Good day, ladies and gentlemen, and welcome to the Q2 2013 ADT Corp. Earnings Conference Call. My name is Charlene, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Mr. Craig Streem. Please proceed, sir.

Thank you, Charlene. Good morning, everyone. Thanks for joining us today for our discussion of ADT's second quarter results for fiscal 2013. With me this morning are ADT's Chief Executive Officer, Naren Gursahaney; and our Chief Financial Officer, Kathy Mikells. My role this morning is to remind everyone that the discussion today contains certain forward-looking statements about the company's future financial performance and business prospects which are subject to risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings press release, which was furnished to the SEC in a 8-K report, and in our Form 10-Q for the quarter ended March 29, 2013, which we expect to file with the SEC later today. In the second quarter 2013 earnings release and accompanying slides, which are now posted on our website at adt.com, we've provided information that compares and reconciles our non-GAAP financial measures with GAAP financial information, and we explain why these presentations are useful to management and investors. And certainly, we urge you to review that information in conjunction with today's discussion. For those of you following on the webcast, we will be using the slide deck that you see there to supplement our commentary this morning. Please note that unless otherwise mentioned, references to our operating results exclude special items and these metrics are non-GAAP measures. Now let me turn the call over to Naren, for his opening comments.

Thanks, Craig, and good morning, everyone. Thank you, all, for joining us. I want to begin by reminding you of the 3 basic elements of value creation at ADT that drive our operating performance, as well as how we think about long-term strategic direction of the business. First, we're focused on achieving profitable growth by effectively balancing the 5 key drivers of the business, which I'll review with you in a moment when we cover Slide 5. Second, we are committed to growing steady-state free cash flow on an absolute and per-share basis which are good indicators of the cash flow strength and cash returns in the business. Kathy will review this with you later in the call. And third, we will continue to take a balanced approach to capital management. We have a resilient, predictable business model which enables us to invest in growth and consistently return significant capital to shareholders over time through both dividends and share repurchases. Overall, this was another solid quarter for us with a number of continuing positive trends in our business. First, ADT Pulse has great momentum with take rates increasing in all channels. We've also accelerated our efforts to market Pulse upgrades to existing customers and are seeing very positive results. The increase in Pulse take rates, greater upgrade activity and price escalations for base customers are fueling improvements in our average revenue per user. During the quarter, we also made significant progress against the $2 billion 3-year share buyback program that we announced in November. To date, we have repurchased $800 million worth of ADT shares under this program, consistent with our commitment to front-load this year's repurchases and demonstrating our effective use of cash flow and deployment of capital. We ended the quarter with excess liquidity, having $419 million in…

Thanks, Naren, and good morning, everyone. Turning to Slide 6, I'd like to walk through a bit more detail on our financial performance for the quarter. Our recurring revenue grew 5% year-over-year to $756 million. That growth was driven by a 4.4% increase in average revenue per customer, and a 0.6% increase in our overall customer base. About 65% of the gain in average revenue per customer was due to price escalations, with the remaining 35% due to the richer mix from new customer additions, including those customers who chose our Pulse service. Account growth was challenged by headwinds from lower dealer channel production and the impact of attrition, offset by the bulk purchase that we closed in January. Production in both our direct and dealer channels increased sequentially with dealer channel production, excluding the bulk account purchase, up 8%. We're encouraged by the strengthening performance but also recognize we need to further accelerate account growth in order to expand our top line growth rate. Nonrecurring revenue, which includes the balance of the revenue categories that you see on the slide, was down 25% year-over-year, due to the $26 million decline in install revenue from outright sales. That's affected by the mix shift towards ADT-owned systems. Total revenue was $821 million for the quarter, up only 1.7%, again, due to the mix shift. Turning to cost, total operating expenses before items were $642 million, up 4% or $25 million, as the increase in cost to serve expenses and depreciation and amortization, were only partially offset by a decline in subscriber acquisition costs that run through our income statement. Cost to serve expenses increased by $31 million due to the incremental corporate cost associated with the spend, dis-synergies from the split from the Tyco commercial security business and the investments that…

Thanks, Kathy. Turning to Slide #9. We are affirming our guidance for fiscal year 2013. Looking specifically at recurring revenue growth in the third quarter, I'd like to point out that last year's Q3 had a full quarter's benefit of a higher level of price increases that we began to implement late in the second quarter of fiscal 2012. As a result, we expect the year-over-year growth rate in the third quarter to be modestly below our full year guidance range. We expect the comparison to normalize in the fourth quarter which allows us to affirm our full year guidance for recurring revenue growth. However, based on the softness in account growth during the first quarter, I expect we will be about 5% for recurring revenue growth in fiscal 2013. In terms of additional color, I'd note that our total revenue growth will continue to be impacted by the reduction in revenue from outright sales. We expect revenue from outright sales to continue to decline modestly to $12 million to $13 million per quarter. As Kathy mentioned earlier, we're expecting a modest second-half improvement in EBITDA margin compared to the current quarter. As we look towards the back half of the year, we expect cost to serve expenses to be flat to up only modestly, with further investment in capability to be largely offset by productivity gains and other cost reduction programs. As a result, margins should modestly improve as we continue to grow the revenue base. Overall, given the strong Pulse take rates and the associated ARPU growth, I expect us to come in at the high end of our full year EBITDA margin guidance. Our effective tax rate before items through the first 2 quarters was 37.7%, about 30 basis points below the high end of our guidance…

[Operator Instructions] Our first question comes from the line of Ian Zaffino from Oppenheimer. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Great. As far as the Pulse upgrades, where do you see the potential for that? How aggressively are you going to do that? What type of numbers are we looking at? And then, if you could just spend a moment on the economics of doing that vis-à-vis maybe a new customer. Or how you think about the economics of it?

Sure, Ian, I'll go ahead and take that. We're still very early in rolling out the upgrade program to our installed base. And at this stage, I think we've got some very strong interest from customers initiated by them first, as well as in response to programs. At this stage, we're targeting about half of our installed base. Yes, what we think are good targets for upgrade, but that will be over a sustained period of time. So I think we'll continue to see steady growth in that number of upgrades that we install per, yes, per quarter. As far as the economics of it, clearly, the economics are not as attractive as a new customer, where we go from 0 to $50 of ARPU. On average, we're going from $40 to $50. We do have to make an investment in that customer of several hundred dollars, so I would say, it's still got a decent return, but nowhere near the kind of returns we get for a new customer.

And just the one thing that I'd add to that, Ian, is as we look at the results, we enter into new contract with the customer, a new 3-year contract when we do an upgrade. And then we basically look at the results on attrition for understanding what that customer's life was at the time we did the upgrade, and sort of comparing that to similar customers at a similar age that we didn't do the upgrade. And we're seeing good results from that. But again, it's really, really early and so we can't yet predict how that upgrade is going to change customer tenure. But I'd certainly say that's another item that we're watching really closely in terms of the long-term economics. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. And then the other question would be, I know you talked about, maybe, the churn attributable to competitor pressures. What are you seeing as far as competitor pressures on the actual additions side? When you go out to compete, are you seeing anything? Or is it just sort of nothing unusual over the past quarter or so?

Clearly, in our subscriber acquisition cost, we are seeing a little bit of pressure. I mean, the primary drivers in the increase in our SAC continue to be Pulse take rates, as well as the Pulse upgrades. But we are seeing a little bit of pressure there. Our focus have been really, though, on maintaining that ARPU so that the economics work for the long term. And as you guys have seen, really, we've held that $50 ARPU for the past 2.5 years since we launched the program. It has not moved significantly off that $50 mark. So I feel very good about the premium value we're able to get for our Pulse offering in the marketplace. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. So basically SAC increases a little bit but you have a commensurate improvement in ARPU?

Exactly.

The next question comes from the line of Charles Clarke from Crédit Suisse. Charles Clarke - Crédit Suisse AG, Research Division: Just had a question on attrition. I realize there are some differences in how different competitors account for attrition. But just as a general question, because I think it's a long-term, self-help opportunity for you guys. One of the newer competitors in this space is Vivint. Information that I've seen says that their dollar attrition is close 8%, which would kind of correspond with the 13.8% that you guys just reported this quarter. Two statistics that I've kind of seen are first, that Vivint has 90% of their customers on auto pay, and you guys only have 60%. I've also seen that 85% of their customers use the system every day. And I'd imagine that, that number is much lower for you guys, given only 5% of your customers right now have Pulse. So I guess the 2 questions that I have are first, what efforts are you taking to convert existing customers to auto pay? Second, do the analytics that you're starting to look at more closely, do they indicate that your Pulse users are using their systems more than the non-Pulse users? And do you think that this will help drive down attrition?

Sure. On the attrition side, it is a little difficult to compare apples to apples across companies, the one thing I would say specifically to Vivint, they tend to have longer contract terms that we do. So again, you tend to see lower attrition during the initial contract period. And in general, I think they have a younger base than we have. They've gone through some pretty rapid growth there. So they have a larger percentage of their customers that are under that initial contract period. So the age of the base does drive some difference. Regarding the auto pay, I think you're right on the mark. In fact, I'd say well over 80% of our new customers coming on board through our direct channel, as well as our dealer channel, are coming on with some form of auto pay, whether it's credit card or ACH, and that is virtually a requirement. Where you might see us a little bit lower is on the small business side, where again, just the nature of their business would not support that. We have started, as I mentioned in the prepared comments, to be a little bit more aggressive in converting that installed base customer and we've got some special promotions for customers with certain credit card companies that they -- if they move to a credit card auto pay system, they'll participate in some giveaways there, as well as we're piloting now some de-escalations. In return for not escalating a customer, we would expect them to move over to an auto pay if they're getting a monthly or quarterly paper bill right now. So we are continuing to push for more of that. We're just north of 60% in aggregate right now. And we're going to continue both on the new as well as in the installed base and continue to migrate that base up. As far as the usage, again, I agree completely there. We are seeing our Pulse customers being much more engaged with their system, using it more frequently, especially when you move in to the home automation piece, the level of engagement, even increases just over the remote security aspects. And that's why we're continuing to drive Pulse aggressively through all of our channels, and while we're not modeling better attrition in our economics models right now, as we get more data, we'll continue to look at that, but I think we all believe that the attrition for Pulse customers in the long run will be better.

Our next question is from the line of Shlomo Rosenbaum from Stifel.com. Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division: Shlomo Rosenbaum from Stifel. Naren, is this level of attrition, does this match your expectations to where we are at this point in the housing cycle?

Yes, I think, Shlomo, it does. We expected to see continued pressure based on the rebound in the housing market. And that is clearly driving virtually 100% of our quarter sequential increase that we see this year. At the same time, I think the other pieces of attrition which we do think we can impact, the voluntary and the non-pay, we're working very aggressively on and I think we've got some good programs in place so that we can not just go to stabilization, but hopefully, reverse that trend over time. But I do think that the housing market will have continued short-term headwinds for us, and that's the biggest driver of disconnects for us at that 30% or 40%. So I do think that, that will be a continued headwind for us. On the attrition side, again, as the new housing market especially continues to grow, that does expand our target market and hopefully, create new opportunities for us on the gross add side. Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division: And can you talk a little bit about your partnerships with utilities and what you're trying to do there so that you guys would be kind of the first vendor in there trying to market to new customers?

Sure. And we've got several partnerships that are active right now with different utilities across the country. And each one is a little bit different, maybe I'll just highlight a couple of them for you. We've got a program with Constellation Energy, primarily in the Illinois area right now, where we're actually offering new customers a discount on their utility rates, as well as a subsidy on the ADT product or any new customers who come on board who activate service on the Constellation-ADT bundle. So again, you have for the new customer, they get a lower rate on their electricity and then especially with ADT Pulse, are able to help manage their home a little better. We've got program with NextEra Energy, which is Florida Power &Light, and that was more of a traditional lead sharing-type of opportunity, where they refer customers to us. And generally speaking, when a person moves into a new home, one of the very first calls they have to make is to the energy company. So we're getting them introduced to ADT very early in that relocation process. And we're also doing some things on our own side to try and introduce customers to our moving capabilities and move related offers much earlier in the process. Our customer self service site, myadt.com, has information not just about move offers for our customers, but also other services that we can provide them, including the capability to get crime information at the new home so they understand what's going on around them. So we're really working on a lot at both partnerships, as well as new initiatives within our own business to make sure that we connect with customers. Ideally, even before that move process starts, but after the move, as early in that process as possible. Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division: And could you just walk through a little bit about the competition impact on SAC? I mean, is that you guys having to lower your prices? Just walk us through what that is exactly?

Yes, I mean, it really is a response to what we're seeing on pricing on the upfront side. We've got some good promotions. We still expect to and are demanding a premium in the marketplace because we believe we've got the best solution in the industry, supported by not just the product side, but also the monitoring, which is an in-house monitoring, very high reliable, and the customer experience, both from how they interact with our system, as well as the support from a service and install perspective, as well as our customer care operations. So we are the premium player in the market, and we continue to expect and are continuing to get a premium price for our solutions. Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And I'm going to -- last question. Just in terms of converting a customer, I know that you're only looking at incremental revenue of maybe $10, but don't you have to take into the calculation that you don't have a subscriber acquisition cost for marketing and the like?

We -- it really depends on how we get that customer. If it's the customer calling us requesting an upgrade, then yes, there's no associated marketing cost with that. But there are cases where we are marketing directly to, either through direct mail, e-mail, and even some of our TV advertising now, will have a number for existing customers to call, especially for Pulse. So it really depends via what channel we pursue that customer.

Our next question's from the line of Jeff Kessler from Imperial Capital.

Quickly, because I have a couple of questions here. Number one, with regard to ADT-owned systems, we've seen a number of companies over the years do this with varying success, depending on where the technology is at this point. We've just seen a big technology upgrade in a lot of these panels and systems that are out there. Are you confident that, if indeed the customer does attrit, you can take over that panel and replace it into another situation and make use of the fact that you're owning that system?

Again, Jeff, I think at this stage, we retain the option to pull that back. Where our interests would be primarily is on Pulse customers and the iHub that has the intellectual property. And again, I'm very confident, we can redeploy those assets. So I think we'll be selective about what assets based on the economics associated with that, because again, we don't want to necessarily incur cost to do that. But there are pieces of the system -- we have a lot of confidence we'd be able to redeploy.

Okay, second question. You are obviously looking at acquisitions out there, because that's what I think your shareholders expect of you with regard to capital deployment. Are you targeting, what you would call, Pulse-ready types of acquisitions or Pulse-ready types of groups of subscribers who would more easily move toward Pulse, as opposed to you having to go through a very heavy marketing process with them?

No, I mean, I think that is a consideration. But clearly, again, we still have a significant traditional security business that is growing and growing nicely. So I think we'll continue to have a mix there. And as we look at how we value potential opportunities, we look at that installed base, we look at it both for its current economics, as well as what we think the Pulse upgrade opportunity might be within that installed base as well as the production engine that might come with an acquisition. So we look at all pieces of it.

Okay, in your cost -- your integration and your upgrade of cost to service, could you drill down that a little bit more, the -- what you're actually doing there and the timing on that? When are we going to see the margin on your recurring revenue or your corporate, so to speak, your corporate margin begin to improve? I know you've talked about that in the front of this, but I'd like you to drill down a little bit more to see what actual improvements we can get and how you're getting to there?

Sure. I'd break it up into 2 pieces, Jeff. The first piece which is about half of the year-over-year deterioration in that margin rate, is just the investment we had to make to build our public company costs, the new capabilities we needed to be for stand-alone company, things that Tyco did for us under the old structure. And then second piece of that is the dis-synergies. I would say on the dis-synergies and public company's cost, we've added the cost that we needed to, or more important, we've added the capabilities that we needed to kind of run this company going forward. I would expect increases on that to be very modest at this point in time. So that portion of the cost structure should remain virtually flat to up modestly as we move forward and continue to grow the business. So we should get margin leverage as we continue to grow our recurring revenue base. The other piece of that was some investments we made in customer service. Again, some of that was IT-related expenses to move to this common platform for customer information, as well as investments in our loyalty desk. Again, I think these were "some step function increases" that we had made to get to start driving better improvements on customer service and, hence, attrition. I don't expect again, to have continue to scale that as revenue grows. So again, I think on both of those investments, we should get good volume leverage flow through for the incremental recurring revenue volume that we get in the back half of the year and going forward.

Okay. And finally, last question. Under threat of death if I -- from 100 clients if I don't ask this question, but why do you -- give us the reason for why you believe you should remain investment grade?

I guess, what I'd say at this point in time, Jeff, is we've communicated our strategy around our financial structure back in November. At this point in time, nothing has changed, I don't have anything new to report. What I will tell you is we discuss our capital structure and the assumptions around that capital structure at every board meeting and we always do that in the context of our business strategy and the growth opportunities that we see, both organic growth opportunities as well as M&A opportunities. So we will continue to look at that as a team. Clearly, as we put together our strategic plan, that's a logical time, where we will look at it again in the context of our strategy. So it's something that we're going to continue to evaluate as an entire board, but I have nothing to report on any changes at this time.

Okay, but it's not something that you've totally pulled off the table forever?

No, again, we're going to look at it always in the context of our business strategy and the opportunities that we see in the marketplace.

The next question is from the line of Jim Krapfel from Morningstar.

It sounds like you've had response to increased competition through some increased promotions. Can you quantify the level of increased promotions recently? And has that accelerated at all as a result of a competitor's launch last week?

Again, it is hard to quantify because we're always running promotions in the business, both on traditional security systems as well as our Pulse. We did a big holiday promotion at the end of last year, around the holiday season, highlighting some of the features of Pulse around home automation. In the second quarter, we did a friends and family promotion. So we, on a regular basis, I would say -- I assume the announcement you're talking about last week was AT&T's entry into the market. At this stage, we're still learning what they're doing. They just announced the entry into 12 markets. I actually had the opportunity to go visit 1 of their stores this weekend. And I think that there are still some significant differences, not just in the solution, but also in the selling experience. I found it difficult to configure a system either using their online tool or in the store, especially compared to the in-home experience that we deliver with our customers which results in a customized solution that meets the needs, not just of your home, but how you operate your home from a feature functionality perspective. Again, I think the user experience that ADT offers especially with our Pulse application, which is optimized for all the different platforms, smartphones as well as tablets, very easy to navigate, very easy to operate your system. I think that continues to be a differentiator. So again, any one new competitor coming in the market, I don't think is going to change our strategy on how we pursue our customers or our value proposition to our customers.

So then you haven't really, I guess, given increased discounts or lower installation fees in those markets where AT&T has launched then yet?

Not -- no. We're continuing to pursue our strategy and do what we do very well.

Okay. And then what elements of Pulse are customers most excited about? And where do you see the biggest revenue opportunity over the next few years? And how does that pricing strategy evolve, as more Pulse capabilities are launched? I mean do you expect to maintain the 2 or 3 build options? Or you're going to go more like à la carte?

Well, I think we're going to continue to evolve the platform. As you've seen from when we originally launched, when it was light switches and thermostats and video, we've extended the range of products within those categories but added the door locks. And a lot of our work has really been focused on that user experience. We've got a -- within the Pulse application, we've got a tool called Home View, where instead of naming all the devices in your home and trying to remember how you named each thermostat, each light switch, you can actually layout a floor plan of your home and just select the specific one as it exists within your floor plan. And again, it makes it easier for the customer to interact with their system. Door locks have gotten a lot of attention. It's hard to say which one or ones have gotten the best interest, because each customer's needs and each customer segment needs are very different. I would say in recent times, there's a lot of excitement around the deadbolt, the automatic door locks because, again, that ties back to the security aspects and giving people access remotely, where you can power down the security system and unlock the door for deliveries and do what some commercial customers have been able to do over time. So again, we're continuing to work with partners and our engineering team to determine what else we can add both hardware and software.

The next question's from the line of Jason Bazinet from Citi.

This is Chris Lowe [ph] on behalf of Jason. Just had a quick question on G&A cost in the quarter. On Slide 11, I guess you showed G&A of $128 million and I believe during the last call, in the first quarter that number was about $111 million. Just wondered if you could give us a sense of what may have driven the sequential increase and if you could sort of let us know what G&A was in each of the last quarters of the prior year?

Chris, actually, it's Craig Streem. We didn't quite catch the first half of your question. We know you're on Slide 11. So if you don't mind, if you could ask -- just repeat it. But then in terms of comparisons with historical data, you and I can probably take that offline and we can try to fill in the blanks for you. But for your question for Naren and Kathy, please, if you don't mind repeat it?

Sure, sorry about that. G&A costs, I guess, on Slide 11 of $128 million versus $111 million in the first quarter of '13. Just wondered if you could help us get a sense of what the increase was driven by and is there any sort of seasonality in that? Or...

Yes, sure. So similar to year-over-year and what Naren mentioned earlier, we were still building up our cost structure for corporate cost and dis-synergies. And so even on a sequential basis, that is part of what you're seeing in G&A. There's, what I would describe as a little bit of seasonality, as well, that you see between our first quarter and second quarter. I'll give you just examples of that. We have a use-it-or-lose-it policy around vacation time and so it's calendar-based, which means in our first fiscal quarter, we get a credit, basically, for people who didn't utilize their vacation. In the fourth quarter of the year, we also see a little lower payroll taxes because some people have sort of the peak in certain tax buckets. And so there is a little bit of seasonality. But also overall, we continue to see that buildup of corporate costs and dis-synergies from quarter-to-quarter.

And so the only other thing in there was the acquisition of Absolute Security which now became ADT Direct Connect. That brought with it some G&A cost and now move into our G&A structure.

Great. And one more if I could. Could you just talk broadly about sort the spread in cost in subscriber system assets between a Pulse direct add, where ADT owns the equipment, and a non-pulse add?

All right, is the question the overall subscriber acquisition cost differential between a customer who's a Pulse customer and a customers who's buying a traditional security system?

Right.

It's, call it 35% to 40% differential.

Coming with that comes a significantly higher ARPU. So -- but just to clarify, the ADT-owned versus customer-owned, we look at it on a cash basis, cash returns. So that factor would not impact it. We have traditional systems that are ADT owned also, not just Pulse systems.

[Operator Instructions] Our next question is from the line of Ginger Chambler [ph] from JPMorgan.

A follow-up question on the capital structure. And I guess, just wanted to hear from you, if you could give us any thoughts on the pace of share repurchase to expect over the remainder of the fiscal year. And if you, at this point, plan for any additional debt issuance to fund your repurchase in the near term?

Well, first, I'd say anything we do at this stage is going to be consistent with the $2 billion 3-year share repurchase program that we announced back in November. We did announce at that time that we were going to front-end load that. As I mentioned in my comments, we are sitting on excess liquidity and cash right now and based on M&A opportunities, organic growth opportunities that we see, as well as share repurchase, we plan to deploy any surplus cash we have to pursue those opportunities.

Okay, so -- but based on that, it doesn't sound like you're anticipating at this point, raising incremental debt to fund share repurchase. Sounds like you have additional -- you have plenty of excess liquidity at this point to do what you want to do.

I think we have liquidity at this point, and we are at our target leverage. So again, I think we're sticking to what we laid out back in November.

Our next question is from the line of Charles Clark from Crédit Suisse. Charles Clarke - Crédit Suisse AG, Research Division: Just a quick follow up. So Naren, when you mentioned that the $419 million in cash as excess liquidity, just kind of given the free cash flow you're going to generate over the balance of the year and where the cash balance is now, what cash balance would you say is not excess liquidity?

I'll take that. When we originally spun off from Tyco, we have said we were targeting about $200 million as well as having a $750 million revolver in terms of overall liquidity. Part of what we wanted to see was, post the spin from Tyco, the consistency in our cash flow generation. Because as you know, all the results that we published pre-spin were based on the Form 10, kind of carve out, allocate it, income statement and cash flow. Our cash flow results have been, I'd say, very consistent and consistent with our expectations. And while we have some quarter-to-quarter variance due to things, like when we're paying interest expense, we're getting more and more comfortable with that consistency and performance. So we're actually bringing down our minimum cash balance from $200 million to $100 million. And we'll continue to look at that and look at our overall liquidity, just, situation as we get more comfortable with the business performance post-spin. Charles Clarke - Crédit Suisse AG, Research Division: So in terms of just allocation, you would think $319 million on top of the minimum cash balance would be available to use, plus any cash you generate in the back half of the year. Is that the right way to understand?

That's correct. Absolutely. Charles Clarke - Crédit Suisse AG, Research Division: Okay, great. And then any preference between dividend, M&A or repurchase?

Wherever we feel we get the best economic return.

Our next question is from the line of Jeff Kessler from Imperial Capital.

In January of 2012, Tyco, while you were still part of them, bought Visonic, which has effectively a, what we call, a superior communications capability, frequency hopping. Are you able to use that technology in your systems?

Well, we are -- I mean, Visonics became part of the Tyco security products platform and connected with the DSC business. DCS continues to be one of our key product partners. And to the extent that they integrate theirs, the Visonic product, with their platform, we would be integrating it in our solutions.

I would now like to turn the call over to Craig Streem at ADT for closing remarks.

Thanks, Charlene. Thank you, all, for your attention this morning. And as always, any follow-ups, please come back to us and we will do the best we can to respond to your questions. Thanks. Have a good day.

Thank you. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Thank you. Have a good day.