American Home Shield 2008 Annual Report Download - page 35

Table of Contents
Segment Review (Year ended December 31, 2008 compared with the Successor period from July 25, 2007 to December 31, 2007 and the Predecessor
period from January 1, 2007 to July 24, 2007)
The following business segment reviews should be read in conjunction with the required footnote disclosures presented in the Notes to the Consolidated
Financial Statements. This disclosure provides a reconciliation of segment operating income to income from continuing operations before income taxes, with
net non-operating expenses as the only reconciling item.
The Company uses Adjusted EBITDA and Comparable Operating Performance to facilitate operating performance comparisons from period to period.
Adjusted EBITDA and Comparable Operating Performance are supplemental measures of the Company's performance that are not required by, or presented
in accordance with, GAAP. Adjusted EBITDA and Comparable Operating Performance are not measurements of the Company's financial performance under
GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP or as alternatives to
net cash provided by operating activities or any other measures of the Company's cash flow or liquidity. "Adjusted EBITDA" means net income before net
income (loss) from discontinued operations; provision (benefit) for income taxes; minority interest and other expense, net; interest expense and interest and
net investment income; and depreciation and amortization expense; as well as adding back interest and net investment income and non-cash trade name
impairment. "Comparable Operating Performance" is calculated by adding back to Adjusted EBITDA non-cash option and restricted stock expense and non-
cash effects on Adjusted EBITDA attributable to the application of purchase accounting in connection with the Merger.
The Company believes Adjusted EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences
caused by variations in capital structures (affecting net interest income and expense), taxation and the age and book depreciation of facilities and equipment
(affecting relative depreciation expense), which may vary for different companies for reasons unrelated to operating performance. The Company uses
Comparable Operating Performance as a supplemental measure to assess the Company's performance because it excludes non-cash option and restricted stock
expense and non-cash effects on Adjusted EBITDA attributable to the application of purchase accounting in connection with the Merger. The Company
presents Comparable Operating Performance because it believes that it is useful for investors, analysts and other interested parties in their analysis of the
Company's operating results.
Adjusted EBITDA and Comparable Operating Performance are not necessarily comparable to other similarly titled financial measures of other
companies due to the potential inconsistencies in the method of calculation.
Adjusted EBITDA and Comparable Operating Performance have limitations as analytical tools, and should not be considered in isolation or as
substitutes for analyzing the Company's results as reported under GAAP. Some of these limitations are:
Adjusted EBITDA and Comparable Operating Performance do not reflect changes in, or cash requirements for, the Company's working capital
needs;
Adjusted EBITDA and Comparable Operating Performance do not reflect the Company's interest expense, or the cash requirements necessary to
service interest or principal payments on the Company's debt;
Adjusted EBITDA and Comparable Operating Performance do not reflect the Company's tax expense or the cash requirements to pay the
Company's taxes;
Adjusted EBITDA and Comparable Operating Performance do not reflect historical cash expenditures or future requirements for capital
expenditures or contractual commitments;
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