<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, 2000
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)
781-326-4700
(Registrant's telephone number, including area code)
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 CORPORATE ISSUERS:
There were 16,080,981 shares issued and outstanding of $.01 par value, common
stock, as of July 7, 2000.
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information PAGE
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets:
May 31, 2000 and February 29, 2000............................................. 1
Consolidated Statements of Operations:
Three Months Ended May 31, 2000 and 1999.................................. 2
Consolidated Statements of Cash Flows:
Three Months Ended May 31, 2000 and 1999.................................. 3
Notes to Consolidated Financial Statements.................................... 4
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition..................................... 6
Item 3. Quantitative and Qualitative Disclosures
About Market Risk......................................................... 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................................ 10
Signatures...................................................................... 11
Exhibit 27...................................................................... 12
</TABLE>
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, FEBRUARY 29,
2000 2000
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents ....................... $ 11,617,089 $ 6,023,323
Accounts receivable - net .................. 12,551,412 12,096,998
Inventories................................. 4,146,027 3,593,760
Prepaid expenses and other ................. 221,331 152,393
Prepaid income taxes ....................... 733,478 1,595,421
Deferred income taxes ...................... 1,007,808 1,021,394
------------ ------------
Total current assets.................... 30,277,145 24,483,289
PROPERTY AND EQUIPMENT - Net................ 9,770,182 9,780,828
OTHER ASSETS - Net.......................... 1,177,551 897,173
------------ ------------
TOTAL....................................... $ 41,224,878 $ 35,161,290
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease
obligations................................ $ 1,638,796 $ 1,556,536
Accounts payable............................ 6,513,171 3,016,220
Accrued and other liabilities .............. 1,388,585 1,351,218
Current portion of deferred revenue......... 1,652,452 1,621,933
Accrued compensation........................ 1,469,583 1,484,850
------------ ------------
Total current liabilities.............. 12,662,587 9,030,757
------------ ------------
DEFERRED REVENUE............................ 3,346,629 3,026,442
------------ ------------
DEFERRED INCOME TAXES....................... 572,104 645,730
------------ ------------
CAPITAL LEASE OBLIGATIONS .................. 905,290 1,204,412
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; authorized,
35,000,000 shares; issued, 22,494,581
and 22,474,581 shares at May 31, 2000 and
February 29, 2000, respectively .......... 224,946 224,746
Additional paid-in-capital ................. 60,804,990 60,688,316
Retained earnings .......................... 28,151,136 25,639,941
Treasury stock, at cost, 6,413,600 and
6,393,600 shares of common stock at May
31, 2000 and February 29, 2000,
respectively............................... (65,442,804) (65,299,054)
------------ ------------
Total stockholders' equity.............. 23,738,268 21,253,949
------------ ------------
TOTAL...................................... $ 41,224,878 $ 35,161,290
============ ============
See notes to consolidated financial statements.
(1)
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
(Unaudited)
MAY 31, MAY 31,
2000 1999
Revenues................................. $ 24,315,554 $ 22,501,407
Cost of goods sold....................... 11,073,754 9,968,539
------------ ------------
Gross margin ............................ 13,241,800 12,532,868
------------ ------------
Costs and expenses:
Systems costs and research and
development............................ 441,387 393,040
Marketing................................ 5,869,103 5,868,216
General and administrative............... 2,413,567 2,240,592
Depreciation and amortization............ 479,665 434,646
------------ ------------
Total.................................. 9,203,722 8,936,494
------------ ------------
Operating income......................... 4,038,078 3,596,374
------------ ------------
Other income (expense):
Interest income.......................... 99,108 114,906
Interest expense......................... (77,897) (56,741)
Gain on sale of fixed assets............. 57,906 24,341
------------ ------------
Total.................................. 79,117 82,506
------------ ------------
Income before provision
for income taxes........................ 4,117,195 3,678,880
Provision for income taxes............... 1,606,000 1,434,000
------------ ------------
Net income............................... $ 2,511,195 $ 2,244,880
============ ============
Earnings per share:
Basic.................................... $ 0.16 $ 0.13
============ =============
Diluted.................................. $ 0.15 $ 0.12
============ =============
Weighted average shares:
Basic.................................... 16,080,981 17,385,108
============ =============
Diluted.................................. 16,781,068 18,157,695
============ =============
See notes to consolidated financial statements.
(2)
<PAGE>
LOJACK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(Unaudited)
MAY 31, MAY 31,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................... $ 2,511,195 $ 2,244,880
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................................................... 1,007,183 855,518
Provision for doubtful accounts........................................................ (16,735) 8,767
Deferred income taxes.................................................................. (60,040) 181,099
Increase (decrease) in cash from changes in
assets and liabilities:
Accounts receivable.................................................................. (437,679) (1,176,215)
Inventories.......................................................................... (552,267) 1,654,082
Prepaid expenses and other........................................................... (68,938) (52,164)
Prepaid income taxes................................................................. 861,943 (818,569)
Other assets......................................................................... 25,000 -
Accounts payable..................................................................... 3,496,951 940,195
Accrued and other liabilities........................................................ 372,806 99,066
------------ ------------
Net cash provided by operating activities........................................... 7,139,419 3,936,659
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment- net............................................. (721,494) (339,423)
Purchase of patent....................................................................... - (425,000)
Expenditures for product development..................................................... (328,481) -
------------ ------------
Net cash used for investing activities.............................................. (1,049,975) (764,423)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options................................................................ 116,874 204,609
Repayment of capital lease obligations................................................... (468,802) (353,224)
Repurchase of common stock............................................................... (143,750) (6,675,962)
------------ ------------
Net cash used for financing activities.............................................. (495,678) (6,824,577)
------------ ------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS............................................. 5,593,766 (3,652,341)
BEGINNING CASH AND EQUIVALENTS........................................................... 6,023,323 10,230,215
------------ ------------
ENDING CASH AND EQUIVALENTS.............................................................. $ 11,617,089 $ 6,577,874
============ ============
</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
2000 amounts have been reclassified to conform with the fiscal 2001
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, 2000 and 1999
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, 2000 and 1999 was
$78,000 and $57,000, respectively. Cash paid for income taxes for the three
months ended May 31, 2000 and 1999 was $678,000 and $2,003,000,
respectively. For the three months ended May 31, 2000 and 1999 the Company
incurred capital lease obligations of $251,940 and $0 respectively.
4. Earnings per share:
The Company computes earnings per share under the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share."
SFAS No. 128 requires the dual presentation of basic and diluted earnings
per share. Basic earnings per common share is computed using the weighted
average number of common shares outstanding during the period. Diluted
earnings per common share reflects the effect of the Company's outstanding
options (using the treasury stock method), except where such options would
be antidilutive.
A reconciliation of weighted average shares used for the basic and diluted
computations is as follows as of May 31:
2000 1999
Weighted average shares for basic 16,080,981 17,385,108
Dilutive effect of stock options 700,087 772,587
---------- ----------
Weighted average shares for diluted 16,781,068 18,157,695
========== ==========
5. Comprehensive Income:
For the three months ended May 31, 2000, there are no items defined as
other comprehensive income. For the three months ended May 31, 1999, the
only item that would be included in comprehensive income is an unrealized
gain of $323,000 related to an investment in common stock. For the three
months ended May 31, 2000 and 1999, respectively, comprehensive income
totaled approximately $2,511,000 and $2,568,000.
(4)
<PAGE>
6. Segment Reporting:
In March 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131 requires
disclosure of segmented information about the Company's operations based
upon how management oversees and evaluates the results of such operations.
Accordingly, the Company has determined that it has two distinct reportable
segments: the domestic segment and the international segment. The Company
considers these two segments reportable as they are managed separately and
the operating results of each segment are regularly reviewed and evaluated
separately by the Company's senior management. Certain general overhead
costs have been allocated to each segment based on methods considered to
be reasonable by the Company's management. Income taxes have been allocated
to each segment using the Company's effective tax rate.
The following table presents information about the Company's operating
segments for the three months ended May 31, 2000 and 1999:
Domestic International
Segment Segment Consolidated
----------- ------------ ------------
1999
----
Revenues:
Product sales $20,655,035 $1,802,641 $22,457,676
License fees and
system component revenues - 43,731 43,731
----------- ---------- -----------
Total revenues $20,655,035 $1,846,372 $22,501,407
=========== ========== ===========
Segment net income $ 1,947,453 $ 297,427 $ 2,244,880
=========== ========== ===========
2000
----
Revenues:
Product sales $21,185,020 $2,726,134 $23,911,154
License fees and
system component revenues - 404,400 404,400
----------- ---------- -----------
Total revenues $21,185,020 $3,130,534 $24,315,554
=========== ========== ===========
Segment net income $ 1,850,490 $ 660,705 $ 2,511,195
=========== ========== ===========
(5)
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Three months ended May 31, 2000 ("fiscal 2001")
versus three months ended May 31, 1999 ("fiscal 2000")
Revenues for the three months ended May 31, 2000 increased by $1,814,000 or 8%,
to $24,315,000 from $22,501,000 for the same period a year earlier. Domestic
revenues increased during the same period by $530,000, or 3% to $21,185,000 from
$20,655,000 a year earlier. Revenues from product sales and licensing fees
related to international licensing agreements increased by $1,284,000 to
$3,130,000 for the three months ended May 31, 2000 from $1,846,000 for the same
period a year earlier.
The increase in domestic revenues was primarily due to an increase of 6% in the
number of LoJack Units sold in domestic markets offset by a decrease in the
average revenue earned per LoJack Unit sale as a result of volume variable
pricing discounts earned by large dealer group customers. The increase in
international revenues was related to an increase of $361,000 in revenues from
the sale of system components and license fees, and an increase of $923,000 from
sales of and royalties on the international version of the LoJack Units and
related products. The increase in the system component revenues and license
fees, which are generally non-recurring in nature were primarily generated from
new licensees, while the increase in revenues from the international version of
the LoJack Unit which are generally recurring in nature, were generated
primarily from existing licensees.
Cost of goods sold was 46% of revenues for the three months ended May 31, 2000
compared to 44% of revenues for the three months ended May 31, 1999.
Domestically, cost of sales increased to 45% of related revenues from 44% for
the same period a year earlier. The increase in domestic cost of sales was
principally related to the decrease in average revenue earned per LoJack Unit
sold as a result of standard volume variable pricing discounts earned by larger
customers offset partially by a decrease in the manufactured cost of the LoJack
Unit as a result of the rollout of the LJU III. International costs of sales
decreased to 50% of related revenues for the three months ended May 31, 2000
from 51% a year earlier principally as the result of the increase in non-
recurring component sales and license fees which generated higher margins than
the sale of LoJack Units.
Systems costs and research and development increased by $48,000 to $441,000 for
the three months ended May 31, 2000 from $393,000 for the same period a year
earlier. An increase in systems costs of $97,000 related primarily to increased
engineering salaries and benefits was partially offset by a decrease of $49,000
in research and development expense. Approximately $328,000 of product
development costs associated with a new feature of the LoJack Unit was
capitalized during the three months ended May 31, 2000.
Marketing expense for the three months ended May 31, 2000 was $5,869,000, an
increase of $1,000 from $5,868,000 for the same period a year earlier. An
increase in marketing wages and benefits of $271,000 was offset by a decrease in
media spending of $279,000, primarily attributable to cable television
production costs in the three months ended May 31, 1999 which did not recur in
the first quarter of fiscal 2001.
General and administrative expense increased by $173,000 to $2,414,000 for the
three months ended May 31, 2000 from $2,241,000 for the same period a year
earlier primarily as the result of increased payroll costs and administrative
expenses related to the increased domestic business volume and market
expansions.
Depreciation and amortization increased by $45,000 to $480,000 for the three
months ended May 31, 2000 from $435,000 for the same period a year earlier. The
increase was a result of a $15,000 increase on the amortization of the patent
purchased in May 1999, as well as the result of depreciation expense on LoJack
System components in new markets and depreciation expense on installation
vehicles purchased during the fiscal year ended February 29, 2000.
(6)
<PAGE>
Interest income decreased by $16,000 to $99,000 for the three months ended May
31, 2000 from $115,000 for the same period a year earlier. Interest expense
increased by $21,000 to $78,000 for the three months ended May 31, 2000 from
$57,000 for the same period a year earlier as a result of interest on additional
capital leases of installation vehicles.
Gain on sale of fixed assets increased by $34,000 to $58,000 for the three
months ended May 31, 2000 from $24,000 for the same period a year earlier due to
an increase in the number of fully depreciated installation vehicles sold during
the period in the normal course of business.
The provision for income taxes increased by $172,000 to $1,606,000 for the three
months ended May 31, 2000 from $1,434,000 for the same period a year earlier as
the result of the increase in the Company's taxable income during the respective
periods. The Company's effective tax rate remained at 39% during both periods.
As a result of the foregoing, net income increased by $266,000 to $2,511,000 for
the three months ended May 31, 2000 from $2,245,000 for the same period a year
earlier.
Liquidity and Capital Resources
In the first three months of fiscal 2001 cash and equivalents increased by
$5,594,000. The overall increase is the result of cash provided by operating
activities of $7,139,000 offset by cash used for investing activities of
$1,050,000 and cash used for financing activities of $495,000. Cash flows
provided by operating activities in fiscal 2001 of $7,139,000 was primarily
attributed to net income of $2,511,000, depreciation and amortization of
$1,007,000, and an increase in accounts payable of $3,497,000. The increase in
accounts payable is primarily related to the timing of payment to certain
vendors including one inventory vendor.
Cash flows from investing activities included expenditures for property and
equipment for the three months ended May 31, 2000 of $722,000 (exclusive of
additions under capital leases of $252,000) and product development costs
capitalized of $328,000.
Cash flows used for financing activities included repayment of capital leases of
$469,000, as well as the repurchase of 20,000 shares of the Company's common
stock during the three months ended May 31, 2000 for $144,000. Total cumulative
common shares repurchased under the Company's stock repurchase program were
6,413,600 shares as of May 31, 2000. As of May 31, 2000 there are 786,400
additional common shares authorized for repurchase under the Company's existing
repurchase program.
The Company is presently pursuing opportunities to expand its stolen vehicle
recovery system to several additional domestic markets, which meet the
qualifications set forth in the Company's strategic plan. The Company expects
that, pending receipt of necessary approvals, certain of these potential
expansion markets will become operational during fiscal 2001. The Company plans
to fund these expansions as well as other capital expenditures during fiscal
2001 using existing working capital, cash flow from operations, and/or the line
of credit. The Company expects that it will spend approximately $2,100,000 on
capital expenditures (excluding assets purchased under capital lease agreements)
during the remainder of fiscal 2001.
As of May 31, 2000 the Company had working capital of $17,615,000. The Company
believes that it can meet its anticipated capital and operating requirements for
the remainder of fiscal 2001 using existing working capital, cash flow from
operations, and if necessary, the Company's $7,500,000 line of credit, which was
unused as of May 31, 2000.
(7)
<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 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 June 1998, the Financial Accounting Standards Board released SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes new standards of accounting and reporting for derivative instruments
and hedging activities. This statement requires that all derivatives be
recognized at fair value in the balance sheet, and that the corresponding gains
or losses be reported either in the statement of operations or as a component of
comprehensive income, depending on the type of hedging relationship that exists.
The statement will be effective for the Company in fiscal 2001. Management is
currently evaluating the effect of adopting SFAS No. 133 on the Company's
consolidated financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." The SAB summarizes certain of the SEC's views in applying revenue
recognition in financial statements. The provisions of SAB No. 101 are effective
in our fourth quarter of fiscal year 2001. The Company has not yet completed the
evaluation of the effects of SAB No. 101.
(8)
<PAGE>
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 and accompanying materials 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 products
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 expand its 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, 2000.
Quantitative and Qualitative Disclosures About Market Risk
The Company has limited exposure to market risk due to the nature of its
financial instruments. The Company's financial instruments at February 29, 2000
consist of cash and equivalents, accounts receivable, accounts payable,
deposits, accrued liabilities, and capital lease obligations. The fair value of
these financial instruments as of February 29, 2000 approximate their carrying
values.
The Company's interest rate exposure is limited primarily to interest rate
changes on its $7,500,000 variable rate line-of-credit facility. Any outstanding
amounts under the facility are presumed to approximate market value, as the
facility's interest rate will adjust accordingly with market rates. An immediate
adverse change in market interest rates would not have had any effect on the
Company's interest expense, as there were no borrowings under the facility
during fiscal 2000. In addition, the Company does not have any foreign currency
exposure as it does not have foreign subsidiaries and all amounts are transacted
in U.S. dollars.
Currently, the Company does not enter into financial instrument transactions for
trading or other speculative purposes.
(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 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
------------------
Registrant
July 10, 2000 /s/ C. Michael Daley
--------------- --------------------
Date C. Michael Daley
Chief Executive Officer
July 10, 2000 /s/ Joseph F. Abely
--------------- -------------------
Date Joseph. F. Abely
President and Chief
Operating Officer
(Principal Financial Officer)
(11)
