The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying consolidated financial statements and the notes thereto included elsewhere herein.

At December 31, 2012, our assets consisted primarily of our wholly-owned operating subsidiary, Monitronics.

Monitronics

On December 17, 2010, we acquired 100% of the outstanding capital stock of Monitronics, through the merger of Mono Lake Merger Sub, Inc., a direct wholly-owned subsidiary of Ascent Capital established to consummate the merger, with and into Monitronics, with Monitronics as the surviving corporation in the merger (the "Monitronics Acquisition"). The cash consideration paid in connection with the merger was $397,088,000. The consideration was funded by a $60,000,000 term loan, a draw of $45,000,000 on an

$115,000,000 revolving credit facility and cash on hand. We also assumed approximately $795,000,000 in net debt (which we define as the principal amount of such debt less Monitronics cash) of Monitronics.

Monitronics provides security alarm monitoring and related services to residential and business subscribers throughout the U.S. and parts of Canada. Monitronics monitors signals arising from burglaries, fires, medical alerts and other events through security systems at subscribers' premises. Nearly all of its revenues are derived from monthly recurring revenues under security alarm monitoring contracts purchased from independent dealers in its exclusive nationwide network.

Revenues are recognized as the related monitoring services are provided. Other revenues are derived primarily from the provision of third-party contract monitoring services and from field technical repair services. All direct external costs associated with the creation of subscriber accounts are capitalized and amortized over fourteen to fifteen years using a declining balance method beginning in the month following the date of purchase. Internal costs, including all personnel and related support costs incurred solely in connection with subscriber account acquisitions and transitions, are expensed as incurred.

Account cancellation, otherwise referred to as subscriber attrition, has a direct impact on the number of subscribers that Monitronics services and on its financial results, including revenues, operating income and cash flow. A portion of the subscriber base can be expected to cancel its service every year. Subscribers may choose not to renew or terminate their contract for a variety of reasons, including relocation, cost and switching to a competitors' service. The largest category of canceled accounts relate to subscriber relocation or the inability to contact the subscriber. Monitronics defines its attrition rate as the number of canceled accounts in a given period divided by the weighted average of number of subscribers for that period. Monitronics considers an account canceled if payment from the subscriber is deemed uncollectible or if the subscriber cancels for various reasons. If a subscriber relocates but continues its service, this is not a cancellation. If the subscriber relocates, discontinues its service and a new subscriber takes over the original subscriber's service continuing the revenue stream (a "new owner takeover"), this is also not a cancellation. Monitronics adjusts the number of canceled accounts by excluding those that are contractually guaranteed by its dealers. The typical dealer contract provides that if a subscriber cancels in the first year of its contract, the dealer must either replace the canceled account with a new one or refund the purchase price. To help ensure the dealer's obligation to Monitronics, Monitronics typically holds back a portion of the purchase price for every account purchased, ranging from 5-10%. In some cases, the amount of the purchase holdback may be less than actual attrition experience.

The table below presents subscriber data for the twelve months ended December 31, 2012 and 2011:

                                                Twelve Months Ended
                                                   December 31,
                                                 2012         2011

Beginning balance of accounts                    700,880     670,450
Accounts purchased (a)                           202,379     114,691
Accounts cancelled (b)                           (89,724 )   (76,067 )
Accounts guaranteed to be refunded by dealer        (996 )    (8,194 )
Ending balance of accounts                       812,539     700,880
Monthly weighted average accounts                732,694     688,774
Attrition rate                                     (12.2 )%    (11.0 )%

(b) Net of canceled accounts that are contractually guaranteed by the dealer.

The attrition rate for the twelve months ended December 31, 2012 and 2011 was 12.2% and 11.0%, respectively. Increased attrition reflects the current age of accounts in the portfolio and an increase in disconnections due to household relocations.

Monitronics also analyzes its attrition by classifying accounts into annual pools based on the year of purchase. Monitronics then tracks the number of accounts that cancel as a percentage of the initial number of accounts purchased for each pool for each year subsequent to its purchase. Based on the average cancellation rate across the pools, in recent years Monitronics has averaged less than 1% attrition within the initial 12-month period after considering the accounts which were replaced or refunded by the dealers at no additional cost to Monitronics. Over the next few years of the subscriber account life, the number of subscribers that cancel as a

percentage of the initial number of subscribers in that pool gradually increases and historically has peaked following the end of the initial contract term, which is typically three to five years. The peak following the end of the initial contract term is primarily a result of the buildup of subscribers that moved or no longer had need for the service but did not cancel their service until the end of their initial contract term. Subsequent to the peak following the end of the initial contract term, the number of subscribers that cancel as a percentage of the initial number of subscribers in that pool declines.

Adjusted EBITDA

We evaluate the performance of our operations based on financial measures such as revenue and "Adjusted EBITDA." Adjusted EBITDA is defined as net income
(loss) before interest expense, interest income, income taxes, depreciation, amortization (including the amortization of subscriber accounts and dealer network), realized and unrealized gain/(loss) on derivative instruments, restructuring charges, stock-based and other non-cash long-term incentive compensation, and other non-cash or nonrecurring charges. Ascent Capital believes that Adjusted EBITDA is an important indicator of the operational strength and performance of its business, including the business' ability to fund its ongoing acquisition of subscriber accounts, its capital expenditures and to service its debt. In addition, this measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance. Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate the financial performance of companies in the security alarm monitoring industry and is one of the financial measures, subject to certain adjustments, by which Monitronics' covenants are calculated under the agreements governing their debt obligations. Adjusted EBITDA does not represent cash flow from operations as defined by generally accepted accounting principles ("GAAP"), should not be construed as an alternative to net income or loss and is indicative neither of our results of operations nor of cash flows available to fund all of our cash needs. It is, however, a measurement that Ascent Capital believes is useful to investors in analyzing its operating performance. Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA is a non-GAAP financial measure. As companies often define non-GAAP financial measures differently, Adjusted EBITDA as calculated by Ascent Capital should not be compared to any similarly titled measures reported by other companies.

Results of Operations

The following table sets forth selected data from the accompanying consolidated statements of operations for the periods indicated. The results of operations for Monitronics are included from December 17, 2010, the date of its acquisition (amounts in thousands).

                                                     Years ended December 31,
                                                  2012        2011           2010

Net revenue                                    $  344,953     311,898  (a)     9,129
Cost of services                                   49,791      40,553          1,422
Selling, general, and administrative               73,389      76,845         30,314
Amortization of subscriber accounts and
dealer network                                    163,468     159,619          5,980
Restructuring charges                                   -       4,258          4,604
Loss (gain) on sale of operating assets, net       (8,670 )       565         (2,768 )
Interest expense                                   71,390      42,813          2,672
Realized and unrealized loss on derivative
financial instruments                               2,044      10,601          1,682
Income tax expense from continuing
operations                                          2,591       2,457            270
Net loss from continuing operations               (24,255 )   (28,152 )      (33,501 )
Earnings (loss) from discontinued
operations, net of income taxes                    (4,348 )    48,789        (13,893 )
Net income (loss)                                 (28,603 )    20,637        (47,394 )

Adjusted EBITDA (b)
Monitronics business Adjusted EBITDA           $  236,341     214,485          5,577
Corporate Adjusted EBITDA                           3,096     (12,052 )      (20,259 )
Total Adjusted EBITDA                          $  239,437     202,433        (14,682 )

Adjusted EBITDA as a percentage of Revenue
Monitronics business                                 68.5 %      68.8 %         61.1 %
Corporate                                             0.9 %      (3.9 )%         N/A

(b) See reconciliation to net loss from continuing operations below.

Net Revenue. Revenue increased $33,055,000, or 10.6%, for the year ended December 31, 2012 as compared to the corresponding prior year. The increase is attributable to the increase in the number of subscriber accounts from 700,880 as of December 31, 2011 to 812,539 as of December 31, 2012. Approximately 93,000 accounts were acquired in a bulk buy on October 25, 2012, which provided approximately $9,640,000 in increased revenue. Average monthly revenue per subscriber increased from $37.49 as of December 31, 2011 to $39.50 as of December 31, 2012. Furthermore, the increase is partially attributable to a $2,295,000 fair value adjustment associated with deferred revenue acquired in the Monitronics Acquisition, which reduced net revenue for the year ended December 31, 2011.

Revenue increased $302,769,000 for the year ended December 31, 2011 as compared to the corresponding prior year. The increase is primarily attributable to the inclusion of a full year's operation of the Monitronics business in 2011 as compared to 15 days in 2010, due to revenue only being generated from the Monitronics business which was acquired on December 17, 2010.

Cost of Services. Cost of services increased $9,238,000 or 22.8%, for the year ended December 31, 2012 as compared to the corresponding prior year. The increase is attributable to an increased number of accounts monitored across the cellular network and an increase in interactive and home automation services, which resulted in higher operating and service costs. Cost of service as a percent of net revenue increased from 13.0% for the year ended December 31, 2011 to 14.4% for the year ended December 31, 2012.

Cost of services increased $39,131,000 for the year ended December 31, 2011 as compared to the corresponding prior year. The increase is attributable to the inclusion of a full year's operation of the Monitronics business in 2011 as compared to 15 days in 2010, due to cost of services only being incurred from the Monitronics business.

Selling, General and Administrative. Selling, general and administrative expense ("SG&A") decreased $3,456,000, or 4.5%, for the year ended December 31, 2012 as compared to the corresponding prior year. The decrease is primarily attributable to decreased administrative and corporate expenses related to the reorganization of the Company in 2010 and 2011 with the acquisition of Monitronics and disposition of the Content Services and Creative Services businesses. Additionally, the decrease is attributable to a non-recurring $2,640,000 charge related to an ongoing litigation matter recorded for the year ended December 31, 2011. The decrease was partially offset by an increase in Monitronics SG&A costs. The increased Monitronics SG&A costs were driven by increased payroll, marketing and stock-based compensation expenses of approximately $3,525,000 as compared to the corresponding prior year period. The increase in stock-based compensation expense is related to restricted stock and stock option awards granted to certain employees during 2011 and 2012. SG&A as a percent of net revenue decreased from 24.6% for the year ended December 31, 2011 to 21.3% for the year ended December 31, 2012.

SG&A increased $46,531,000 for the year ended December 31, 2011 as compared to the corresponding prior year. The increase was primarily due to increased SG&A expense related to Monitronics which had a full year of operations in 2011 as compared to 15 days in 2010. The Monitronics business' SG&A expenses were $57,170,000 for the year ended December 31, 2011, as compared to $2,130,000 for the year ended December 31, 2010. The 2011 increase was partially offset by decreased administrative and corporate expenses as a result of the reorganization of the Company's primary businesses in 2010 and 2011.

Amortization of Subscriber Accounts and Dealer Network. Amortization of subscriber accounts and dealer network increased $3,849,000 and $153,639,000 for the years ended December 31, 2012 and 2011, respectively, as compared to the corresponding prior years. The 2012 increase is primarily attributable to amortization of subscriber accounts purchased subsequent to December 31, 2011. The 2011 increase is attributable to a full year's amortization of subscriber accounts and dealer network related to the Monitronics Acquisition, as compared to 15 days of amortization recognized in 2010.

Restructuring Charges. There were no restructuring charges recorded in continuing operations for the year ended December 31, 2012. During 2011 and 2010, the Company completed certain restructuring activities and recorded charges of $4,258,000 and $4,604,000, respectively.

In the fourth quarter of 2010, the Company began a new restructuring plan (the "2010 Restructuring Plan") in conjunction with the expected sales of the Creative/Media and Content Distribution businesses. The 2010 Restructuring Plan was implemented to meet the changing strategic needs of the Company as it sold most of its media and entertainment services assets and acquired Monitronics. Such charges included retention costs for corporate employees to remain employed until the sales were complete, severance costs for certain employees and facility costs that were no longer being used by the Company due to the business sales.

Before the Company implemented the 2010 Restructuring Plan, it had just completed a restructuring plan that was implemented in 2008 and concluded in September 2010 (the "2008 Restructuring Plan"). The 2008 Restructuring Plan was implemented to align our organization with our strategic goals and how we operate, manage and market our services. The 2008 Restructuring Plan charges included severance costs from labor cost mitigation measures undertaken across all of the businesses and facility costs in conjunction with the consolidation of certain facilities in the United Kingdom and the closing of the Company's Mexico operations.

The following table provides the activity and balances of the 2010 Restructuring Plan and the 2008 Restructuring Plan (amounts in thousands):

                                                   Year ended December 31, 2012
                                 Opening balance     Additions     Deductions (a)    Ending balance

2010 Restructuring Plan
Severance and retention         $           1,886             -            (1,886 )               -

2008 Restructuring Plan
Excess facility costs           $             236             -               (95 )             141

                                                   Year ended December 31, 2011
                                 Opening balance     Additions     Deductions (a)    Ending balance

2010 Restructuring Plan
Severance and retention         $           3,590         4,186            (5,890 )           1,886

2008 Restructuring Plan
Severance                       $               9             -                (9 )               -
Excess facility costs                         211            72               (47 )             236
Total                           $             220            72               (56 )             236

                                                   Year ended December 31, 2010
                                 Opening balance     Additions     Deductions (a)    Ending balance

2010 Restructuring Plan
Severance and retention         $               -         3,994              (404 )           3,590

2008 Restructuring Plan
Severance                       $             221           477              (689 )               9
Excess facility costs                          93           133               (15 )             211
Total                           $             314           610              (704 )             220

Loss (Gain) on the Sale of Assets. During the year ended December 31, 2012, the Company sold land and buildings for approximately $15,860,000, resulting in pre-tax gains of approximately $9,202,000. In addition, the Company sold its 50% interest in an equity method investment for $1,420,000, resulting in a pre-tax loss of $532,000. During the year ended December 31, 2011, the Company disposed of certain property and equipment, resulting in a pre-tax loss of $565,000. The 2010 gain on the sale of assets is primarily attributable to the sale of real estate for $6,176,000, resulting in a pre-tax gain of $2,736,000.

Interest Expense. Interest expense increased $28,577,000 and $40,141,000 for the years ended December 31, 2012 and 2011, respectively, as compared to the corresponding prior years. The increase in 2012 is primarily due to the presentation of interest costs related to derivative instruments executed on March 23, 2012 in conjunction with Monitronics' debt refinancing. Interest costs related to the current derivative instruments are presented in Interest expense on the consolidated statement of operations and comprehensive income
(loss) as the related derivative instruments are effective hedges of Monitronics' interest rate risk for which hedge accounting is applied. As the Company did not apply hedge accounting on its prior derivative instruments, the related interest costs incurred prior to March 23, 2012 are presented in Realized and unrealized loss on derivative financial instruments in the consolidated statement of operations and comprehensive income (loss). The increase is also attributable to the increase in debt and the increase in interest rates associated with the Senior Notes and Credit Facility, as compared to the Company's prior debt obligations. The increase in 2011 interest expense is attributable to the increase in debt associated with the Monitronics Acquisition on December 17, 2010. Interest expense includes amortization of debt discount of $4,473,000, $16,985,000 and $780,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

Realized and Unrealized Loss on Derivative Financial Instruments. Realized and unrealized loss on derivative financial instruments was $2,044,000, $10,601,000 and $1,682,000 for the years ended December 31, 2012, 2011 and 2010, respectively. The decrease in 2012 is attributable to the March 23, 2012 settlement of Monitronics' prior derivative instruments for which the Company did not

apply hedge accounting. The increase in 2011 is attributable to the inclusion of a full year's operations of the Monitronics business, which held the derivative instruments, in 2011 as compared to 15 days in 2010.

For the year ended December 31, 2012, the realized and unrealized loss on the derivative financial instruments includes settlement payments of $8,837,000 partially offset by a $6,793,000 unrealized gain related to the change in fair value of the derivative instruments before their termination on March 23, 2012. For the year ended December 31, 2011, the realized and unrealized loss on derivative financial instruments includes settlement payments of $38,645,000 partially offset by a $28,044,000 unrealized gain related to the change in the fair value of these derivatives. For year ended December 31, 2010, the realized and unrealized loss on derivative financial instruments in the consolidated statements of operations includes settlement payments of $1,504,000 and a $178,000 unrealized loss related to the change in the fair value of these derivatives.

Income Taxes from Continuing Operations. For the year ended December 31, 2012, we had a pre-tax loss from continuing operations of $21,664,000 and income tax expense from continuing operations of $2,591,000. For the year ended December 31, 2011, we had a pre-tax loss from continuing operations of $25,695,000 and an income tax expense from continuing operations of $2,457,000. For the year ended December 31, 2010, we had a pre-tax loss from continuing operations of $33,231,000 and an income tax expense from continuing operations of $270,000. Income tax expense from continuing operations for the year ended December 31, 2012, 2011, and 2010 is primarily attributable to Monitronics' state tax expense. The Company recorded charges of $8,527,000, $7,484,000 and $9,756,000 to increase the valuation allowance for the years ended December 31, 2012, 2011 and 2010, respectively.

Earnings (Loss) from Discontinued Operations, Net of Income Taxes. Earnings
(loss) from discontinued operations, net of income taxes were $(4,348,000), $48,789,000 and $(13,893,000) for the years ended December 31, 2012, 2011 and 2010, respectively. These amounts included the earnings and expenses of operations disposed of in prior years and the related gains or losses on those disposals. See further information about the discontinued operations below.

Adjusted EBITDA. The following table provides a reconciliation of total Adjusted EBITDA to loss from continuing operations before income taxes (amounts in thousands):

                                                     Year Ended December 31,
                                                2012           2011          2010

Total Adjusted EBITDA                        $   239,437       202,433       (14,682 )
Amortization of subscriber accounts and
dealer network                                  (163,468 )    (159,619 )      (5,980 )
Depreciation                                      (8,404 )      (7,052 )      (3,067 )
Loss on pension plan settlements                  (6,571 )           -             -
Stock-based compensation                          (5,298 )      (4,456 )      (4,182 )
Restructuring charges                                  -        (4,258 )      (4,604 )
Impairment of assets held for sale                (1,692 )           -             -
Realized and unrealized loss on
derivative instruments                            (2,044 )     (10,601 )      (1,682 )
Refinancing costs                                 (6,245 )           -             -
Interest income                                    4,011           671         3,638
Interest expense                                 (71,390 )     (42,813 )      (2,672 )
Income tax expense from continuing
operations                                        (2,591 )      (2,457 )        (270 )
Net loss from continuing operations          $   (24,255 )     (28,152 )     (33,501 )

Adjusted EBITDA increased $37,004,000, or 18.3% for the year ended December 31, 2012 as compared to the corresponding prior year. The increase in Adjusted EBITDA was primarily due to revenue growth. Adjusted EBITDA increased $217,115,000 for the year ended December 31, 2011 as compared to the corresponding prior year, which is attributable to the inclusion of a full year's operation of the Monitronics business in 2011 as compared to 15 days in 2010. The Monitronics business' Adjusted EBITDA was $236,341,000, $214,485,000 and $5,577,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

Discontinued Operations

During 2012, the Company recorded costs of approximately $3,742,000 related to contract termination and other loss contingencies associated with the discontinued operations. The following businesses have been treated as discontinued operations in the consolidated financial statements for all periods presented.

Systems Integration

The Company shut down the operations of the Systems Integration business in June 2011 to meet its changing strategic needs. In connection with ceasing its . . .