<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----
ACT OF 1934
For the quarterly period ended May 31, 1996
----------------------------------
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----
ACT OF 1934
For the transition period from to
--------------------- --------------------
Commission File Number 2-74238-B
---------
LOJACK CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2664794
- --------------------------------------------------------------------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
333 Elm Street Dedham, Massachusetts 02026
- --------------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
617-326-4700
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
There were 21,621,791 shares issued and outstanding of $.01 par value, common
stock, as of July 11, l996.
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets,
May 31, 1996 and February 29,
1996.................................................1
Consolidated Statements of Operations:
Three Months Ended May 31, 1996 and 1995............2
Consolidated Statements of Cash Flows:
Three Months Ended May 31, 1996 and 1995............3
Notes to Consolidated Financial
Statements..........................................5
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition...............6
Part II. Other Information...................................10
Item 6. Exhibits and Reports on Form 8-K
Signatures..........................................11
Exhibit 11..........................................12
Exhibit 27..........................................14
</TABLE>
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
May 31, February 29,
1996 1996
----------- --------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents............................... $33,323,091 $31,630,663
Accounts receivable-net............................ 7,104,685 5,873,918
Inventories........................................ 3,045,689 2,780,416
Prepaid expenses and other assets.................. 79,587 83,544
---------- ----------
Total current assets........................... 43,553,052 40,368,541
PROPERTY AND EQUIPMENT - NET.......................... 7,643,277 7,652,703
DEFERRED TAX ASSET 3,603,173 4,703,173
OTHER ASSETS-NET...................................... 351,516 355,020
---------- ----------
Total.......................................... $55,151,018 $53,079,437
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Current portion of capital
obligations ..................................... $ 672,537 $ 670,925
Accounts payable................................... 2,884,826 2,562,922
Accrued and other liabilities...................... 666,233 996,165
Deposits in escrow................................. 1,110,054 1,087,741
Current portion of deferred revenue................ 749,120 695,794
Accrued compensation............................... 476,829 672,938
Accrued taxes...................................... 395,634 364,500
--------- ---------
Total Current Liabilities....................... 6,955,233 7,050,985
--------- ---------
DEFERRED REVENUE...................................... 1,804,669 1,656,766
--------- ---------
LONG TERM DEBT:
Capital lease obligations.......................... 628,856 644,218
--------- --------
Total long-term debt.......................... 628,856 644,218
--------- --------
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; authorized,
35,000,000 shares; issued, 21,944,291
and 21,876,666 shares at May 31, 1996
and February 29, 1996, respectively............... 219,443 218,767
Additional paid-in capital......................... 57,163,965 56,872,389
Deficit............................................ (10,579,898) (12,516,188)
Treasury stock, at cost, 110,000 and
90,000 shares of common stock at May 31,
1996 and February 29, 1996, respectively........... ( 1,041,250) ( 847,500)
----------- -----------
Total stockholders' equity......................... 45,762,260 43,727,468
---------- ----------
Total......................................... $55,151,018 $53,079,437
========== ==========
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 31, May 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues......................................$15,005,326 $11,832,738
Cost of Goods Sold............................ 6,932,418 5,633,024
---------- ---------
Gross Margin.................................. 8,072,908 6,199,714
---------- ---------
Costs and Expenses:
System costs and research and
development............................... 347,173 324,343
Sales and marketing........................ 3,174,947 2,652,745
General and administrative................. 1,409,031 1,274,753
Depreciation and amortization.............. 356,091 472,987
--------- ---------
Total................................... 5,287,242 4,724,828
--------- ---------
Operating Income ............................. 2,785,666 1,474,886
--------- ---------
Other Income (Expense):
Interest Income............................... 423,166 338,525
Interest Expense ............................. ( 34,542) (32,626)
-------- ------
Total......................................... 388,624 305,899
-------- -------
Income before Provision
for Income Taxes............................ 3,174,290 1,780,785
Provision for Income Taxes.................... 1,238,000 160,000
--------- -------
Net Income ................................... $1,936,290 $1,620,785
========= =========
Earnings per Share:
Net income.................................. $0.08 $0.07
===== =====
Common shares and equivalents................. 23,287,059 22,880,828
========== ==========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 31, May 31,
1996 1995
------ ------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................... $ 1,936,290 $ 1,620,785
---------- ----------
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Deferred tax asset ...................... $ 1,100,000
Depreciation and amortization............ 560,554 666,557
Increase (decrease) in cash from
changes in assets and liabilities:
Accounts receivable-net............ (1,230,767) (642,716)
Inventories........................ (265,273) 499,122
Prepaid expenses and other assets.. 3,957 (12,373)
Other assets....................... (8,508) 849
Accounts payable................... 321,904 464,665
Accrued and other
liabilities...................... (271,365) 3,395
------- -------
Total adjustments................... 210,502 979,499
------- -------
Net cash provided by
operating activities............ $ 2,146,792 $ 2,600,284
---------- ---------
</TABLE>
-3-
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 31, May 31,
1996 1995
-------- ------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and
equipment - net........................ $( 290,499) $( 433,817)
--------- ---------
Net cash used for investing
activities....................... ( 290,499) ( 433,817)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock................ 292,252 232,401
Repayment of debt....................... (262,367) (113,971)
Repurchase of common stock.............. (193,750)
------- -------
Net cash provided by (used for)
financing activities............. (163,865) 118,430
------- -------
INCREASE IN CASH AND
EQUIVALENTS.............................. 1,692,428 2,284,897
BEGINNING CASH AND EQUIVALENTS............ 31,630,663 21,665,908
---------- ----------
ENDING CASH AND EQUIVALENTS............... $ 33,323,091 $23,950,805
========== ==========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements and notes do not include
all of the disclosures made in the Company's Annual Report to Stockholders,
which should be read in conjunction with these statements. Certain fiscal
1996 amounts have been reclassified to conform with the fiscal 1997
presentation. In the opinion of the Company, the statements include all
adjustments necessary for a fair presentation of the quarterly results and
any and all such adjustments were of a normal recurring nature.
2. The results of operations for the three months ended May 31, 1996 and 1995
are not necessarily indicative of the results to be expected for the full
year.
3. Supplemental cash flow information:
Cash paid for interest for the three months ended May 31, 1996 and 1995
was $34,542 and $35,126, respectively. Cash paid for income taxes for
the three months ended May 31, 1996 and 1995 were $232,7l3 and $49,000,
respectively.
4. Earnings per share
Earnings per share has been computed by dividing net earnings, by the
weighted average number of common shares and equivalents outstanding.
Common share equivalents included in the computation represent shares
issuable upon assumed exercise of stock options which would have a dilutive
effect.
Fully diluted and primary earnings per share were the same for the three
months ended May 31, 1996 and 1995.
-5-
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operation
Results of Operations
Year Ended May 31, 1996 ("fiscal 1997")
vs. May 31, 1995 ("fiscal 1996")
Revenues increased by $3,173,000, or 27%, to $15,005,000 for the three months
ended May 31, 1996 from $11,833,000 for the same period a year earlier. Revenues
from domestic markets contributed $2,273,000 of the increase and international
revenues contributed $900,000. The increase in domestic revenues was primarily
due to increased revenues from sales of LoJack Units and related components in
domestic markets. The increase in international revenues resulted primarily
from an increase in revenues from sales and royalties of the international
version of the LoJack Unit to both new and existing licensees.
Cost of goods sold decreased to 46% of consolidated revenues for the quarter
ending May 31, 1996 from 48% in the same period a year earlier. Domestically
cost of goods sold decreased as a percentage of revenues to 45% for the three
months ending May 31, 1996 from 49% for the prior year. This decrease is
primarily the result of a decrease in the manufactured cost of the LoJack Unit
during the year and installation efficiencies resulting from economies of scale.
International cost of goods sold increased to 57% of revenues in the first
quarter of fiscal 1997 from 24% in the same period of fiscal 1996 primarily as
the result of revenues being weighted towards lower margin product sales rather
than license fees.
Research and development and systems maintenance expenses increased by $23,000
to $347,000 for the three months ended May 31, 1996 from $324,000 for the same
period a year earlier as the result of a decrease in research and development
expense of $53,000 related to modifications to the LoJack Unit and Police
Tracking Computers in fiscal 1996, and an increase of $76,000 in systems
maintenance and operating costs as a result of increased system operating costs
and maintenance costs including maintenance engineering salaries related to
updating and repairing existing LoJack Systems.
Marketing expenses increased by $522,000 to $3,175,000 in the three months ended
May 31, 1996 from $2,653,000 in the same period a year earlier primarily as the
result of increases in marketing wages and benefits of $117,000 and increases in
general marketing expense, including advertising costs, of $405,000 which were
related to the fiscal 1996 expansion markets and an increase in marketing
spending related to the increase in overall business volume during the year in
existing domestic markets.
-6-
<PAGE>
General and administrative expenses increased by $134,000 to $1,409,000 for the
three months ended May 31, 1996 from $1,275,000 for the same period a year
earlier primarily due to administrative salaries and related office, telephone,
insurance and other expenses necessary to accommodate the demands caused by the
increase in the company's business volume, offset partially by a decrease in
professional fees related to certain matters in fiscal 1996.
Depreciation expense decreased by $117,000 as the result of LoJack System
components in certain older markets becoming fully depreciated, offset partially
by increases in depreciation related to fiscal 1996 start-up markets as well as
current year additions of certain computer equipment and software.
Interest income increased by $85,000 to $423,000 in the three months ended
May 31, 1996 from $339,000 in the same period a year earlier as the result of
the increase in cash balances available for investment during the year.
Interest expense increased by $2,000 to $35,000 in the three months ended
May 31, 1996 from $33,000 in the same period in the prior year as the result of
interest expense related to capital leases for installation vehicles.
The provision for income taxes increased by $1,078,000 to $1,238,000 for the
three months ended May 31, 1996 from $160,000 for the same period a year earlier
as the result of the increase in estimated taxable income during the fiscal
quarter as well as the realization in the fourth quarter of fiscal 1996 of the
future tax benefit of the Company's remaining net operating loss carryforwards
in accordance with certain accounting pronouncements, which resulted in an
increase in the Company's effective tax rate to 39% in the first quarter of
fiscal 1997 from 7.5% in the first quarter of fiscal 1996.
As a result of the foregoing, net income for the three months ended May 31, 1996
increased by $315,000 to $1,936,000 from $1,621,000 for the same period a year
earlier.
-7-
<PAGE>
Liquidity and Capital Resources
In the first quarter of 1997 the decrease in cash from changes in assets and
liabilities of $1,450,000 includes an increase in accounts receivable of
$1,231,000, an increase in inventory of $265,000, and a decrease in accrued
liabilities of $271,000 and other net increases in assets and liabilities of
$5,000, offset partially by increases in accounts payable of $322,000. The
increase in inventory resulted primarily from an effort to increase the
Company's inventory on hand to levels sufficient to satisfy the Company's
current level of business, as well as to meet unanticipated demand. The increase
in accounts receivable is primarily related to the increase in domestic
revenues during the first quarter of fiscal 1997 versus the fourth quarter of
fiscal 1996. The Company expects that its investment in inventory and accounts
receivable will increase as its sales increase. The decrease in the deferred tax
asset results from the interperiod utilization of net operating loss
carryforwards to offset current taxable income.
The Company estimates capital expenditures for the remainder of fiscal 1997 of
approximately $2,500,000 for potential new domestic market expansions and other
on-going capital requirements. The Company's expansion into additional
international markets is achieved through licensing agreements and has not in
the past required capital investment on the part of the Company. The Company
currently has no plans to change its practice in the future.
During fiscal 1996 the Company's board of directors authorized a stock
repurchase program under which the Company may repurchase up to 2,200,000 shares
of its outstanding common stock. The Company plans to accomplish the repurchase
program in open market transactions, from time to time, depending on the price
of its common stock. As of May 31, 1996 the Company had repurchased 110,000
shares for a total of $1,041,250. From May 31, 1996 through July 11, 1996 the
Company has repurchased an additional 212,500 shares for a cost of $2,326,876.
As of May 31, 1996 the Company had working capital of $36,598,000. The Company
believes that its anticipated capital and operating requirements for fiscal 1997
can be funded from cash flows from operations. The Company intends to continue
to repurchase shares of its common stock in accordance with the plan authorized
by the board of directors during fiscal 1996 provided that the reacquisition
cost makes such repurchases economically practical.
-8-
<PAGE>
The Company is also continuing to explore possible investment opportunities,
including, but not limited to, possible acquisitions of or investments in other
companies.
New Accounting Pronouncements
In fiscal 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" and SFAS No. 123
"Accounting for Stock-Based Compensation", which are effective for the Company's
fiscal year 1997. The implementation of SFAS No. 121 did not have a significant
impact on the financial statements when adopted in fiscal 1997. With regard to
SFAS No. 123, the Company has determined as permitted under SFAS No. 123 that it
will not adopt the fair value method and will continue to use Accounting
Principles Board Opinion No.25 for the measurement and recognition of employee
stock based transactions.
Cautionary Statements
The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. From time to time, information
provided by the Company or statements made by its employees may contain
"forward-looking" information which involve risk and uncertainties. Any
statements in this report that are not statements of historical fact are
forward-looking statements (including, but not limited to, statements concerning
the characteristics and growth of the Company's market and customers, the
Company's objectives and plans for future operations and the Company's expected
liquidity and capital resources). Such forward-looking statements are based on a
number of assumptions and involve a number of risks and uncertainties, and
accordingly, actual results could differ materially. Factors that may cause such
differences include, but are not limited to: the continued and future acceptance
of the Company's products and services, the rate of growth in the industries of
the Company's customers; the presence of competitors with greater technical,
marketing and financial resources; the Company's ability to promptly and
effectively respond to technological change which meet evolving customer needs;
capacity and supply constraints or difficulties; and the Company's ability to
successfully integrate new operations. For a further discussion of these and
other significant factors to consider in connection with forward-looking
statements concerning the Company, reference is made to Exhibit 99 of the
Company's Annual Report on Form 10-K for the fiscal year ended
February 29, 1996.
-9-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Not Applicable
Item 2. Not Applicable
Item 3. Not Applicable
Item 4. Not Applicable
Item 5. Not Applicable
Item 6a. Exhibit 11. Statement Regarding Computation of Per
Share Earnings
Exhibit 27. Financial Data Schedule
b. No reports on Form 8-K were filed during the
quarter for which this report is filed.
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOJACK CORPORATION
July 11, 1995 /s/ C. Michael Daley
- ----------------------- --------------------
Date C. Michael Daley
Chief Executive Officer
July 11, 1995 /s/ Joseph F. Abely
- ----------------------- -------------------
Date Joseph F. Abely
President and
Chief Operating Officer
(Principal Financial Officer)
-11-
<PAGE>
STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS
EXHIBIT 11
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 31, May 31,
1996 1995
---- ----
<S> <C> <C>
Primary:
Earnings:
Net Income $ 1,936,290 $ 1,620,785
========== ==========
Shares:
Weighted average number of common
shares outstanding 21,789,731 21,284,465
Assumed exercise of options
and warrants 1,497,328 1,596,363
--------- ---------
Weighted average number of common
shares for primary calculation 23,287,059 22,880,828
========== ==========
Primary earnings per share:
Net income $ 0.08 $ 0.07
==== ====
</TABLE>
-12-
<PAGE>
STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS
EXHIBIT 11
(Continued)
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 31, May 31,
1996 1995
---- ----
<S> <C> <C>
Assuming full dilution:
Earnings:
Net income $ 1,936,290 $ 1,620,785
========== ==========
Shares:
Weighted average number of common
shares outstanding 21,789,731 21,284,465
Assumed exercise of options and
warrants 1,646,147 1,682,375
---------- ----------
Weighted average number of common
shares assuming full dilution 23,435,878 22,966,840
========== ==========
Fully diluted earnings per share:
Net income $ 0.08 $ 0.07
==== ====
</TABLE>
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> MAY-31-1996
<CASH> 33,323,091
<SECURITIES> 0
<RECEIVABLES> 7,616,780
<ALLOWANCES> 512,095
<INVENTORY> 3,045,689
<CURRENT-ASSETS> 43,553,052
<PP&E> 20,168,729
<DEPRECIATION> 12,525,452
<TOTAL-ASSETS> 55,151,018
<CURRENT-LIABILITIES> 6,955,233
<BONDS> 0
0
0
<COMMON> 219,443
<OTHER-SE> 45,542,817
<TOTAL-LIABILITY-AND-EQUITY> 55,151,018
<SALES> 14,905,326
<TOTAL-REVENUES> 15,005,326
<CGS> 6,932,418
<TOTAL-COSTS> 6,932,418
<OTHER-EXPENSES> 5,287,242
<LOSS-PROVISION> 124,801
<INTEREST-EXPENSE> 34,542
<INCOME-PRETAX> 3,174,290
<INCOME-TAX> 1,238,000
<INCOME-CONTINUING> 1,936,290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,936,290
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
