UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1999
                                       or
             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

              For the transition period from ________ to _________



              0-24780                               33-73002-01
       (Commission File Number)               (Commission File Number)

         PROTECTION ONE, INC.            PROTECTION ONE ALARM MONITORING, INC.
     (Exact Name of Registrant               (Exact Name of Registrant
     As Specified In its Charter)             As Specified In its Charter)


              Delaware                                  Delaware
      (State or Other Jurisdiction            (State of Other Jurisdiction
   Of Incorporation or Organization)        Of Incorporation or Organization)


           93-1063818                                  93-1064579
 (I.R.S. Employer Identification No.)     (I.R.S. Employer Identification No.)

   600 Corporate Pointe, 12th Floor,      600 Corporate Pointe, 12th Floor,
     Culver City, California 90230         Culver City, California 90230
(Address of Principal Executive Offices,(Address of Principal Executive Offices,
           Including Zip Code)                 Including Zip Code)

            (310) 342-6300                       (310) 342-6300
  (Registrant's Telephone Number,        (Registrant's Telephone Number,
       Including Area Code)                  Including Area Code)






    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 [X] No [ ]

    As of November 10, 1999, Protection One, Inc. had outstanding 126,944,077
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.





                                     PART I

                              FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS


                      PROTECTION ONE, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                             (Dollars in thousands)
                                   (Unaudited)


                                                                 September 30,       December 31,
                                                                     1999                1998
                                                                --------------     ----------
                            ASSETS
                                                                                      (Restated)
                                                                                
Current assets:
      Cash and cash equivalents.........................          $   19,101          $   10,025
      Restricted cash...................................               8,991              11,987
      Marketable securities.............................               9,617              17,770
      Receivables, net..................................              67,932              61,262
      Inventories.......................................              10,976               7,895
      Prepaid expenses..................................               3,703               3,867
      Tax receivable & current deferred taxes...........              78,156              55,429
      Other assets......................................              20,107              19,605
                                                                  ----------          ----------
           Total current assets.........................             218,583             187,840
Property and equipment, net.............................              59,671              46,959
Customer accounts, net..................................           1,164,412           1,031,956
Goodwill and trademarks, net............................           1,118,678           1,175,153
Other...................................................              44,321              68,528
                                                                  ----------          ----------
   Total assets.........................................          $2,605,665          $2,510,436
                                                                  ==========          ==========

             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable..................................          $   21,668          $   16,374
      Accrued liabilities...............................              73,121              77,412
      Purchase holdbacks................................              45,422              42,303
      Long-term debt, current portion...................              34,469              40,838
      Capital leases, current portion...................               1,655               1,361
      Deferred revenue..................................              62,367              57,703
                                                                  ----------          ----------
           Total current liabilities....................             238,702             235,991
Long-term debt, net of current portion..................           1,074,731             926,784
Capital leases, net of current portion..................                  --                 187
Other liabilities.......................................               3,154               3,238
                                                                ----------------   ----------------
   Total liabilities....................................           1,316,587           1,166,200

Commitments and contingencies ( See Note 6)

Stockholders' equity:
Preferred  stock,  $0.10 par value,  5,000,000  authorized,
  none outstanding......................................                 --                 --
Common   stock,   $0.01  par   value,   150,000,000   shares
  authorized, 126,890,169  shares  issued and  outstanding,
  at September 30, 1999 and 126,838,741 at
  December 31, 1998...............                                     1.269               1.268
   Additional paid-in capital...........................           1,392,342           1,392,256
   Accumulated other comprehensive income, net..........              (4,376)             (2,576)
   Accumulated  deficit.................................            (100,157)            (46,712)
                                                                  ----------          ----------
           Total stockholders' equity...................           1,289,078           1,344,236
                                                                  ----------          ----------
   Total liabilities and stockholders equity............          $2,605,665          $2,510,436
                                                                  ==========          ==========



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



                      PROTECTION ONE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)

              (Dollars in thousands, except for per share amounts)
                                   (Unaudited)


                                                        Nine Months Ended September 30,_
                                                           1999                   1998
                                                  ---------------------  -------------
                                                                             (Restated)
                                                                         
Revenues:
      Monitoring and related services.........           $386,283               $254,749
      Installation and other..................            66,197                 22,347
                                                         -------                 ------
           Total revenues.....................           452,480                277,096

Cost of revenues:
      Monitoring and related services.........            99,497                 71,914
      Installation and other..................            33,472                 16,113
                                                         -------                -------
           Total cost of revenues.............           132,969                 88,027
                                                         -------                -------

           Gross profit.......................           319,511                189,069

Selling, general and administrative expense...           134,711                 69,987
Amortization  of  intangibles  and  depreciation         182,606                 81,064
expense.......................................
Acquisition expense...........................            21,932                 14,470
Employee severance and transition cost........             4,308                     --
                                                         -------                 ------
           Operating income...................           (24,046)                23,548
Other income/expense:
      Interest expense, net...................            64,334                 21,297
      Interest expense to parent, net.........                --                 16,033
      Gain on sale of Mobile Services Group...           (17,249)                    --
      Other...................................               (71)               (20,785)
                                                         -------                -------
                Income   (loss)   before  income
taxes &                                                  (71,060)                 7,003
                  extraordinary item..........
Income tax (expense) benefit..................            17,615                 (6,251)
                                                         -------                -------
Income (loss)before extraordinary item........           (53,445)                   752
  Extraordinary gain, net of tax..............                --                  1,591
                                                         -------                -------
     Net income (loss)........................           $(53,445)              $ 2,343
                                                         ========               =======

Other comprehensive income:
  Unrealized loss on marketable  securities,
    net of tax....................................       $(3,888)               $(1,959)
  Unrealized  loss on currency  translation,
    net of tax....................................          (488)                    --
                                                           -----                --------

Comprehensive income (loss):                             $(57,821)              $   384
                                                         ========               =======

     Income (loss) per common share...........           $  (0.42)              $  0.01
                                                         ========               =======
     Extraordinary gain per common share                 $  (0.00)              $  0.02
                                                         ========               =======
     Net income(loss) per common share                   $  (0.42)              $  0.03
                                                         ========               =======


     Weighted average common shares
     outstanding (in thousands)...............            126,872               102,445





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






                      PROTECTION ONE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)

              (Dollars in thousands, except for per share amounts)
                                   (Unaudited)


                                                        Three Months Ended September 30,_
                                                           1999                     1998
                                                  ---------------------    -------------
                                                                         
                                                                               (Restated)
Revenues:
      Monitoring and related services.........           $131,220                 $96,527
      Installation and other..................            21,911                    6,734
                                                         -------                  -------
           Total revenues.....................           153,131                  103,261

Cost of revenues:
      Monitoring and related services.........            39,631                   27,159
      Installation and other..................            10,181                    5,396
                                                         -------                  -------
           Total cost of revenues.............            49,812                   32,555
                                                         -------                  -------

           Gross profit.......................           103,319                   70,706

Selling, general and administrative expense...            50,203                   23,454
Amortization  of  intangibles  and  depreciation          94,250                   31,761
expense.......................................
Acquisition expense...........................            10,298                    4,970
Employee severance and transition cost........             2,309                       --
                                                         -------                  -------
           Operating income...................           (53,741)                  10,521
Other income/expense:
      Interest expense, net...................            22,319                    7,875
      Interest expense to parent, net.........                --                    4,554
      Gain on sale of Mobile Services Group...           (17,249)                      --
      Other...................................               945                   (7,372)
                                                         -------                  -------
      Income (loss) before income tax.........           (59,756)                   5,464
Income tax (expense) benefit..................            18,770                   (4,489)
                                                         -------                  -------
      Net income (loss).......................          $(40,986)                 $   975
                                                        ========                  =======
Other comprehensive income:
  Unrealized loss on marketable  securities,
    net of tax....................................       $(3,888)               $(1,959)
  Unrealized  loss on currency  translation,
    net of tax....................................          (488)                    --
                                                           -----                --------

Comprehensive income (loss):                             $(45,362)              $  (984)
                                                         ========               =======

     Net income (loss) per common share...........       $  (0.32)              $  0.01
                                                         ========               =======

     Weighted average common shares outstanding
      (in thousands)..............................       126,890                127,345




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





                      PROTECTION ONE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (Dollars in thousands)
                                   (Unaudited)



                                                                  Nine Months Ended September 30,
                                                                    1999                   1998
                                                           ---------------------  -------------

                                                                                       (Restated)
                                                                                   
Cash flow from operating activities:
Net income (loss)......................................          $ (53,445)              $ 2,343
Adjustments  to reconcile  net income  (loss) to net cash
provided
  by operating activities:
    Extraordinary gain.................................                 --                (1,591)
    Gain on sale of Mobile Services Group..............            (17,249)                   --
    Gain on Guardian stock exchange transaction........                 --                (2,498)
    Amortization and depreciation......................            182,606                81,064
    Accretion of discount note interest................             (5,057)                4,635
    Deferred income taxes..............................            (20,795)                5,817
    Provision for doubtful accounts....................             16,933                 7,762
    Loss on sale of marketable securities..............              1,910                    --
Changes in assets and liabilities, net of effects of acquisitions:
    Receivables, net...................................            (17,505)               (3,550)
    Other current assets...............................             (1,120)               (8,765)
    Accounts payable...................................              5,302                (4,051)
    Other liabilities..................................            (15,644)                1,368
                                                                 ---------               -------
         Net cash provided by operating activities.....             75,936                82,534
                                                                 ---------               -------

Cash flows from investing activities:
    Purchase of installed security systems.............           (207,657)             (228,352)
    Purchase of property and equipment.................            (26,679)              (18,933)
    Purchase (sale) of marketable securities...........              2,722               (14,365)
    Acquisition of alarm companies, net of cash received           (27,408)             (554,230)
    Proceeds from sale of Mobile Services  Group,  net of           19,087                    --
cash paid..............................................
    Investment in Guardian.............................                 --                (4,131)
                                                                 ---------               -------
         Net cash used in investing activities.........           (239,935)              (820,011)
                                                                 ---------               --------

Cash flows from financing activities:
    Proceeds from equity offering......................                 --               402,322
    Payments on long-term debt.........................                 --               (86,205)
    Proceeds from long term-debt.......................            171,725               247,160
    Funding from parent................................                434               113,239
    Stock options and warrants exercised...............                273                   820
                                                                 ---------               -------
         Net cash provided by financing activities.....            172,432               677,336
                                                                 ---------               -------
Effect of exchange rate changes on cash and equivalents                643                    --
                                                                 ---------               -------
         Net  increase   (decrease)   in  cash  and  cash            9,076               (60,141)
equivalents............................................
Cash and cash equivalents:
    Beginning of period................................             10,025                75,556
                                                                 ---------               -------
    End of period......................................          $  19,101               $15,415
                                                                 =========               =======

Interest paid during the period........................          $  54,437               $ 7,316
                                                                 =========               =======
Taxes paid during the period...........................          $     285               $    42
                                                                 =========               =======





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





                      PROTECTION ONE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          (DOLLAR AMOUNTS IN THOUSANDS)
                                   (Unaudited)


1.       Basis of Consolidation and Interim Financial Information:

    Protection  One,  Inc.,  a  Delaware  corporation  ("Protection  One" or the
"Company"),  is principally  engaged in the business of providing security alarm
monitoring services, which include sales,  installation and related servicing of
security alarm systems for residential  and small business  subscribers in North
America,  the United Kingdom and continental Europe. The accompanying  unaudited
consolidated financial statements include the accounts of Protection One and its
wholly owned subsidiaries.

    As of September 30, 1999,  Protection One is an approximately 85% owned
subsidiary of Westar Capital,  Inc. ("Westar  Capital"), a wholly owned
subsidiary of Western Resources, Inc. ("Western Resources").

    The Company's unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") for interim
financial  information  and in accordance  with the  instructions  to Form 10-Q.
Accordingly,  certain information and footnote  disclosures normally included in
financial  statements presented in accordance with generally accepted accounting
principles have been condensed or omitted.  These financial statements should be
read in conjunction with the audited financial  statements and notes thereto for
the year ended  December 31, 1998,  included in the  Company's  Annual Report on
Form 10-K/A filed with the Securities and Exchange Commission (the "SEC").

    In the opinion of  management  of the Company,  all  adjustments  considered
necessary  for a  fair  presentation  of  the  financial  statements  have  been
included.  All adjustments made were normal recurring adjustments except for the
adjustment  related to the change in accounting  principle for customer accounts
discussed  in Note 3. The  results of  operations  for the three and  nine-month
periods ended September 30, 1999 are not  necessarily  indicative of the results
to be  expected  for the full  year.  Certain  purchase  price  allocations  for
acquisitions  made in 1999 were made on a  preliminary  basis and are subject to
change.

2.       Restatement of Financial Statements:

    The Company  has  restated  its 1998  financial  statements  and its interim
financial  statements  for the quarters  ended March 31, 1999 and June 30, 1999.
These  restatements  result from a revaluation  of amounts  assigned to acquired
customers in the Multifamily business segment. During 1998, the Company acquired
businesses in its  Multifamily  business  segment and allocated a portion of the
purchase price to the customer  accounts  acquired.  During the third quarter of
1999,  management  analyzed the initial  purchase  price  allocations  for these
acquisitions  and  increased  the amount  allocated to customer  accounts by $19
million, reduced goodwill by $13 million and increased deferred taxes payable by
$6 million.  Due to the difference in periods over which  customer  accounts and
goodwill  are  amortized,  net income  was  decreased  for each of the  reported
periods in 1999 and 1998 as follows:


                           As Previously Reported             Restatement                 As Restated
                         ----------------------------  --------------------------- ---------------------------
                                          Earnings                     Earnings                    Earnings
                            Amount        Per Share       Amount      Per Share       Amount      Per Share
                         --------------  ------------  ------------- -------------  ------------ -------------
                                          (Dollars in thousands, except for per share amounts)
                                                                                
Income (loss) before
   extraordinary gain
- -----------------------
1998 - Quarter Ended:
   March 31                 $   398         $  -           $(204)        $ -          $   194      $   -
   June 30                     (199)           -            (221)          (.01)         (420)         (.01)
   September 30               1,206             .01         (229)          -              977           .01
   December 31               (5,459)           (.05)        (229)          -           (5,688)         (.05)
                         --------------  ------------  ------------- -------------  ------------ -------------
For the Year Ended
December 31, 1998           $(4,054)        $  (.04)       $(883)        $ (.01)      $(4,937)     $   (.05)
                         ==============  ============  ============= =============  ============ =============

Net income (loss)
- -----------------------
1999 - Quarter Ended:
   March 31                 $(4,553)        $  (.04)       $(232)        $ -          $(4,785)     $   (.04)
   June 30                   (7,441)           (.06)        (232)          -           (7,673)         (.06)
1998 - Quarter Ended:
   March 31                     398            -            (204)          -              194          -
   June 30                    1,392             .02         (221)          (.01)        1,171           .01
   September 30               1,206             .01         (229)          -              977           .01
   December 31               (5,459)           (.05)        (229)          -           (5,688)         (.05)
                         --------------
                                         ============  ============= =============  ============ =============
For the Year Ended
December 31, 1998           $(2,463)        $  (.02)       $(883)        $ (.01)      $(3,346)     $   (.03)
                         ==============  ============  ============= =============  ============ =============

    The  restatements  did not impact  previously  reported  revenues and do not impact the Company's net cash flow.



3.       Change in Accounting Principle:

    The Company  historically  amortized  the costs it allocated to its customer
  accounts  by  using  the  straight-line  method  over  a  ten-year  life.  The
  straight-line method,  indicated in Accounting Principles Board Opinion No. 17
  as the appropriate  method for such assets,  has been the  predominant  method
  used  to  amortize  customer  accounts  in the  monitored  services  industry.
  Management  is  not  aware  of  whether  the  economic  life  or the  rate  of
  realization for the Company's  customer accounts differs materially from other
  monitored services companies.

    The  choice of a  ten-year  life was  based on  management's  estimates  and
  judgments  about the amounts and timing of expected future revenues from these
  assets,  the rate of attrition of such revenue over customer life, and average
  customer account life. Ten years was used because, in management's opinion, it
  would adequately match  amortization cost with anticipated  revenue from those
  assets even though many accounts were expected to produce revenue over periods
  substantially longer than ten years. Effectively,  it expensed the asset costs
  ratably over an  "expected  average  customer  life" that was shorter than the
  expected life of the revenue  stream,  thus implicitly  giving  recognition to
  projected revenues for a period beyond ten years.

    The  Company  has  recently   concluded  a   comprehensive   review  of  its
amortization  policy that was undertaken  during the third quarter of 1999. This
review was performed  specifically to evaluate the historic  amortization policy
in light of the  inherent  declining  revenue  curve  over the life of a pool of
customer accounts,  and the Company's  historical  attrition  experience.  After
completing the review, management identified three distinct pools, each of which
has distinct  attributes that effect differing  attrition  characteristics.  The
pools correspond to the Company's North America, Multifamily and Europe business
segments. These separate pools will be used going forward. For the North America
and Europe pools, the analyzed data indicated to management that the Company can
expect attrition to be greatest in years one through five of asset life and that
a change from a straight-line to a declining balance  (accelerated) method would
more closely match future  amortization  cost with the estimated  revenue stream
from these assets.  Management  has elected to change to that method.  No change
was made in the method used for the Multifamily pool.

    The Company's  amortization  rates for the North America and Europe customer
pools consider the average estimated remaining life and historical and projected
attrition rates. The average estimated  remaining life for each customer pool is
as follows:

                       Average Estimated
                         Remaining Life
     Pool                   (Years)                          Method
- ---------------      -------------------       --------------------------------
North America               8-10                Ten-year 130% declining balance
Europe                       10                 Ten-year 125% declining balance
Multifamily                  12                 Ten-year straight-line

    Adoption of the declining balance method effectively  shortens the estimated
expected  average  customer life for these two customer pools,  and does so in a
way that does not make it  possible  to  distinguish  the  effect of a change in
method  (straight-line to declining balance) from the change in estimated lives.
In such cases,  generally accepted accounting principles require that the effect
of such a change be recognized in operations in the period of the change, rather
than as a cumulative  effect of a change in accounting  principle.  Accordingly,
the effect of the change in accounting principle increased  amortization expense
reported  in  the  third   quarter  by  $47  million.   Similarly,   accumulated
amortization  recorded on the balance  sheet would have been  approximately  $41
million higher if the Company had historically used the declining balance method
through the end of the second quarter of 1999.

4.       Customer Accounts:

    Customer  accounts  are stated at cost.  The cost  includes  amounts paid to
dealers  and  the  estimated  fair  value  of  accounts   acquired  in  business
acquisitions.  Internal costs incurred in support of acquiring customer accounts
are  expensed  as  incurred.  Customer  accounts  consist of the  following  (in
thousands):




                                                 Nine Months Ended                Year Ended
                                                September 30, 1999             December 31, 1998
                                              ------------------------      ------------------------
                                                                              
Customer accounts                                     $ 1,150,342                   $   558,805
Acquisition of customer accounts                          291,550                       601,063
Non-cash charges to purchase holdbacks                     (9,918)                       (9,526)
                                                      -----------                   -----------
Total customer accounts                                 1,431,974                     1,150,342
Less accumulated amortization                             267,562                       118,386
                                                      -----------                   -----------
Customer accounts, net                                 $1,164,412                    $1,031,956
                                                      ===========                    ==========



    In  conjunction  with certain  purchases of customer  accounts,  the Company
withholds  a portion of the  purchase  price as a reserve  to offset  qualifying
attrition of the acquired  customer  accounts for a specified period as provided
for in the purchase agreements,  and as a reserve for purchase price settlements
of assets  acquired  and  liabilities  assumed.  As of  September  30,  1999 and
December 31, 1998,  purchase  holdbacks  were $45.4  million and $42.3  million,
respectively.

     As the  result  of the  attrition  rates for the North  America  pool,  the
  Company  intends to hire an  appraiser  to perform a current  lifing  study to
  assess  the  impact  of the 1999  customer  service  issues  on the  estimated
  long-term revenues to be received from the current North America account base.
  Upon completion of the study, the Company will consider the  reasonableness of
  the value of its  North  America  account  base and the  current  amortization
  rates. This could result in a change in amortization rate. The Company intends
  to perform an  evaluation  for  potential  impairment  taking into account the
  results of this study.  Amounts involved may be material and would represent a
  non-cash charge to earnings.

5.       Debt:

    During the first nine months of 1999 the Company borrowed approximately $173
million on its senior credit facility. As of September 30, 1999 and December 31,
1998, total borrowings under this facility were  approximately  $215 million and
$42 million, respectively. In addition, there were outstanding letters of credit
of  approximately $5 million at September 30, 1999.  Available  borrowings under
the credit facility were  approximately $30 million as of September 30, 1999 and
November 10, 1999.

    The Company  borrows to fund  operations in excess of  internally  generated
cash under its senior credit facility. The Company's ability to borrow under the
facility is subject to compliance with certain financial covenants,  including a
leverage  ratio of 5.0 to 1.0 and an interest  coverage ratio of 2.75 to 1.0. At
year end 1999, the leverage  ratio  required  under the credit  facility will be
reduced to 4.5 to 1.0. As of September 30, 1999,  the ratios were  approximately
6.7 to 1.0 and 2.0 to 1.0.

    The indentures  governing the Company's  outstanding senior and subordinated
notes contain  similar  covenants  with different  calculations  relating to the
Company's ability to incur  indebtedness.  The Company is in compliance with all
covenants contained in these indentures.

    The senior credit facility  lenders have waived  compliance with the current
leverage and interest  coverage  ratio  covenants  through  December 3, 1999. In
connection  with the waiver,  the amount of the credit facility was reduced from
$500  million  to  $250  million.   The  Company  will  not,  absent  successful
implementation  of the  alternatives  discussed below, be in compliance with the
current  leverage and interest  coverage ratio  covenants in the credit facility
following  the  expiration of the waiver.  The Company is discussing  waivers or
amendments  to the senior credit  facility with the lenders and exploring  other
alternatives  to address these covenant  restrictions  and the reduced amount of
the credit facility,  including selling assets to reduce debt or refinancing the
facility.  The credit  facility  lenders have  requested that the Company obtain
credit support for the facility from Western Resources or one of its affiliates.
The Company's  public debt contains  restrictions on providing  certain forms of
credit support to the credit facility.  Further,  there can be no assurance that
Western  Resources  or its  affiliates  will  provide any credit  support to the
lenders under the facility. If the Company's negotiations with its senior credit
facility  lenders are not  successful,  the Company will be in default under the
credit facility. If the lenders elect to accelerate the outstanding indebtedness
under the credit  facility,  this  action  would  result in  defaults  under the
indentures  governing  certain  of  the  Company's  outstanding  notes  and  the
repayment  of the notes  could be  accelerated  if the  defaults  were not cured
within  applicable  grace  periods.  The Company  would not be able to repay its
indebtedness  if  repayment  is  accelerated.  Even if the lenders  elect not to
accelerate the outstanding  indebtedness under the credit facility,  the Company
will likely experience  shortfalls in liquidity which would adversely impact the
Company's  ability  to meet its cash  obligations  and have a  material  adverse
effect upon the Company's  financial position and results of operations.  If the
Company is unable to maintain adequate  liquidity,  Western Resources may choose
to make additional investments in the Company, but it is not obligated to do so.
Management  believes the Company will be able to address this matter in a manner
so that there is no default under the credit  facility or significant  impact on
its  liquidity,  but no assurances can be given that the Company will be able to
do so or the terms  thereof.  See Note 11 for recent  developments  concerning a
review of the Company's capital structure and financial alternatives.

6.       Commitments and Contingencies:

    The Company has been advised by  the Division of  Corporation  Finance that,
in the view of the staff, there are errors in the Company's financial
statements which are material and which have had the effect of inflating
earnings  commencing with the year 1997. The Company has had extensive
discussions  with the SEC  staff  about the  methodology  used by the Company to
amortize customer accounts, the purchase price allocation to customer
accounts in the Network Multifamily  acquisition and other matters.  The Company
has restated its financial  statements for certain prior periods and has changed
the  accounting  principle  used for the  amortization  of customer  accounts as
discussed  above in Notes 2 and 3. The SEC staff has not  indicated  it  concurs
with, nor has the SEC staff determined not to object to, the restatements or the
change in accounting  principle.  The Company cannot  predict  whether the SEC
staff will make additional  comments or take other action that will further
impact its financial statements or the effect or timing of any such action.

    Six  Protection  One dealers have filed a class action  lawsuit in the U. S.
District Court for the Western District of Kentucky  alleging breach of contract
because of the Company's interpretation of their dealer contracts. The action is
styled  Total  Security  Solutions,   Inc.,  et  al.  v.  Protection  One  Alarm
Monitoring,  Inc.,  Civil  Action  No.  3:99CV-326-H  (filed May 21,  1999).  On
September  10,  1999,  the Court  granted  Protection  One's  motion to stay the
proceeding pending the individual plaintiff's pursuit of arbitration as required
by the terms of their agreements. As of November 10, 1999, none of these dealers
have  commenced  arbitration.  Other  Protection  One  dealers  have  threatened
litigation or arbitration based upon similar claims. The Company believes it has
complied with the terms of these contracts and intends to vigorously  defend its
position. The Company cannot currently predict the impact of these disputes with
dealers which could be material.

    Under the Company's  agreements with dealers, the Company may be required to
purchase  customer  accounts  on an ongoing  basis.  The  Company  is  currently
spending  approximately  $15  million  per  month  to  purchase  these  customer
accounts.

    The  Company,   its  subsidiary   Protection  One  Alarm  Monitoring,   Inc.
("Monitoring"),  and  certain  present  and former  officers  and  directors  of
Protection One are defendants in a purported class action litigation  pending in
the United States District Court for the Central  District of California,  David
Lyons v.  Protection  One, Inc., et al., No CV 99-3755 DT (RCx).  Pursuant to an
Order dated  August 2, 1999 which  consolidated  four  pending  purported  class
actions,  the  plaintiffs  filed a  single  Consolidated  Amended  Class  Action
Complaint  ("Amended  Complaint")  on October 15,  1999.  The Amended  Complaint
asserts  claims under Section 11 of the Securities Act of 1933 and Section 10(b)
of the Securities Exchange Act of 1934 against Protection One,  Monitoring,  and
certain  present and former  officers and directors of  Protection  One based on
allegations  that  various  statements  concerning  Protection  One's  financial
results and  operations  for 1997 and 1998 were false and  misleading and not in
compliance with generally  accepted  accounting  principles.  Plaintiffs allege,
among other  things,  that former  employees  of  Protection  One,  including an
unnamed former executive  officer and an unnamed former staff  accountant,  have
reported that Protection One lacked adequate  internal  accounting  controls and
that certain accounting information was unsupported or manipulated by management
in order to avoid  disclosure  of accurate  information.  The Amended  Complaint
further  asserts  claims  against  Western   Resources  and  Westar  Capital  as
controlling  persons under  Sections 11 and 15 of the Securities Act of 1933 and
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. A claim is also
asserted under Section 11 of the Securities Act of 1933 against Protection One's
auditor Arthur Andersen LLP. The Amended  Complaint seeks an unspecified  amount
of compensatory damages and an award of fees and expenses,  including attorneys'
fees.  The time for the  defendants to respond to the Amended  Complaint has not
yet expired.  The Company  believes that all the claims  asserted in the Amended
Complaint are without merit and intends to defend  against them  vigorously.  We
cannot currently predict the impact of this litigation which could be material.

    The Company is a party to claims and matters of litigation incidental to the
normal  course of its  business.  The ultimate  outcome of such  matters  cannot
presently be determined;  however,  in the opinion of management of the Company,
the resolution of such matters will not have a material  adverse effect upon the
Company's combined financial position or results of operations.

7.       Segment Reporting:

    The Company's  reportable segments include North America,  Multifamily,  and
Europe. North America provides security alarm monitoring services, which include
sales,  installation  and related  servicing  of security  alarm  systems in the
United  States and  Canada.  Multifamily  provides  security  alarm  services to
apartments,  condominiums and other multi-family  dwellings.  The Europe segment
provides security alarm services in Europe.

    The  accounting  policies of the  operating  segments  are the same as those
described in the summary of  significant  accounting  policies in the  Company's
1998 Form 10-K/A, subject to the change in accounting principle for amortization
expense  discussed in Note 3 above.  The Company  manages its business  segments
based on earnings before interest and income taxes (EBIT).








                      Nine Months Ended September 30, 1999
                             (Dollars in thousands)


                                                         North
                                                         America    Multifamily     Europe     Consolidated
                                                                                   

     Revenues from customers:
           Monitoring and related services.........    $ 290,180    $  25,680     $  70,423    $ 386,283
           Installation and rental.................       11,009        3,218        51,970       66,197
                                                       ---------    ---------     ---------    ---------
                Total..............................      301,189       28,898       122,393      452,480
     EBITDA........................................      115,170       12,170        35,528      162,868
     Amortization  of  intangibles  and  depreciation    153,531        7,003        22,072      182,606
     expense.......................................
     Other1........................................      (12,825)          --          (187)     (13,012)
     Earnings before interest and income taxes.....      (25,536)       5,167        13,643       (6,726)



                      Nine Months Ended September 30, 1998
                             (Dollars in thousands)



                                                         North
                                                         America    Multifamily     Europe2    Consolidated
                                                                                   

    Revenues from customers:
           Monitoring and related services.........    $ 231,202    $  21,041     $ 2,506      $ 254,749
           Installation and rental.................       17,613        2,351       2,383         22,347
                                                       ---------    ---------     --------     ---------

                Total..............................      248,815       23,392       4,889        277,096

     EBITDA........................................       95,451        9,152           9        104,612
     Amortization  of  intangibles  and  depreciation     74,953        5,520         591         81,064
     expense.......................................
     Other income..................................      (20,785)          --          --        (20,785)
     Earnings before interest and income taxes.....       41,283        3,632        (582)        44,333




                      Three Months Ended September 30, 1999
                             (Dollars in thousands)


                                                         North
                                                         America    Multifamily     Europe     Consolidated
                                                                                   

     Revenues from customers:
           Monitoring and related services.........    $  98,568    $   8,697     $  23,955    $ 131,220
           Installation and rental.................        3,500          970        17,441       21,911
                                                       ---------    ---------     ---------    ---------
                Total..............................      102,068        9,667        41,396      153,131
     EBITDA........................................       26,800        4,025        11,993       42,818
     Amortization  of  intangibles  and  depreciation     80,655        2,388        11,207       94,250
     expense.......................................
     Other1........................................      (13,969)          --           (26)     (13,995)
     Earnings before interest and income taxes.....      (39,886)       1,637           812      (37,437)




                      Three Months Ended September 30, 1998
                             (Dollars in thousands)


                                                         North
                                                         America    Multifamily     Europe2    Consolidated
                                                                                   
     Revenues from customers:
           Monitoring and related services.........    $  87,560    $   7,510     $   1,457    $  96,527
           Installation and rental.................        5,105          424         1,205        6,734
                                                       ---------    ---------     ---------    ---------
                Total..............................       92,665        7,934         2,662      103,261
     EBITDA........................................       39,020        3,427          (165)      42,282
     Amortization  of  intangibles  and  depreciation     29,400        1,963           398       31,761
     expense.......................................
     Other income..................................       (7,372)          --            --       (7,372)
     Earnings before interest and income taxes.....       16,992        1,464          (563)      17,893



1  "Other"  includes  employee  severance and transition  cost,  gain on sale of
   Mobile Services Group, and other (income) expense.
2 Results for  Protection  One Europe do not include the operations of CET which
  was acquired September 30, 1998.


8.       Related Party Transactions

    In the third  quarter,  the Company  signed a letter of intent with Paradigm
Direct LLC ("Paradigm") concerning a three year marketing relationship.  Western
Resources has a 40%  ownership  interest in Paradigm.  The proposed  arrangement
contemplates  that the Company will purchase a targeted  number of accounts from
Paradigm  during each year of the agreement  following an initial pilot program,
with 50,000 accounts targeted for the first year. Paradigm will be paid $775 per
installed  account that generates  monthly recurring revenue of $32.95 per month
and meets certain other criteria and an annual fee, in arrears,  of $20 for each
account that remains in good standing for the life of the account.  In addition,
the Company will purchase leads that satisfy certain  criteria at $115 per lead.
The Company will have the right to terminate  the agreement if Paradigm does not
deliver the targeted number of accounts or attrition  exceeds certain levels for
accounts purchased or if the pilot program proves unsuccessful.

    In  connection  with the  marketing  arrangement,  the  Company's  marketing
personnel will be  transferred to Paradigm.  During the pilot program period and
the first year of the  agreement,  the Company will  reimburse  Paradigm for the
overhead  associated with these persons plus 10%. Overhead is defined as current
salary  plus  benefits,  but the 10%  mark-up is limited to base  salaries.  The
number of persons for which  Paradigm  will be  reimbursed  for overhead will be
adjusted annually by agreement.

    The  Company  expensed $1 million  paid to Paradigm in the third  quarter in
connection  with start up costs  relative to this program.  The first  marketing
year would start following  completion of a pilot program.  The Company will pay
$857 per new account for up to 2,500 accounts sold during the pilot program. The
pilot program is expected to be completed by the end of the first quarter 2000.

    The Company entered into a service  agreement with Western  Resources during
the third  quarter.  Pursuant to this agreement  Western  Resources will provide
administrative services including accounting, human resources, legal, facilities
and technology.  The Company accrued $450,000 for services provided in the third
quarter.

9.       Income Taxes

     The income tax benefit  recorded for the nine-month  period ended September
30, 1999 is 25% of the pre-tax loss. This rate represents the expected effective
rate for 1999.  This effective rate was adjusted in the third quarter to reflect
the revised  expected annual operating  performance.  The change in the expected
annual effective rate increased the tax benefit recorded in the third quarter by
approximately $3.8 million. The difference between the expected annual effective
rate of 31% and the federal  statutory rate of 35% is primarily  attributable to
non-deductible  goodwill  amortization.  The Company has a tax sharing agreement
with Western  Resources  which  allows it to be  reimbursed  for tax  deductions
utilized by Western Resources in its consolidated tax return.

10.      Sale of Mobile Services Group

     During the third  quarter,  the Company sold the assets which had comprised
its Mobile Services Group.  Cash proceeds of this sale  approximated $20 million
and the Company recorded a pre-tax gain of approximately $17 million.

11.      Recent Developments:

     In October  1999,  the Company and Western  Resources  jointly  announced a
review of the capital  structure  and  financial  alternatives  for the Company,
including:  review of the  Company's  capital  structure;  changes in  financial
ownership interests,  including spinning or splitting off some portion or all of
Western  Resources'  interest;  potential  purchase of selected  Protection  One
assets by Western  Resources;  seeking new  sources of debt and equity  capital;
refinancing  existing  debt;  the  repurchase of  Protection  One debt by either
Protection One or Western Resources; and other options.




ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    Unless the context  otherwise  indicates,  all  references in this Report on
Form 10-Q (this  "Report")  to the  "Company,"  "Protection  One," "we," "us" or
"our" or similar words are to Protection One, Inc., its wholly owned subsidiary,
Protection One Alarm Monitoring,  Inc.  ("Protection One Alarm  Monitoring") and
Protection One's other wholly owned subsidiaries. Protection One's primary asset
is, and Protection One operates primarily through, its investments in Protection
One Alarm  Monitoring and its other wholly owned  subsidiaries.  Both Protection
One and Protection One Alarm Monitoring are Delaware  corporations  organized in
September 1991.

    The following  Management's  Discussion and Analysis of Financial  Condition
and Results of Operations updates the information provided in and should be read
in conjunction with Management's  Discussion and Analysis of Financial Condition
and Results of Operations in our 1998 Annual Report on Form 10-K/A.

     Certain  matters  discussed  here  and  elsewhere  in this  Form  10-Q  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  the  Company  believes,
anticipates,  expects or words of similar  meaning.  Forward-looking  statements
describe the Company's future plans,  objectives,  expectations,  or goals. Such
statements address future events and conditions concerning capital expenditures,
earnings,   restructuring  the  dealer  program  and  the  methods  of  customer
acquisition,  litigation, the outcome of accounting issues being reviewed by the
SEC   staff,   possible   corporate   restructurings,   mergers,   acquisitions,
dispositions,  liquidity and capital resources,  compliance with debt covenants,
interest,  Year 2000  Issue,  ability  to enter  new  markets  successfully  and
capitalize  on  growth  opportunities,   events  in  foreign  markets  in  which
investments  have been made, and accounting  matters.  What happens in each case
could vary  materially  from what the Company  expects because of such things as
future economic conditions;  legislative developments;  competitive markets; and
other circumstances affecting anticipated operations, revenues and costs.

Overview

    Protection  One is  one of the  leading  providers  of  property  monitoring
services,  providing electronic  monitoring and maintenance of its alarm systems
to over 1.6 million  customers in North America and Europe.  We also provide our
customers with enhanced services that include:

- -        extended service protection;

- -        patrol and alarm response;

- -        two-way voice communication;

- -        pager service;

- -        medical information service;

- -        cellular back-up; and

- -        mobile security services.

    Approximately 85% of our revenues are contractually recurring for monitoring
alarm  security  systems and other  related  services.  We have grown rapidly by
participating  in the growth in the alarm industry and by acquiring  other alarm
companies.

    Our principal activity is responding to the security and safety needs of our
customers.  Our revenues are generated primarily from recurring monthly payments
for  monitoring  and  maintaining  the alarm  systems that are  installed in our
customers'  homes  and  businesses.  Security  systems  are  designed  to detect
burglaries, fires and other events. Through a network of 57 service branches and
11 satellite  offices in North  America and 51 service  branches in  continental
Europe  and the  United  Kingdom,  we provide  maintenance  service of  security
systems  and,  in  certain  markets,  armed  response  to verify  that an actual
emergency has occurred.

    We provide our services to residential  (both single family and  multifamily
residences),   commercial  and  wholesale  customers.   We  believe  residential
customers,  who  represent  in  excess  of 80% of our  customer  base,  are most
attractive  because of lower penetration in this market and thus stronger growth
prospects,  higher gross margins and larger  potential size. In prior years, the
Company's strategy was focused primarily on growing its customer account base to
achieve  critical  mass.  We believe we have reached such  critical mass and our
strategic focus has now shifted to the following areas:

- -        Improving customer service;

- -        Reducing attrition;

- -        Reducing customer acquisition costs; and

- -  Integrating  and building  infrastructure  such as common  platforms  for our
central stations, billing, and other applications.

    Our company is divided into three business segments:

    Protection  One North  America  ("North  America")  generated  approximately
$301.2  million,  or 66.6%, of our revenues in the first nine months of 1999 and
is  comprised  of  Protection  One Alarm  Monitoring-our  core alarm  monitoring
business based in Culver City, California.

    Multifamily generated  approximately $28.9 million, or 6.4%, of our revenues
in the first  nine  months  of 1999 and is  comprised  of our  alarm  monitoring
business servicing the multifamily/apartment market based in Addison, Texas.

    Protection One Europe ("Europe") generated  approximately $122.4 million, or
27.0%, of our revenues in the first nine months of 1999 and is comprised of:

- -       Protection  One  Continental   Europe-our  alarm   monitoring   business
        servicing  continental Europe established from our purchase of Compagnie
        Europeenne de Telesecurite ("CET") in September 1998, based in Paris and
        Vitrolles, France with offices in Germany, Switzerland,  Belgium and the
        Netherlands; and

- -       Protection One United  Kingdom-our alarm monitoring  business  servicing
        the United Kingdom  established from our purchase of Hambro  Countrywide
        Security in May 1998, based in Basingstoke, United Kingdom.

  Attrition

    Subscriber  attrition has a direct impact on our results of operations since
  it affects both our revenues and amortization  expense. We define attrition as
  a ratio, the numerator of which is the number of lost customer  accounts for a
  given period, net of certain adjustments,  and the denominator of which is the
  average number of accounts for a given period.  The  adjustments  made to lost
  accounts are  primarily  related to those  accounts  which are covered under a
  purchase price holdback and are "put" back to the seller.  We reduce the gross
  accounts lost during a period by the amount of the  guarantee  provided for in
  the  purchase  agreements  with  sellers.  In some  cases,  the  amount of the
  purchase holdback may be less than actual attrition experience.

    The Company's actual attrition experience shows that the relationship period
  with any individual  customer can vary  significantly and may be substantially
  shorter  or longer  than ten years.  Customers  discontinue  service  with the
  Company for a variety of reasons,  including  relocation,  service  issues and
  cost. A portion of the acquired  customer base can be expected to  discontinue
  service with the Company every year. Any significant  change in the pattern of
  the Company's  historical attrition experience would have a material effect on
  the Company's results of operations.

    The Company  monitors  attrition  each quarter  based on an  annualized  and
trailing  twelve-month  basis.  This  method  utilizes  each  segment's  average
customer  account  base  for  the  applicable  period  in  measuring  attrition.
Therefore,  in periods of customer  account  growth,  customer  attrition may be
understated and in periods of customer account decline,  customer  attrition may
be overstated.  When necessary the Company will adjust  amortization of the cost
of customer accounts.

     During 1999, the Company has experienced an increase in customer attrition.
  Total  attrition for the trailing  twelve months ended  September 30, 1999 was
  12.2%  compared to 10.5% for the trailing  twelve  months ended June 30, 1999.
  Annualized  total attrition for the quarter ended September 30, 1999 was 16.0%
  compared to 14.3% for the quarter ended June 30, 1999.

    Customer  attrition by business  segment for the period ended  September 30,
1999 is summarized below:

                            Customer Account Attrition
                                September 30, 1999
                         ---------------------------------
                          Annualized           Trailing
                           Current              Twelve
                           Quarter              Month
                         -------------       -------------
North America                 19.1%              14.2%
Europe                         4.5%               4.8%
Multifamily                    7.6%               6.5%
Total Company                 16.0%              12.2%

     As the  result  of the  attrition  rates for the North  America  pool,  the
  Company  intends to engage an appraiser  to perform a current  lifing study to
  assess  the  impact  of the 1999  customer  service  issues  on the  estimated
  long-term revenues to be received from the current North America account base.
  Upon completion of the study, the Company will consider the  reasonableness of
  the value of its  North  America  account  base and the  current  amortization
  rates. This could result in a change in amortization rate. The Company intends
  to perform an  evaluation  for  potential  impairment  taking into account the
  results of this study.  Amounts involved may be material and would represent a
  non-cash charge to earnings.

     The Company is addressing customer service issues which management believes
  have impacted  attrition.  In this regard,  150 service  representatives  were
  added in the  second  quarter  and the  Company  has  increased  training  and
  technology  investments.  As  a  result  of  these  initiatives,   there  were
  improvements in the third quarter in  measurements of key performance  metrics
  such as abandonment rates,  acknowledgement  time, average speed of answer and
  service repair backlog.  Additional customer service initiatives are under way
  with a goal of reducing  attrition rates.  These include,  but are not limited
  to, special  retention  teams,  new billing system  implementation,  proactive
  customer  interaction,  and focusing the organization on customer service.  No
  assurance  can be given that these  efforts  will be  successful  in  reducing
  customer attrition.

  Recent Developments

     Change in  Accounting  Principle.  The Company  historically  amortized the
  costs it allocated to its customer accounts by using the straight-line  method
  over a ten-year  life.  The  straight-line  method,  indicated  in  Accounting
  Principles Board Opinion No. 17 as the appropriate method for such assets, has
  been  the  predominant  method  used  to  amortize  customer  accounts  in the
  monitored services  industry.  Management is not aware of whether the economic
  life or the rate of realization for the Company's  customer  accounts  differs
  materially from other monitored services companies.

    The  choice of a  ten-year  life was  based on  management's  estimates  and
  judgments  about the amounts and timing of expected future revenues from these
  assets,  the rate of attrition of such revenue over customer life, and average
  customer account life. Ten years was used because, in management's opinion, it
  would adequately match  amortization cost with anticipated  revenue from those
  assets even though many accounts were expected to produce revenue over periods
  substantially longer than ten years. Effectively,  it expensed the asset costs
  ratably over an  "expected  average  customer  life" that was shorter than the
  expected life of the revenue  stream,  thus implicitly  giving  recognition to
  projected revenues for a period beyond ten years.

    The  Company  has  recently   concluded  a   comprehensive   review  of  its
amortization  policy that was undertaken  during the third quarter of 1999. This
review was performed  specifically to evaluate the historic  amortization policy
in light of the  inherent  declining  revenue  curve  over the life of a pool of
customer accounts,  and the Company's  historical  attrition  experience.  After
completing the review, management identified three distinct pools, each of which
has distinct  attributes that effect differing  attrition  characteristics.  The
pools correspond to the Company's North America, Multifamily and Europe business
segments. These separate pools will be used going forward. For the North America
and Europe pools, the analyzed data indicated to management that the Company can
expect attrition to be greatest in years one through five of asset life and that
a change from a straight-line to a declining balance  (accelerated) method would
more closely match future  amortization  cost with the estimated  revenue stream
from these assets.  Management  has elected to change to that method.  No change
was made in the method used for the Multifamily pool.

    The Company's  amortization  rates for the North America and Europe customer
pools consider the average estimated remaining life and historical and projected
attrition rates. The average estimated  remaining life for each customer pool is
as follows:
                       Average Estimated
                        Remaining Life
    Pool                    (Years)                         Method
- ---------------      ---------------------       -----------------------------
North America                8-10                Ten-year 130% declining balance
Europe                        10                 Ten-year 125% declining balance
Multifamily                   12                 Ten-year straight-line

    Adoption of the declining balance method effectively  shortens the estimated
expected  average  customer life for these two customer pools,  and does so in a
way that does not make it  possible  to  distinguish  the  effect of a change in
method  (straight-line to declining balance) from the change in estimated lives.
In such cases,  generally accepted accounting principles require that the effect
of such a change be recognized in operations in the period of the change, rather
than as a cumulative  effect of a change in accounting  principle.  Accordingly,
the effect of the change in accounting principle increased  amortization expense
reported  in  the  third   quarter  by  $47  million.   Similarly,   accumulated
amortization  recorded on the balance  sheet would have been  approximately  $41
million higher if the Company had historically used the declining balance method
through the end of the second quarter of 1999.

    Sale of Mobile Services Group.  The sale of our Mobile Services Group to ATX
Technologies  ("ATX") was announced on June 28, 1999 and  consummated  on August
25, 1999. The sales price was  approximately $20 million in cash plus a note and
a preferred stock investment in ATX. The Company will continue to deliver mobile
services  through a reseller  arrangement  with ATX.  For the nine months  ended
September 30, 1999, the net loss  attributable  to the Mobile Services Group was
approximately  $2.6 million.  In August, the Company recorded a gain on the sale
of approximately $11.2 million, net of tax.

    SEC Review.  The Company  has been advised by the Division of Corporation
Finance that, in the view of the staff, there are errors in the Company's
financial  statements  which are material and which have had the effect of
inflating  earnings  commencing  with the year 1997.  The Company has had
extensive  discussions  with the SEC staff about the methodology
used by the Company to amortize customer accounts, the purchase price allocation
to customer accounts in the Network  Multifamily  acquisition and other matters.
The Company has restated its financial  statements for certain prior periods and
has changed  the  accounting  principle  used for the  amortization  of customer
accounts  as  discussed  above  in Notes 2 and 3 to the  Consolidated  Financial
Statements.  The SEC staff has not  indicated it concurs  with,  nor has the SEC
staff  determined not to object to, the restatements or the change in accounting
principle.  The Company  cannot predict  whether SEC staff will make  additional
comments or take other action that will further impact its financial  statements
or the effect or timing of any such action.

     Dealer  Program.  In 1998, the Company  expanded the Dealer Program (Dealer
Program) for its North American single family residential market. As part of the
Dealer  Program,  the Company  entered into  contracts  with dealers,  typically
independent  alarm  companies,  providing for the purchase of customer  accounts
generated by the dealer on an ongoing basis. The Company currently has a limited
internal sales capability and relies on the Dealer Program for the generation of
substantially  all new customer  accounts  except those  acquired as part of the
acquisition of other security companies.

     In the third quarter, the Company continued to identify steps that could be
taken to reduce the cost of acquired  accounts and reduce attrition by acquiring
higher quality accounts.  As a result,  the Company began notifying dealers that
it does not  intend to renew  their  contracts  under  their  current  terms and
conditions  when they expire.  The term of dealer  contracts  ranges from one to
five years and  automatically  renews unless notice of  non-renewal  is given by
either party as provided in the  contract.  The Company is  attempting  to renew
contracts with terms providing for a lower cost for acquired  customer  accounts
based upon the multiple of monthly  recurring  revenue and other  revised  terms
that improve the quality of the acquired customer  accounts.  The Company cannot
predict whether it will be successful in renewing existing dealer contracts,  or
entering into contracts with new dealers, on acceptable terms. This could result
in a loss of dealers and fewer  customer  accounts  available for purchase.  The
failure to replace customer accounts could have a material adverse impact on our
financial  condition.  Efforts to date have reduced the number of accounts being
purchased from dealers each month from 25,000 in March to 10,600 in October.

    Six  Protection  One dealers have filed a class action  lawsuit in the U. S.
District Court for the Western District of Kentucky  alleging breach of contract
because of the Company's interpretation of their dealer contracts. The action is
styled  Total  Security  Solutions,   Inc.,  et  al.  v.  Protection  One  Alarm
Monitoring,  Inc.,  Civil  Action  No.  3:99CV-326-H  (filed May 21,  1999).  On
September  10,  1999,  the Court  granted  Protection  One's  motion to stay the
proceeding pending the individual plaintiff's pursuit of arbitration as required
by the terms of their agreements. As of November 10, 1999, none of these dealers
have  commenced  arbitration.  Other  Protection  One  dealers  have  threatened
litigation or arbitration based upon similar claims. The Company believes it has
complied with the terms of these contracts and intends to vigorously  defend its
position. The Company cannot currently predict the impact of these disputes with
dealers which could be material.

    Termination of Lifeline Proposed Merger.  In September 1999,  Protection One
and Lifeline  Systems,  Inc.  terminated  their proposed merger due to delays in
obtaining  effectiveness  of the  registration  statement  covering the proposed
issuance of shares of Protection One in the transaction. Protection One recorded
a charge of  approximately  $3.7 million for costs  related to the  transaction,
including a termination fee of $1 million.

    Sale of Canadian Operations.  In September 1999,  Protection One and VOXCOM,
Incorporated  ("VOXCOM")  entered into a definitive  purchase  agreement for the
sale of Protection  One's Canadian  operations to VOXCOM for  approximately  $27
million,  including  approximately $23 million in cash. The parties subsequently
terminated the purchase  agreement because VOXCOM was unable to obtain financing
for the transaction.  The Company continues to evaluate options for its Canadian
operations.

    Capital  Structure  Review.  In October  1999,  Protection  One and  Western
Resources  jointly  announced a review of the capital  structure  and  financial
alternatives  for the Company,  including:  review of  Protection  One's capital
structure;  changes in  financial  ownership  interests,  including  spinning or
splitting  off some  portion or all of Western  Resources'  interest;  potential
purchase of selected  Protection  One assets by Western  Resources;  seeking new
sources of debt and equity capital; refinancing existing debt; the repurchase of
Protection  One debt either by Protection  One or Western  Resources;  and other
options.  It is  anticipated  the review process will be completed by the end of
the  first  quarter  of 2000.  If  Western  Resources  ceases  to own  specified
percentages  of  Protection  One's equity  securities,  an event of default will
occur under the agreement  governing the senior credit  facility and the Company
will be obligated to make an offer to purchase its  outstanding  notes under the
indentures governing the notes.  Protection One cannot prevent Western Resources
from  pursuing a  financial  alternative  that could  result in such an event of
default.

    Administrative  Services.  In  October  1999,  the  Company  entered  into a
services agreement with Western Resources to provide administrative  services to
the  Company,   including  accounting,   legal,  facilities,   human  resources,
information technology,  and supply chain services. The Company will pay Western
Resources for these services based upon various hourly charges,  negotiated fees
and out of pocket expenses.

    Lifing Study. The Company hired an independent appraiser to perform a lifing
study  of  the  estimated  average  remaining  life,  as  of  the  date  of  the
acquisition,  of  customer  accounts  acquired  by the  Company  in  five  major
acquisitions. The results of the lifing study are summarized below:

                                                       Estimated
        Acquisition                              Average Remaining Life

        Westinghouse                                      8
        Protection One                                   10
        Multimedia                                    9.5 - 10
        Network Multifamily                              12
        CET                                              10

Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998

    General.  Results for the nine months ended  September  30, 1999 (the "first
three  quarters of 1999")  reflect a full nine months of operations for security
businesses  acquired by Protection One in Europe  subsequent to May, 1998, while
results for the  comparable  period in 1998 reflect  primarily the operations of
Protection One North  America.  In the first three quarters of 1998, the Company
added approximately  680,000 customers through  acquisitions that were completed
at various times  throughout the period.  Accordingly,  the results of the first
three  quarters  of 1999  contain a full  nine  months  of  operations  for such
acquisitions.  Increases  in revenues  and  expense  items  discussed  below are
attributable  to five  factors,  as  appropriate:  (i) changes in the  financial
results of Protection One North America;  (ii) the 1998 Acquisitions;  (iii) the
acquisition of alarm  businesses in Europe in the second quarter and late in the
third  quarter of 1998;  (iv) a  significant  increase in the level of customers
added through the Dealer  Program;  and (v) the change in  accounting  principle
adopted  during the third  quarter.  Discussion of results in future periods may
not include  specific  discussion of contributions  from the 1998  Acquisitions,
which consist primarily of Comsec, Multimedia and Network.

    Revenues for the first three  quarters of 1999  increased  by  approximately
$175.4  million,  or 63.3%,  to  $452.5  million  from  $277.1  million  for the
comparable  period in 1998.  The primary  reason for the increase in revenues is
due to acquired businesses included in Protection One Europe,  which had revenue
increases  of  $117.5  million  or  67.0% of the  total  increase  in  revenues.
Approximately $26.4 million of this amount was recognized as a result of ongoing
reductions in the liability under the Company's recourse  financing  agreements.
Protection  One Europe  contributed  $4.9 million of revenues in the  comparable
period in 1998  compared to $122.4  million for the nine months ended  September
30, 1999.  Monitoring and related services  revenues  increased by approximately
$131.5 million,  or 51.6%.  Approximately 51.6% of the increase in such revenues
is due to Protection One Europe,  with most of the remaining increase attributed
to the 1998  Acquisitions  and the growth of  Protection  One North  America and
Multifamily.

    Installation  and other revenues  increased by $43.8  million,  or 196.2% to
$66.2 million from $22.3 million,  reflecting additional  installation and other
revenues  of $49.6  million  from  Protection  One Europe and a decrease of $6.6
million in  Protection  One North  America  installation  revenues.  We maintain
internal sales and installation  capabilities in certain areas,  such as Network
Multifamily,  our commercial  installations and our European operations where we
principally lease security systems to customers.

    Cost of revenues  for the first three  quarters of 1999  increased by
approximately  $44.9  million,  or 51.0%,  to $133.0 million from $88.0 million.
Protection  One Europe  contributed  $34.0 million or 75.6%,  of the increase in
cost of revenues.  Cost of revenues for Protection  One North America  increased
$11.9 million or 26.4%. Cost of revenues for Multifamily decreased $0.9 million,
or 2%. Cost of revenues as a percentage of total revenue  decreased to 29.4% for
the first three quarters of 1999 from 31.8% for the comparable  period in
1998. Protection One Europe's cost of revenues as a percentage of total revenues
decreased  to 29.9% for the nine months  ended  September  30, 1999  compared to
54.5% for the nine months ended  September 30, 1998. It should be noted that for
the nine months ended September 30, 1998,  Protection One Europe  consisted only
of Hambro Countrywide Security,  which was acquired in May 1998, which had total
revenues of $4.9  million  and cost of revenues of $2.7  million for the period.
Protection  One North America cost of revenues as a percentage of total revenues
decreased  to 29.4% for the nine months ended  September  30, 1999 from 30.8% in
the comparable period in 1998. Monitoring and related service expenses increased
by  approximately  $27.6  million,  or 38.4%,  primarily due to  Protection  One
Europe,  which  accounted  for  approximately  49.3% of the total  increase  and
Protection  One North  America which  contributed  45.8% or $12.6 million of the
increase.  Monitoring and related service expenses as a percentage of monitoring
related  services  revenues  decreased to 25.8% for the first three  quarters of
1999, from 28.2% in the comparable period in 1998.

    Installation  and other cost of  revenues  increased  by $17.4  million,  or
107.7%, reflecting primarily installation activities from Protection One Europe.

    Gross profit for the first three quarters of 1999 was  approximately  $319.5
million,  representing  an increase of $130.4 million or 69.0%,  over the $189.1
million  of gross  profit  recognized  in the  comparable  period in 1998.  Such
increase is primarily due to the  contribution by Protection One Europe of $83.5
million,  or approximately  64.0%,  with the 1998 Acquisitions and the growth of
Protection  One North America  comprising  the remainder of the increase.  Gross
profit as a percentage of total  revenues was 70.6% for the first three quarters
of 1999,  compared  to 68.2%  for the  comparable  period  in 1998.  The
increase  in gross  profit as a  percentage  of  revenues  is due to the cost of
revenues factors noted above.

    Selling,  general  and  administrative  expenses  ("S,G&A")  rose to  $134.7
million in the first three quarters of 1999, an increase of approximately
$64.7  million,  or  92.5%,  over  S,G&A  in  the  comparable  period  in  1998.
Approximately  $47.3 million or 73.1% of the increase is due to  Protection  One
Europe,  with the growth and integration efforts of Protection One North America
and the 1998 Acquisitions  contributing 22.1% of the increase.  Such figure as a
percentage of total revenues increased from 25.3% in the first three quarters of
1998 to 29.9% in the first three  quarters of 1999.  The  increase in S,G&A as a
percentage  of total  revenues  reflects  the  higher  percentage  of S,G&A as a
percentage of revenues from Protection One Europe of  approximately  40.5%.  The
higher  percentage  of S,G&A for  Protection  One Europe is due to the  internal
sales and installation activities.

    Acquisition expenses for the first three quarters of 1999 increased to $21.9
million,  an increase of approximately $7.4 million, or 51.6% from $14.5 million
in the comparable period in 1998.  Approximately  half of the increase is due to
the termination  costs related to the Lifeline merger.  Efforts to integrate the
1998  Acquisitions and costs related to the national Dealer Program comprise the
balance.

    Amortization of intangibles and depreciation  expense was $182.6 million for
the first three  quarters of 1999,  an  increase of $101.5  million,  or
125.3% over the $81.0 million in the  comparable  period in 1998.  Approximately
half of the increase ($47.0 million or 46.3%) is due to the change in accounting
method and  finalization of certain  purchase price  allocations.  Approximately
$31.6 million or 31.1% of the increase is due primarily to the 1998 Acquisitions
and  the  growth  in  our  Dealer  Program  in  Protection  One  North  America.
Depreciation  and  amortization  expense from Protection One Europe  represented
$21.5  million,  or  approximately  21.2%  of  the  increase.   See  Note  3  to
Consolidated Financial Statements.

     Employee  severance  and  transition  cost for the first three  quarters of
1999 was $4.3 million.  Approximately $3.2 million is the cost associated
with the  severance  of certain of our former  officers  and the  balance of the
costs are related to the  transition of the Company's  financial  functions from
Irving, Texas to Topeka, Kansas.

    Other income (expense)  totaled $(47.0) million of expense in the first nine
months of 1999,  as  compared  to $(16.5)  million of expense in the  comparable
period in 1998.  Interest  expense  increased by $27.0  million to $64.3 million
during the nine months ended  September 30, 1999,  compared to $37.3 million for
the nine months ended  September 30 1998,  reflecting  the increased  debt level
when compared to the third quarter of 1998 and the recognition of $7.1 million
of interest being recorded as a result of ongoing  reductions in the liability
under the Company's recourse  financing  agreements  in Europe.  Other  expense
in the first  three quarters  of 1999 was  offset  by the gain on the sale of
the  Company's  Mobile Services Group in the amount of $17.2 million.
Other expense in the first three quarters  of 1998 was  significantly  offset
by other  income of $20.8  million, reflecting a gain on repurchase of certain
contracts.

    Income tax (expense) benefit totaled $17.6 million for the nine months ended
September  30,  1999.  The  increase in the  benefit  for the nine months  ended
September  30,  1999  is due  primarily  to the  change  in  accounting  method.
Typically, the Company's provision for income taxes is higher than the effective
rate primarily due to the  non-deductibility of goodwill  amortization which was
incurred as a result of its acquisition  program. We consolidate with our parent
company,  Western Resources,  Inc. for federal tax reporting purposes. We do not
consolidate Protection One Europe for tax reporting purposes.

    Balance  sheet data. At September 30, 1999,  the Company's  working  capital
deficit was $20.1 million compared to a working capital deficit of $48.2 million
at December  31, 1998.  This  decrease in the working  capital  deficit of $28.1
million is primarily due to an increase in current  deferred tax assets of $22.7
million and net receivables of $6.7 million.

    Goodwill and trademarks,  net and customer accounts,  net, increased to $2.3
billion at September 30, 1999,  from $2.2 billion at December 31, 1998. This net
increase of  approximately  $76.0  million,  or 3.5%  reflects  the  addition of
approximately 264,000 customer accounts,  offset by amortization expense for the
first  nine  months  of 1999  of  $171.4  million.  See  Note 4 to  Consolidated
Financial Statements for further discussion.

    Total stockholders' equity decreased approximately $55.1 million to $1,289.1
million from $1,344.2  million at December 31, 1998. The decrease in such figure
reflects the net loss of $53.4  million for the nine months ended  September 30,
1999 and the  increase  in the  unrealized  loss on  marketable  securities  and
currency translation.

Three Months Ended September 30, 1999 Compared to Three Months Ended
September 30, 1998

    Revenues  for the third  quarter of 1999  increased by  approximately  $49.8
million,  or 48.3%,  to $153.1  million from $103.3  million for the  comparable
period in 1998.  Approximately 77.7% or $38.7 million of this increase is due to
acquired  businesses  included  in  Protection  One Europe.  Approximately  $8.1
million of the increase at Protection  One Europe was  recognized as a result of
ongoing  reductions in the  liability  under the  Company's  recourse  financing
agreements.  Protection One North America  contributed  $9.4 million or 18.9% of
the total  increase  in  revenues.  Monitoring  and  related  services  revenues
increased by approximately $34.7 million, or 35.9%. The majority of the increase
is due to Protection One Europe  (approximately $22.5 million or 64.8%) with the
1998  Acquisitions  and the growth of Protection  One North  America  comprising
$11.0 million or 31.7% of the increase.

    Installation  and other revenues  increased by $15.2  million,  or 225.4% to
$21.9 million from $6.7 million,  reflecting additional installation revenues of
$16.2  million from  Protection  One Europe and $0.5  million  from  Multifamily
offset  by  a  decrease  of  $1.6  million  in  Protection   One  North  America
installation  revenues. The decline in Protection One North America installation
revenues  reflects our conversion of  substantially  all sales and  installation
activities  previously  conducted  by an  internal  sales  force  to the  Dealer
Program.  We maintain  internal sales and  installation  capabilities in certain
areas,  such as our Network  Multifamily  Security  subsidiary,  our  commercial
installations  and our European  operations  where we principally  rent security
systems.

    Cost of  revenues  for  the  third  quarter  of  1999  increased  by
approximately  $17.3  million,  or 53.0%,  to $49.8 million from $32.5  million.
Protection One Europe contributed $11.5 million or 66.4% of the increase in cost
of revenues.  Protection One North America's cost of revenues  increased by $5.4
million or 31.5% of the  increase.  Cost of  revenues as a  percentage  of total
revenue  increased to 32.5% for the third  quarter of 1999 from 31.5% for
the comparable period in 1998.  Protection One North America cost of revenues as
a  percentage  of total  revenues  for the  quarter  ended  September  30,  1999
increased to 33.2% from 30.7% for the quarter  ended  September  30, 1998.  Such
increase for Protection One North America is attributable to increased  staffing
in the Company's customer care centers. Monitoring and related services expenses
increased by approximately $12.5 million, or 45.9%,  primarily due to Protection
One Europe,  which accounts for approximately $5.3 million or 42.7% of the total
increase. Monitoring and related services expenses as a percentage of monitoring
and related services revenues increased to 30.2% for the third quarter of 1999,
from 28.1% in the comparable period in 1998.  Protection One North America
monitoring  and  related  expenses as a  percentage  of  monitoring  and related
revenues  increased to 31.9% for the quarter ended September 30, 1999 from 28.6%
for the quarter ended  September 30, 1998. As noted above,  such increase is due
to higher staffing levels at the Company's customer care centers.

    Installation and other cost of revenues increased by $4.8 million, or 88.7%,
reflecting primarily  installation  activities from Protection One Europe in the
amount of $6.1 million  offset by a decrease of $1.0 million and $0.3 million in
the  installation  activities of Protection  One North America and  Multifamily,
respectively.

    Gross profit for the third quarter of 1999 was approximately $103.3 million,
representing an increase of $32.6 million,  or 46.1%,  over the $70.7 million of
gross profit  recognized  in the  comparable  period in 1998.  Such  increase is
primarily due to the contribution by Protection One Europe of $27.3 million,  or
approximately 83.6%, with the 1998 Acquisitions and the growth of Protection One
North America comprising approximately $4.0 million or 12.2% and Multifamily the
remainder of the increase.  Gross profit as a percentage  of total  revenues was
67.5% for the third quarter of 1999, compared to 68.5% for the comparable
period in 1998.  The decrease in gross profit as a percentage of revenues is due
to the cost of revenues factors noted above.

    Selling, general and administrative expenses ("S,G&A") rose to $50.2 million
in the third quarter of 1999, an increase of approximately $26.8 million,
or 114.0%,  over S,G&A in the  comparable  period in 1998.  Approximately  $14.8
million or 55.2% of the increase is due to Protection One Europe. Protection One
North America S,G&A  expenses  increased  $11.1 million or 55.5% for the quarter
ended  September 30, 1999 compared to the quarter ended  September 30, 1998. The
majority of the increase in such  expenses is due to a larger  customer  account
base and efforts to integrate the 1998 Acquisitions. Other items contributing to
the increased expense include higher professional fees, higher provision for bad
debt expense and additional costs associated with changes in the dealer program.
Such figure as a percentage of total revenues  increased from 22.7% in the third
quarter  of 1998 to  32.8%  in the  third  quarter  of 1999  due to the  factors
previously  listed.  The  increase in S,G&A as a  percentage  of total  revenues
reflects  the  higher  percentage  of S,G&A as a  percentage  of  revenues  from
Protection One Europe of approximately 39.0%. The higher percentage of S,G&A for
Protection One Europe is due to the internal sales and installation activities.

    Acquisition  expenses  for the  third  quarter  of 1999  increased  to $10.3
million,  an increase of approximately $5.3 million, or 107.2% from $5.0 million
in the comparable period in 1998. $3.7 million of the increase is related to the
termination of the Lifeline merger.  Efforts to integrate the 1998  Acquisitions
and costs related to the national Dealer Program comprise the balance.

    Amortization of intangibles and  depreciation  expense was $94.3 million for
the third quarter of 1999, an increase of $62.5  million,  or 196.8% over
the $31.8 million in the comparable period in 1998.  Approximately $46.9 million
or 75.1% of the  increase  is related to the change in  accounting  method.  The
balance  of the  increase  in  Protection  One North  America  amortization  and
depreciation  expense is due to the higher amortization and depreciation expense
related  to  the  1998  Acquisitions  and  the  growth  in our  Dealer  Program.
Depreciation  and  amortization  expense from Protection One Europe  represented
$10.8  million,  or  approximately  17.3%  of  the  increase.   See  Note  3  to
Consolidated Financial Statements for further discussion.

    Other  income  (expense)  totaled  $(6.0)  million  of  expense in the third
quarter of 1999,  as  compared  to $(5.1)  million of expense in the  comparable
period in 1998.  Interest expense  increased by $9.9 million,  or 79.6% to $22.3
million during the quarter ended  September 30, 1999,  compared to $12.4 million
for the quarter ended  September 30, 1998,  reflecting  the increased debt level
when compared to the third quarter of 1998 and the recognition of $2.1 million
of interest being recorded as a result of ongoing  reductions in the liability
under the Company's recourse  financing  agreements in Europe. The increase in
debt was used to fund accounts purchased under the Dealer Program,  acquisitions
and operations. Other expense in the third quarter of 1999 was significantly
offset by other income of $17.3 million, reflecting a gain on sale of the
Company's Mobile Services Group. Other  expense in the third  quarter of 1998
was  significantly  offset by other income of approximately  $7.4 million,
reflecting the gain on the repurchase of certain contracts.

    Income tax  (expense)  benefit  totaled  $18.8 million for the quarter ended
September 30, 1999. The income tax benefit  recorded by the Company is primarily
due to the  impact of the change in  accounting  method  related  to  subscriber
accounts. Typically, the Company's provision for income taxes is higher than the
effective rate primarily due to the  non-deductibility of goodwill  amortization
which was incurred as a result of its acquisition  program.  We consolidate with
our parent company, Western Resources,  Inc. for federal tax reporting purposes.
We do not consolidate Protection One Europe for tax reporting purposes.

Liquidity and Capital Resources

    The Company  borrows to fund  operations in excess of  internally  generated
cash under its senior credit facility. The Company's ability to borrow under the
facility is subject to compliance with certain financial covenants,  including a
leverage  ratio of 5.0 to 1.0 and an interest  coverage ratio of 2.75 to 1.0. At
year end 1999, the leverage  ratio  required  under the credit  facility will be
reduced to 4.5 to 1.0. As of September 30, 1999,  the ratios were  approximately
6.7 to 1.0 and 2.0 to 1.0.  The  Company  currently  borrows  approximately  $20
million per month, principally to fund the purchase of customer accounts.

    The indentures  governing the Company's  outstanding senior and subordinated
notes contain  similar  covenants  with different  calculations  relating to the
Company's ability to incur  indebtedness.  The Company is in compliance with all
covenants contained in these indentures.

    The senior credit facility  lenders have waived  compliance with the current
  leverage and interest  coverage ratio covenants  through  December 3, 1999. In
  connection with the waiver, the amount of the credit facility was reduced from
  $500  million  to $250  million.  The  Company  will  not,  absent  successful
  implementation of the alternatives  discussed below, be in compliance with the
  current leverage and interest  coverage ratio covenants in the credit facility
  following the expiration of the waiver.  The Company is discussing  waivers or
  amendments to the senior credit  facility with the lenders and exploring other
  alternatives to address these covenant  restrictions and the reduced amount of
  the credit  facility,  including  selling assets to reduce debt or refinancing
  the facility.  The credit  facility  lenders have  requested  that the Company
  obtain credit  support for the facility  from Western  Resources or one of its
  affiliates.  The  Company's  public debt  contains  restrictions  on providing
  certain forms of credit support to the credit facility.  Further, there can be
  no assurance that Western  Resources or its affiliates will provide any credit
  support to the lenders under the facility. If the Company's  negotiations with
  its senior credit facility lenders are not successful,  the Company will be in
  default under the credit  facility.  If the lenders  elect to  accelerate  the
  outstanding  indebtedness under the credit facility,  this action would result
  in  defaults  under  the  indentures   governing   certain  of  the  Company's
  outstanding  notes and the repayment of the notes could be  accelerated if the
  defaults were not cured within applicable grace periods. The Company would not
  be able to repay its  indebtedness  if repayment is  accelerated.  Even if the
  lenders elect not to accelerate the outstanding  indebtedness under the credit
  facility,  the Company will likely  experience  shortfalls in liquidity  which
  would adversely impact the Company's  ability to meet its cash obligations and
  have a material  adverse  effect upon the  Company's  financial  position  and
  results.  The Company has been advised by its independent  public  accountants
  that if the issues  related to the  Company's  credit  facility  have not been
  resolved  prior to the  completion of their audit of the  Company's  financial
  statements for the year ending December 31, 1999,  their  auditors'  report on
  those  financial  statements may be qualified as being subject to the ultimate
  outcome of that  contingency.  If the Company is unable to  maintain  adequate
  liquidity,  Western Resources may choose to make additional investments in the
  Company,  but it is not  obligated to do so.  Management  believes the Company
  will be able to  address  this  matter in a manner so that there is no default
  under the credit  facility  or  significant  impact on its  liquidity,  but no
  assurances  can be given that the  Company  will be able to do so or the terms
  thereof.  See Note 11 to the  Consolidated  Financial  Statements  for  recent
  developments  concerning  a review  of the  Company's  capital  structure  and
  financial alternatives.

    Cash will also be generated from  recurring  revenue from our security alarm
monitoring  services  customer base, which generated $162.9 million of EBITDA in
the nine months ended  September  30, 1999.  Cash flow from  operations  per the
statement of cash flows was $75.9 million. EBITDA is derived by adding to income
(loss)  before  income  taxes,  the sum of interest  expense,  depreciation  and
amortization  expense and employee severance and transition costs, and deducting
the gain on sale of Mobile  Services  Group and other  income.  EBITDA  does not
represent cash flow from operations as defined by generally accepted  accounting
principles, should not be construed as an alternative to operating income and is
indicative of neither operating performance nor cash flows available to fund our
cash  needs.   Items  excluded  from  EBITDA  are   significant   components  in
understanding and assessing our financial performance.  EBITDA is used by senior
lenders and subordinated creditors and the investment community to determine the
current borrowing capacity and to estimate the long-term value of companies with
recurring  cash  flows from  operations.  Our  computation  of EBITDA may not be
comparable to other similarly titled measures of other companies.

    We generated $75.9 million of net cash provided by operating  activities for
the nine months ended September 30, 1999,  compared to the $85.5million net cash
provided by operating  activities  in the nine months ended  September 30, 1998.
The decrease in net cash provided by operating activities reflects the impact of
approximately $23 million in interest payments on debt incurred in 1998.

    We used  $239.4  million of net cash in  investing  activities  for the nine
months ended  September 30, 1999,  compared to the use of $820.0 million for the
comparable  period in 1998.  Investing  activities  during the nine months ended
September  30, 1999,  included  Dealer  Program  purchases  and  enterprise-wide
software  expenditures.  Investing  activities  during  the  nine  months  ended
September 30, 1998, included the acquisition of Multimedia, Campagnie Europeenne
de Telesecurite ("CET"),  Comsec,  Canguard and Hambro as well as Dealer Program
purchases.

    We generated $172.4 million of net cash through financing activities for the
nine months ended September 30, 1999,  compared to generating $677.3 million for
the nine months ended September 30, 1998. We obtained  funding of  approximately
$173 million through our $250 million senior credit facility.

    In response to liquidity  and  operational  issues and the  announcement  by
Western Resources that it is exploring strategic alternatives for Protection One
(See "Recent Developments- Capital Structure Review"),  Moody's, S & P and Fitch
downgraded  their  ratings on our credit  facility and  outstanding  securities.
These ratings as of November 10, 1999 were as follows:

                              Senior                   Senior
                            Unsecured               Subordinated
                               Debt                Unsecured Debt
                         -----------------      ---------------------
S & P                           BB                       B+
Moody's                        Ba3                       B2
Fitch                           BB                       B+

    The indentures  governing the Senior Subordinated  Discount Notes and Senior
Subordinated  Notes  contain  certain  restrictions  on the  transfer of Company
funds, including dividends, loans and advances made by the Company. Refer to the
Company's 1998 Form 10-K/A for additional information on these notes.

    As a result of the Company's  failure to complete an exchange  offer for the
outstanding senior subordinated notes issued in December 1998, the interest rate
on the notes increased to 8 5/8% per annum in June 1999.

    Material  Commitments.  Under the Company's  agreements  with  dealers,  the
Company may be required to purchase  customer  accounts on an ongoing basis. The
Company is currently  spending  approximately  $15 million per month to purchase
these customer accounts.

    Capital  Expenditures.  We anticipate making capital expenditures in 1999 of
approximately  $35 million,  including $20.0 million to complete the development
and  installation  of our new  software  platforms,  $5.0  million for  computer
hardware to replace and upgrade existing  operations and $10.0 million for other
capital items.  These are estimates,  but actual  expenditures in 1999 for these
and  possibly  other items not  presently  anticipated  are not expected to vary
materially from these estimates.

    Tax Matters. Protection One is consolidated into income tax returns filed by
its parent,  Western Resources.  The two parties have entered into a tax sharing
agreement  whereby  Western  Resources will make cash payments to us for current
tax benefits utilized for income tax return purposes and which will require cash
payments  from us for  current  tax  expenses  incurred  for  income  tax return
purposes.  This  arrangement has allowed us to provide a current tax benefit for
the year ended December 31, 1998, as well as for the nine months ended September
30, 1999.

    In the future,  if and when we generate income for tax return  purposes,  we
will proportionately over time utilize existing net operating loss carryforwards
in amounts up to approximately $60 million.  Currently,  the deferred tax assets
related  to the net  operating  loss  carryforwards  are fully  reserved  due to
uncertainty as to their future  realizability.  However, when net operating loss
carryforwards  are utilized,  the relief of the  corresponding  reserve will not
create a benefit, but, as required by generally accepted accounting  principles,
will reduce our goodwill  balances.  The net financial  statement effect of this
treatment will cause us to recognize deferred tax expense we might otherwise not
recognize.

Year 2000 Issue

    An issue  exists for all  companies  that rely on computers as the year 2000
approaches.  The "Year 2000"  problem is the result of the past  practice in the
computer  industry  of  using  two  digits  rather  than  four to  identify  the
applicable year. This practice could result in incorrect  results when computers
perform  arithmetic  operations,  comparisons,  or data field sorting  involving
years later than 1999.

      We have  reviewed our computer  programs,  computer  hardware and embedded
systems identified as critical to our businesses and operational needs to assess
and to correct  any  components  that could be affected by the change of date to
January 1, 2000,  as well as other  dates in 2000.  In  addition,  we engaged an
outside consulting firm with an international reputation in Year 2000 compliance
to  conduct  an  independent  validation  and  verification  (IV&V)  of our  Y2K
readiness programs.

    We have completed the review and assessment of our systems, although changes
in the  state of  compliance  or  preparedness  within  companies  that  provide
services or equipment to us will require us to continue our evaluations of these
third-party vendors as the need arises or as prudence dictates, until January 1,
2000 or later if need be.

     A number of our accounts are monitored by other firms on  Protection  One's
behalf.  In  the  Protection  One  North  America  monitoring  division,  we are
assimilating these accounts into our own facilities, but will not have completed
this effort prior to January 1, 2000. We therefore  evaluated these  third-party
monitoring  (TPM)  firms and their  facilities  for Y2K  readiness  and used the
results of this evaluation as inputs to our account-assimilation  priorities. In
the European division, TPMs will be continued in operation in Germany,  Belgium,
Netherlands and Switzerland until superceded by Protection One-owned facilities.
Evaluation  of  these  third-party  monitoring  firms  (one for each of the four
countries) will be completed prior to the end of November 1999. U.K. accounts
have been consolidated into the Protection One U.K. monitoring
facility in London,  with the  exception of one  remaining  TPM. This TPM is now
being evaluated for Y2K compliance.  Network  Multifamily does not use TPMs. The
total number of TPM accounts is less than 7% of all accounts as of September 30,
1999, and is expected to be less than 4% at year-end 1999.

     Our Year 2000 policy  requires  testing as a method for  verifying the Year
2000 readiness of  business-critical  items. For those items that are impossible
to test,  other methods may be used to identify the readiness  status,  provided
adequate contingency plans are established to provide a workaround or backup for
the item.  Development  of  contingency  plans  commenced  in  January  1999 and
concluded in October 1999.  Testing and  refinement of  contingency  plans,  and
mobilization  for  "Millennium  Day",  commenced  in the third  quarter and will
conclude in the fourth quarter of 1999. Protection One North America's equipment
testing is scheduled to be completed by December 20, 1999.

    We have largely completed the remediation and readiness  verification  phase
of our  plans  with  respect  to our  Protection  One North  America  monitoring
operations   where  problems  that  were  identified  are  being  corrected  and
re-tested.  Our  highest  priority  has  been to  ensure  the  Y2K-readiness  of
Protection  One's  call  centers   responsible  for  alarm  monitoring  and  for
responding to customer  telephone  calls.  At this time we believe that our call
centers  will  continue  to be able to receive  and act upon alarm  signals  and
in-person  telephone  calls,  so  long as  infrastructure  elements  over  which
Protection  One has no  control  (such  as  electrical  power,  telephones,  and
governmental  services) are not disrupted or overwhelmed by consumer demand. The
majority of our current efforts are now  concentrated  in contingency  planning,
and concluding our Year 2000 readiness verification testing.

    In the  Protection  One North America  Monitoring  division,  remediation of
known  non-compliant  computer-based  systems has been completed  except for one
billing system  serving some 50,000  accounts.  Remediation  and testing of this
system is scheduled to be  completed  by the end of  November.  Remediation  and
testing  of  systems  at  Network  Multifamily  is  complete.  In Europe and UK,
remediation  of  in-house  systems  will  conclude  in  November  1999.  In  all
divisions,   readiness   verification  (testing  of  business-critical   systems
previously  assessed as Y2K-compliant) is proceeding in priority order, and will
continue  throughout the calendar year, as a double-check.  A substantial amount
of readiness  verification  has already been  completed on Protection  One North
America Monitoring major systems, with only non-critical errors found.

    We have  estimated the total cost to update all critical  operating  systems
for Year 2000 readiness to be less than $5.0 million.  As of September 30, 1999,
approximately $3.5 million of these costs had been incurred. These costs include
labor for both company  employees and contract  personnel  used in the Year 2000
program and  non-labor  costs for  software  tools used in the  remediation  and
testing  efforts,  replacement  software,   replacement  hardware,   replacement
embedded devices,  and other such costs associated with testing and replacement.
Management continues to review the projected costs associated with the Year 2000
readiness.  To date,  the costs of the Year  2000  readiness  program  have been
substantially information-technology related. Non-information technology systems
are highly  critical  to our  business,  but are  largely  beyond our ability to
control.  This includes  telephones,  electricity,  water,  transportation,  and
governmental infrastructure.

    The costs of the Year 2000 project and the date on which we plan to complete
the Year 2000  modification,  estimated to be during 1999, are based on the best
estimates,  which were derived utilizing  numerous  assumptions of future events
including  the  continued   availability  of  certain  resources,   third  party
modification plans, and other factors.  However,  there can be no guarantee that
these  estimates will be achieved;  actual results could differ  materially from
those  plans.  Specific  factors  that  might  cause such  material  differences
include,  but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.

    The table below  summarizes  the status of the  components  of the Year 2000
Readiness Program as of September 30, 1999.




                                             North American           Network Multi-Family        Protection One Europe
Phase:                                         Monitoring
                                         ------------------------    ------------------------    ------------------------
                                                                                         
Identification and assessment                   Completed                   Completed                     Completed

Remediation and unit testing                  95% Complete                  Completed                 90% Complete
Comprehensive      Y2K     readiness
verification:
Guidelines and tools                            Completed                   Completed                   Completed
Testing                                       70% Complete                     Completed              85% Complete
Contingency planning:
Guidelines and tools                            Completed                   Completed                   Completed
Plan development                                Completed                   Completed                 90% Complete
Contingency    plan    testing   and
resourcing:
Guidelines and tools                            Completed                   Completed                   Completed
Testing and resourcing                    In progress Sept-Nov        In progress Sept-Nov        In progress Sept-Nov
                                                  1999                        1999                        1999
Mobilization, alert, and standby           In progress Nov-Dec         In progress Nov-Dec         In progress Nov-Dec
                                                  1999                        1999                        1999



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company has not experienced  any significant  changes in its exposure to
market risk since December 31, 1998. For additional information on the Company's
market risk, see the Form 10-K/A dated December 31, 1998.







                                     PART II

                                OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS.

    The  Company,   its  subsidiary   Protection  One  Alarm  Monitoring,   Inc.
("Monitoring"),  and  certain  present  and former  officers  and  directors  of
Protection One are defendants in a purported class action litigation  pending in
the United States District Court for the Central  District of California,  David
Lyons v.  Protection  One, Inc., et al., No CV 99-3755 DT (RCx).  Pursuant to an
Order dated  August 2, 1999 which  consolidated  four  pending  purported  class
actions,  the  plaintiffs  filed a  single  Consolidated  Amended  Class  Action
Complaint  ("Amended  Complaint")  on October 15,  1999.  The Amended  Complaint
asserts  claims under Section 11 of the Securities Act of 1933 and Section 10(b)
of the Securities Exchange Act of 1934 against Protection One,  Monitoring,  and
certain  present and former  officers and directors of  Protection  One based on
allegations  that  various  statements  concerning  Protection  One's  financial
results and  operations  for 1997 and 1998 were false and  misleading and not in
compliance with generally  accepted  accounting  principles.  Plaintiffs allege,
among other  things,  that former  employees  of  Protection  One,  including an
unnamed former executive  officer and an unnamed former staff  accountant,  have
reported that Protection One lacked adequate  internal  accounting  controls and
that certain accounting information was unsupported or manipulated by management
in order to avoid  disclosure  of accurate  information.  The Amended  Complaint
further  asserts  claims  against  Western   Resources  and  Westar  Capital  as
controlling  persons under  Sections 11 and 15 of the Securities Act of 1933 and
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. A claim is also
asserted under Section 11 of the Securities Act of 1933 against Protection One's
auditor Arthur Andersen LLP. The Amended  Complaint seeks an unspecified  amount
of compensatory damages and an award of fees and expenses,  including attorneys'
fees.  The time for the  defendants to respond to the Amended  Complaint has not
yet expired.  The Company  believes that all the claims  asserted in the Amended
Complaint are without merit and intends to defend  against them  vigorously.  We
cannot currently predict the impact of this litigation which could be material.

    Six  Protection  One dealers have filed a class action  lawsuit in the U. S.
District Court for the Western District of Kentucky  alleging breach of contract
because of the Company's interpretation of their dealer contracts. The action is
styled  Total  Security  Solutions,   Inc.,  et  al.  v.  Protection  One  Alarm
Monitoring,  Inc.,  Civil  Action  No.  3:99CV-326-H  (filed May 21,  1999).  On
September  10,  1999,  the Court  granted  Protection  One's  motion to stay the
proceeding pending the individual plaintiff's pursuit of arbitration as required
by the terms of their agreements. As of November 10, 1999, none of these dealers
have  commenced  arbitration.  Other  Protection  One  dealers  have  threatened
litigation or arbitration based upon similar claims. The Company believes it has
complied with the terms of these contracts and intends to vigorously  defend its
position. The Company cannot currently predict the impact of these disputes with
dealers which could be material.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS.

    None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.

    None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.

    None.

ITEM 5.   OTHER INFORMATION.

    None.





ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

    (a) Exhibits.  The following  exhibits are filed with this Current Report on
Form 10-Q or incorporated by reference.

Exhibit
Number                     Exhibit Description

10.1              Waiver letter dated as of September 30, 1999 among  Protection
                  One  Alarm  Monitoring,   Inc.,  Bank  of  America,  N.A.,  as
                  Administrative   Agent,   and  the  Syndication   Agent,   the
                  Documentation  Agent  and  the  Lenders  named  in the  Credit
                  Agreement  dated as of  December  21,  1998 to which  all such
                  persons are a party.

10.2              Waiver  letter  dated as of October 29, 1999 among  Protection
                  One  Alarm  Monitoring,   Inc.,  Bank  of  America,  N.A.,  as
                  Administrative   Agent,   and  the  Syndication   Agent,   the
                  Documentation  Agent  and  the  Lenders  named  in the  Credit
                  Agreement  dated as of  December  21,  1998 to which  all such
                  persons are a party.

10.3              Service Agreement dated as of April 1, 1999 between Western
                  Resources,  Inc. and Protection One, Inc. and Exhibits 3 and 4
                  thereto dated October 14, 1999.

10.4              Letter of Intent dated September 16, 1999 between Paradigm
                  Direct LLC and Protection One Alarm Monitoring, Inc.

18.1              Letter of Arthur Andersen LLP regarding Change in Accounting
                  Principle

27.1              Financial Data Schedule

- ---------

(b) During the quarter ended  September 30, 1999,  the Company filed six Reports
on Form 8-K.  A Current  Report on Form 8-K dated  July 2,  1999,  reported  the
proposed sale of the Company's  Mobile  Services Group. A Current Report on Form
8-K dated August 12, 1999, reported second quarter earnings. A Current Report on
Form 8-K/A dated August 13, 1999, reported a correction in the Form 8-K filed on
August 12,  1999. A current  report on Form 8-K dated August 26, 1999,  reported
the sale of the Company's Mobile Services Group to ATX  Technologies.  A current
report on Form 8-K dated  September  3, 1999,  reported the  termination  of the
proposed merger with Lifeline  Systems,  Inc. A current report on Form 8-K dated
September  29,  1999,  reported  the  proposed  sale of the  Company's  Canadian
operations.







                                   SIGNATURES

    Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, the
Registrants  have duly caused  this  report to be signed on their  behalf by the
undersigned thereunto duly authorized.

Date: November 12, 1999                  PROTECTION ONE, INC.
    --------------------
                                         PROTECTION ONE ALARM MONITORING, INC.

                                         By:       /s/     Anthony D. Somma
                                                           Anthony D. Somma
                                                        Chief Financial Officer











                                  Exhibit List

Exhibit
Number                     Exhibit Description

10.1              Waiver letter dated as of September 30, 1999 among  Protection
                  One  Alarm  Monitoring,   Inc.,  Bank  of  America,  N.A.,  as
                  Administrative   Agent,   and  the  Syndication   Agent,   the
                  Documentation  Agent  and  the  Lenders  named  in the  Credit
                  Agreement  dated as of  December  21,  1998 to which  all such
                  persons are a party.

10.2              Waiver  letter  dated as of October 29, 1999 among  Protection
                  One  Alarm  Monitoring,   Inc.,  Bank  of  America,  N.A.,  as
                  Administrative   Agent,   and  the  Syndication   Agent,   the
                  Documentation  Agent  and  the  Lenders  named  in the  Credit
                  Agreement  dated as of  December  21,  1998 to which  all such
                  persons are a party.

10.3              Service Agreement dated as of April 1, 1999 between  Western
                  Resources,  Inc. and Protection One, Inc. and Exhibits 3 and 4
                  thereto dated October 14, 1999.

10.4              Letter of Intent dated September 16, 1999 between Paradigm
                  Direct LLC and Protection One Alarm Monitoring, Inc.

18.1              Letter of Arthur Andersen LLP regarding Change in Accounting
                  Principle

27.1              Financial Data Schedule