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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended February 28, 1999
or
[ ] Transition Report pursuant Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required] for the transition period from to
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Commission File No. 2-74238-B
LOJACK CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2664794
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
333 Elm Street
Dedham, Massachusetts 02026
(Address of Principal Executive Offices) (Zip Code)
(781) 326-4700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: Common Stock, $.01 par value
Securities registered pursuant to Section 12(g) of the Act: None
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 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[_]
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated in Part III of this Form 10-K or any amendments to this Form 10-K.
The aggregate market value of the Common Stock of the registrant held by non-
affiliates was approximately $88,046,280 as of May 24, 1999.
As of May 24, 1999, there were issued and outstanding 16,946,381 shares of
the registrant's Common Stock, $.01 par value.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Stockholders for the fiscal
year ended February 28, 1999 (Items 5, 6, 7, 7(a), 8 and 14(a)(1))
(2) Portions of the definitive Proxy Statement for Registrant's Annual Meeting
of Stockholders to be held on July 21, 1999 (Items 10, 11, and 12)
<PAGE>
LOJACK CORPORATION
<TABLE>
<CAPTION>
Securities and Exchange Commission
Item Number and Description Page
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PART I
<S> <C> <C> <C>
ITEM 1. Business.......................................................... 1
ITEM 2. Properties........................................................ 6
ITEM 3. Legal Proceedings................................................. 7
ITEM 4. Submission of Matters to a Vote of Security Holders............... 7
PART II
ITEM 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.................................... 7
ITEM 6. Selected Financial Data........................................ 7
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 7
ITEM 7(a). Quantitative and Qualitative
Disclosures about Market Risk.................................. 7
ITEM 8. Financial Statements and Supplementary Data.................... 7
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................ 7
PART III
ITEM 10. Directors and Executive Officers of the
Registrant..................................................... 7
ITEM 11. Executive Compensation......................................... 8
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management................................................. 8
ITEM 13. Certain Relationships and Related Transactions................. 8
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................................ 8
SIGNATURES.................................................................... 12
INDEX TO AUDITORS' REPORT AND FINANCIAL STATEMENT SCHEDULE.................... 13
</TABLE>
In as much as the calculation of shares of the registrant's voting stock held by
non-affiliates requires a calculation of the number of shares held by
affiliates, such figure, as shown on the cover page hereof, represents the
registrant's best good faith estimate for purposes of this annual report on Form
10-K, and the registrant disclaims that such figure is binding for any other
purpose. The aggregate market value of Common Stock indicated is based upon the
last traded price of the Common Stock as reported by NASDAQ on May 24, 1999.
All outstanding shares beneficially owned by executive officers and directors of
the registrant or by any shareholder beneficially owning more than 10% of
registrant's Common Stock, as disclosed herein, were considered for purposes of
this disclosure to be held by affiliates.
<PAGE>
PART I
ITEM 1 - BUSINESS
GENERAL
LoJack Corporation ("LoJack" or the "Company") was organized as a Massachusetts
corporation in 1978. Its telephone number is (781) 326-4700.
LoJack developed and markets the LoJack System, a unique, patented system
designed to assist law enforcement personnel in locating, tracking and
recovering stolen vehicles. In addition, LoJack developed and markets
CarSearch, a product line of its patented LoJack System, designated for use in
international markets where it may not be practicable or desirable to implement
the fully integrated LoJack System.
The LoJack System is comprised of a Registration System maintained and operated
by LoJack; a Sector Activation System and Police Tracking Computers operated by
law enforcement officials (the "Law Enforcement Components"); and the LoJack
Unit, a VHF (very high frequency) transponder sold to consumers. The LoJack
System is designed to be integrated into existing law enforcement computers and
telecommunication networks and procedures. If a car equipped with a LoJack Unit
is stolen, its owner reports the theft as usual to the local police department.
Existing law enforcement computer and communication networks and procedures
operate in the normal manner for a report of a stolen vehicle. If the theft
involves a vehicle equipped with a LoJack Unit, a unique radio signal will be
transmitted automatically to the LoJack Unit in the stolen vehicle activating
its tracking signal. The tracking signal emitted from the LoJack Unit can be
detected by the Police Tracking Computer installed in police patrol cars and
aircraft throughout the coverage areas and used to lead law enforcement officers
to the stolen vehicle. The Company also sells conventional vehicle security
devices, which may be purchased as options with the LoJack Unit, under the names
"LoJack Prevent" and "LoJack Alert."
OPERATION OF THE LOJACK SYSTEM IN THE UNITED STATES
Under agreements with state police agencies, LoJack generally furnishes the Law
Enforcement Components for distribution to state, county, and municipal law
enforcement agencies for a nominal rent. The installation, testing and
maintenance of the Law Enforcement Components are primarily the responsibility
of LoJack. The Law Enforcement Components are generally owned by LoJack or a
LoJack subsidiary; the respective state, county or city law enforcement agency
provides the necessary staff to operate the LoJack System as required during the
term of each such agreement. The agreements with the applicable law enforcement
agencies are generally for initial terms of up to five (5) years. To date, any
such agreements which have expired have been renewed or are in the process of
renewal. Renewal or extension of any such agreement may be subject to
competitive bidding.
The LoJack System has been implemented in the following domestic jurisdictions
pursuant to agreements with applicable law enforcement agencies:
Jurisdiction Date Operational
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Massachusetts July 1986
Rhode Island June 1994
Connecticut April 1995
New York June 1994
New Jersey March 1990
Pennsylvania March 1997
Delaware March 1998
Maryland February 1997
Virginia August 1993
District of Columbia September 1994
Georgia August 1992
Florida:
Dade, Broward,
Palm Beach and surrounding areas; December 1988
Indian River, St. Lucie and Martin
Counties, and surrounding areas;
Tampa, St. Petersburg and
surrounding areas in West Florida; and July 1994
Orlando and surrounding areas April 1996
Michigan April 1990
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Illinois November 1990
Texas (Dallas) May 1997
Texas (Houston) April 1998
California:
Los Angeles County July 1990
San Diego and Orange County June 1995
San Bernadino, and Riverside March 1997
Ventura County April 1998
Arizona July 1998
New Hampshire June 1998
The Company is presently pursuing negotiations with several law enforcement
agencies in the United States regarding the implementation of the LoJack System
in jurisdictions in addition to those mentioned above. The Company's strategy
is to expand the LoJack System to those jurisdictions where the combination of
new vehicle sales, population density, and the incidence of vehicle theft is
high. To date, LoJack has expanded into 15 of the original 16 markets it has
targeted. Certain improvements to the Company's technology and interface with
law enforcement systems have made expansion beyond the 16 targeted states
economically feasible for the Company. Accordingly, over the next two years the
Company plans to expand to certain jurisdictions which are contiguous to
existing LoJack coverage areas as well to markets that have increased incidence
of car theft.
THE LOJACK SYSTEM
The LoJack System consists of four basic components:
1. LoJack Unit
2. Police Tracking Computer
3. Sector Activation System
4. Registration System
The LoJack Unit. The LoJack Unit is the consumer component of the LoJack System
and is installed in a purchaser's motor vehicle. The LoJack Unit consists of a
VHF transponder, a microprocessor based computer, and a modem. The computer's
memory contains a set of codes unique to the particular LoJack Unit and the
vehicle in which it is installed. The microprocessor activates the Unit's
transmitter upon receipt of its unique activation code from the Sector
Activation System. Since each LoJack Unit has its own unique activation code
and reply code, the microprocessor responds only upon receipt of the appropriate
code. An activated LoJack Unit will continue to broadcast its reply code until
it receives a properly coded message to stop. That message is sent after the
police have recovered the vehicle. All transmissions are made on a nationwide
radio frequency allocated by the Federal Communications Commission ("FCC") as a
law enforcement radio service.
Police Tracking Computer. The Police Tracking Computer ("PTC") is a
sophisticated radio direction finder. The PTC is used by police to locate and
track activated LoJack Units. The PTC consists of a radio receiver with a
directional antenna array, doppler signal processor, microprocessor based
computer and a controllable display. When the PTC detects a LoJack Unit
transmission from a stolen vehicle, it displays the reply code along with
graphic indications of signal strength and the direction toward the stolen
vehicle. The officer may then radio the reply code to the police dispatcher and
obtain a vehicle description.
The PTC is generally installed in police vehicles. Modified designs of the PTC
have been developed for use in helicopters, as well as fixed locations such as
toll booths, radio towers, or police communication centers. Effective tracking
range varies under different topographical and other conditions, from about one
mile to approximately five miles under ideal conditions.
Sector Activation System. The Sector Activation System ("SAS") is a
computerized system that controls and commands the LoJack System and activates
LoJack Units in stolen vehicles. It is designed to function with existing law
enforcement computer and telecommunication networks and procedures. Routine and
normal processing of a stolen vehicle report activates the SAS, even if the
person reporting the theft and the officer responding are unfamiliar with the
LoJack System.
The Sector Activation Computer ("SAC") contains a file with up-to-date
information on vehicles equipped with LoJack Units. This computer works in
conjunction with pre-existing law enforcement computer and communication
systems. This file contains, for each LoJack equipped vehicle, the vehicle
identification number ("VIN") assigned by the vehicle's manufacturer, and the
activation and reply codes for the LoJack Unit installed in that vehicle.
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<PAGE>
When the VIN of a stolen vehicle is entered into existing stolen vehicle
reporting systems, it is compared automatically to those contained in the LoJack
file. When a match occurs, the SAC automatically transmits the appropriate
activation code. Police officers who have detected the transmissions of an
activated LoJack Unit call into a dispatcher for a description of the
transmitting vehicle. After the vehicle is recovered, the VIN is again entered
into the SAC to generate the appropriate deactivation code and to reset the
LoJack Unit for future use.
The SAC controls a network of radio transmitters positioned on sites throughout
the coverage area. The SAC accepts stolen vehicle reports from the state law
enforcement computer and initiates activations and deactivations of LoJack
Units.
Registration System. The Registration System is a proprietary method of
assigning digital codes to be transmitted and received by LoJack Units in such
manner that unique activation codes are permanently correlated with the unique
VIN assigned to the vehicle in which the LoJack Unit has been installed.
MARKETING AND DISTRIBUTION OF LOJACK UNITS - UNITED STATES
LoJack's marketing approach in each jurisdiction focuses on franchised new car
dealers who will offer the LoJack Unit as an option on both their new and used
car sales. LoJack also markets conventional vehicle security devices sold under
the names "LoJack Prevent" and "LoJack Alert."
LoJack's sales force routinely visits franchised new car dealers to educate and
train dealership personnel on the benefits of the LoJack System. LoJack's
direct marketing efforts emphasize the benefits to the dealers and their
customers of the LoJack Unit as a purchase option for new and used car buyers.
Like other options, the LoJack Unit can usually be financed conveniently as a
part of the purchase price of the vehicle. LoJack uses direct advertising to
consumers to generate product awareness.
LoJack also markets its products directly to operators of fleet and commercial
vehicles.
LoJack maintains full responsibility for installation and warranty service of
LoJack Units sold by the Company both for the convenience of dealers through
whom the LoJack Units are marketed and for LoJack to maintain a high degree of
quality control and security over its technology.
In addition to distributing LoJack Units itself, through its subsidiaries or
licensees, LoJack may consider joint ventures or other cooperative arrangements
to expedite the expansion of the LoJack System. The actual method of
distribution will be determined on a market-by-market basis.
INTERNATIONAL OPERATIONS
The Company also licenses the use of its stolen vehicle recovery system
technology in selected international markets. In connection with its efforts to
expand outside of the United States, the Company has utilized its stolen
recovery vehicle technology to develop the CarSearch Stolen Vehicle Recovery
System ("CarSearch"). Unlike the LoJack System currently operational in the
United States, CarSearch has the flexibility of operating independent of
existing law enforcement communication networks.
The Company targets CarSearch for use by either law enforcement or private
security companies in selected international markets where the implementation of
a fully integrated LoJack System may not be feasible. This application of the
LoJack technology allows stolen vehicles to be activated, tracked and recovered
without the direct involvement of local police.
Present international license agreements have thus far been denominated in U.S.
dollars and structured with up-front licensing fees, which may be substantial
and are non-recurring, and provide that the Company will subsequently either
supply components and products at prices to be determined from time to time
and/or receive royalties based upon the licensees' revenues. It is the
Company's intention to continue to license the use of either the LoJack System
or CarSearch in other selected international markets on the same basis as
described above.
In March 1998 the Company exercised an option to purchase 292,507 common shares
of its United Kindom licensee, Tracker Network, UK Ltd., for an aggregate
exercise price of $1,259,170. In April 1998, the Company sold 150,000 shares of
its investment and recognized a pre-tax gain of $1,099,597. The Company does
not anticipate making any additional direct investments in the operations of
foreign licensees in the foreseeable future. The Company generally does not
recognize revenues during the period immediately after entering into an
agreement with a licensee. Recognition of revenues does not generally commence
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<PAGE>
until after the licensee receives any required governmental approvals, such as
frequency allocation for the CarSearch or LoJack System. The governmental
approval process may be time-consuming.
As of February 28, 1999, the Company had licensees operating stolen vehicle
recovery systems using LoJack's technology in the following countries:
Argentina, Colombia, Ecuador, Germany, Greece, Hong Kong, Kenya, Korea, Mexico,
Nigeria, Panama, Poland, Russia, South Africa, Trinidad and Tobago, United
Kingdom, and Venezuela. The Company also has entered into agreements to license
the use of LoJack's technology in other countries. However the date for
commencement of operations in these countries has not been set, as their ability
to operate may be subject to the licensees obtaining adequate financing as well
as certain governmental approval which may be time consuming or may not be
obtained. The Company is also pursuing similar agreements for other countries.
Approximately 13% of the Company's revenues in fiscal 1999 were derived from
exports. These revenues were comprised of product sales and licensing
revenues from unaffiliated customers in foreign countries. Approximately 95% of
the Company's foreign product sales are covered by letters of credit or require
payment in advance from the licensee. (See Note 9 to the Notes to Financial
Statements which are included in LoJack's 1999 Annual Report which is filed as
Exhibit 13 hereto.)
GOVERNMENT REGULATION AND APPROVAL
In 1989, the FCC put into effect a rule change to allocate frequency 173.075 MHz
for nationwide use by state and local law enforcement agencies for stolen
vehicle recovery systems. Law enforcement agencies in jurisdictions where the
Company operates have been granted authority by the FCC to use this frequency
for LoJack's stolen vehicle recovery system.
In connection with its domestic operations, the Company must obtain the approval
of law enforcement agencies, as well as executive or legislative bodies, for
implementation of the LoJack System before sales of LoJack Units can commence in
a given jurisdiction. The approval process may be time consuming and costly and
is subject to considerations generally affecting the process of governmental
decision making. In some jurisdictions, governmental approval may be terminable
at the convenience of the executive or legislative body. Any such termination
could have a material effect on future sales in any such jurisdiction.
If LoJack were to seek to charge more than nominal prices for the Law
Enforcement Components, governmental appropriation of funds will be required.
Most government agencies have established, by policy, statute or regulation, a
process requiring competitive bidding for all acquisitions of products and
equipment. This process may cause delay and expense to the Company. To date,
the Company has not sought to charge law enforcement agencies more than nominal
prices for the Law Enforcement Components, and does not expect to do so in the
near future.
AUTOMOBILE INSURANCE BENEFITS
Management considers automobile insurance premium discounts to be an inducement
for the purchase of LoJack Units by vehicle owners. The application of insurance
premium discounts, which are generally applied to the vehicle owner's
comprehensive insurance, varies from state to state and, in some cases, from
insurance company to insurance company. For example, insurance regulations in
some states, such as Massachusetts, Rhode Island, New York and New Jersey,
provide for mandated insurance discounts for automobiles protected by automobile
security systems. In other states, such as California, where the granting of
such discounts is not regulated, the determination is made by individual
insurance carriers. Currently, insurance discounts, which vary from state to
state, and nationally by certain insurance carriers, provide for discounts of up
to 35% on comprehensive insurance premiums for vehicles equipped with a vehicle
recovery and anti-theft device. The Company continues to work on legislative
initiatives in states where the LoJack System is operational which would
establish or increase discounts available to vehicle owners who install the
LoJack Unit. Since the insurance industry is, in general, heavily regulated, the
process of seeking voluntary or mandatory discounts for vehicles may involve
significant time and effort by LoJack.
PRODUCT WARRANTY
LoJack warrants to consumers that the LoJack Unit will be free from defects in
material or workmanship for a period of two years, subject to extension at the
customer's option for an additional charge. LoJack also warrants to purchasers
of LoJack Units that if their LoJack equipped vehicle is stolen within two years
of installation and not recovered within 24 hours from the time that the report
of the theft is reported to the police, LoJack will refund the full purchase
price of the LoJack Unit up to a maximum of $595.
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<PAGE>
PATENTS AND TRADEMARKS
LoJack holds United States Patent Nos. 4,818,998 and 4,908,629, which expire in
2006 and 2007, respectively, covering the LoJack System. The Company also holds
patents in various countries in Europe, Asia, South America, and North America.
Patent protection has also been sought by LoJack in several other countries.
Although management believes the patents have value, there can be no assurance
such patents will effectively deter others from manufacturing and marketing a
stolen vehicle recovery system. LoJack's name and logo are registered
trademarks in the United States and many foreign countries.
COMPETITION
Several competitors or potential competitors are marketing or have announced the
development of products, including those which are GPS-based, which claim to
have stolen vehicle recovery features that may be directly competitive with the
LoJack System. To the knowledge of management, none are compatible with the
LoJack System, and none are proposed to be operated or actively monitored
exclusively by law enforcement agencies as is the LoJack System. Additionally,
most of these potential competitors require the consumer to pay recurring fees
for their service, which LoJack does not.
LoJack markets the LoJack System as a stolen vehicle recovery device.
Management believes, however, that makers of auto theft prevention devices view
the LoJack System as competitive, and, consequently, LoJack believes it faces
competition from companies that sell vehicle security devices.
Some of the competitors and potential entrants into the vehicle tracking
industry have greater resources than LoJack. In addition, there can be no
assurance that a competitor will not develop a system of theft detection or
recovery, including other stolen vehicle recovery systems that may or may not
require government approvals, that would compete with or be superior to the
LoJack System.
SUBCONTRACTORS
LoJack has subcontracted the manufacture of the LoJack Unit, which is designed
for automated production using surface mounted technology, to Motorola, Inc.
LoJack believes that several companies have the capability to manufacture LoJack
Units using this technology. The Company also has contracted with Motorola for
development and redesign of the LoJack Unit to accommodate additional
applications, and to meet the technical and economical constraints of the
leasing and trucking industries.
LoJack has granted to Micrologic, through April 2000, the exclusive right to
assemble Police Tracking Computers. LoJack believes that other companies have
the same capabilities as Micrologic, but that changing to a new subcontractor
for these tasks could involve delays and additional cost to LoJack.
INVENTORY
LoJack seeks to maintain a 60-day supply of LoJack Units, which it believes is
in line with sales levels and sufficient to rapidly fulfill orders. The Company
maintains an inventory of certain Law Enforcement Components beyond its current
requirements in order to facilitate expansion into additional domestic markets.
RESEARCH AND DEVELOPMENT
During fiscal years 1999, 1998, and 1997 the approximate amounts spent by
LoJack on company-sponsored research and development activities were $201,000,
$244,000, and $518,000, respectively.
EMPLOYEES
As of May 1, 1999, the Company and its subsidiaries had a total of 470 full-time
employees.
EXECUTIVE OFFICERS OF THE REGISTRANT
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<TABLE>
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Name Age Title
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C. Michael Daley 62 Chairman of the Board, Chief Executive Officer and Treasurer
Joseph F. Abely 46 President and Chief Operating Officer
William R. Duvall 47 Senior Vice President (Operations and Technical Development)
Peter J. Conner 58 Vice President (Government Relations)
Kevin M. Mullins 44 Vice President (Sales and Marketing)
</TABLE>
Mr. C. Michael Daley has served as Chairman of the Board, Chief Executive
Officer and Treasurer of the Company since July 1986. Mr. Daley was also
President of the Company from July 1986 to January 11, 1996. Mr. Daley has been
a director of the Company since 1981. Prior to July 1986, he was President and
a principal of Daley Care Management Company, a company engaged in the health
care business.
Mr. Abely joined LoJack in October 1988 as Senior Vice President and Chief
Financial Officer. He was named President and Chief Operating Officer in January
1996. From 1976 until October 1988, Mr. Abely was employed by the accounting
firm of Deloitte Haskins & Sells, where he served as a partner since 1985. Mr.
Abely is a Certified Public Accountant.
Mr. Duvall joined LoJack in 1985 and is Senior Vice President of Operations and
Technical Development. From 1984 to 1985, he was a part owner and manager of
Rich's Car Tunes, a company engaged in the sale and installation of consumer
electronic products in the automotive aftermarket. For six years prior to 1984,
Mr. Duvall was Vice President of Marketing and Sales for Analog and Digital
Systems, Inc., a manufacturer of consumer electronic products.
Mr. Mullins joined LoJack in February 1996 and was appointed Vice President of
Sales and Marketing as of March 1, 1996. From 1976 until joining LoJack Mr.
Mullins served in a variety of positions at Proctor & Gamble Company, Inc.,
including District Sales Manager, Customer Business Development Manager, and
most recently as Northeast Operation Manager.
Mr. Conner joined LoJack in 1985 and is Vice President of Government Relations.
From 1982 to 1985, he was a franchise director for Continental Cablevision of
Boston, Massachusetts. From 1980 to 1982, Mr. Conner was a franchise director
for American Television Communications of Denver, Colorado, a cable television
operator.
Each executive officer is elected for a term scheduled to expire at the meeting
of Directors following the annual meeting of Stockholders or until a successor
is duly chosen and qualified. There are no arrangements or understandings
pursuant to which any executive officer was or is to be selected for election or
reelection. There are no family relationships among any Directors or executive
officers, except that C. Michael Daley, a Director and executive officer, and
James A. Daley, a Director, are brothers.
ITEM 2 - PROPERTIES
The Company's executive offices are located at 333 Elm Street, Dedham,
Massachusetts, under a lease for such space expiring in May 2001. In addition,
the Company leases various facilities in Arizona, Massachusetts, New Jersey,
Pennsylvania, Michigan, California, Illinois, Georgia, Virginia, Florida and
Texas under operating leases whose terms expire from 1999 to 2003. The leases
contain renewal options ranging from two to five years. Because the Company's
operations do not require any special facilities, the Company does not
anticipate any difficulty in finding space adequate for its purposes at
reasonable rates, should the need arise. The Company believes that its
facilities are adequate for its operations.
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ITEM 3 - LEGAL PROCEEDINGS
In March 1998, four former employees of the Company, filed a lawsuit against
the Company in the Superior Court of New Jersey alleging that the Company
wrongfully terminated the Plaintiffs' employment. This case was settled without
material costs to the Company during fiscal 1999. The Company is periodically
the subject of litigation which is not material to its business.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference to the
section entitled "Market for Registrant's Common Equity and Related Stockholder
Matters" on page 1 of the Company's 1999 Annual Report, which is filed herewith
as Exhibit 13.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to the
section entitled "Selected Financial Data" on page 4 of the Company's 1999
Annual Report, which is filed herewith as Exhibit 13.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated herein by reference to the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations," pages 5 through 8 of the Company's 1999 Annual
Report, which is filed herewith as Exhibit 13.
ITEM 7(a) - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated herein by reference to the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations," on page 8 of the Company's 1999 Annual
Report, which is filed herewith as Exhibit 13.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to the
consolidated financial statements of the Company (including the notes thereto)
and the independent auditors' report thereon appearing on pages 9 through 19 of
the Company's 1999 Annual Report, which is filed herewith as Exhibit 13.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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Pursuant to General Instruction G(3) of Form 10-K and instruction 3 to Item
401(b), the information required by this item concerning executive officers is
set forth in Part I, Item 1 under the heading "Executive Officers of the
Registrant."
DIRECTORS OF THE REGISTRANT
<TABLE>
<CAPTION>
Present Principal Employer
Name Age And Prior Business Experience
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<S> <C> <C>
C. Michael Daley 62 Mr. C. Michael Daley has served as Chairman of the Board, Chief Executive
Officer and Treasurer of the Company since July 1986. Mr. Daley was also
President of the Company from July 1986 to January 11, 1996. Mr. Daley has
been a director of the Company since 1981. Prior to July 1986, he was
President and a principal of Daley Care Management Company, a company
engaged in the health care business.
James A. Daley 58 Mr. James A. Daley has served as a director of the Company since 1985. Mr.
Daley is President and a principal of Daley Hotel Group, Inc., and several
affiliated entities, all of Boston, Massachusetts, which are in the hotel
and restaurant business.
Harold W. Shad, III 52 Mr. Shad has served as a director of the Company since July 1988. From 1984
to April 1997 Mr. Shad was the owner, President and Chief Executive Officer
of Mike Shad Ford, Inc. and Mike Shad Chrysler, Plymouth Jeep, Eagle, Inc.
of Jacksonville, Florida. Since April 1997, Mr. Shad has continued to serve
as President of Mike Shad Ford, Inc. and Mike Shad Chrysler, Plymouth, Jeep,
Eagle, Inc. of Jacksonville, Florida. Mr. Shad is a former director of the
National Automobile Dealers Association, representing Florida. Mr. Shad is
also a past Chairman of the Ford Motor Company's National Dealer Counsel.
Lee T. Sprague 59 Mrs. Sprague has served as a director of the Company since 1981. Mrs.
Sprague has been a private investor for more than the past eight years. Mrs.
Sprague also serves on the boards of various private, educational and
charitable institutions.
Robert J. Murray 57 Mr. Murray has served as a director of the Company since 1992. Mr. Murray
has been Chairman of the Board, President and Chief Executive Officer of New
England Business Service, Inc. since December 13, 1995. From January 1991
to December 1995, Mr. Murray was Executive Vice President, North Atlantic
Group, of The Gillette Company. Prior to January 1991, Mr. Murray served as
Chairman of the Board of Management of Braun AG, a Gillette subsidiary
headquartered in Germany. He has also held a variety of other management
positions in Gillette since 1961. Mr. Murray also serves on the Board of
Directors of Fleet National Bank, Allmerica Financial Corporation and
Hannaford Bros. Co.
Larry C. Renfro 45 Mr. Renfro has served as a director of the Company since 1993. Mr. Renfro
is currently the Chief Executive Officer of LCR Financial Group, Inc. From
1990 to 1997, Mr. Renfro held the office of Vice President, Financial
Services and served as a member of the Operating Committee of Allmerica
Financial. From 1989 to 1990, he was Executive Vice President of State
Street Bank and Trust Company. From 1988 to 1989, he was Chairman of Boston
Financial Data Services, Inc., a subsidiary of State Street Bank and Trust
Company.
Harvey Rosenthal 56 Mr. Rosenthal has served as a director of the Company since 1997. Now
retired, Mr. Rosenthal held the offices of President and Chief Operating
Officer and was a member of the Board of Directors of Melville Corporation
(now known as CVS Corporation) from 1994 to 1996. From 1984 to 1994, Mr.
Rosenthal was the President and Chief Executive Officer of the CVS Division
of Melville Corporation. Mr. Rosenthal also serves on the Board of
Directors of Cosmetic Centers, Inc. and on the Board of Trustees of EQ
Advisors Trust.
</TABLE>
There are no family relationships between any nominees, directors or executive
officers of the Company except that Mr. James A. Daley and Mr. C. Michael Daley
are brothers.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and persons who own more than 10% of the outstanding Common
Stock of the Company to file with the Securities and Exchange Commission ("SEC")
and NASDAQ reports of ownership and changes in ownership of voting securities of
the Company and to furnish copies of such reports to the Company. Based solely
on review of the copies of such reports furnished to the Company and written
representations from certain persons that no reports were required for those
persons, the Company believes that all Section 16(a) filing requirements were
satisfied in a timely fashion during the fiscal year ended February 28, 1999.
ITEM 11 - EXECUTIVE COMPENSATION
Summary Compensation Table
The following table and notes present the compensation paid by the Company to
its Chief Executive Officer and the Company's four most highly compensated
executive officers other than the Chief Executive Officer for each of the last
three fiscal years.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------- -------------
Name and Securities All Other
Principal Fiscal Underlying Compensation
Position Year (1) Salary ($) Bonus ($) Options (#)(2) ($)(3)
------------ -------- ------------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
C. Michael Daley (Chairman, 1999 $372,404 $175,000 125,000 $10,000
Chief Executive Officer and 1998 347,499 175,000 125,000 3,799
Treasurer) 1997 322,596 162,500 125,000 3,600
Joseph F. Abely (President 1999 $199,184 $90,000 43,000 $10,000
and Chief Operating Officer) 1998 186,153 92,500 35,000 3,799
1997 176,316 90,000 30,000 3,600
William R. Duvall (Senior 1999 $141,211 $63,000 30,000 $10,000
Vice President, Operations 1998 133,115 65,000 30,000 3,503
and Technical Development) 1997 125,277 62,000 30,000 3,600
Peter J. Conner (Vice 1999 $104,463 $42,500 30,000 $8,882
President, Government 1998 99,226 42,500 30,000 3,287
Relations) 1997 95,146 40,000 30,000 3,042
Kevin M. Mullins (Vice 1999 $126,492 $54,000 30,000 $2,650
President, Sales and 1998 119,077 50,500 30,000 1,040
Marketing) 1997 118,808 40,000 2,500 0
<FN>
- -----------------
(1) The Company's fiscal year ends on the last day of February.
(2) Options represent the right to purchase shares of Common Stock at a
fixed price per share (fair market value) in accordance with vesting
schedules applicable to each option. Certain options become immediately
and fully exercisable upon a "Change in Control." A "Change in Control"
occurs if the Company (i) ceases operations; (ii) merges or
consolidates with another entity and is not the surviving entity; (iii)
sells or otherwise transfers substantially all of its operating assets;
or (iv) if more than fifty percent (50%) of the capital stock of the
Company is transferred in a single transaction or in a series of
related transactions other than a public offering of stock of the
Company.
(3) Represents the Company's match of the employee's contribution to the
401(k) plan.
</FN>
</TABLE>
-8-
<PAGE>
Option Grants in Last Fiscal Year
The following table shows all options granted to each of the named executive
officers of the Company during the fiscal year ended February 28, 1999 and the
potential value at stock price appreciation rates of 5% and 10% over the
ten-year term of the options. The 5% and 10% rates of appreciation are used for
illustration only and are not intended to forecast possible future actual
appreciation, if any, in the Company's stock prices. The Company did not use an
alternative present value formula permitted by the SEC because the Company is
not aware of any such formula that can determine with reasonable accuracy the
present value based on future unknown or volatile factors.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (3)
---------------------------------------------------- ------------------------
Number of Percent of
Securities Total
Underlying Options Exercise or
Options Granted to Base Price per
Granted Employees in share Expiration
(#) (1) Fiscal Year ($/Sh) (2) Date 5%($) 10%($)
------- ----------- ---------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
C. Michael Daley 125,000 28.88 % $13.00 3/19/08 $1,021,954 $2,589,832
Joseph F. Abely 40,000 9.24% 13.00 3/19/08 350,252 828,746
William R. Duvall 30,000 6.93% 13.00 3/19/08 262,689 621,560
Peter J. Conner 30,000 6.93% 13.00 3/19/08 262,689 621,560
Kevin W. Mullins 30,000 6.93% 13.00 3/19/08 262,689 621,560
<FN>
- --------------
(1) These Senior Management Options become exercisable in four equal
installments commencing on February 28, 1999, February 29, 2000,
February 28, 2001 and February 28, 2002. These options are subject to
earlier vesting upon a "Change in Control" (see Summary Compensation
Table Note (2)). Options may be exercised by the employee only during
the term of employment and are not assignable other than by will, by
the laws of descent and distribution or pursuant to a qualified
domestic relations order. Upon the death of the optionee, the estate or
other beneficiary may exercise the options for a period of up to twelve
months, but prior to expiration.
(2) The exercise price per share is the market price of the underlying
Common Stock on the date of grant.
(3) The values shown are based on the indicated assumed annual rates of
appreciation, compounded annually. Actual gains realized, if any, on
stock option exercises and Common Stock holdings are dependent on the
future performance of the Common Stock and overall stock market
conditions. There can be no assurance that the values shown in this
table will be achieved.
</FN>
</TABLE>
-9-
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
The following table sets forth information with respect to the named executive
officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
FY-End (#) FY-END ($)(2)
Shares Acquired Value Realized ----------------------------- ----------------------------
Name on Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. Michael Daley 100,000 $895,312.50 992,000 187,500 3,746,448 0
Joseph F. Abely 10,000 60,937.50 334,000 55,000 1,375,813 0
William R. Duvall 4,000 44,000.00 257,000 45,000 833,413 0
Peter J. Conner 0 0 334,000 45,000 1,372,413 0
Kevin M. Mullins 0 0 54,375 37,500 0 0
<FN>
- -----------------
(1) Value realized equals fair market value on the date of exercise, less
the exercise price, times the number of shares acquired without
deducting taxes or commissions paid by employee.
(2) Value of unexercised options equals fair market value of the shares
underlying in-the-money options at February 26, 1999 ($9.00 per share),
which was the last trading day of the Company's fiscal year, less
exercise price, times the number of options outstanding.
</FN>
</TABLE>
-10-
<PAGE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Annual Report, in whole or in part, the following report and the
stock performance graph contained elsewhere herein shall not be incorporated by
reference into any such filings nor shall they be deemed to be soliciting
material or deemed filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") consists
of Lee T. Sprague, Robert J. Murray and Larry C. Renfro, three non-employee
directors. The Committee is responsible for reviewing the Company's compensation
philosophy and programs and exercises oversight with respect to the payment of
annual salary, bonuses, and stock-based incentives (currently stock options) to
directors and officers and also exercises authority with respect to the
administration of the stock incentive plans of the Company.
Compensation Philosophy and Practice
The Committee believes that leadership and motivation of the Company's employees
is critical to the continued success of the Company. In support of this
philosophy, the Committee structures its compensation programs to achieve the
following objectives:
-offer compensation opportunities that attract and retain exceptionally
talented individuals; motivate individuals to perform at their highest
levels; reward achievements that further the business strategy of the
Company.
-link a significant portion of an executive's total compensation to the
annual and long term financial performance of the Company as well as to
the creation of stockholder value.
-encourage executives to manage from the perspective of persons with
ownership interests in the Company.
Each year the Committee conducts a full review of the Company's executive
compensation program. In fiscal 1997, the Company retained an independent
consultant to review the current executive compensation practices of the
Company, to assess the competitive level of the executive compensation and to
recommend objective performance measures to use in awarding bonus compensation.
The Committee expects to periodically retain independent consultants in the
future to further assist with developing, maintaining and structuring the
Company's executive compensation programs.
Based upon the findings of the independent consultant and its own deliberations,
the Committee believes that the Company's executive compensation practices
provide an overall level of compensation that is competitive with the level of
compensation of companies of similar size, complexity, revenues and growth
potential, and that its executive compensation practices also recognize the
caliber, level of experience and performance of the Company's management.
The Committee recently reviewed the performance standards by which it determines
annual bonus awards. These performance standards are based on a combination of
Company results and individual achievements, except for C. Michael Daley whose
award is determined completely by
-11-
<PAGE>
reference to corporate results. In reviewing the performance of executive
officers whose compensation is detailed in this proxy statement (other than Mr.
Daley), the Committee also takes into account the views of Mr. Daley, the
Company's Chief Executive Officer. The Committee determines and recommends to
the Board the compensation of the Chief Executive Officer without his
participation.
Executive Officer Compensation Program
Base Salary. Base salary compensation is generally set within the ranges of
salaries of executive officers with comparable qualifications, experience and
responsibilities at other companies of similar size, complexity, revenues and
growth potential taking into account the caliber and level of experience of
management. In addition, consideration is given to other factors, including an
officer's contribution to the Company as a whole. Over the past three years,
increases in base salary (other than for Mr. Daley) have generally been modest.
Annual Bonus Compensation. The Company's executive officers are eligible for an
annual cash bonus. Early in the fiscal year, the Committee establishes
individual and Company performance standards. Executive officers are assigned
target bonus levels. In fiscal 1999, the corporate performance standards were
based on growth in revenues, growth in pre-tax earnings and market penetration.
The Committee also considered individual achievements in areas such as
departmental performance and leadership of special projects. Over the past five
fiscal years, the Committee has awarded cash bonuses to its executive officers.
The awards for each year are generally declared and paid during the first
quarter of the following fiscal year and are paid during that fiscal year. The
Committee recommended, and the Board approved, allocating $249,150 for bonus
compensation to the executive management group (other than to Mr. Daley) for
fiscal 1999, which has been allocated and was paid in the first quarter of
fiscal 2000. The Committee has allocated more for bonuses in fiscal 1999 than in
fiscal 1998 because the Company has had an excellent year in which, among other
things, it had record sales growth and operating profits, expanded the use of
the Company's technology into new jurisdictions, and reduced the manufactured
and installed cost of the Company's products.
Management Stock Ownership. Under the Stock Incentive Plan, stock options may be
granted to the executive officers, officers and other key employees of the
Company. The Committee believes that it is important for the Company's executive
officers to hold significant levels of stock ownership in order to align the
interests and objectives of the executive officers with those of the Company's
other stockholders. Furthermore, the Committee believes stock option grants
pursuant to the Stock Incentive Plan provide incentives for improving the
long-term performance of the Company and help retain superior talent in the
Company's senior management. The Committee awards stock options and determines
the size of stock option awards based on similar factors as are used to
determine the base salaries and annual bonus amounts, including comparative
compensation data.
On May 12, 1999, the Committee granted 90,000 Senior Management Options to
purchase Common Stock at $7.875 per share, as follows: Joseph F. Abely, 30,000,
William R. Duvall, Peter J. Conner and Kevin M. Mullins, 20,000 each. The
Committee considers these option grants reflective of the excellent performance
of senior management during fiscal 1999 as measured by the corporate and
individual performance standards and consistent with the intent and purposes of
the Company's compensation philosophy. The Chief Executive Officer was also
granted Senior Management Options, as discussed below.
-12-
<PAGE>
Chief Executive Officer Compensation
In determining the compensation of the Company's Chairman and Chief Executive
Officer, C. Michael Daley, the Committee considered the demonstrated leadership
he brings to the Company and the excellent performance of the Company during the
past fiscal year as measured against the Company performance standards
established by the Committee. In light of these factors, Mr. Daley's salary was
also increased to $395,000, effective April 1, 1998. Based on the Company's
achievements in fiscal 1999 as measured by its growth in revenues, growth in net
earnings and market penetration, the Board approved, based on the Committee's
recommendation, a bonus of $175,000 to be paid in the first quarter of fiscal
2000 and the Committee granted Mr. Daley a Senior Management Option to purchase
100,000 shares of the Company's Common Stock on the same terms as the grants of
Senior Management Options to other executive officers.
The Compensation Committee
Lee T. Sprague
Robert J. Murray
Larry C. Renfro
-13-
<PAGE>
Stock Performance Graph
The following line graph compares the yearly percentage change in the cumulative
stockholder return on the Company's Common Stock to the NASDAQ Market Index and
a company-selected peer group index, consisting of Audiovox Corp., over a
five-year period beginning February 28, 1994 and ending February 28, 1999. The
peer group index was formed on a weighted average basis based on market
capitalizations. Cumulative total return is measured assuming an initial
investment of $100 and reinvestment of dividends.
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
ASSUMES $100 INVESTED ON MAR. 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING FEB. 28, 1999
Fiscal Year Ending
--------------------------------------------------------------------------
Company/Index/Market 2/28/1994 2/28/1995 2/29/1996 2/28/1997 2/27/1998 2/26/1999
--------------------
<S> <C> <C> <C> <C> <C> <C>
Lo-Jack Corp 100.00 100.00 142.37 138.98 165.25 122.03
Customer Selected Stock List 100.00 46.34 34.15 43.50 45.13 43.50
NASDAQ Market Index 100.00 98.47 131.83 158.24 215.21 278.09
</TABLE>
-14-
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth certain information as of May 24, 1999 with
respect to the voting securities of the Company owned by (1) any person
(including any "group" as that term is defined in section 13(d)(3) of the
Securities Exchange Act of 1934) who is known to the Company to be the
beneficial owner of more than 5% of the outstanding shares of a class of voting
securities of the Company, (2) each director or nominee for director of the
Company, (3) each of the executive officers named in the Summary Compensation
Table in this Annual Report, and (4) all directors, nominees for director and
executive officers of the Company as a group. In accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended, a person is deemed to be
the beneficial owner, for purposes of this table, of any voting securities of
the Company if he or she has or shares voting power or investment power with
respect to such securities or has the right to acquire beneficial ownership
thereof at any time within 60 days of May 24, 1999. As used herein "voting
power" is the power to vote or direct the voting of shares, and "investment
power" is the power to dispose of or direct the disposition of shares. Except as
indicated in the notes following the table below, each person named has sole
voting and investment power with respect to the shares listed as being
beneficially owned by such person.
<TABLE>
<CAPTION>
Number of
Name of Shares Percentage of
Beneficial Owner and Nature of Common Stock
Beneficial Ownership
<S> <C> <C>
Capital Guardian Trust Company 1,911,700 (1) 11.28%
11100 Santa Monica Boulevard
Los Angeles, CA 90025-3384
Capital Research and Management 1,347,000 (2) 7.95%
Company
Smallcap World Fund, Inc.
333 South Hope Street
Los Angeles, CA 90071
Leon G. Cooperman 1,182,400 (3) 6.98%
c/o Omega Advisors, Inc.
88 Pine Street
Wall Street Plaza - 31st Floor
New York, NY 10005
C. Michael Daley 1,345,681 (4) 7.50%
James A. Daley 32,000 (5) *
Lee T. Sprague 253,134 (6) *
Harold W. Shad, III 113,742 (7) *
Robert J. Murray 62,500 (8) *
Larry C. Renfro 32,000 (9) *
Joseph F. Abely 379,200 (10) 2.19%
Kevin M. Mullins 54,375 (11) *
William R. Duvall 257,000 (12) 1.49%
Peter J. Conner 334,000 (13) 1.93%
Harvey Rosenthal 9,500 (14) *
All executive officers and directors as 2,873,132 (15) 15.06%
a group (11 persons)
- -----------------
<FN>
* Less than one percent (1%) of the outstanding Common Stock.
</FN>
</TABLE>
-15-
<PAGE>
(1) According to a report filed with the SEC on Amendment No. 2 to Schedule
13G, dated February 8, 1999, Capital Guardian Trust Company exercised
sole investment power with respect to 1,911,700 shares and sole voting
power with respect to 1,548,700 shares. Capital Guardian Trust Company
disclaims beneficial ownership as to 1,911,700 shares.
(2) According to a report filed with the SEC on Amendment No. 1 to Schedule
13G, dated February 8, 1999, jointly by Capital Research and Management
Company and Smallcap World Fund, Inc., Capital Research and Management
Company exercised sole investment power with respect to 1,347,000
shares, and Smallcap World Fund, Inc. exercised sole voting power with
respect to 1,347,000 shares. Capital Research and Management Company
disclaims beneficial ownership as to 1,347,000 shares.
(3) According to a report filed with the SEC on Amendment No. 2 to Schedule
13G, dated January 28, 1999, Leon G. Cooperman is the managing member
of Omega Associates, L.L.C. (which is the sole general partner of Omega
Capital Partners, L.P., Omega Institutional Partners, L.P., and Omega
Capital Investors, L.P.), the President and majority stockholder of
Omega Advisors, Inc., investment manager to Omega Overseas Partners,
Ltd. and investment advisor to a limited number of institutional
clients. Mr. Cooperman exercises sole voting and sole investment power
with respect to 952,200 shares and shared voting and investment power
with respect to 230,200 shares.
(4) Includes (i) 23,809 shares held jointly with spouse, (ii) 5,167 shares
held by spouse as to which beneficial ownership is disclaimed, (iii)
5,800 shares held as custodian under the Massachusetts Uniform Transfer
to Minors Act as to which beneficial ownership is disclaimed and (iv)
992,000 shares issuable upon exercise of certain options which options
are currently exercisable or become exercisable within 60 days of May
24, 1999 ("Currently Exercisable Options").
(5) Includes 32,000 shares issuable upon exercise of Currently Exercisable
Options.
(6) Includes 5,000 shares held by spouse as to which beneficial ownership
is disclaimed and 32,000 shares issuable upon exercise of Currently
Exercisable Options.
(7) Includes (i) 12,565 shares held by spouse as to which beneficial
ownership is disclaimed, (ii) 8,612 shares held by controlled
corporations, (iii) 9,000 shares held by a retirement account, and (iv)
32,000 shares issuable upon exercise of Currently Exercisable Options.
(8) Includes 30,500 shares held jointly with spouse and 32,000 shares
issuable upon exercise of Currently Exercisable Options.
(9) Included 32,000 shares issuable upon exercise of Currently Exercisable
Options.
(10) Includes (i) 200 shares held by spouse as to which beneficial ownership
is disclaimed, (ii) 1,000 shares held jointly with spouse, and (iii)
334,000 shares issuable upon exercise of Currently Exercisable Options.
(11) Includes 54,375 shares subject to Currently Exercisable Options.
(12) Includes 257,000 shares issuable upon exercise of Currently Exercisable
Options.
(13) Includes 334,000 shares issuable upon exercise of Currently Exercisable
Options.
(14) Includes 7,500 shares issuable upon exercise of Currently Exercisable
Options.
(15) Includes 2,138,875 shares issuable upon exercise of Currently
Exercisable Options. See footnotes (4) through (14).
-16-
<PAGE>
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are included as part of this report:
(1) Consolidated Financial Statements
---------------------------------
The following financial statements of the Company and the report of
the independent auditors are incorporated by reference to the Company's
1999 Annual Report:
Independent Auditors' Report Relating to the Consolidated Financial
Statements (and notes thereto)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Consolidated Financial Statement Schedule
-----------------------------------------
-17-
<PAGE>
The following report and consolidated financial statement schedule
is filed as part of this report and should be read in conjunction with
the consolidated financial statements (and notes thereto):
Independent Auditors' Report Relating to the Consolidated Financial
Statement Schedule
Schedule II - Valuation and Qualifying Accounts
Other financial statement schedules have been omitted because they are
not required or not applicable or because the required information is
included in the consolidated financial statements or notes thereto.
(3) Exhibits
--------
Certain of the exhibits listed hereunder have been previously filed
with the Commission as exhibits to certain registration statements and
periodic reports as indicated in the footnotes below and are
incorporated herein by reference pursuant to Rule 411 promulgated under
the Securities Act and Rule 24 of the Commission's Rules of Practice.
The location of each document so incorporated by reference is indicated
by footnote.
3A. Restated Articles of Organization (incorporated by reference to Exhibit
3A filed with the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1994 (the "1994 Form 10-K"))
3B. Amended By-Laws (incorporated by reference to exhibit 3B filed with the
Company's Annual Report on Form 10-K for the fiscal year ended February
29, 1992 (the "1992 Form 10-K"))
4A. Specimen Share Certificate (incorporated by reference to exhibit 4A to
File No. 2-74238-B)
4A1. Amended Specimen Share Certificate (incorporated by reference to exhibit
4B to File No. 2-98609)
10A. Volume Assembly Contract with Micrologic, Inc. (incorporated by
reference to exhibit 10I to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1986 (the "1986 Form 10-K"))
10B. Supply Agreement with Motorola (incorporated by reference to exhibit 10J
to the 1986 Form 10-K)
10C. Agreement with the City of Los Angeles dated March 9, 1989 (incorporated
by reference to exhibit 10K to File No. 33-27457)
10D. Contract between the State of Michigan and LoJack Corporation dated as
of April 24, 1989 (incorporated by reference to exhibit 10O filed with
the Company's Annual Report on Form 10-k for the fiscal year ended
February 28, 1990 ("the 1990 Form 10-K)
10E. Agreement between LoJack Corporation and the Illinois State Police dated
as of August 23, 1990 (incorporated by reference to exhibit 10P to the
1990 Form 10-K)
10F.++ 1985 Non-Qualified Stock Option Plan, as amended (incorporated by
reference to exhibit 10F to 1992 Form 10-K)
10G.++ Directors' Compensation Plan (incorporated by reference to exhibit 10G
to 1992 Form 10-K)
10H.++ LoJack Corporation Restated and Amended Stock Incentive Plan
(incorporated by reference to Exhibit 10H to the 1994 Form 10-K)
10I.++ Amendment Number One to Restated and Amended Stock Incentive Plan
(incorporated by reference to Exhibit 10ss filed with the Company's
Annual Report on Form 10-K for the fiscal year ended February 29, 1996
(the "1996 Form 10-K")
10J.++ Amendment Number Two to Restated and Amended Stock Incentive Plan
10K. Form of Agreement with respect to options granted to certain officers
and employees (incorporated by reference to exhibit 10H to File No. 33-
27457)
10L. Lease Agreement LoJack Sector Activation System dated February 23, 1988
between Recovery Systems, Inc. and the Florida Department of Motor
Vehicles (incorporated by reference to exhibit 10K to 1992 Form 10-K)
10M. Accepted Proposal by LoJack Corporation to the Massachusetts Department
of Public Safety (incorporated by reference to exhibit 10F to File No.
2-74238-B)
10N. Lease Agreement between Auto Recovery Systems, Inc. and the State of New
Jersey dated July 31, 1989 (incorporated by reference to exhibit 10M to
1992 Form 10-K)
10O. Loan Agreement dated December 10, 1993 among The First National Bank of
Boston and LoJack Corporation, LoJack Midwest Corporation, LoJack of New
Jersey Corporation, Recovery Systems, Inc. and CarSearch Corporation
(incorporated by reference to Exhibit 10N to the 1994 Form 10-K)
-18-
<PAGE>
10P. Lease Agreement Number VA-901212-LOJ between LoJack Corporation and the
Commonwealth of Virginia dated September 17, 1991 (incorporated by
reference to exhibit 10W to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1993 (the "1993 Form 10-K"))
10Q. Lease Agreement between LoJack Corporation and the State of Georgia
Department of Public Safety dated June 6, 1991 (incorporated by reference
to exhibit 10X to 1993 Form 10-K)
10R.++ Form of Senior Management Option (incorporated by reference to exhibit
10Z to 1993 Form 10-K)
10S. License, Trademark and Supply Agreement dated July 16, 1992, by and
between Carsearch Corporation, a subsidiary of LoJack Corporation, and
Secar, Ltd. Kutuzovovn, Bratislava, Czechoslovakia (incorporated by
reference to exhibit 10aa to 1993 Form 10-K)
10T. Patent License and Ancillary Know-How Agreement dated December 30, 1991,
and Second Amendment (relating to the Patent, License and Know-How
Agreement of December 30, 1991), dated January 29, 1993, (the Second
Amendment incorporates by reference the First Amendment to the Patent,
License and Know-How Agreement dated April 27, 1992 which is superseded),
each by and between LoJack Corporation and Stolen Vehicle Recovery Systems
Limited, Aylesbury, Buckingham, UK (incorporated by reference to exhibit
10bb to 1993 Form 10-K)
10U. Agreement dated January 21, 1994 between the New York Division of State
Police and LoJack Corporation (incorporated by reference to Exhibit 10aa
to the 1994 Form 10-K)
10V. Memorandum of Understanding dated July 29, 1993 with the District of
Columbia Metropolitan Police Department (incorporated by reference to
Exhibit 10cc filed with the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1995 (the "1995 Form 10-K")
10W. Memorandum of Understanding dated February 28, 1994 with Rhode Island
State Police (incorporated by reference to Exhibit 10dd to the 1995 Form
10-K)
10X. Contract dated July 15, 1993 with the State of Connecticut (incorporated
by reference to Exhibit 10ee to the 1995 Form 10-K)
10Y. License, Trademark, and Supply Agreement dated August 10, 1993 between
CarSearch Corporation and Vehicles Security Resources Limited, Nassau,
Bahamas (incorporated by reference to Exhibit 10ii to the 1995 Form 10-K)
10Z. License, Trademark, and Supply Agreement dated August 23, 1993 between
CarSearch Corporation and MaxRich
Consultants, Ltd., Kowloon, Hong Kong (incorporated by reference to
Exhibit 10jj to the 1995 Form 10-K)
10aa. License, Trademark, and Supply Agreement dated April 15, 1994 between
CarSearch Corporation and Triones Taiwan Co., Ltd., Taichung, Taiwan,
R.O.C. (incorporated by reference to Exhibit 10ll to the 1995 Form 10-K)
10bb. Patent, License, Trademark, and Supply Agreement dated October 4, 1994
between LoJack International Corporation, a subsidiary of LoJack
Corporation, and Sucess Trading, S.A., Buenos Aires, Argentina
(incorporated by reference to Exhibit 10mm to the 1995 Form 10-K)
10cc. License, Trademark, and Supply Agreement dated October 13, 1994 between
LoJack International Corporation and Tracker Vehicle Location Systems
(PTY) Ltd., Cape Town, South Africa (incorporated by reference to Exhibit
10nn to the 1995 Form 10-K)
10dd. License and Ancillary Know-How Agreement dated October 1, 1995 between
LoJack International Corporation and Detektor, Bad Homburg, Germany
(incorporated by reference to Exhibit 10oo to the 1996 Form 10-K)
10ee. Patent License and Ancillary Know-How Agreement dated November 30, 1994
between LoJack International Corporation and LoJack Italia, Bologna, Italy
(incorporated by reference to Exhibit 10pp to the 1995 Form 10-K)
10ff. License and Supply Agreement dated April 25, 1995 between LoJack
International Corporation and United States Consolidated Technologies
Corporation (incorporated by reference to Exhibit 10qq to the 1995
Form 10-K) Amendment No. 1 to Restated and Amended Stock Incentive Plan
10gg. Second Amendment to Loan Agreement dated as of February 20, 1996 among The
First National Bank of Boston and LoJack Corporation, LoJack International
Corporation, LoJack of New Jersey Corporation, Recovery Systems, Inc. and
LoJack Holdings Corporation (incorporated by reference to Exhibit 10tt to
the 1996 Form 10-K)
10hh. Amended and Restated Revolving Credit and Term Note dated as of February
20, 1996 in the amount of $7,500,000 made by LoJack Corporation, LoJack
International Corporation, LoJack of New Jersey Corporation, Recovery
Systems, Inc. and LoJack Holdings Corporation payable to the order of The
First National Bank of Boston (incorporated by reference to Exhibit 10mm
to the 1996 Form 10-K)
10ii. Trademark and Supply Agreement dated August 15, 1995 between LoJack
International and CarTrack Kenya Limited, Nairobi, Kenya (incorporated by
reference to Exhibit 10yy to the 1996 Form 10-K)
10jj. Third Amendment to Loan Agreement dated as of October 31, 1996 among The
First National Bank of Boston
and LoJack Corporation, LoJack International Corporation, LoJack of New
Jersey Corporation, Recovery
Systems, Inc. , LoJack Holdings Corporation and LoJack Venture Corporation
10kk. Second Amended and Restated Revolving Credit and Term Note dated as of
October 31, 1996 in the amount of $7,500,000 made by LoJack Corporation,
LoJack International Corporation, LoJack of New Jersey Corporation,
Recovery Systems, Inc., LoJack Holdings Corporation, and LoJack Venture
Corporation payable to the order of The First National Bank of Boston
-19-
<PAGE>
10ll. Fourth Amendment to Loan Agreement dated as of February 28, 1997among The
First National Bank of Boston and LoJack Corporation, LoJack International
Corporation, LoJack of New Jersey Corporation, Recovery Systems, Inc.,
LoJack Holdings Corporation, and LoJack Venture Corporation
10mm. Third Amended and Restated Revolving Credit and Term Note payable to the
order of The First National Bank of Boston dated as of February 28, 1997
in the amount of $7,500,000 made by LoJack Corporation, LoJack
International Corporation, LoJack of New Jersey Corporation, Recovery
Systems, Inc., LoJack Holdings Corporation, LoJack Venture Corporation,
and LoJack of Pennsylvania Corporation, and LoJack FSC, Ltd.
10nn. License, Trademark and Supply Agreement dated September 10, 1996 between
LoJack International and S1 Corporation, Seoul, Korea
10oo. Agreement dated September 1, 1996 between LoJack Corporation and the Texas
Department of Public Safety
10pp. Agreement between Commonwealth of Pennsylvania, Pennsylvania State Police
and LoJack Corporation dated May 14, 1996
10qq. Agreement between the Maryland Department of State Police and LoJack
Corporation dated November 8, 1996
10rr. Joint Venture Agreement dated as of December 1, 1995 by and between
LoJack Venture Corporation and Micrologic, Inc.
10ss. License Agreement dated as of December 1, 1995 between SCT Development
Venture and LoJack Corporation.
10tt. Development Agreement dated as of December 1, 1995 by and between SCT
Development Venture and Micrologic, Inc.
10uu. Fifth Amendment to Loan Agreement dated February 28, 1998 among BankBoston
N. A. and LoJack Corporation, LoJack International Corporation, LoJack New
Jersey Corporation, Recovery Systems Inc., LoJack Holdings Corporation,
LoJack Venture Corporation, LoJack of Pennsylvania Corporation, and LoJack
FSC, Ltd.
10vv. Fourth Amended and Restated Revolving Credit and Term Note payable to the
order of BankBoston N.A.dated as of February 28, 1998 in the amount of
$7,500,000 made by LoJack Corporation, LoJack International Corporation,
LoJack of New Jersey Corporation, Recovery Systems, Inc., LoJack Holdings
Corporation, LoJack Venture Corporation, and LoJack of Pennsylvania
Corporation, and LoJack FSC, Ltd
10ww.* Sixth Amendment to Loan Agreement dated May 26, 1999 among BankBoston N.
A. and LoJack Corporation, LoJack International Corporation, LoJack New
Jersey Corporation, Recovery Systems Inc., LoJack Holdings Corporation,
LoJack Venture Corporation, LoJack of Pennsylvania Corporation, LoJack
Arizona LLC, LoJack Recovery Systems Business Trust and LoJack FSC, Ltd.
10xx.* Fifth Amended and Restated Revolving Credit and Term Note payable to
the order of BankBoston N.A. dated as of May 26, 1999 in the amount of
$7,500,000 made by LoJack Corporation, LoJack International Corporation,
LoJack of New Jersey Corporation, Recovery Systems, Inc., LoJack Holdings
Corporation, LoJack Venture Corporation, and LoJack of Pennsylvania
Corporation, LoJack of Arizona LLC, LoJack Recovery Systems Business Trust
and LoJack FSC, Ltd
11.* Statement re: Computation of per share earnings
13.* 1999 Annual Report to Stockholders
21.* Subsidiaries of the Registrant
23.* Consent of Deloitte & Touche LLP
27.* Financial Data Schedule
99. "Safe Harbor" Statement under Private Securities Litigation Reform Act of
1995 (incorporated by reference to Exhibit 99 to the 1996 Form 10-K)
- ---------------------------
* Indicates an exhibit which was previously filed with the original Annual
Report of the Company on Form 10-K filed on May 28, 1999.
++ Indicates an exhibit which constitutes an executive compensation plan.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the last quarter of the
period covered by this report.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the Town of Dedham,
Commonwealth of Massachusetts, on the 13th day of March 2000.
LOJACK CORPORATION
(Registrant)
BY: /s/ Joseph F. Abely
-------------------------------
Joseph F. Abely
President and
Chief Operating Officer
-21-
<PAGE>
INDEX TO INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENT SCHEDULE
PAGE
Independent Auditors' Report Relating to the
Financial Statement Schedule............................................. F-1
Schedule II - Valuation and Qualifying Accounts.......................... F-2
-22-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
LoJack Corporation:
We have audited the consolidated financial statements of LoJack Corporation and
subsidiaries as of February 28, 1999 and 1998, and for each of the three years
in the period ended February 28, 1999, and have issued our report thereon dated
April 22, 1999, except for the information contained in the first paragraph of
Note 4, as to which the date is May 26, 1999; such consolidated financial
statements and report are included in your 1999 Annual Report to Stockholders
and are incorporated herein by reference. Our audits also included the
consolidated financial statement schedule of LoJack Corporation, listed in Item
14. This consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 22, 1999
(May 26, 1999 as to the first paragraph of Note 4
of the notes to the consolidated financial statements)
F-1
<PAGE>
SCHEDULE II
LOJACK CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED FEBRUARY 28, 1999, 1998, AND 1997
- --------------------------------------------------------------------------------
Column C
Column B Additions Column E
Balance at Charged to Balance
Column A Beginning Costs and Column D at End
Description of Period Expenses Deductions of Period
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:
For the year ended:
February 28, 1999 $ 579,187 $ 99,103 $(151,753)(1) $ 526,537
========= ========= ========= =========
February 28, 1998 $ 553,442 $ 217,139 $(191,394)(1) $ 579,187
========= ========= ========= =========
February 28, 1997 $ 395,202 $ 223,384 $ (65,144)(1) $ 553,442
========= ========= ========= =========
WARRANTY RESERVE:
For the year ended:
February 28, 1999 $ 482,731 $ 185,584 $(191,349) $ 476,966
========= ========= ========= =========
February 28, 1998 $ 388,697 $ 358,447 $(264,395) $ 482,731
========= ========= ========= =========
February 28, 1997 $ 324,813 $ 371,275 $(307,409) $ 388,679
========= ========= ========= =========
(1) Net accounts written off.
F-2
