-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SNaXsTEK2mriDvtr4mfYBWy7WZ390XCQJr+ZjQcRr8KckHWqqcOyrYpJClsb8MMk z44aHjr6z0UN5W2zWxAJIQ== 0000054507-99-000038.txt : 19990813 0000054507-99-000038.hdr.sgml : 19990813 ACCESSION NUMBER: 0000054507-99-000038 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990812 ITEM INFORMATION: FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROTECTION ONE ALARM MONITORING INC CENTRAL INDEX KEY: 0000916310 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS BUSINESS SERVICES [7380] IRS NUMBER: 931065479 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12181 FILM NUMBER: 99684771 BUSINESS ADDRESS: STREET 1: 600 CORPORATE POINTE STREET 2: 12TH FLOOR CITY: CULVER CITY STATE: CA ZIP: 90230 BUSINESS PHONE: 3103386930 MAIL ADDRESS: STREET 1: 3900 SW MURRAY BLVD CITY: BEAVERTON STATE: OR ZIP: 97005 8-K 1 8/12/99 8-K 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) August 12, 1999 (August 11, 1999) 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.) 600 Corporate Pointe, 12th Floor 600 Corporate Pointe, 12th Floor 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) Item 5. Other Events On August 11, 1999, Protection One, Inc. announced a summary of its results of operations for the quarter and six months ended June 30, 1999. Item 7. Financial Statements and Exhibits (c) Exhibits Exhibit 99.1 - Press release dated as of August 11, 1999 issued by Protection One, Inc. 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: August 12, 1999 By: /s/ Anthony D. Somma Anthony D. Somma Chief Financial Officer Protection One Alarm Monitoring, Inc. Date: August 12, 1999 By: /s/ Anthony D. Somma Anthony D. Somma Chief Financial Officer EXHIBIT INDEX Exhibit Number Description of Exhibit 99.1 Press release dated as of August 11, 1999 issued by Protection One, Inc. EX-99 2 EX-99.1 Exhibit 99.1 FOR FURTHER INFORMATION CONTACT: Adam M. Goldston Director Strategic Planning and Investor Relations (310) 258-6502 FOR IMMEDIATE RELEASE PROTECTION ONE REPORTS SECOND QUARTER 1999 RESULTS CULVER CITY, California, August 12, 1999 - Protection One, Inc. (NYSE: POI), the nation's second largest provider of life safety and property monitoring services, today announced its second quarter 1999 financial results. At June 30 1999, the company's customer base increased slightly over the previous quarter to 1.65 million and monthly monitoring and service revenue increased to $42.4 million. Net losses for the second quarter of 1999 totaled $7.4 million, or $0.06 per share compared to a net loss of $4.6 million, or $0.04 per share in the first quarter of 1999 (including a non-recurring $2 million severance expense) and net income of $1.4 million or $0.01 per share in the second quarter of 1998 (including a non-recurring gain of $10.2 million). Compared to the first quarter 1999, revenues increased 1.5% to $150.8 million while earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 5.7% to $58.3 million, or 38.6% of total revenues. The decrease in EBITDA was a result of higher call center expenses and one-time information technology expenses both incurred as a result of the company's customer service initiatives, acquisition and transition expenses as well as a decrease in the company's rate of growth. Compared to the second quarter 1998, revenues increased 55.4% while EBITDA increased 73.8%. Protection One's reported performance was also impacted by increased customer intangible amortization expense at its European business segment based upon the results of a recent appraisal. This adjustment reduced Protection One's earnings by approximately $2.4 million for the first half of the year. Adjusted net income, defined as net income (as reported) plus goodwill amortization, was break-even for the second quarter compared to adjusted net income of $3.9 million or $0.03 per share for the first quarter 1999 and $7.4 million or $0.08 per share for the second quarter 1998. Cash flow, defined as net income (as reported) plus depreciation and amortization, was $37.5 million, or $0.29 per share in the second quarter of 1999, compared to $38.1 million or $0.30 per share in the first quarter 1999, and $29.2 million or $0.31 per share in the second quarter 1998. Second quarter net annualized attrition was 14.3% and the trailing 12-month net attrition was 10.5%. In early 1999, Protection One consolidated monitoring of accounts to central locations to improve customer service. The execution of this strategy caused service disruptions that have adversely affected customer service. Protection One is addressing these customer service issues. In this regard, Protection One has hired approximately 150 additional service representatives. Protection One is reviewing the accounting consequences, if any, of this customer service issue. If a change in the average estimated life of 10 years is determined to be appropriate, each one year decrease in life would increase annual amortization expense by about $14 million. John E. Mack III, chief executive officer of the company, said "Our second quarter was a transition quarter for us as we continue to evolve toward a less expensive means of customer creation. We continue to concentrate on lowering our cost of growth, improving customer service and divesting our non-core assets. We are making substantial investments in technology and people to improve our customer service and to reduce attrition." Protection One received a letter from the Division of Corporation Finance of the Securities and Exchange Commission on August 11, 1999. The letter raised questions about the company's financial statements and stated that, in the view of the staff, there are errors in the financial statements which are material to Protection One's financial statements. These questions relate to the methodology used by Protection One to amortize accounts and the allocation to customers' accounts in the Network Multifamily acquisition. See the company's annual report on Form 10-K/A and quarterly reports on Form 10-Q filed with the SEC for further information. On June 28, 1999, Protection one announced the signing of a definitive agreement to sell its Mobile Services Group to ATX Technologies, Inc. for approximately $20 million in cash, plus a note and a preferred investment in ATX. The sale is expected to result in a one-time approximate $11 million after-tax gain in the company's third quarter. The company anticipates closing this transaction by the end of August. Mr. Mack went on to say that "Protection One is enthusiastic about our continuing investment in ATX as well as our ability to resell ATX's state of the art telematics product offerings to our customer base." Protection One, one of the leading residential security alarm companies in the United States, provides monitoring and related security services to more than 1.6 million residential and commercial subscribers in North America and Europe. For more information about Protection One and its operating companies, visit the company on the Internet at http://www.protectionone.com. Statements contained in this press release concerning statements of management's beliefs, goals and expectations are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995, and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. Certain information in this release constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor protections of that Act. Other risks and uncertainties are described in Protection One's 1998 Form 10-K/A filed with the Securities and Exchange Commission on April 14, 1999 and quarterly reports on Form 10-Q. Protection One disclaims any obligation to update any forward-looking statements as a result of developments occurring after the date of this press release. - Tables Follow - Protection One and Subsidiaries Summary Income Statement (Dollars in thousands, except per share and subscriber amounts) Three Months Ended June 30, 1999 1998 Monitoring and related services $127,818 $87,449 Installation and other 22,983 9,592 Total revenues 150,801 97,041 Cost of revenues: Monitoring and related services 30,169 22,682 Installation and other 11,713 6,798 Total cost of revenues 41,882 31,480 Gross profit 108,919 65,561 Selling, general and administrative expense 43,901 26,020 Acquisition and transition expense 6,767 6,032 Amortization of intangibles and depreciation expense 44,947 27,833 Operating income 13,304 5,676 Other income / expense: Interest expense, net 21,844 6,868 Interest expense to Parent, net - 6,899 Other (671) (10,185) Income (loss) before income taxes (7,869) 2,094 Income tax (expense) benefit 428 (2,292) Net income (loss) before extraordinary gain $(7,441) $ (198) Extraordinary gain, net of taxes (-) 1,591 Net income (loss) $(7,441) $ 1,393 Net income (loss) per common share $ (0.06) $ 0.01 Net loss before non-recurring charges $(7,441) $ (198) Net loss before non-recurring charges per share $ (0.06) $ (0.00) Other data: Three Months Ended June 30, 1999 1998 EBITDA $58,251 $33,509 Cash flow (1) 37,503 29,226 Cash flow per share (1) 0.29 0.31 Adjusted Net Income(2) 14 7,424 Adjusted Net Income per share(2) 0.00 0.09 End of period Monitoring/related service rev. 42,420 30,777 End of period subscribers 1,653,055 1,318,665 Note: 1. Cash flow is defined as net income (loss) as reported, plus depreciation and amortization 2. Adjusted net income is defined as net income (loss) as reported, plus goodwill amortization Protection One and Subsidiaries Summary Balance Sheet and Cash Flow Data (Dollars in thousands) Balance Sheet Data: June 30, December 31, 1999 1998 Assets Current assets $ 222,467 $ 187,840 Property and equipment, net 58,395 46,959 Customer accounts, net 1,176,605 1,014,428 Goodwill and trademarks, net 1,155,148 1,187,862 Other assets 29,994 74,230 $2,642,559 $2,511,319 Liabilities and Stockholders' Equity Current liabilities $ 259,756 $ 235,991 Long term debt, net of current portion 1,037,028 926,971 Other liabilities 15,300 3,238 Total liabilities 1,312,084 1,166,200 Stockholders' equity 1,330,475 1,345,119 $2,642,559 $2,511,319 Other Data: Total Debt/EBITDA (1) 4.7 Interest Coverage (1) 3.3 Cash Flow Data: Three Months Ended June 30, 1999 1998 Net cash provided by operating activities $37,262 $35,448 Net cash used in investing activities $(83,337) $(166,062) Net cash provided by financing activities $45,831 $138,187 Note: (1) Leverage ratio and interest coverage ratios consistent with covenant calculation employed by senior debt holders. -----END PRIVACY-ENHANCED MESSAGE-----