Securities and Exchange Commission Inquiry On November 1, 2002, the SEC notified us that it would be conducting an inquiry into the matters involved in the restatement of our first and second quarter 2002 financial statements. Our counsel has communicated with the SEC about these matters and other matters within the scope of the grand jury investigation. We are unable to predict the ultimate outcome of the inquiry or its impact on us.      Special Committee Investigation Our board of directors appointed a Special Committee of directors to investigate management matters and matters that are the subject of the grand jury investigation and SEC inquiry. The Special Committee retained counsel and other advisors. The Special Committee investigation has been completed and has not resulted in adjustments to our consolidated financial statements.      FERC Subpoena On December 16, 2002, we received a subpoena from FERC seeking details on power trades with Cleco Corporation (Cleco) and its affiliates, documents concerning power transactions between our system and our marketing operations and information on power trades in which we or other trading companies acted as intermediaries. We have provided information to FERC in response to the subpoena. We believe that our participation in these transactions did not violate FERC rules and regulations. However, we are unable to predict the ultimate outcome of the investigation. See Note 19 of the Notes to Consolidated Financial Statements, “Ongoing Investigations — FERC Subpoena,” for additional information. Call Option In August 1998, we entered into a call option with an investment bank related to the issuance of $400 million of our putable/callable notes. This call option is required to be settled by August 2003 through either a cash payment or a remarketing or refinancing of the putable/callable notes. The ultimate value of the call option will be based on the difference between the 10-year United States treasury rate on August 12, 2003 and 5.44%. If the 10-year United States treasury rate on August 12, 2003 is less than 5.44%, we will have liability to the investment bank at that time. At December 31, 2002, our potential liability under the call option was $62.2 million. Based on the 10-year forward treasury rate on March 14, 2003 of 3.91%, we would be obligated to make a cash payment of approximately $69.1 million to settle the call option if we did not remarket or refinance the notes. The amount of our liability will increase or decrease approximately $5 million for every 10-basis point change in the 10-year forward treasury rate. If settled through a remarketing or refinancing, any liability related to the call option will be amortized as a credit to interest expense over the term of the new debt. The investment bank will price the notes to yield a market premium adequate to allow the investment bank to retain proceeds equal to the fair value of the call option at settlement. At the time of issuance of the notes in 1998, we were not required by generally accepted accounting principles (GAAP) to account separately for the call option. However, when we began retiring these notes as a part of our overall debt reduction strategy, the portion of the call option associated		with the retired notes became a freestanding option required to be treated as a derivative instrument under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS Nos. 137 and 138 (collectively, SFAS No. 133). In addition, under SFAS No. 133, we are required to mark to market changes in the anticipated amount of the liability related to the portion of the $400 million in notes that have been retired so that our balance sheet reflects the current fair value of the free standing portion of the call option. For 2002, we recognized a loss of $10.1 million, net of $6.7 million tax benefit, related to the fair value of the call option associated with the putable/callable notes at the time the notes were retired. This loss is included in our consolidated statements of income as part of the gain on extinguishment of debt line item of other income. For 2002, we also recorded an additional non-cash charge of $13.6 million, net of $9.0 million tax benefit, to reflect mark to market changes in the fair value of the call option associated with the retired notes. This charge is reflected in the other line item of other income in our consolidated statements of income. In total, the loss recorded related to the fair value of the call option for the year ended December 31, 2002 was $23.7 million, net of $15.7 million tax benefit. We intend to repurchase or provide for the repayment of the putable/callable notes on or prior to June 15, 2003. Any repurchase of these notes will require us to mark to market additional amounts of the call option. From January 1, 2003 through March 14, 2003, we purchased $35.3 million face value of our putable/callable notes. We cannot predict changes in the market value of the call option and therefore cannot estimate amounts of future mark-to-market non-cash charges associated with the call option or the impact on our earnings. Impairment Charges Effective January 1, 2002, we adopted SFAS No. 142, “Accounting for Goodwill and Other Intangible Assets,” and SFAS No. 144, “Accounting for the Impairment and Disposal of Long-Lived Assets.” As a result of implementing the new standards, we recorded a charge for the first quarter of 2002 of approximately $749.3 million (net of tax benefit and minority interests), of which $555.4 million was related to goodwill and $193.9 million was related to customer accounts. In addition, in the fourth quarter of 2002 we recorded a $79.7 million impairment charge, net of tax benefit and minority interests, to reflect the additional impairment of all remaining goodwill of Protection One’s North America segment. We also recorded a $36 million impairment charge to reflect the impairment of all remaining goodwill at Protection One Europe. These accounting standards, the related charges and other related information are discussed in Note 23 of the Notes to Consolidated Financial Statements, “Impairment Charges.” Work Force Reductions During 2002, we reduced our utility work force by approximately 400 employees through a voluntary separation program. We recorded a net charge of approximately $21.7 million in 2002 related to this program. We have replaced and may continue to replace some of these employees. For additional information, see Note 29 of the Notes to Consolidated Financial Statements, “Work Force Reductions.”