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and Transactions.” SFAS No. 145 prohibits
treating gains and losses associated with extinguishments resulting
from a company’s risk management strategy as extraordinary. Under
SFAS No. 145, current gains and losses from the extinguishment of
debt are reported as other income. Gains or losses in prior periods
that were previously classified as extraordinary that do not meet
the APB Opinion No. 30 criteria have been reclassified to other
income. The adoption of this standard did not impact our net income
or financial condition.
27. DISCONTINUED OPERATIONS
During the second quarter of 2002, Protection
One entered into negotiations for the sale of its Canadian business,
which was included in our monitored services segment. The sale was
consummated on July 9, 2002. Protection One recorded an impairment
loss of approximately $1.3 million, net of $0.7 million tax benefit,
in the second quarter of 2002 as a result of the sale.
The net operating losses of these operations
are included in the consolidated statements of income under discontinued
operations. The net operating loss for the year ended December 31,
2002, of $1.6 million, includes an impairment loss on customer accounts
of approximately $1.9 million. An impairment charge of $2.3 million
relating to the Canadian operations’ goodwill is reflected in the
consolidated statement of income for the year ended December 31,
2002, as a cumulative effect of accounting change from discontinued
operations. Revenues from these operations were $4.2 million for
the year ended December 31, 2002, compared to $8.2 million for the
year ended December 31, 2001.
Protection One sold all assets and liabilities
of the Canadian operations. The major classes of assets and liabilities
of the Canadian operations at December 31, 2001 were as follows:
28. RELATED PARTY TRANSACTIONS
Below, we describe significant transactions
between us and Westar Industries and some of our other subsidiaries
and related parties. We have disclosed these significant transactions
even if they have been eliminated in the preparation of our consolidated
results and financial position.
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ONEOK
Shared Services Agreement
We and ONEOK have shared services agreements
in which we provide and bill one another for facilities, utility
field work, information technology, customer support, meter reading
and bill processing. Payments for these services are based on various
hourly charges, negotiated fees and out-of-pocket expenses.
 ONEOK gave us notice of termination effective
December 2003 of this shared services agreement. We expect termination
of this agreement will increase our annual costs to provide these
services by approximately $11 million to $13 million.
Protection
One Shared Services Agreement
We provide administrative services to
Protection One pursuant to services agreements, including accounting,
tax, audit, human resources, legal, purchasing, facilities and technology
services. Fees for these services are based upon various hourly
charges, negotiated fees and out-of-pocket expenses. Protection
One incurred charges of $3.9 million in 2002, $8.1 million in 2001
and $7.3 million in 2000. These intercompany charges have been eliminated
in consolidation
Westar Energy and Protection One have
entered into an amended service agreement that stipulates that if
Westar Energy sells its interest in Protection One, Westar Energy
and Protection One will negotiate, in good-faith, the terms and
conditions for continuation of the services during an agreed-upon
transition period. This agreement is subject to KCC approval, which
has not yet been received.
Transactions
Between Westar Industries and Subsidiaries
Protection
One Credit Facility
Westar Industries is the lender under
Protection One’s senior credit facility. The senior credit facility
was amended to increase the capacity from $155 million to $280 million
during the year ended December 31, 2002. On August 26, 2002, the
senior credit facility was further amended to extend the maturity
date to January 5, 2004. On March 11, 2003, the KCC limited the
amount of the credit facility to $228.4 million, authorized us to
fund the facility and extend the term of the facility to January
5, 2005 and required the facility to be paid in full and terminated
upon the disposition of all or part of our investment in Protection
One. We are in discussions with Protection One about the extension
of the facility and we intend to renew the facility through January
5, 2005, should such renewal be necessary to provide Protection
One with continued liquidity. For further information, see Note
34.
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