<PAGE>
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) May 9, 2000
(May 9, 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 May 9, 2000, the Company gave a presentation to analysts in New
York, New York. A copy of the presentation is posted on the Company's website
and is attached as Exhibit 99.1.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 99.1 - A copy of the May 9, 2000, Protection One, Inc.
presentation made in New York, New York and posted on the Company's
website.
<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: MAY 9, 2000 By: /S/ ANTHONY D. SOMMA
----------------------- -----------------------
Anthony D. Somma
Chief Financial Officer
Protection One Alarm Monitoring, Inc.
Date: MAY 9, 2000 By: /S/ ANTHONY D. SOMMA
----------------------- -----------------------
Anthony D. Somma
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
99.1 May 9, 2000 Protection One, Inc.
presentation made in New York,
New York.
<PAGE>
[LOGO]
PRESENTATION OF PROTECTION ONE, INC.
May 9, 2000
<PAGE>
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 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, and ability to enter new markets
successfully. Our actual results may differ materially from those discussed
here. See the company's 1999 Annual Report on Form 10-K and the 2000 1st Quarter
Report on Form 10-Q which was filed on May 5, 2000 and current reports on Form
8-K for further discussion of factors affecting the company's performance.
Protection One disclaims any obligation to update any forward-looking statements
as a result of developments occurring after the date of this seminar.
2
[LOGO]
<PAGE>
AGENDA
- -------------------------------------------------------------------------------
- Introduction
- Phase I - The Turn Around
- North America Overview
- Network Multifamily Review
- Financial Review
- Phase II - A Healthier Protection One
- The Investment Opportunity
3
[LOGO]
<PAGE>
HISTORY
- -------------------------------------------------------------------------------
- Founded in 1988
- IPO in 1994
- Merged with Western Resources security business in 1997
- Purchased Network Multifamily from Westar Capital in 1998
- Board of Directors installed new management team in 1999
- Protection One Europe sold to Westar Capital in February 2000
4
[LOGO]
<PAGE>
ADDRESSING CONCERNS
- -------------------------------------------------------------------------------
- Management
- Growth strategy
- Attrition
- SEC Overhang
- Leverage/Liquidity
5
[LOGO]
<PAGE>
[LOGO]
PROTECTION ONE TODAY
- -------------------------------------------------------------------------------
<PAGE>
PROTECTION ONE TODAY
- -------------------------------------------------------------------------------
- One of the top three largest monitored security companies in the nation
- 1.5 million subscribers
- Retail 1,038,400
- Wholesale 140,000
- Network Multifamily 297,000
- North American Operations, Network Multifamily
- Protection One Europe and Guardian investment separately owned by Westar
Capital
7
[LOGO]
<PAGE>
MANAGEMENT
- --------------------------------------------------------------------------------
Chairman
Doug Lake
President President and COO CFO
Network Multifamily Annette Beck Tony Somma
25 years
Steve Williams
VP Operations Sr. VP Operations Controller
13 years 20 + years at Andy Devin
Gary Skraehart ADT/Centennial
Rich Simonetti
VP Sales VP Customer Operations Executive Director
18 years 9 years at Westinghouse of Finance
Chris Whipple Joe Sanchez Craig Liening
VP Legal/HR & VP Sales Exec. Director Investor
General Counsel 15 years at Relations & FinancialPlanning
8 years Brinks Craig Weingartner
Steven Parker Doug Valenski
Director Market Support VP Legal & Administration
11 years 10 years at
Renee Caldwell Westinghouse
Renee Kingsley
Director ICS VP Patrol
2 years 10 years
Ibrahim Kassem Retired DEA
Craig Chretien
Controller VP Wholesale
9 years 10 + years at
Kelly James CMS
Tony Wilson
VP National Accounts
20 + years at
ADT
John Tosches
8
[LOGO]
<PAGE>
PROTECTION ONE TODAY
- --------------------------------------------------------------------------------
Number of Subscribers: Total 1.5 million
[MAP]
Number of Subscribers
/ / > 125,000 / / 20,000 - 125,000 / / < 20,000
California Washington All other states
Texas Oregon
Florida Nevada
Kansas
Oklahoma
Tennessee
Kentucky
Georgia
Michigan
Ohio
New York
Arizona
Canada
9
[LOGO]
<PAGE>
PROTECTION ONE CALL CENTER LOCATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF CAPACITY*
SUBSCRIBERS
<S> <C> <C>
- - Main Centers
- Beaverton, OR 305,000 750,000
- Irving, TX 403,600 460,000
- Wichita, KS 210,000 1,020,000
- Hagerstown, MD 66,000 98,000
- - Canadian
- Vancouver, Canada 19,000 80,000
- Ottawa, Canada 24,000 50,000
- - Sonitrol
- Norwalk, CT 6,600 7,000
- Phoenix, AZ 1,700 3,600
- Dayton, OH 1,500 2,000
- - Other
- Portland, ME 32,000 60,000
- Addison, TX (NMF) 297,000 345,000
- Orlando, FL (wholesale) 109,000 150,000
---------- ----------
Total 1,475,400 3,025,600
</TABLE>
- ------------------------------------------------------------------------
EXCESS CAPACITY CREATES HUGE POTENTIAL FOR MARGIN IMPROVEMENT
- ------------------------------------------------------------------------
* Receiver capacity
10
[LOGO]
<PAGE>
REVIEW OF PROTECTION ONE - LATE 1998 EARLY 1999
- -------------------------------------------------------------------------------
- - Europe, Multifamily, and North American stand alone entities
- - Problems related to North American segment
- Growth model with reliance on dealers at high multiples of MRR, (35
times) or $1200/customer
- Financed solely with bank debt; peak monthly borrowings of $28M in April
- Operational issues which led to poor customer service
- Employee layoffs in call centers
- High call abandonment rates
- Low service response
- No collections efforts
- -------------------------------------------
RESULTED IN ATTRITION SPIKE
- -------------------------------------------
- No integration efforts
- Third party monitoring costs of $8M+
- Different call center and financial platforms
11
[LOGO]
<PAGE>
[LOGO]
PHASE I
THE TURN AROUND
- --------------------------------------------------------------------------------
"PROTECTION ONE NORTH AMERICA IS FIXED"
<PAGE>
PHASE I - THE NORTH AMERICAN TURN AROUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Before After Status
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cost of Growth 35x 20x - 23x Done
- ---------------------------------------------------------------------------------------------------------------------------
Customer Service 30% TSF 80+% TSF Done
25% Abandoned Call Rate 3% Abandoned
- ---------------------------------------------------------------------------------------------------------------------------
Technology Multiple Platforms One Platform MAS Rollout Q4
Information Internet Site Transactional Internet Site Walker Rollout Q4
Internet Rollout Q2
- ---------------------------------------------------------------------------------------------------------------------------
Attrition 19% Q3 1999 11.9% Q1 2000 Done
- ---------------------------------------------------------------------------------------------------------------------------
Total Company Debt $1.1 B $700 M On-going
- ---------------------------------------------------------------------------------------------------------------------------
Executive and Back office Decentralized Centralized Done
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
13 [LOGO]
<PAGE>
[LOGO]
NORTH AMERICAN OVERVIEW
- --------------------------------------------------------------------------------
<PAGE>
NORTH AMERICAN ACHIEVEMENTS
- --------------------------------------------------------------------------------
- Reduced cost of growth
- Strengthened our customer service
- Continued to provide superb monitoring service
- Reduced service order backlog
- Lowered attrition
15 [LOGO]
<PAGE>
REVAMPED GROWTH MODEL
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BEFORE AFTER
<S> <C>
High Internal
Cost Sales
Dealers
Sole New
Reliance "Low-Cost"
on Dealers Dealers
Relaxed Paradigm
Credit Direct
Scoring
Tightened
Credit
Scoring
</TABLE>
16 [LOGO]
<PAGE>
RESIDENTIAL DISTRIBUTION CHANNELS
- --------------------------------------------------------------------------------
QUALIFIED LEADS
- Internet
- Telemarketing
- Mail
- Direct TV
- Referral
- Retention
Revamped Internal Third Party,
Dealer Commissioned Scalable
Network Sales Force Sales
Platforms
Protection One Sales 20-23x
17 [LOGO]
<PAGE>
DEALER PROGRAM
- --------------------------------------------------------------------------------
- Old program peaked at 25,000 accounts in March 1999
- Cash outlay peaked in April 1999 at $28M
- Average multiple 35x
- Program revamped to 26x
- Favorable economics to dealer at new multiple
- Q1 purchases
- 8,000 "old" program
- 260 "alternative" program
- 1,100 "new" program
18 [LOGO]
<PAGE>
DEALER PROGRAM PURCHASES
- --------------------------------------------------------------------------------
Dealer Program Purchases
Accounts Purchased and Multiple Trend
<TABLE>
<CAPTION>
Number of Accounts Average Gross
Multiple Paid
<S> <C> <C>
Jan 15,894 35.04
Feb 20,808 34.08
Mar 24,871 34.45
Apr 22,497 34.63
May 20,865 34.75
Jun 20,139 34.96
July 17,678 35.02
Aug 14,437 35.00
Sep 12,606 34.97
Oct 10,616 34.91
Nov 7,812 34.78
Dec 6,866 34.93
Jan 3,468 33.56
Feb 3,771 32.54
Mar 2,152 29.40
Apr MTD 1,673 28.90
</TABLE>
19 [LOGO]
<PAGE>
INTERNAL SALES PROGRAM
- --------------------------------------------------------------------------------
- Commission only sales organization rolled out February 21, 2000
- Seventy-six hired in 1st Quarter
- Leverage branch infrastructure
- Utilize subcontractor installation network to fix labor costs
- Telesales aimed at new owners and new installations
- Commission only compensation plan rewards self-generated and add-on
sales
- $75-$200 per sale
- 15% of add on revenue
- Bonus based on hitting qualified volume levels
- Q1 results
- 1,900 sales
- 2,600 new owners
20 [LOGO]
<PAGE>
PARADIGM DIRECT
- --------------------------------------------------------------------------------
- Protection One transferred marketing department, to Paradigm in 1999
forming POMS
- POMS focus:
- Utilize new marketing channels; telemarketing, direct response TV,
direct mail, affinity programs (Priceline.com, Ourhouse.com),
internet
- Lead machine
- Create new fully installed customer creation vehicle
- Pilot program underway
- Contracted with RS&I for installations
- Protection One installing in 11 markets
- Rollout new transactional internet site Q2
- Q1 purchases
- 87 accounts
- 213 leads
21 [LOGO]
<PAGE>
[LOGO]
COMMERCIAL BUSINESS
- --------------------------------------------------------------------------------
<PAGE>
COMMERCIAL INITIATIVE
- --------------------------------------------------------------------------------
- 10% of North America revenue from commercial account base
- Under utilized asset
- Evaluation of business showed significant potential
- Creating commercial business unit to unlock value
23
[LOGO]
<PAGE>
COMMERCIAL DISTRIBUTION MODEL
- --------------------------------------------------------------------------------
Light Commercial National Accounts
Dealers and Internal Sales National Accounts team
Commercial Sales
Internal Commercial Sales NJ and KC teams
Medium Commercial Engineered Systems
24
[LOGO]
<PAGE>
COMMERCIAL BUSINESS PROFILE
- --------------------------------------------------------------------------------
- Light commercial
- Small retail stores, restaurants, strip mall locations
- MRR - $25-$80
- Residential equipment, sales and installers
- National Accounts
- Multi location accounts of a larger parent company
- MRR - $25-$50 per location
- Moderate installation sophistication
- Experienced, more knowledgeable sales
- Medium Commercial
- Established retailers, office/warehouse combinations, class A, B and
C office
- MRR $35-$100
- Moderate installation sophistication
- Experienced, more knowledgeable sales
25
[LOGO]
<PAGE>
COMMERCIAL BUSINESS PROFILE (CONTINUED)
- --------------------------------------------------------------------------------
- Engineered Systems
- High risk accounts, property management integrated systems,
fire systems
- MRR $100-$500 plus generally up front equipment sale
- Sophisticated design and installation
26
[LOGO]
<PAGE>
[LOGO]
CUSTOMER SERVICE
- --------------------------------------------------------------------------------
<PAGE>
IMPROVED CUSTOMER SERVICE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BEFORE AFTER
<S> <C>
Busy Appropriately
Signal Staffed
Call Centers
Rollout Vision
and Performance
Objectives
High Improved
Attrition Technology
Refocused
Collections
</TABLE>
28
[LOGO]
<PAGE>
CUSTOMER SERVICE PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% OF CALLS ANSWERED WITHIN 20 SECONDS
Jan Feb Mar Apr May Jun July Aug Sep Oct D
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Goal 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8
TSF 52.0% 49.0% 51.0% 59.0% 52.0% 33.0% 61.0% 79.0% 87.0% 78.0%
Nov Dec Jan Feb Mar Apr MTD
<S> <C> <C> <C> <C> <C> <C>
Goal 0.8 0.8 0.8 0.8 0.8 0.8
TSF 86.0% 84.0% 85.0% 82.0% 85.0% 84.0%
</TABLE>
[GRAPH]
29
[LOGO]
<PAGE>
CUSTOMER SERVICE PERFORMANCE
- --------------------------------------------------------------------------------
Customer Service Performance
Abandoned Call Rate
<TABLE>
<CAPTION>
Goal Abandon
<S> <C> <C>
Jan 5% 9%
Feb 5% 14%
Mar 5% 18%
Apr 5% 14%
May 5% 12%
Jun 5% 26%
Jul 5% 10%
Aug 5% 4%
Sept 5% 3%
Oct 5% 3%
Nov 5% 2%
Dec 5% 2%
Jan 5% 2%
Feb 5% 2%
Mar 5% 2%
Apr 5% 3%
</TABLE>
30
[LOGO]
<PAGE>
FIELD OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE BACKLOG OF
SERVICE ORDERS
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Goal 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5
Average Backlog 2.1 1.6 1.7 1.8 2.0 2.1 2.6 2.3 2.3 2.0 1.9 2.0 2.1 1.8 1.8
</TABLE>
[GRAPH]
31
[LOGO]
<PAGE>
NORTH AMERICA ATTRITION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTERLY ANNUALIZED
'98 Q1 '98 Q2 '98 Q3 '98 Q4 '99 Q1 '99 Q2 '99 Q3 '99 Q4 '00 Q1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Attrition 10.40% 12.60% 10.90% 8.30% 11.20% 15.90% 19.00% 16.30% 11.93%
</TABLE>
- - Goal for 2000 is 13%
[GRAPH]
32
[LOGO]
<PAGE>
[LOGO]
OTHER INITIATIVES
- --------------------------------------------------------------------------------
<PAGE>
COST REDUCTIONS
- --------------------------------------------------------------------------------
- Third Party monitored accounts decrease
- 108K accounts in March, 1999
- 47K accounts as of March, 2000
- Expenditure reduced from $8.1M to $2.7M annually
- Culver City office move March 15; $2M savings over 4 years
- Irving office sublease in process; $2M savings over 5 years
34
[LOGO]
<PAGE>
COMPENSATION PROGRESS
- --------------------------------------------------------------------------------
- Watson Wyatt study implemented as of March 1
- 15 pay grade structure
- Standard titles
- Stock options being given to all exempt employees
- Annualize salary increases
35
[LOGO]
<PAGE>
[LOGO]
NETWORK MULTIFAMILY OVERVIEW
- --------------------------------------------------------------------------------
<PAGE>
HISTORY
- --------------------------------------------------------------------------------
- Founded in 1982
- Acquired by Westar Capital in late 1997
- Purchased by Protection One in early 1998
- Acquired two largest competitors in 1998
37
[LOGO]
<PAGE>
- --------------------------------------------------------------------------------
Total Number of
Subscribers: 300,000
[MAP]
Number of Subscribers
Yellow = 40,000 and above Red = 10,000 - 39,999 Blue = less than 10,000
Texas California Alaska
Florida Nevada Oregon
Georgia Washington
Virginia Utah
North Carolina New Mexico
Maryland Arizona
Colorado
Kansas
Oklahoma
Missouri
Arkansas
Louisiana
Mississippi
Kentucky
Tennessee
Illinois
Minnesota
Wisconsin
Michigan
Ohio
Indiana
West
Virginia
Pennsylvania
New York
New
Jersey
New
Hampshire
Connecticut
Massachusetts
Rhode
Island
Alabama
South
Carolina
Deleware
*States not listed have no subscribers
38
[LOGO]
<PAGE>
ESTABLISH OUR FOCUS
- --------------------------------------------------------------------------------
Security Market Segments Multifamily Residential Security Segment
Single Family 30 MM MFP's Nationwide
11% Penetration 20 MM Garden Style
15 MM Target
Mutilfamily
3% Penetration
Commercial
20% + Penetration
39
[LOGO]
<PAGE>
<TABLE>
<CAPTION>
SEGMENT COMPARISONS
- --------------------------------------------------------------------------------
SINGLE FAMILY MULTIFAMILY
<S> <C>
110 Million Homes 30 Million Apartments
110 Million Decision Makers 2,000 Individuals Control 50%
of the Apartment Market
>16,000 Alarm Companies < 50 Alarm Companies
2-5 year agreements 10 year agreements with
automatic escalators
</TABLE>
40
[LOGO]
<PAGE>
TYPICAL CONTRACTUAL ARRANGEMENTS
- --------------------------------------------------------------------------------
- Long term contract with 10 year primary term and 5 year renewal term
- Lower Attrition
- Contract rate of $10 - $11 per unit with annual CPI increase
- Contract executed by property owner/developer
- Approximately 2,000 owner/developers versus approximately 300,000
monitored units/residents
- Bill and collect from only 2,000 customers
- Minimal credit risk with very few contracts canceling prior to
completion of primary contract term
- Contracts typically assumed by new owner/developers as properties
turn over
41
<PAGE>
TARGET PROPERTY
- --------------------------------------------------------------------------------
[PHOTO]
42
<PAGE>
BUYING MOTIVE
- --------------------------------------------------------------------------------
-- > < --
AMENITY VS PROTECTION
43
<PAGE>
THE MFP DISTRIBUTION CHANNEL
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OWNER PROPERTY RESIDENT
MANAGER
<S> <C> <C>
- - Increased - Leasing Tool - Reliability
Occupancy Peace of Mind
- Quality
- - Reduced Service - High Value
Turnover
- Management - Ease of Use
- - Higher Rents Incentives Convenience
</TABLE>
NETWORK'S TAILORED APPROACH
- Sales Executive
- Market Support
- Customer Service
44
<PAGE>
ACCEPTANCE AND ENDORSEMENTS
- --------------------------------------------------------------------------------
- FROM THE INDUSTRY...
- Private in-unit alarm systems are #1 TECHNOLOGY ITEM in new
apartment homes. (1998, National Multi Housing Council and the
National Apartment Association)
- Apartment residents' PRIMARY CONCERN is for safety and security.
(1998, CEL & Associates)
- The fast-growing luxury sector ATTRACTS RESIDENTS with built-in
alarm systems. (1998, National Multi Housing Council)
- 77% of residents consider security alarms in their units TO BE
IMPORTANT OR VERY IMPORTANT. (1995, Multi-Housing News Survey).
- Apartment residents choose their homes because of location, unit
size and SAFETY AND SECURITY CONCERNS. (Multi-Housing News).
45
<PAGE>
POSITION IN THE INDUSTRY
- --------------------------------------------------------------------------------
- Nation's oldest and largest provider of alarm amenities
- More than ten times its nearest competitor
- Operations in 42 states, 260 major cities and Canada
- Industry leader with memberships in the following:
- National Multi Housing Council and its Board of Directors
- National Apartment Association and its National Suppliers Council
- National Association of Home Builders' Multifamily Services Division
Pillars of the Industry Sponsor
- Active Product Supplier Member of 23 apartment associations at the
state and local level
- Expertise is recognized by industry trade journals and publications
evidenced by editorial requests and executive interviews
46
<PAGE>
GROWTH
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BULK UNIT INSTALLATIONS AND SALES
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Installations 12,760 15,148 26,857 35,053 40,420 45,366
Sales 18,518 25,845 31,933 40,028 48,438 58,276
</TABLE>
47
<PAGE>
FINANCIAL PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EBITDA
($ in thousands)
1997 1998 1999
<S> <C> <C>
10,133 13,978 16,236
</TABLE>
48
<PAGE>
FUTURE OUTLOOK
- --------------------------------------------------------------------------------
- Subscriber growth
- Units in Backlog
- Synergies with North America
- Feeder of leads
- New business opportunities
- Telecom
[LOGO]
49
<PAGE>
[LOGO]
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
50
<PAGE>
CASH ON CASH RETURN ANALYSIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------
Average Life in Years
------------------------------------------------------------
Multiple 8 9 10
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Old Program 35 4.5% 7.0% 8.9%
------------------------------------------------------------
------ 33 5.2% 7.7% 9.5%
DEALER ------------------------------------------------------------
------ 31 6.6% 9.1% 10.9%
------------------------------------------------------------
29 8.3% 10.7% 12.4%
------------------------------------------------------------
New Program 26 11.2% 13.5% 15.1%
------------------------------------------------------------
25 12.3% 14.5% 16.1%
------------------------------------------------------------
24 13.5% 15.7% 17.2%
------------------------------------------------------------
23 14.8% 16.9% 18.4%
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
Average Life in Years
--------------------------------------------------
Multiple 8 9 10
--------------------------------------------------
<S> <C> <C> <C> <C>
24 15.3% 17.3% 18.7%
--------- --------------------------------------------------
INTERNAL/ 23 16.4% 18.3% 19.7%
PARADIGM --------------------------------------------------
--------- 22 17.5% 19.4% 20.7%
--------------------------------------------------
21 18.7% 20.5% 21.8%
--------------------------------------------------
20 20.0% 21.7% 23.0%
--------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
Average Life in Years
------------- ---------------------------------------------------
NETWORK Multiple 10 13 15
MULTIFAMILY ---------------------------------------------------
-------------
<S> <C> <C> <C> <C>
30 17.7% 19.5% 20.3%
---------------------------------------------------
</TABLE>
[LOGO]
51
<PAGE>
IMPROVED FINANCIAL PERFORMANCE
- --------------------------------------------------------------------------------
PROTECTION ONE NORTH AMERICA
FREE CASH FLOW ANALYSIS
($ IN MILLIONS)
[GRAPH]
<TABLE>
<CAPTION>
-------------------------------------------------
'99 Q1 '99 Q2 '99 Q3 '99 Q4 '00 Q1*
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---CASH FLOW 36.7 34.6 38.6 27.5 30.9
- --------------------------------------------------------------------------
- ---SUBSCRIBER CAP X (72.0) (69.7) (53.6) (29.6) (9.7)
- --------------------------------------------------------------------------
- ---FREE CASH FLOW (35.3) (35.1) (15.0) (2.1) 21.2
- --------------------------------------------------------------------------
</TABLE>
* Excludes extraordinary gain
- -Free Cash Flow = Net Income + Depr. + Amort. - Subscriber Cap X
- -Self funding in 2000
[LOGO]
52
<PAGE>
[LOGO]
DEBT REDUCTION
- --------------------------------------------------------------------------------
53
<PAGE>
EUROPEAN TRANSACTION WITH WR
- --------------------------------------------------------------------------------
- - European assets most likely candidate for sale
- European cash flow did not service Protection One Alarm Monitoring debt
- All cash flow stayed in Europe to service European obligations
- Cash flow from North America and Multifamily used to service public debt
obligations and revolver totaling over $1B
- - Protection One received the following in exchange for Europe, other
assets and tax payment from Westar Capital
<TABLE>
<S> <C>
Cash $183,025
Market value of bonds 75,959*
Note 14,199
--------
Result $273,184
</TABLE>
*Face amount of $131,340
[LOGO]
54
<PAGE>
OPEN MARKET BOND REPURCHASE
- --------------------------------------------------------------------------------
- - Market continues to present unique opportunity to delever balance sheet
- Protection One bonds still trading at a discount to face
- - Subsequent to European transaction Protection One has retired an additional
$20.4M face amount bonds in the 1st Quarter
- $14.5M face amount of bonds received from Westar Capital as repayment of
note
- $6.0M face amount of bonds purchased in open market
- - Subsequent to 1st Quarter, Protection One has retired an additional $20.9M
face amount bonds
- $7.5M face amount bonds received from Westar Capital as repayment of
note
- $13.4M face amount bonds purchased in open market
[LOGO]
55
<PAGE>
PROFORMA FINANCIAL IMPACT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEBT AT (1)PROFORMA 4Q 99 (1)PROFORMA INTEREST
12/31/99 DEBT TODAY INTEREST EXPENSE EXPENSE
-------- ---------- ---------------- -------
<C> <C> <C> <C>
$1,110,162 $698,463 $22,588 $13,804
</TABLE>
<TABLE>
<S> <C>
Q1 00 Annualized EBITDA w/o Europe $156M
Leverage ratio proforma(2) 4.4x
Leverage ratio proforma(2) 2.7x
</TABLE>
- ----------------------------------------------------------------------------
As a result of deleveraging the balance sheet, North America and Multifamily
support $698M in debt vs. $1B; interest expense reduced $35M/year
- ----------------------------------------------------------------------------
(1)Reflects debt reduction through April 21, 2000
(2)Ratios calculated are not consistent with definitions in the Company's
indentures and senior credit facility
[LOGO]
56
<PAGE>
[LOGO]
YTD FINANCIALS
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
1ST QUARTER 2000 FINANCIALS (W/O EUROPE)
- --------------------------------------------------------------------------------------------------------------------
Pro-1 Pro-1 Consolidated
Monitoring Executive Multi-Family Eliminations POI
---------- --------- ------------ ------------ ---
<S> <C> <C> <C> <C> <C>
Revenues:
Monitoring and Related Services $93,167 $0 $8,688 $0 $101,855
Installation and Other 3,511 0 1,453 0 4,964
------------- ---------------- --------------- --------------- ---------------
Total Revenues 96,678 0 10,141 0 106,819
Cost of Revenues:
Monitoring and Related Services 28,125 0 1,935 0 30,060
Installation and Other 3,224 0 1,382 0 4,606
------------- ---------------- --------------- --------------- ---------------
Total Cost of Revenues 31,349 0 3,317 0 34,666
Gross Profit 65,329 0 6,824 0 72,153
Gross Margin 68% 0% 67% 68%
Selling Expense 1,221 0 676 0 1,897
General and Administrative Expense 23,438 1,602 2,026 0 27,066
Acquisition and Transition Expense 4,145 0 0 0 4,145
------------- ---------------- --------------- --------------- ---------------
EBITDA 36,525 (1,602) 4,122 0 39,045
EBITDA Margin 38% 0% 41% 37%
Depreciation and Amortization Expense 50,840 3 3,834 0 54,677
Other 0 3,050 0 0 3,050
------------- ---------------- --------------- --------------- ---------------
Operating Income(Loss) (14,315) (4,655) 288 0 (18,682)
Interest Expense 0 (17,129) 0 0 (17,129)
Other Income (Expense) 25 (1,712) 0 1,994 307
------------- ---------------- --------------- --------------- ---------------
Income (Loss) Before Taxes
& Extraordinary Items (14,290) (23,496) 288 1,994 (35,504)
Extraordinary Gain (Loss), net of tax 31,926 0 0 0 31,926
------------- ---------------- --------------- --------------- ---------------
Income (Loss) Before Taxes 17,636 (23,496) 288 1,994 (3,578)
Income Tax Expense ( Benefit) (3,851) (5,678) 0 0 (9,529)
------------- ---------------- --------------- --------------- ---------------
Net Income (Loss) 21,487 (29,174) 288 1,994 5,951
============= ================ =============== =============== ===============
Average Customer Base (In Thousands) 1,197 NMF 297 NMF 1,492
Monitoring and Service Revenue per sub/month $25.95 NMF $9.75 NMF $23.42
Monitoring and Service Margin per sub/month $11.59 NMF $5.31 NMF $9.86
Monitoring Margin 1 45% NMF 54% NMF 44%
</TABLE>
1 (Monitoring and service revenue - monitoring and service cost - G&A expense)/
Monitoring and service revenue.
58
<PAGE>
COST TO REPLACE AN ACCOUNT
- ------------------------------------------------------------------------------
- North America
- Wholesale accounts - no capital required
- Retail accounts
- Move ins: No capital required as service technician does site
visit to activate account
- Competitive takeover: Capital may or may not be required
depending on the system
- Internal sales/Paradigm - capitalize only direct labor and
equipment which approximates $400 per account, balance expensed
- Dealer tuck-in acquisitions - total multiple capitalized
- Holdback reduces cash outlay
- Multifamily
- $230 per account gets capitalized, balance expensed
59
<PAGE>
THEORETICAL EXAMPLE - CAPITAL REQUIRED
- --------------------------------------------------------------------------------
- Assume 10,000 accounts lost (pro rata customer base)
- 880 Network Multifamily
- 990 wholesale
- 8,922 retail
- Capital spent
- 880 Network Multifamily $230
- 900 wholesale 0
- 825 move-ins 0
- 4,200 dealer/tuck-in acquisitions 825
- 3,195 internal 400*
-----
- Total Average $495
* $375 expensed, $400 capitalized
60
<PAGE>
PHASE II
A HEALTHIER PROTECTION ONE
- --------------------------------------------------------------------------------
<PAGE>
SYSTEMS OVERVIEW
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CURRENT PLANNED
----------------------------------------------------------------------------------- ------------------
HAGERSTOWN/
BEAVERTON IRVING WICHITA PORTLAND ALL CENTERS
----------------------------------------------------------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Accounts 305,000 430,000 210,000 80,000 1.2M
- ------------------------------------------------------------------------------------------------------ ------------------
Database MS SQL SVR SYBASE B32/C1SAM 1332/CISAM Oracle
- ------------------------------------------------------------------------------------------------------ ------------------
Monitoring S1R 3 WEC MAS MAS MAS
- ------------------------------------------------------------------------------------------------------ ------------------
Customer Service S1R 3 WEC AS400 None MAS
- ------------------------------------------------------------------------------------------------------ ------------------
Operating System NT 4.5 SP5 AIX4.3 AIX4.3/OS400 AIX 4.2.1 AIX
- ------------------------------------------------------------------------------------------------------ ------------------
Hardware Compaq/Intel RS6000 RS6000 RS6000 RS6000
- ------------------------------------------------------------------------------------------------------ ------------------
A/R Billing PS IBS/Intergy RPG/Intergy MAS BR MAS
- ------------------------------------------------------------------------------------------------------ ------------------
Accounting PS:GL/AP/PUR PS:GL/AP/PUR PS:GL/AP/PUR Spreadsheet Walker
----------------------------------------------------------------------------------- ------------------
</TABLE>
ONE COMMON PLATFORM Q4 2000
62
<PAGE>
TECHNOLOGY BENEFITS
- --------------------------------------------------------------------------------
- MAS implementation scheduled Q4 2000
- One common platform for all customers
- Allows call sharing between centers; reduces customer transfers
- Gives flexibility to shut down and/or backup centers
- Improves reporting
- Implements common procedures
- Improves accuracy of billing
- Walker financials implementation by year end
- Ability to see performance by business unit
- Automates manual processes
- Internet strategy implemented Q2
- On-line distribution channel
- Affinity relationships
- Customer interaction
63
<PAGE>
SECURITY INDUSTRY
- --------------------------------------------------------------------------------
<PAGE>
MARKET SHARE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average RMR
($ Millions)
RELATIVE SIZE - TOP 25 COMPANIES
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 51.5 11.1 9.8 8.5 5.4 3 2.9 2.8 2.3 2.2 2.2 2 1.7 1.7 1.4
1999 93 38 30 14 7 2.7 2.6 2.3 2.2 1.8 1.8 1.7 1.6 1.4 1.2
16 17 18 19 20 21 22 23 24 25
1996 1.4 1.3 1.2 1.2 1.2 1.1 0.9 0.8 0.7 0.7
1999 1 0.9 0.9 0.7 0.7 0.7 0.6 0.6 0.6 0.5
</TABLE>
- - After Brinks and Honeywell, next 200+ largest companies would need to be
acquired to yield additional 13% market share gain.
- - Each and every of next 1,000+ would need to be acquired to yield next 13%
gain in market share.
- - Current structure limits probable share of top 3 players...near term (3-5
years) at roughly 45% to 50%.
Source: Barnes Associates 2/2000
65
<PAGE>
MARKET POTENTIAL
- --------------------------------------------------------------------------------
- Huge growth potential: approx. 30-40 million new residential alarm
customers created in North America over the next ten years (from current
base of 12 million)
- Total North American industry revenue: $16.1B
- $6.5B of monitoring and service revenue growing at > 10% per year
- 110 million households in North America
- 11% alarm penetration
- 16,000 North American alarm companies
- Positive demographic trends
- Penetration goes from 12 million residences to 35 million residences
equals an 11.3% CAGR
Source: SDM Magazine
66
<PAGE>
BUSINESS DRIVERS/GOALS
- ---------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Today Future HOW?
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IMPROVE QUALITY AND VOLUME OF LEADS
NEW CHANNELS
Customer Growth 20-23x 15-20x INCREASE NEW OWNER SALES
Replace Attrition 7% in 2001 GROW INTERNAL SALES
10% to 15% in 2002 and beyond INCREASE UP FRONT CUSTOMER REVENUE
- ------------------------------------------------------------------------------------------------------------------------------
ONE CALL RESOLUTION
Attrition 13% < 10% COMMON BILLING
IMPROVED SCHEDULING
- ------------------------------------------------------------------------------------------------------------------------------
Montioring and TECHNOLOGY IN CENTERS AND BRANCHES
Service Margin 68% 75+% PROCESS EFFICIENCIES
CALL CENTER INTEGRATION
- ------------------------------------------------------------------------------------------------------------------------------
Monitoring Margin 45% 50+% BACK OFFICE TECHNOLOGY
EXPAND COMMERCIAL BUSINESS
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INCREASE SHAREHOLDER VALUE
67
<PAGE>
PROTECTION ONE FOCUS
- --------------------------------------------------------------------------------
- Positioned for significant customer growth for 2001 and beyond
- Expand monitoring and related service profit margins
- Enhance customer retention
- Reduce cost of adding customers
- Build preeminent brand name
- Leverage synergies between businesses
- Create affinity partnerships to enhance services to customers
- Focus on flawless execution
68
<PAGE>
VALUATION
- --------------------------------------------------------------------------------
Protection One VS. (1)Peer Group
(2)5.5x EBITDA 7.2x EBITDA
- If Protection One were to trade at peer group average then stock price
would increase to $3.31/share or a 165% increase
- If Protection One executes plan then the following occur:
- Faster growth in revenues
- Margin expansion
- Lower attrition
- Higher EBITDA
THEN PROTECTION ONE WOULD COMMAND A HIGHER MULTIPLE
(1) See Index
(2) Closing price as of April 28, 2000
69
<PAGE>
INDEX
- --------------------------------------------------------------------------------
<PAGE>
INDEX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARABLE EBITDA MUTIPLES
(U.S. DOLLARS IN MILLIONS, EXCEPT STOCK PRICE)
EQUITY
MARKET FIRM VALUE/LTM
COMPANY STOCK PRICE (a) HIGH* LOW* VALUE FIRM VALUE (b) EBITDA
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sensormatic Electronics (SRM) $16.69 (28.0%) 58.9% $1,280 $1,745 11.1x
Pittston Brink's Group (PZB) 16.38 (45.4%) 9.2% 848 1,234 4.9x
Checkpoint Systems (CKP) 8.94 (28.5%) 27.7% 270 494 8.8x
Armor Holdings (AH) 11.19 (16.4%) 31.6% 243 234 9.3x
Burns International (BOR) 10.81 (51.0%) 31.1% 215 348 5.6x
Wackenhut (WAK) 13.19 (55.7%) 6.6% 143 82 1.3x
LOJACK Corp. (LOJN) 7.19 (39.5%) 15.0% 116 113 6.6x
Lifeline Systems (LIFE) 11.50 (45.2%) 53.3% 68 71 6.2x
VOXCOM Incorporated (VOX) 3.03 (42.7%) 45.2% 24 56 13.8x
American Medical Alert (AMAC) 2.19 (48.5%) 75.0% 14 13 4.8x
Alarmforce Industries (AF) 0.79 (36.2%) 47.5% 7 8 6.5x
------------------------------------------------------------------------------------
MEDIAN: - - 6.5x
MEAN: - - 7.2x
------------------------------------------------------------------------------------
Protection One (POI) $1.19 (81.0%) 18.8% $ 151 $ 852 5.5x
</TABLE>
* % of 52 Week
Note: EBITDA adjusted for unusual and nonrecurring items.
LTM: Latest Twelve Months as of 12/31/99.
(a) Stock price as of April 28, 2000
(b) Firm Value equals equity value plus straight debt, minority interest,
straight preferred stock, all out-of-money convertibles, less investments in
unconsolidated affiliates and cash.
71
