ADT 2012 Annual Report Download - page 19

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Earnings before interest, taxes, depreciation and amortization (EBITDA), EBITDA margin, steady-state free cash ow
(SSFCF) and earnings per share (EPS), in each case “before special items,” are non-GAAP measures and should not
be considered replacements for GAAP results.
The difference between EBITDA (the non-GAAP measure) and Net Income (the most comparable GAAP measure)
is the exclusion of interest expense, the provision for income taxes, depreciation and amortization expense, and
special items. Excluding these items eliminates the impact of expenses associated with our capitalization and tax
structure as well as the impact of non-cash charges related to capital investments.
The difference between SSFCF (the non-GAAP measure) and Cash Flows from Operating Activities (the most compa-
rable GAAP measure) consists of the impact of capital expenditures, subscriber system assets, dealer generated
customer accounts required to maintain recurring revenue, and cash paid for interest and income taxes. Capital
expenditures, subscriber system assets, and dealer generated customer accounts required to maintain recurring
revenue are subtracted from cash ows from operating activities because they represent long-term investments
that are required to replace recurring revenue lost to attrition. The exclusion of cash paid for interest and income
taxes eliminates the impact of cash ows associated with our capitalization and tax structure.
The company has presented diluted EPS, EBITDA, EBITDA margin, and SSFCF before special items. Special items
include charges and gains related to acquisitions, restructurings, impairments, and other income or charges that
may mask the underlying operating results and/or business trends of the company. The company utilizes these
measures to assess overall operating performance, as well as to provide insight to management in evaluating over-
all operating plan execution and underlying market conditions. These measures are useful for investors because
they may permit more meaningful comparisons of the company’s underlying operating results and business trends
between periods. The difference between these measures and the most comparable GAAP measures consists of
the impact of the special items noted above on the applicable GAAP measure.
NON-GAAPFINANCIALMEASURES
FY 2012 FY 2011
DILUTED EPS (GAAP) $1.67 $1.59
RESTRUCTURING, NET 0.01 —
INTEGRATION COSTS 0.03 0.07
SEPARATION COSTS 0.02 —
DEBT ISSUANCE COSTS 0.01 —
EPS BEFORE SPECIAL ITEMS $1.74 $1.66
DILUTEDEPS
ADT 2012 ANNUAL REPORT 17