<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, 1997
------------
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 18,985,241 shares issued and outstanding of $.01 par value, common
stock, as of July 11, 1997.
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information PAGE
----
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets, May 31, 1997
and February 28, 1997.......................................... 1
Consolidated Statements of Operations:
Three Months Ended May 31, 1997 and 1996...................... 2
Consolidated Statements of Cash Flows:
Three Months Ended May 31, 1997 and 1996....................... 3
Notes to Consolidated Financial Statements....................... 4
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition........................ 5
Part II. Other Information................................................ 8
Item 6. Exhibits and Reports on Form 8-K
Signatures....................................................... 9
Exhibit 11....................................................... 10
Exhibit 27....................................................... 11
</TABLE>
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31 FEBRUARY 28
1997 1997
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents........................................... $ 12,438,907 $ 14,671,700
Short-term investments......................................... 1,600,000 1,600,000
Accounts receivable - net...................................... 7,160,071 7,430,491
Inventories.................................................... 3,233,268 3,745,473
Prepaid expenses and other..................................... 153,020 153,812
Deferred income taxes.......................................... 1,531,507 1,525,010
------------ ------------
Total current assets........................................... 26,116,773 29,126,486
PROPERTY AND EQUIPMENT - Net................................... 9,314,306 8,722,950
OTHER ASSETS - Net............................................. 305,171 315,707
------------ ------------
TOTAL.......................................................... $ 35,736,250 $ 38,165,143
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease
obligations................................................. 736,733 693,553
Accounts payable............................................... 2,563,191 2,842,186
Accrued and other liabilities.................................. 857,895 847,984
Deposits....................................................... 392,060 749,020
Current portion of deferred revenue............................ 998,963 985,301
Accrued compensation........................................... 541,470 837,953
Accrued taxes.................................................. 1,287,680 287,473
------------ ------------
Total current liabilities................................. 7,377,992 7,243,470
DEFERRED REVENUE............................................... 2,301,955 2,149,524
DEFERRED INCOME TAXES.......................................... 733,478 770,143
CAPITAL LEASE OBLIGATIONS...................................... 763,831 781,817
COMMITMENTS AND CONTINGENCIES..................................
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; authorized,
35,000,000 shares; issued, 21,999,701 and
21,985,091 at May 31, 1997 and
February 28, 1997, respectively.............................. 219,997 219,851
Additional paid-in-capital..................................... 57,615,201 57,539,986
Deficit........................................................ (2,074,738) (4,335,990)
Treasury stock, at cost, 3,065,500
and 2,569,500 shares of common stock at
May 31, 1997 and February 28, 1997,
respectively.................................................. (31,201,466) (26,203,658)
------------ ------------
Total stockholders' equity .............................. 24,558,994 27,220,189
------------ ------------
TOTAL.......................................................... $ 35,736,250 $ 38,165,143
============ ============
</TABLE>
See notes to consolidated financial statements.
(1)
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(Unaudited)
MAY 31, MAY 31,
1997 1996
------------- -------------
<S> <C> <C>
Revenues......................................... $18,558,153 $15,005,326
Cost of goods sold............................... 8,560,794 6,932,418
------------- -------------
Gross margin..................................... 9,997,359 8,072,908
------------- -------------
Costs and expenses:
Systems costs and research and
development................................... 342,314 347,173
Marketing........................................ 3,934,724 3,174,947
General and administrative....................... 1,780,446 1,409,031
Depreciation and amortization.................... 395,928 356,091
------------- -------------
Total............................................ 6,453,412 5,287,242
------------- -------------
Operating income ................................ 3,543,947 2,785,666
------------- -------------
Interest income.................................. 184,438 423,166
Interest expense................................. (21,131) (34,542)
------------- -------------
Total............................................ 163,307 388,624
Income before provision ------------- -------------
for income taxes................................ 3,707,254 3,174,290
Provision for income taxes....................... 1,446,000 1,238,000
------------- -------------
Net income ...................................... $ 2,261,254 $ 1,936,290
============= =============
Earnings per share:.............................. $ 0.11 $ 0.08
============= =============
Common shares and equivalents.................... 20,449,384 23,287,259
============= =============
</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,
1997 1996
---------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income.................................................................. $2,261,254 $1,936,290
Adjustments to reconcile net
income to net cash used for
operating activities:
Depreciation and
amortization......................................................... 646,869 560,554
Deferred taxes......................................................... (43,162) 1,100,000
Increase (decrease) in
cash from changes in
assets and liabilities:
Accounts receivable - net.............................................. 270,420 (1,230,767)
Inventories............................................................ 512,205 (265,273)
Prepaid expenses and other............................................. 792 3,957
Other assets........................................................... 7,976 (8,508)
Accounts payable....................................................... (278,995) 321,904
Accrued and other
liabilities.......................................................... 522,766 (271,365)
-------------------- -------------------
Total adjustments........................................................... 1,638,871 210,502
-------------------- -------------------
Net cash provided by operating
activities............................................................. 3,900,125 2,146,792
-------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property
and equipment - net.................................................... (941,385) (290,499)
-------------------- -------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock.................................................... 75,361 292,252
Repayment of debt........................................................... (269,086) (262,367)
Repurchase of common stock.................................................. (4,997,808) (193,750)
-------------------- -------------------
Net cash used for
financing activities................................................... (5,191,533) (163,865)
-------------------- -------------------
(DECREASE) INCREASE IN CASH
AND EQUIVALENTS........................................................ (2,232,793) 1,692,428
BEGINNING CASH AND EQUIVALENTS.............................................. 14,671,700 31,630,663
-------------------- -------------------
ENDING CASH AND EQUIVALENTS................................................. $12,438,907 $33,323,091
==================== ===================
</TABLE>
See notes to consolidated financial statements.
(3)
<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
1997 amounts have been reclassified to conform with the fiscal 1998
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, 1997 and 1996
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, 1997 and 1996 was
$40,628 and $34,542, respectively. Cash paid for income taxes for the three
months ended May 31, 1997 was $ 480,500 and $232,173, 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, 1997 and 1996.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share" which will become effective during the
fourth quarter of fiscal 1998. SFAS No. 128 replaces the presentation of
primary earnings per share with basic earnings per share, which excludes
dilution, and requires the dual presentation of basic and diluted earnings
per share. Had the Company used SFAS No. 128, the Company's basic earnings
per share on a proforma basis would have been $.12 and $.09 for the three
months ended May 31, 1997 and 1996, respectively. Diluted earnings per
share would have been the same as the earnings per share presented in the
consolidated financial statements.
(4)
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Three months ended May 31, 1997 ("fiscal 1998)
versus three months ended May 31, 1996 ("fiscal 1997")
Revenues for the three months ending May 31, 1997 ("first quarter of fiscal
1998") increased by $3,553,000, or 24%, to $18,558,000 from $15,005,000 for the
same period a year earlier. Revenues from domestic markets contributed $618,000
of the increase and international revenues contributed $2,935,000. The increase
in domestic revenues resulted from an increase in overall LoJack Unit sales
offset partially by the absence of LoJack Units sold through dealers and
direct-to-consumers in connection with several promotional activities which
ran in several markets during the first quarter of fiscal 1997. The increase in
international revenues resulted primarily from an increase in the sale of LoJack
Units and related products to existing licensees, the final license fees and
remaining shipments from the initial orders of two licensees who began
operations in the latter part of fiscal 1997, and the initial license fee from
an agreement to license the company's technology in Germany.
Cost of goods sold for the first quarter of fiscal 1998 and 1997 remained
constant at 46% of revenues. Domestically, cost of goods sold remained stable
for both periods at 45% of related revenues. The positive effect on cost of
goods sold of lower domestic alarm sales and absence of certain promotions as
compared to a year ago was offset by start-up costs of the new markets of
Maryland, Pennsylvania, and Texas ("New Markets"), as well as lower direct-to-
consumer sales which have a higher gross margin. International cost of goods
sold decreased to 49% of related revenues during the first quarter of fiscal
1998 as compared to 57% of related revenues for the same period a year ago as
the result of the increase of non-recurring license fees and component sales in
the mix of revenues which have a higher gross margin as compared to the lower
gross margin sales of LoJack Units to foreign licensees.
Systems costs and research and development expense decreased by $5,000 to
$342,000 for the three months ended May 31, 1997 from $347,000 for the same
period a year earlier. A decrease in system maintenance costs in the existing
markets was offset by an increased in system operating costs related to the
start-up of the New Markets. Research and development expense remained constant
for both periods.
Marketing expense increased by $760,000 to $3,935,000 for the three months ended
May 31, 1997 from $3,175,000 for the same period a year earlier. Marketing
expense remained constant for both periods at 21% of revenues. The increase
in marketing expense was related primarily to an increase in spending on
advertising, personnel and other costs related to the start-up of the New
Markets.
General and administrative expense increased by $371,000 to $1,780,000 for the
first quarter of fiscal 1998 from $1,409,000 for the same period a year ago.
This increase is related primarily to increase in general and administrative
salaries, rent, and telephone expense related to the start-up of New Markets.
Depreciation expense increased by $40,000 for the first quarter of fiscal 1998
to $396,000 from $356,000 for the same period a year ago. This increase is
related to depreciation expense on LoJack System and related equipment in the
New Markets, and on additions of certain computer equipment and software in the
existing markets offset by equipment in certain older markets becoming fully
depreciated.
Interest income decreased by $239,000 to $184,000 for the first quarter of
fiscal 1998 as compared with $423,000 for the same period a year ago primarily
as the result of the decrease in cash balances available for investment.
(5)
<PAGE>
Interest expense decreased by $13,000 to $21,000 for the first quarter of fiscal
1998 from $34,000 for the same period a year earlier as the result of a
decrease in interest expense on capital leases for installation vehicles as
compared to a year earlier.
Provision for income taxes remained constant at 39% of income before provision
for income taxes for the first quarter of fiscal 1998 and 1997 resulting in
provisions of $1,446,000 and $1,238,000, respectively, for the two periods.
As a result of the foregoing, net income for the first quarter of fiscal 1998
was $2,261,000, an increase of $325,000 of net income for the same period a year
earlier of $1,936,000.
Liquidity and Capital Resources
In the first quarter of fiscal 1998 cash and equivalents decreased by
$2,233,000. Cash flow from operations was $3,900,000, cash flow used for
investing activities was $941,000 and cash flow used for financing purposes was
$5,192,000. Cash flow from operations of $3,900,000 included net income of
$2,261,000, non-cash adjustments to net income of $604,000, and changes in
assets and liabilities of $1,035,000. The cash flow from changes in assets and
liabilities include an increase in accrued and other liabilities of $523,000
primarily as the result of an increase in accrued federal and state income taxes
offset by a decrease in deposits and accrued compensation, a decrease in
inventory of $512,000 primarily related to the sale of international inventory
which was on hand at February 28, 1997, and a decrease in accounts payable of
$279,000 primarily related to purchases of international inventory outstanding
at February 28, 1997. A decrease of $270,000 in accounts receivable was the
result of an increase in domestic receivables of $231,000 which resulted from
both an increase in domestic revenues in the first quarter of fiscal 1998 as
compared with the fourth quarter of fiscal 1997 offset by improved domestic
collections, as well as a decrease in international receivables of $501,000
resulting from the timing of certain international equipment and product
shipments and collections.
As of May 31 ,1997 the Company had existing working capital of $18,739,000. The
Company believes that it can meet its anticipated capital and operating
requirements for the remainder of fiscal 1998 using existing working capital,
cash flow from operations, and if necessary, the Company's existing $7,500,000
line of credit.
The Company is presently pursuing expansion efforts in several additional
domestic jurisdictions. The Company expects that, pending receipt of necessary
governmental approvals, certain of these potential expansion markets may become
operational during fiscal 1998. The Company plans to fund these expansions as
well as other capital expenditures during fiscal 1998 using existing working
capital, cash flow from operations, or the line of credit. The Company expects
that it will spend approximately $2,000,000 (excluding assets purchased under
capital lease agreements) during the remainder of fiscal 1998 including an
investment to upgrade the Company's information systems.
The Company repurchased an additional 496,000 shares of its common stock during
the three months ended May 31, 1997 for $4,997,808. Total cumulative common
shares repurchased under the Company's stock repurchase program was 3,065,500 as
of May 31, 1997. The Company intends to continue to repurchase shares of its
common stock in open market transactions, from time to time, depending upon the
price of the stock. As of May 31, 1997 there are 2,134,500 additional common
shares authorized for repurchase under the Company's existing repurchase
program.
(6)
<PAGE>
The Company's expansion to 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 this practice.
The Company is also continuing to explore possible investment opportunities,
including , but not limited to, possible acquisitions of, or investments in,
other companies.
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
characteristics and growth of 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 to
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.
(7)
<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.
(8)
<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.
July 15 1997 /s/ C. Michael Daley
------------ --------------------
Date C. Michael Daley
Chief Executive Officer
July 15 1997 /s/ Joseph F. Abely
------------ -------------------
Date President and Chief
Operating Officer
(Principal Financial Officer)
(9)
<PAGE>
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS
<TABLE>
<CAPTION>
PRIMARY CALCULATION: THREE MONTHS ENDED
MAY 31, MAY 31,
1997 1996
-------------- --------------
<S> <C> <C>
Net Income $ 2,261,254 $ 1,936,290
============== ==============
Shares:
Weighted average number of common
shares outstanding 19,086,406 21,789,731
Assumed exercise of options 1,356,059 1,497,328
Dilutive effect of exercised options 6,919
-------------- --------------
Weighted average number of common
for primary calculation 20,449,384 23,287,059
============== ==============
Primary earnings per share $ 0.11 $ 0.08
============== ==============
FULLY DILUTED CALCULATION
Net Income $ 2,261,254 $ 1,936,290
============== ==============
Shares:
Weighted average number of common
shares outstanding 19,086,406 21,789,731
Assumed exercise of options 1,497,989 1,646,147
Dilutive effect of exercised options 7,545
-------------- --------------
Weighted average number of common
for fully diluted calculation 20,591,940 23,435,878
============== ==============
Fully diluted earnings per share $ 0.11 $ 0.08
============== ==============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
5/31/97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> FEB-28-1998 FEB-28-1997
<PERIOD-START> MAR-01-1997 MAR-01-1996
<PERIOD-END> MAY-31-1997 MAY-31-1996
<CASH> 12,438,907 0
<SECURITIES> 1,600,000 0
<RECEIVABLES> 7,744,107 0
<ALLOWANCES> 584,036 0
<INVENTORY> 3,233,268 0
<CURRENT-ASSETS> 26,116,773 0
<PP&E> 24,105,060 0
<DEPRECIATION> 14,790,754 0
<TOTAL-ASSETS> 35,736,250 0
<CURRENT-LIABILITIES> 7,377,992 0
<BONDS> 0 0
0 0
0 0
<COMMON> 219,997 0
<OTHER-SE> 24,338,997 0
<TOTAL-LIABILITY-AND-EQUITY> 35,736,250 0
<SALES> 17,851,010 14,905,326
<TOTAL-REVENUES> 18,558,153 15,005,326
<CGS> 8,560,794 8,072,908
<TOTAL-COSTS> 8,560,794 8,072,908
<OTHER-EXPENSES> 6,453,412 5,287,242
<LOSS-PROVISION> 31,384 124,801
<INTEREST-EXPENSE> 21,131 34,542
<INCOME-PRETAX> 3,707,254 3,174,290
<INCOME-TAX> 1,446,000 1,238,000
<INCOME-CONTINUING> 2,261,254 1,936,290
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,261,254 1,936,290
<EPS-PRIMARY> .11 .08
<EPS-DILUTED> .11 .08
</TABLE>
