Ratings on Protection One Alarm Monitoring Inc. reflect a highly leveraged financial profile and near-term operational challenges. These factors are only partially offset by the stability and predictability associated with the security alarm monitoring business and with a recurring revenue stream that comprises more than 80% of sales. Culver City, Calif.-based Protection One is the second-largest security alarm company in the U.S., providing monitoring and related security services. Operating performance deteriorated considerably in 2000 as new management struggled to stem rising customer attrition rates and higher operating costs while revamping its customer acquisition strategy. Consequently, the subscriber base declined and growth and profitability have slowed. Operating margins are likely to remain pressured as management focuses on improving service levels and
