successfully respond to the challenges posed by the COVID-19 pandemic, and other matters. Any forward-looking statement made in this press release speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. Forward-looking statements can be identified by various words such as “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions. These forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to management. The Company cautions that these statements are subject to risks and uncertainties, many of which are outside of the Company’s control, and could cause future events or results to be materially different from those stated or implied in this press release, including among others, risk factors that are described in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein.
          

Contacts:
ADT Investor Relations
Derek Fiebig
derekfiebig@adt.com

ADT Media
Paul Wiseman
paulwiseman@adt.com



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