UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

ý    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2002

or

 

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from           to           

 

 

 

Indicate by check mark whether each of the registrants (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that such registrants were required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o

 

As of August 8, 2002, Protection One, Inc. had outstanding 97,943,440 shares of Common Stock, par value $0.01 per share. As of such date, Protection One Alarm Monitoring, Inc. had outstanding 110 shares of Common Stock, par value $0.10 per share, all of which shares were owned by Protection One, Inc. Protection One Alarm Monitoring, Inc. meets the conditions set forth in General Instructions H(1)(a) and (b) for Form 10-Q and is therefore filing this form with the reduced disclosure format set forth therein.

 

 

FORWARD-LOOKING STATEMENTS

 

Certain matters discussed in this Form 10-Q are forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward–looking statements generally can be identified as such because the context of the statement includes words such as we “believe,” “expect,” “anticipate” or other words of similar import. Similarly, statements herein that describe our objectives, plans or goals also are forward–looking statements. Such statements include those made on matters such as our earnings and financial condition, litigation, accounting matters, our business, our efforts to consolidate and reduce costs, our customer account acquisition strategy and attrition, our liquidity and sources of funding and our capital expenditures. All such forward–looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward–looking statements. Please refer to “Risk Factors” in our Form 10-K for the year ended December 31, 2001 with respect to such risks and uncertainties as well as certain important factors, among others, that could cause actual results to differ materially from our expectations.

 

Unless the context otherwise indicates, all references in this Report on Form 10-Q (this “Report”) to the “Company,” “Protection One,” “we,” “us” or “our” or similar words are to Protection One, Inc., its direct wholly owned subsidiaries, Protection One Alarm Monitoring, Inc. (“Monitoring”) including Monitoring’s wholly owned subsidiaries and AV ONE, Inc.  Protection One’s sole assets are Monitoring and AV ONE, Inc.  Both Protection One and Monitoring are Delaware corporations organized in September 1991.

 

2

 

PART I

 

FINANCIAL INFORMATION

 

ITEM 1.      FINANCIAL STATEMENTS

 

PROTECTION ONE, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

(Dollars in thousands)

(Unaudited)

 

		June 30, 2002			December 31, 2001
ASSETS
Current assets:
Cash and cash equivalents		$	1,320		$	3,671
Restricted cash		2,597			—
Receivables, net		28,172			35,972
Inventories		7,726			8,043
Prepaid expenses		1,619			2,487
Related party tax receivable		12,671			1,655
Deferred tax assets		12,911			8,783
Other		5,693			4,744
Total current assets		72,709			65,355
Property and equipment, net		52,242			54,341
Customer accounts, net		386,593			746,574
Goodwill		262,811			763,449
Deferred tax assets, net of current portion		246,639			79,612
Other		20,584			18,082
Assets of discontinued operations		19,410			22,938
Total assets		$	1,060,988		$	1,750,351
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	197,054		$	688
Accounts payable		8,842			5,617
Accrued liabilities		34,903			40,543
Due to related parties		4,748			1,875
Deferred revenue		38,776			41,370
Total current liabilities		284,323			90,093
Long-term debt, net of current portion		368,667			584,115
Other liabilities		17,583			11,590
Liabilities of discontinued operations		1,333			1,364
Total liabilities		671,906			687,162
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.10 par value, 5,000,000 authorized		—			—
Common stock, $0.01 par value, 150,000,000 shares authorized, 127,779,286 shares and 127,245,891 issued at June 30, 2002 and December 31, 2001 respectively		1,278			1,272
Additional paid-in capital		1,381,923			1,381,450
Accumulated other comprehensive loss		—			(2,361		)
Deficit		(946,483		)	(284,741		)
Investment in parent stock – held in treasury		(13,027		)	—
Treasury Stock, at cost, 29,840,405 and 28,840,405 shares at June 30,2002 and December 31, 2001 respectively		(34,609		)	(32,431		)
Total stockholders’ equity		389,082			1,063,189
Total liabilities and stockholders’ equity		$	1,060,988		$	1,750,351

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

PROTECTION ONE, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

 

(Dollars in thousands, except for per share amounts)

(Unaudited)

 

		Six Months Ended June 30,
		2002			2001
Revenues:
Monitoring and related services		$	138,204		$	168,263
Other		8,784			7,551
Total revenues		146,988			175,814
Cost of revenues (exclusive of depreciation and amortization shown below):
Monitoring and related services		40,468			54,115
Other		8,387			6,692
Total cost of revenues		48,855			60,807
Gross profit (exclusive of depreciation and amortization shown below)		98,133			115,007
Operating expenses:
Selling		10,803			9,333
General and administrative		42,673			53,497
Amortization and depreciation		44,849			99,834
Loss on impairment		332,194			—