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EXHIBIT 99.1
Protection One, Inc. (NYSE:POI) announced today that as a result of
discussions with the staff of the Securities and Exchange Commission (SEC), the
company will restate its 1997 operating results and its results for the first
three quarters of 1998. These discussions were related to the registration
statement filed by Protection One in connection with the proposed acquisition of
Lifeline Systems, Inc. (Nasdaq:LIFE).
The company expects the release of additional and more definitive
information in its Form 10-K for 1998. As a result of this restatement, the
company has filed for a 15-day extension from the SEC of the filing of its 1998
10-K, to April 15, 1999.
The largest adjustment results from a change in accounting treatment
for the replacement of residential yard signs which will require Protection One
to reverse an approximate $12.3 million acquisition-related expense recorded in
1997 and expense this amount in 1998. With the decision to exit the Westar trade
name and utilize the Protection One brand name on a nationwide basis, the former
Westar yard signs became obsolete. Protection One considered these charges to be
exit costs and accrued the estimated costs of removing and replacing the
obsolete signage in the fourth quarter of 1997. The impact of this change is to
increase 1997 net income by approximately $7.4 million and to reduce 1998 net
income by the same amount.
Protection One also will restate 1997 and 1998 net income to expense
the costs of yard signs for accounts acquired in acquisitions which have been
capitalized. The impact of this adjustment will reduce 1997 net income by
approximately $0.5 million and 1998 net income by approximately $2.5 million.
Protection One management also determined a need to increase its 1998 expense
provision for uncollectible accounts, which will reduce net income by
approximately $3.6 million. In addition, Protection One will increase 1998 net
income by approximately $0.5 million to reflect adjustments to purchase price
allocations recorded in connection with its business acquisitions.
The overall effect of these adjustments increases 1997 net income by
approximately $6.9 million, or $0.10 per share, and decreases 1998 net income by
approximately $13 million, or $0.12 per share.
The SEC staff is also reviewing Protection One's amortization
methodology use on customer accounts and the timing of non-recurring gains
relating to the settlement of certain financial obligations. The company is
working with the SEC staff to resolve these open issues.
Protection One currently amortizes customer acquisition costs on a
straight line method over a 10-year period. The SEC staff has questioned the
appropriateness of the current accounting method. Protection One believes its
amortization method is consistent with industry practices, but will work with
the SEC to complete their review. A significant change in the amortization
method would likely have a material effect on the
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company's results of operations. Protection One expects to resolve this matter
prior to filing its first quarter results in 1999.
Until the 1998 10-K is filed, Protection One's financial statements and
the auditors' report for the year ended 1997 and the unaudited financial
statements for the first three quarters of 1998 should not be relied upon as
they do not reflect the adjustments discussed above.
PROTECTION ONE, ONE OF THE LEADING RESIDENTIAL SECURITY ALARM COMPANIES
IN THE UNITED STATES, PROVIDES MONITORING AND RELATED SECURITY SERVICES TO MORE
THAN 1.5 MILLION RESIDENTIAL AND COMMERCIAL SUBSCRIBERS IN NORTH AMERICA AND
EUROPE.
FOR MORE INFORMATION ABOUT PROTECTION ONE AND ITS OPERATING COMPANIES,
VISIT US ON THE INTERNET AT http://www.protectionone.com.
Statements contained in this press release concerning statements of
management's beliefs, goals and expectations are "forward-looking statements" as
that term is defined in the Private Securities Litigation Reform Act of 1995,
and are subject to risks and uncertainties that could cause actual results to
differ materially from those expressed in or implied by the statements. The
information in this release regarding the company's estimates of the amounts of
restatement constitutes forward-looking statements within the meaning of the
Private Securities Litigation Reform Acts of 1995, and is subject to the safe
harbor protections of that Act. These estimated amounts of restatements are
subject to completion and audit of the restated financial statements, as well as
to additional review by the SEC staff. Other risks and uncertainties are
described in Protection One's preliminary information statement filed with the
Securities and Exchange Commission on February 12, 1999. Protection One
disclaims any obligation to update any forward-looking statements as a result of
developments occurring after the date of this press release.
PROTECTION ONE
SUMMARY OF ESTIMATED RESTATABLE ADJUSTMENTS
1997 ADJUSTMENTS:
Replace residential yard signs $ 7.4
Yard signs for acquired accounts (0.5)
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Estimated Increase in Net Income $ 6.9
1998 ADJUSTMENTS:
Replace residential yard signs $ (7.4)
Yard signs for acquired accounts (2.5)
Bad debt expense (3.6)
Purchase price allocations .5
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Estimated Decrease in Net Income $ (13.0)
NOTE - All amounts in millions and presented net of tax.