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SEC fines Apollo-backed ADT $100K for not following accounting rules

  • Apollo bought ADT for nearly $7 bln in 2016
  • ADT IPO raised $1.6 bln in January 2018
  • ADT’s stock has dropped 54 pct from $14 IPO price

The SEC slapped ADT, the security company backed by Apollo Global Management, with a $100,000 fine for failing to follow accounting rules in its financial reporting.

The Boca Raton, Florida, company settled with the SEC without admitting or denying the findings. It has 20 days from the date of the Dec. 26 order to pay the fine.

Apollo acquired ADT, which provides security for home and businesses, for nearly $7 billion in 2016. The company has been public for a year.

It violated SEC rules when it used non-GAAP metrics in two earnings releases in 2018 and failed to provide the GAAP version at the same time, the SEC said in a Dec. 26 cease and desist order.

Companies are required to use GAAP figures when reporting quarterly, annual or current financials, the regulator said.

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, MarketWatch said.

ADT didn’t do that when it reported Q4 and fiscal year 2017 financial results in a release dated March 15. It also didn’t do that when it posted first quarter 2018 earnings on May 9.

For example, ADT, in its Q1 release, used non-GAAP numbers in a bulleted list that said adjusted EBITDA rose 7 percent to $620 million.

The list also said ADT’s adjusted net income jumped 26 percent to $249 million while adjusted net income per share was up 10 percent to 34 cents.

Since ADT didn’t provide the GAAP version at the same time, it was only when readers got further into the release that they realized ADT actually posted a $157 million net loss, MarketWatch said.

ADT could not immediately be reached for comment.

ADT went public in January 2018, raising $1.6 billion. The offering was the biggest PE-backed U.S. IPO in 2018, according to Dealogic. ADT’s stock is off 54 percent from the January IPO. It closed Jan. 2 at $6.41 a share.

Apollo is still a major backer of ADT, owning 84.7 percent of the company as of July 31, according to SEC filings.

Action Item: Contact Jim DeVries, ADT’s president and CEO, at +1 888-238-8525

Clarification: The headline and first sentence of the story were changed to show that ADT was fined for not following SEC accounting rules.