2012 Annual Report 47 Algonquin Power & Utilities Corp. – Management’s Discussion & Analysis earnings or loss on this basis will enhance an investor’s understanding of the operating performance of its  businesses. It is not intended to be representative of net earnings or loss determined in accordance with GAAP. The following table is derived from and should be read in conjunction with the audited Consolidated Statement  of Operations. This supplementary disclosure is intended to more fully explain disclosures related to adjusted  net earnings and provides additional information related to the operating performance of APUC. Investors are  cautioned that this measure should not be construed as an alternative to consolidated net earnings in  accordance with GAAP.  The following table shows the reconciliation of net earnings to adjusted net earnings exclusive of these items:  For the year ended December 31, 2012, adjusted net earnings totalled $21.1 million as compared to adjusted  net earnings of $38.3 million, a decrease of $17.2 million as compared to the same period in 2011. The  decrease in adjusted net earnings for the year ended December 31, 2012 is primarily due to higher depreciation  and amortization expense, higher interest expense, higher administration costs and decreased income tax  recovery amounts, partially offset by higher income from operations, and interest and dividends as compared to  the same period in 2011. For the three months ended December 31, 2012, adjusted net earnings totalled $5.4 million as compared to  adjusted net earnings of $3.6 million, an increase of $1.8 million as compared to the same period in 2011. The  increase in adjusted net earnings for the three months ended December 31, 2012 is primarily due to increased  earnings from operations, and increased income tax recovery amounts, partially offset by higher depreciation  and amortization expense, higher administration costs, and higher interest expense as compared to the same  period in 2011. Adjusted funds from operations is a non-GAAP metric used by investors to compare cash flows from operating  activities without the effects of certain volatile items that generally have no current economic impact or items  such as acquisition expenses and are viewed as not directly related to a company’s operating performance. Cash flows from operating activities of APUC can be impacted positively or negatively by changes in working  capital balances, acquisition and litigation expense. Adjusted weighted average shares outstanding represents  weighted average shares outstanding adjusted to remove the dilution effect related to shares issued in advance  of funding requirements. APUC uses adjusted funds from operations to assess its performance without the  effects of changes in working capital balances, acquisition and litigation expense as these are not reflective of  the long-term performance of the underlying businesses of APUC. APUC believes that analysis and  presentation of funds from operations on this basis will enhance an investor’s understanding of the operating  performance of its businesses. It is not intended to be representative of cash flows from operating activities as  determined in accordance with GAAP. The following table is derived from and should be read in conjunction with the audited Consolidated Statement  of Operations and Statement of Cash Flows. This supplementary disclosure is intended to more fully explain  disclosures related to adjusted funds from operations and provides additional information related to the  operating performance of APUC. Investors are cautioned that this measure should not be construed as an  alternative to funds from operations in accordance with GAAP.  The following table shows the reconciliation of funds from operations to adjusted funds from operations exclusive of these items:  Reconciliation of adjusted funds from operations to cash flows from operating activities  Three months ended December 31  Year ended December 31  2012  2011  2012  2011  (millions)  (millions)  (millions)  (millions)  Net earnings/(loss) attributable to Shareholders $ 6.4 $ (8.5) $ 14.5 $ 23.4 Add (deduct):  Loss from discontinued operations, net of tax  0.1 0.9 1.2 0.8 (Gain)/Loss on derivative financial instruments, net of  tax (0.3) 1.0 (0.2) 3.9 Write down of long-lived assets, net of tax  - 9.1 - 9.1 Quebec water lease litigation and interest, net of tax  - - 1.5 - (Gain)/Loss on foreign exchange, net of tax  (1.6) 0.4 (0.6) (0.7) Acquisition costs, net of tax  0.8 0.7 4.7 1.8 Adjusted net earnings  $  5.4  $ 3.6  $  21.1  $  38.3  Adjusted net earnings per share  $ 0.03 $ 0.03 $ 0.14 $ 0.33