American Home Shield 2009 Annual Report Download - page 35

Table of Contents
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.
The Company believes Comparable Operating Performance, which excludes the impact of purchase accounting and non-cash option and restricted stock
expense adjustments, is useful to investors. The exclusion of the impact of these items facilitates a comparison of operating results from periods pre-dating the
Merger transaction with the Equity Sponsors with periods subsequent to the Merger. The purchase accounting charges were not present prior to the Merger. In
addition, charges relating to option and restricted stock expense prior to the Merger were computed under different plans and formulas than charges
subsequent to the Merger. Moreover, such charges are non-cash and the exclusion of the impact of these items from Comparable Operating Performance
allows investors to understand the current period results of operations of the business on a comparable basis with previous periods and, secondarily, gives the
investors added insight into cash earnings available to service the Company's debt. We believe this to be of particular importance to the Company's public
investors, which are debt holders. The Company also believes that the exclusion of the purchase accounting and non-cash option and restricted stock expense
adjustments may provide an additional means for comparing the Company's performance to the performance of other companies by eliminating the impact of
differently structured equity-based, long-term incentive plans (although care must be taken in making any such comparison, as there may be inconsistencies
among companies in the manner of computing similarly titled financial measures).
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 methods 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;
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the
future, and Adjusted EBITDA and Comparable Operating Performance do not reflect any cash requirements for such replacements;
Other companies in the Company's industries may calculate Adjusted EBITDA and Comparable Operating Performance differently, limiting
their usefulness as comparative measures; and
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