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.