SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
Current Report Pursuant
To Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) March 29, 2000
(March 29, 2000)
Protection One, Inc. Protection One Alarm Monitoring, Inc.
(Exact Name of Registrant (Exact Name of Registrant
as Specified in Charter) as Specified in Charter)
Delaware Delaware
(State or Other Jurisdiction (State or Other Jurisdiction
of Incorporation) of Incorporation)
0-247802 33-73002-1
(Commission File Number) (Commission File Number)
93-1063818 93-1065479
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
6011 Bristol Parkway 6011 Bristol Parkway
Culver City, California 90230 Culver City, California 90230
(Address of Principal Executive (Address of Principal Executive
Offices, Including Zip Code) Offices, Including Zip Code)
(310) 342-6300 (310) 342-6300
(Registrant's Telephone Number, (Registrant's Telephone Number,
Including Area Code) Including Area Code)
<PAGE>
Item 5. Other Events
On March 29, 2000, Protection One, Inc. announced fourth quarter 1999
results.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 99.1 - Press release dated as of March 29, 2000, issued by
Protection One, Inc.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Protection One, Inc.
Date: March 29, 2000 By: /s/ Anthony D. Somma
--------------------- -----------------------------
Anthony D. Somma
Chief Financial Officer
Protection One Alarm Monitoring,Inc.
Date: March 29, 2000 By: /s/ Anthony D. Somma
--------------------- -----------------------------
Anthony D. Somma
Chief Financial Officer
3
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
99.1 Press release dated as of March 29,
2000, issued by Protection One, Inc.
4
PROTECTION ONE
MEDIA CONTACT:
Robin J. Lampe
Phone: 785.575.6468
FAX: 785.575.6511
INVESTOR CONTACT:
Craig Weingartner
Phone: 785.575.8168
FAX: 785.575.6511
PROTECTION ONE ANNOUNCES 4TH QUARTER
AND YEAR-END EARNINGS
CULVER CITY, Calif., March 29, 2000 (6:30 a.m. CST) -- Protection
One, Inc., (NYSE:POI) one of the leading residential security alarm companies in
North America, today reported financial results for the fourth quarter and the
year ended 1999 and shared an update related to its debt and customer service
and creation efforts.
"Last year, we began a comprehensive plan to improve customer
service, reduce the cost of adding customers and to de-leverage our balance
sheet. During the third and fourth quarters of 1999, our efforts continued to
improve customer service, integrate operations and build the platform for
controlled, economic growth," said Annette Beck, president and chief operating
officer of Protection One. "While our financial results are indicative of the
issues we faced in 1999, management is building a solid foundation for future
performance and progress is being made daily."
FOURTH-QUARTER RESULTS
- ----------------------
Revenues for the fourth quarter 1999 were $152.7 million, compared to
$144.0 million for the fourth quarter 1998. The net loss for the fourth quarter
of 1999 was $(29.5) million, or $(0.23) per share compared to a net loss of
-more-
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P. 2 - 4th QUARTER RESULTS
$(5.7) million, or $(0.05) per share for the fourth quarter 1998.
Fourth-quarter earnings before interest, taxes, depreciation and
amortization (EBITDA), excluding one-time expenses, were $44.9 million, compared
to fourth quarter 1998 EBITDA of $52.6 million. The company's EBITDA goal for
2000 is approximately $160 million.
Adjusted net loss, defined as net loss (as reported) plus goodwill
amortization, was $(22.7) million compared to a loss of $(3.35) million in the
fourth quarter 1998.
Cash flow, defined as net loss (as reported) plus depreciation and
amortization, for the fourth quarter 1999 was $25.2 million compared to $32.4
million in the fourth quarter 1998.
YEAR-END RESULTS
- ----------------
Revenues for the year ended were $605.2 million, compared to $421.1
million in 1998, an increase of 43.7 percent. The net loss for 1999 was $(82.9)
million, or $(0.65) per share, compared to a net loss of $(3.3) million, or
$(0.05) per share for 1998. This loss is attributed primarily to the change in
the amortization methodology of customer accounts and increased interest costs
during 1999.
LOWERING DEBT
- -------------
Recently, Protection One announced the sale of its European
operations and certain other assets for $244 million and an amendment to its
revolving credit facility. The company received approximately $183 million in
cash and approximately $61 million market value of its bonds. Pro forma credit
ratios as of Dec. 31, 1999, under the Westar Capital revolver were approximately
4.5 (debt/EBITDA) and 3.0 (interest coverage test).
The indentures governing the company's outstanding subordinated notes
contain similar covenants with different calculations relating to the company's
ability to incur indebtedness. The company is in compliance with these
indentures.
-more-
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P. 3 - 4th QUARTER RESULTS
The company may, from time to time, depending on market conditions,
buy back its publicly traded debt securities.
CUSTOMER SERVICE AND CREATION INITIATIVES
- -----------------------------------------
In mid-to late-1999, a new management team focused on addressing
customer service issues by investing in training and technology, hiring 150 new
service representatives and building customer retention teams in order to
enhance customer service.
This focus on service has resulted in continued improvements in
measurements of key performance metrics such as call abandonment rates,
acknowledgement time, average speed of answer and service repair backlog.
"Our efforts to improve service are showing results," Beck said.
"The company's customer attrition rate in North America decreased to 16.3
percent in the fourth quarter from 19.1 percent in the third quarter. Overall
company attrition for the fourth quarter was 14.7 percent on an annualized
basis. We expect attrition to be lower in the first quarter 2000 than it was in
the fourth quarter 1999."
This year, the company is moving to a standard customer service and
monitoring platform nationwide using Monitoring Automation Systems (MAS), a
supplier of security industry computer systems and products that assist with
functions such as a general customer service, monitoring, billing, lead tracking
and collections. This system, scheduled for implementation by year-end 2000,
will replace the multiple systems currently used and, the company believes, it
will provide more opportunities for one-call resolution with customers and
general operating efficiencies.
The company also is focusing on lowering its cost of growth and
reducing the reliance on the more expensive dealer model, one that added
customers at an average of 35 times Monthly Recurring Revenue (MRR) at its peak.
Protection One's growth model now includes dealers who are paid a lower
multiple, internal sales and Paradigm Direct, which will incorporate new
-more-
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P. 4 - 4th QUARTER RESULTS
marketing channels, such as the internet, direct response TV, and direct mail.
Through these channels, customers are being acquired at a lower multiple.
ANNUAL MEETING DATE SET
- -----------------------
Protection One today also announced that its 2000 annual meeting of
shareholders will be on Tuesday, May 23. The meeting will be at the
Ritz-Carlton, Marina del Rey, California. Shareholders of record on April 11,
2000, may attend and vote at the meeting.
The company's annual report to shareholders will be mailed to
shareholders on or about April 15, 2000.
-- TABLES FOLLOW --
Protection One, one of the leading residential security alarm
companies in the United States, provides monitoring and related security
services to approximately 1.2 million residential and commercial subscribers in
North America.
Forward-Looking Statements: Certain matters discussed in this news
release are "forward-looking statements." The Private Securities Litigation
Reform Act of 1995 has established that these statements qualify for safe
harbors from liability. Forward-looking statements may include words like we
"believe", "anticipate," "expect" or words of similar meaning. Forward-looking
statements describe our future plans, objectives, expectations, or goals. Such
statements address future events and conditions concerning capital expenditures,
earnings, litigation, the outcome of accounting issues reviewed by the SEC staff
as disclosed in previous filings, possible corporate restructurings, mergers,
acquisitions, dispositions, liquidity and capital resources, interest,
environmental matters, changing weather, ability to enter new markets
successfully, and accounting matters. Our actual results may differ materially
from those discussed here. See the company's and Protection One's 1999 Annual
Report on Form 10-K and current reports on Form 8-K for further discussion of
factors affecting the company's and Protection One's performance. Protection One
disclaims any obligation to update any forward-looking statements as a result of
developments occurring after the date of this news release. Other risks and
uncertainties are described in Protection One's 1999 Form 10-K filed with the
Securities and Exchange Commission on March 29,2000. Protection One disclaims
any obligation to update any forward-looking statements as a result of
developments occurring after the date of this press release.
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PROTECTION ONE AND SUBSIDIARIES
SUMMARY BALANCE SHEET AND CASH FLOW DATA
----------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
December 31, December 31,
1999 1998
--------------------- ---------------------
<S> <C> <C>
ASSETS
Current assets $ 186,380 $ 187,840
Property and equipment, net 60,912 46,959
Customer accounts, net 1,139,066 1,031,956
Goodwill and trademarks, net 1,101,788 1,175,153
Other assets 70,089 68,528
--------------------- ---------------------
$ 2,558,235 $ 2,510,436
===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 214,313 $ 278,408
Long term debt, net of current portion 1,077,152 884,554
Other liabilities 4,173 3,238
--------------------- ---------------------
Total liabilities 1,295,638 1,166,200
--------------------- ---------------------
Stockholders' equity 1,262,597 1,344,236
--------------------- ---------------------
$ 2,558,235 $ 2,510,436
===================== =====================
CASH FLOW DATA:
Three Months Ended December 31,
--------------------------------------------------------
1999 1998
--------------------- ---------------------
Net cash provided by operating activities $ 15,332 $ 2,616
Net cash used in investing activities $ (32,290) $ (73,936)
Net cash provided by financing activities $ 5,242 $ 67,143
</TABLE>
<PAGE>
PROTECTION ONE AND SUBSIDIARIES
SUMMARY INCOME STATEMENT
------------------------
(Dollars in thousands, except per share and subscriber amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
---------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues:
Monitoring and related services $ 128,782 $ 121,091
Installation and other 23,914 22,908
---------------------- -------------------
Total Revenues 152,696 143,999
Cost of revenues:
Monitoring and related services 38,054 31,607
Installation and other 12,983 9,449
---------------------- -------------------
Total Cost of Revenues 51,037 41,056
Gross Profit 101,659 102,943
Selling, general and administrative expense 51,279 44,519
Acquisition and transition expense 5,519 5,828
Amortization of intangibles and depreciation expense 54,637 38,147
Severance & relocation costs 1,501 3,400
---------------------- -------------------
Operating income (11,277) 11,049
Other (income)/expense:
Interest expense, net 22,703 12,572
Interest expense to parent, net - 6,088
Gain on sale of Mobile Services Group - -
Other 4,451 215
---------------------- -------------------
Income (loss) before income taxes & extraordinary item (38,431) (7,826)
Income tax (expense)/benefit 10,661 2,137
---------------------- -------------------
Income (loss) before extraordinary item (27,770) (5,689)
Extraordinary gain (loss), net of tax (1,691) -
---------------------- -------------------
Net income (loss) (29,461) (5,689)
====================== ===================
Net income (loss) per common share (0.23) (0.05)
Net loss before one-time and non-operational items (26,794) (3,649)
Net loss before one-time and non-operational items per share (0.21) (0.03)
OTHER DATA:
EBITDA (1) 44,861 52,596
Cash Flow per share (2) 0.20 0.26
Adjusted Net Income/(Loss) (3) (22,690) (3,352)
Adjusted Net Income/(Loss) per share (0.18) (0.03)
December Monitoring/related service revenue 43,569 40,496
End of period subscribers 1,623,201 1,557,996
</TABLE>
(1) - For 1999, excludes a charge of $1.5 million for relocation of
administrative offices. For 1998, excludes severance charges of $3.4
million.
(2) - Cash flow is defined as net income (loss) as reported, plus
depreciation and amortization.
(3) - Adjusted net income is defined as net income (loss) as reported, plus
goodwill amortization.
