UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

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

 

Indicate by check mark whether each of the registrants is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes o No ý

 

As of November 7, 2003, Protection One, Inc. had outstanding 98,282,679 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.  Protection One’s sole asset is Protection One Alarm Monitoring and Protection One Alarm Monitoring’s wholly owned subsidiaries, as such there are no separate financial statements for Protection One Alarm Monitoring, Inc.

 

 

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, 2002 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.  Westar Energy, Inc. (“Westar Energy”) which beneficially owns approximately 88% of the Company’s common stock has announced its intention to sell its ownership interest in the Company.  Any such sale may materially adversely affect the Company’s financial position and liquidity and the Company may need to restructure its indebtedness in an out-of-court proceeding and/or to seek the protection of the federal bankruptcy laws to reorganize. Statements made in this Form 10-Q regarding this potential sale by Westar Energy and its possible impacts or effects upon the Company also constitute forward-looking statements.

 

 

Unless the context otherwise indicates, all references in this Report on Form 10-Q to the “Company,” “Protection One,” “we,” “us” or “our” or similar words are to Protection One, Inc., its direct wholly owned subsidiary, Protection One Alarm Monitoring, Inc., which we refer to in this document as “Monitoring,” and Monitoring’s wholly owned subsidiaries.  Protection One’s sole asset is, and Protection One operates solely through, Monitoring and Monitoring’s wholly owned subsidiaries.  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

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Dollars in thousands, except for per share amounts)

(Unaudited)

 

		September 30, 2003			December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents		$	15,958		$	1,545
Restricted cash		1,807			2,616
Receivables, net		21,715			26,084
Inventories, net		7,007			7,213
Prepaid expenses		4,621			4,672
Related party tax receivable		31,672			20,745
Deferred tax assets, current		8,561			8,256
Other		3,916			4,094
Assets of discontinued operations		—			1,117
Total current assets		95,257			76,342
Property and equipment, net		31,507			37,754
Customer accounts, net		261,935			312,785
Goodwill		41,847			41,847
Related party tax receivable, net of current portion		27,286			—
Deferred tax assets, net of current portion		261,530			286,645
Deferred customer acquisition costs		90,212			75,403
Other		7,079			6,796
Total assets		$	816,653		$	837,572
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	—		$	10,159
Accounts payable		5,303			5,795
Accrued liabilities		32,098			35,921
Due to related parties		2,023			995
Deferred revenues		32,798			35,115
Liabilities of discontinued operations		—			428
Total current liabilities		72,222			88,413
Long-term debt, net of current portion		547,485			547,798
Deferred customer acquisition revenue		40,932			31,662
Other liabilities		1,541			1,552
Total liabilities		662,180			669,425
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.10 par value, 5,000,000 shares authorized		—			—
Common stock, $0.01 par value, 150,000,000 shares authorized, 127,949,184 shares and 127,796,745 shares issued at September 30, 2003 and December 31, 2002, respectively		1,279			1,278
Additional paid-in capital		1,379,372			1,382,024
Deficit		(1,191,566		)	(1,165,596		)
Investment in parent		—			(14,950		)
Treasury Stock, at cost, 29,842,905 and 29,840,405 shares at September 30, 2003 and December 31, 2002, respectively		(34,612		)	(34,609		)
Total stockholders’ equity		154,473			168,147
Total liabilities and stockholders’ equity		$	816,653		$	837,572

 

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

 

3

 

PROTECTION ONE, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE LOSS

 

(Dollars in thousands, except for per share amounts)

(Unaudited)

 

		Nine Months Ended September 30,
		2003			2002
					(As Restated See Note 10)
Revenues:
Monitoring and related services		$	193,555		$	205,012
Other		15,230			14,569
Total revenues		208,785			219,581
Cost of revenues (exclusive of depreciation and amortization shown below):
Monitoring and related services		55,427			60,007
Other		21,232			26,749
Total cost of revenues		76,659			86,756
Gross profit (exclusive of depreciation and amortization shown below)		132,126			132,825
Operating expenses:
Selling		23,847			19,938
General and administrative		59,880