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 EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-08439
LOJACK CORPORATION
(Exact name of registrant as specified in its charter)
| Massachusetts | 04-2664794 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
| 200 Lowder Brook Drive, Suite 1000 Westwood, Massachusetts |
02090 | |
| (Address of principal executive offices) | (Zip code) |
(781) 251-4700
(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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨
There were 16,919,338 shares issued and outstanding of the registrant’s common stock, $.01 par value, as of May 5, 2005.
LOJACK CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
| PAGE | ||||
| Part I. Financial Information |
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| Item 1. Financial Statements (unaudited) |
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|
Condensed Consolidated Balance Sheets: |
1 | |||
|
Condensed Consolidated Statements of Income: |
2 | |||
|
Condensed Consolidated Statements of Cash Flows: |
3 | |||
| Notes to Unaudited Condensed Consolidated Financial Statements |
4 | |||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | |||
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
18 | |||
| Item 4. Controls and Procedures |
19 | |||
| Part II. Other Information |
||||
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
20 | |||
| Item 6. Exhibits |
20 | |||
| 21 | ||||
LOJACK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
| March 31, 2005 |
December 31, 2004 |
|||||||
| (unaudited) | ||||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and equivalents |
$ | 16,842 | $ | 15,862 | ||||
| Short term investments at fair value |
10,380 | 5,575 | ||||||
| Accounts receivable - Net |
32,109 | 29,687 | ||||||
| Inventories |
11,086 | 12,613 | ||||||
| Prepaid expenses and other |
3,132 | 3,212 | ||||||
| Deferred income taxes |
4,075 | 3,784 | ||||||
| Total current assets |
77,624 | 70,733 | ||||||
| PROPERTY AND EQUIPMENT - NET |
16,014 | 15,600 | ||||||
| DEFERRED INCOME TAXES |
6,222 | 5,873 | ||||||
| INTANGIBLE ASSETS - NET |
8,210 | 8,446 | ||||||
| GOODWILL |
44,173 | 44,584 | ||||||
| OTHER ASSETS - NET |
4,361 | 4,286 | ||||||
| TOTAL |
$ | 156,604 | $ | 149,522 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Current portion of long term debt, capital lease obligations and short-term borrowings |
$ | 6,025 | $ | 4,241 | ||||
| Accounts payable |
8,712 | 8,040 | ||||||
| Accrued and other liabilities |
7,841 | 6,431 | ||||||
| Current portion of deferred revenue |
15,979 | 15,856 | ||||||
| Deferred income taxes |
137 | 110 | ||||||
| Accrued compensation |
2,694 | 5,495 | ||||||
| Total current liabilities |
41,388 | 40,173 | ||||||
| LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS |
19,422 | 20,900 | ||||||
| DEFERRED REVENUE |
22,359 | 21,343 | ||||||
| DEFERRED INCOME TAXES |
2,836 | 3,115 | ||||||
| ACCRUED COMPENSATION AND OTHER LONG-TERM LIABILITIES |
130 | 41 | ||||||
| TOTAL LIABILITIES |
86,135 | 85,572 | ||||||
| COMMITMENTS AND CONTINGENT LIABILITIES |
— | — | ||||||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Preferred stock - $.01 par value; authorized, 10,000,000 shares; one special voting preferred share issued and outstanding |
— | — | ||||||
| Common stock - $.01 par value; authorized, 35,000,000 shares; issued and outstanding, 17,700,742 at March 31, 2005 and 17,223,917 at December 31, 2004 |
169 | 164 | ||||||
| Additional paid-in capital |
29,643 | 24,514 | ||||||
| Unearned compensation |
(1,314 | ) | (367 | ) | ||||
| Accumulated other comprehensive income |
620 | 923 | ||||||
| Retained earnings |
41,351 | 38,716 | ||||||
| Total stockholders’ equity |
70,469 | 63,950 | ||||||
| TOTAL |
$ | 156,604 | $ | 149,522 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements
1
LOJACK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
| THREE MONTHS ENDED MARCH 31, |
||||||||
| 2005 |
2004 |
|||||||
| (unaudited) | ||||||||
| Revenues |
$ | 42,952 | $ | 32,146 | ||||
| Cost of goods sold |
20,857 | 15,731 | ||||||
| Gross margin |
22,095 | 16,415 | ||||||
| Costs and expenses: |
||||||||
| Product development |
1,441 | 1,461 | ||||||
| Sales and marketing |
8,927 | 7,608 | ||||||
| General and administrative |
6,039 | 4,153 | ||||||
| Depreciation and amortization |
1,349 | 636 | ||||||
| Total |
17,756 | 13,858 | ||||||
| Operating income |
4,339 | 2,557 | ||||||
| Other income (expense): |
||||||||
| Interest income |
112 | 43 | ||||||
| Interest expense |
(233 | ) | (14 | ) | ||||
| Other |
(6 | ) | — | |||||
| Total |
(127 | ) | 29 | |||||
| Income before provision for income taxes |
4,212 | 2,586 | ||||||
| Provision for income taxes |
1,577 | 1,008 | ||||||
| Net income |
$ | 2,635 | $ | 1,578 | ||||
| Earnings per share: |
||||||||
| Basic |
$ | 0.15 | $ | 0.11 | ||||
| Diluted |
$ | 0.14 | $ | 0.10 | ||||
| Weighted average shares: |
||||||||
| Basic |
17,391,386 | 15,027,705 | ||||||
| Diluted |
18,600,412 | 15,495,300 | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements
2
LOJACK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| (unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 2,635 | $ | 1,578 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Deferred revenue recognized |
(5,224 | ) | (1,288 | ) | ||||
| Deferred revenue additions |
6,422 | 2,739 | ||||||
| Stock-based compensation |
71 | 14 | ||||||
| Depreciation and amortization |
1,589 | 1,062 | ||||||
| Allowance for doubtful accounts |
299 | 42 | ||||||
| Deferred income taxes |
(814 | ) | (277 | ) | ||||
| Gain on disposal of fixed assets |
(26 | ) | — | |||||
| Tax benefit related to stock option plan |
1,053 | — | ||||||
| Increase (decrease) in cash from changes in assets and liabilities: |
||||||||
| Accounts receivable |
(2,718 | ) | (1,828 | ) | ||||
| Inventories |
1,419 | 681 | ||||||
| Prepaid expenses and other |
79 | (11 | ) | |||||
| Other assets |
(57 | ) | 6 | |||||
| Accounts payable |
662 | (1,236 | ) | |||||
| Accrued and other liabilities |
(1,428 | ) | (113 | ) | ||||
| Net cash provided by operating activities |
3,962 | 1,369 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Expenditures for property and equipment |
(1,732 | ) | (564 | ) | ||||
| Purchase of marketable securities |
(4,920 | ) | — | |||||
| Proceeds from the sale of marketable securities |
99 | — | ||||||
| Purchase of intangible assets |
(150 | ) | — | |||||
| Proceeds from sale of fixed assets |
39 | — | ||||||
| Net cash used for investing activities |
(6,664 | ) | (564 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Exercise of stock options |
3,062 | 1,046 | ||||||
| Repayment of capital lease obligations |
(130 | ) | (301 | ) | ||||
| Proceeds from debt |
693 | — | ||||||
| Net cash provided by financing activities |
3,625 | 745 | ||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS |
57 | — | ||||||
| INCREASE IN CASH AND EQUIVALENTS |
980 | 1,550 | ||||||
| BEGINNING CASH AND EQUIVALENTS |
15,862 | 4,746 | ||||||
| ENDING CASH AND EQUIVALENTS |
$ | 16,842 | $ | 6,296 | ||||
| Supplemental cash flow information: |
||||||||
| Income taxes paid |
$ | 2,454 | $ | 897 | ||||
| Interest paid |
$ | — | $ | 14 | ||||
| Supplemental disclosure of non-cash financing activities: |
||||||||
| Fair value of restricted stock issued |
$ | 1,043 | $ | 508 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements
3
LOJACK CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying interim condensed consolidated financial statements have been prepared by LoJack Corporation, or “LoJack”, “we”, “our”, or “the Company”, without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted pursuant to the rules and regulation of the Securities and Exchange Commission. The condensed consolidated financial statements include our accounts and those of our subsidiaries. All material intercompany balances have been eliminated. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in our 2004 Annual Report on Form 10-K.
In October 2004, we acquired Boomerang Tracking, Inc., or Boomerang, a marketer and provider of stolen vehicle recovery technology in Canada. The acquisition was accounted for as a purchase in accordance with SFAS No. 141, and the accompanying condensed consolidated statement of income and statement of cash flows include the operations of Boomerang for the three months ended March 31, 2005. The accompanying condensed balance sheets include the amounts of Boomerang as of December 31, 2004 and March 31, 2005.
In the opinion of our management, the unaudited financial information for the interim periods presented reflects all adjustments necessary for a fair presentation of our financial position, results of operations and cash flows. The results reported in these condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year.
Certain reclassifications have been made to the unaudited interim financial statements for the three months ended March 31, 2004 to conform to current year presentation.
2. Unaudited Pro Forma Results
On October 29, 2004, we acquired Boomerang, a provider of stolen vehicle recovery technology in Canada. The following represents the unaudited pro forma results of operations for LoJack and Boomerang as though the acquisition of Boomerang had occurred on January 1, 2004 (in thousands, except per share data). The unaudited pro forma financial information is not necessarily indicative of the results for the quarter ended March 31, 2004 that would have resulted had the acquisition occurred on January 1, 2004, nor is it necessarily indicative of future results. Had we acquired Boomerang as of January 1, 2004, our pro forma results for the three months ended March 31, 2004 would have been as follows, as compared to our actual consolidated results for the three months ended March 31, 2005:
| March 31, | ||||||
| 2005 |
2004 | |||||
| Revenues |
$ | 42,952 | $ | 36,831 | ||
| Net income |
2,635 | 1,547 | ||||