Sitting pretty in Kansas: Pro One gets $22.75m windfall
LAWRENCE, Kan.--The new year is starting off happy here for Protection One, which today announced it received a $22.75 million payment from Westar, its former majority owner.
"It's a significant amount of money," said Richard Ginsburg, CEO of Protection One. "In an era when companies are struggling, we've paid down our debt a lot, $74 million throughout the year, so we're entering 2010 with $20 million cash on hand."
The $22.75 million is a post-closing adjustment from an acquisition, which took place six years ago. In 2004, Westar, a Kansas utility company, sold its majority interest in Protection One to Quadrangle, a private equity firm. At that time, Westar agreed that if it received any additional tax benefits for losses incurred from the sale of Protection One, it would split the proceeds with Protection One, Ginsburg explained.
Due to new IRS rules, Westar was able in 2009 to re-characterize some of the loss as an operating loss rather than a capital loss.
"Voila, Protection One is allowed to share in the [proceeds]," Ginsburg said.
"It puts the company in good position, where the balance sheet is much stronger," Ginsburg said. Last month, Protection One announced more auspicious news that it had extended its credit facility by $75 million and was in acquisition mode.
Ginsburg said the payment will come in handy this year as Protection One works on its "number one priority, expanding our commercial business." In addition to acquisitions, Protection One is "continuing to invest in technology and training."
In the past year, Protection One established "Protection One University," a new internal training program. "We've expanded the number of trainers from one to eight over the past year and we have a set schedule for training [for sales and technical employees]," Ginsburg said.
The training is for employees who work on the commercial and residential side. Protection One has 400,000 residential customers and 100,000 commercial customers.