ADT Fined by SEC for Earnings Disclosure Requirements Violations

SEC ordered ADT to pay $100,000 for failure to report financial measures under Generally Accepted Accounting Principles (GAAP).

BOCA RATON, Fla. – The Securities and Exchange Commission has fined ADT (NYSE: ADT) $100,000 over failures to report under Generally Accepted Accounting Principles (GAAP) when presenting its financial numbers.

In accordance with SEC rules, companies are obligated to report under GAAP when presenting quarterly, annual or current financial numbers, reports. They are allowed to supplement those numbers with certain non-GAAP metrics, but they must give the GAAP numbers equal or greater prominence in their reporting.

In May, in its Q1 earnings release, ADT reported its adjusted net income rose 26% to $249 million. The company said its adjusted net income per share increased 10% to 34 cents. But it did not highlight GAAP net income in a bullet-point. The company actually had a net loss of $157 million, greater than the year-earlier loss of $141 million.

The SEC issued guidelines in 2016 reminding companies of the rule, amid widespread concern over the use of non-GAAP metrics.

According to the SEC, in the headline of the fiscal 2017 earnings release, ADT presented its adjusted EBITDA for fiscal year 2017 and stated that the adjusted EBITDA was up 8 percent year-over-year, without mentioning its GAAP net income or loss in the headline.

The company also reported its earnings results similarly for the first quarter of 2018.

The SEC has ordered ADT to cease and desist from committing or causing any violations and any future violations of the Securities Exchange Act of 1934 and also ordered the company to pay a civil money penalty of $100,000 to the agency within 20 days of the entry of the order.

“When including a non-GAAP financial measure in a filing with the commission, (companies) must include a presentation, with equal or greater prominence, of the most directly comparable financial measure or measures calculated and presented in accordance with GAAP,” the SEC said in its enforcement announcement.

ADT was acquired by private-equity firm Apollo Global Management in 2016, but returned to the public markets in January 2018.

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