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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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 29, 2000
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
------------
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 $94,103,642 as of May 22, 2000.
As of May 22, 2000, there were issued and outstanding 16,080,981 shares of the
registrant's Common Stock, $.01 par value.
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Stockholders for the fiscal
year ended February 29, 2000 (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 19, 2000 (Items 10, 11, and 12)
LOJACK CORPORATION
Securities and Exchange Commission
Item Number and Description Page
- --------------------------- ----
PART I
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.............. 8
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
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 22,
2000. 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.
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 all or a portion of each of the
following domestic jurisdictions pursuant to agreements with applicable law
enforcement agencies:
Jurisdiction Date Operational
------------ ----------------
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
Ft Myers; April 1999
Jacksonville August 1999
Michigan April 1990
Illinois November 1990
Texas:
Dallas May 1997
Houston April 1998
San Antonio and Austin May 2000
California:
Los Angeles County July 1990
San Diego and Orange County June 1995
San Bernadino, and Riverside March 1997
Ventura County April 1998
San Francisco and San Jose Counties March 2000
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.
Improvements to the Company's technology and interface with law enforcement
systems have made expansion 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 as 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 that part of
the LoJack System that contains the Sector Activation Computer ("SAC"), the
Sector Activation Transmitters ("SATs"), and the communication network that
connects them.
The SAC contains the LoJack subscriber database, an up-to-date file with
information on each vehicle equipped with a LoJack Unit. For each vehicle
equipped, the file contains the vehicle identification number ("VIN") assigned
by the vehicle's
-2-
manufacturer, and the activation, deactivation, and reply codes for the LoJack
Unit installed in that vehicle. The SAC also controls the SAT network, causing
activation, speed-up, and deactivation commands to be broadcast at appropriate
times during the stolen vehicle activation and recovery sequence.
The SAS was designed to function with existing law enforcement computer and
telecommunication systems 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.
When the VIN of a stolen vehicle is entered into the existing police computer
system, it is compared automatically to those contained in the SAC database.
When a match occurs, the SAC causes the SAT network to broadcast the appropriate
activation command. Police officers who receive the corresponding reply code
call dispatch and receive a description of the transmitting vehicle. After
recovery, the officer reports to dispatch, which enters the vehicle as
recovered. The routine entry into the police computer causes the SAS to transmit
a deactivate command, which returns the LoJack unit to its original state.
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.
-3-
The Company may make direct investments in the operations of foreign licensees
in the 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 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 29, 2000, the Company had licensees operating stolen vehicle
recovery systems using LoJack's technology in the following countries:
Argentina, Brazil, Colombia, Ecuador, 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 approvals which may be time consuming or may not be
obtained. The Company is also pursuing similar agreements for other countries.
Approximately 11% of the Company's revenues in fiscal 2000 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, are insured
through EXIM Bank, or require payment in advance from the licensee. (See Note 8
to the Notes to Financial Statements which are included in LoJack's 2000 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 would 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
-4-
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.
PATENTS AND TRADEMARKS
LoJack holds United States Patents 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.
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 2000, 1999, and 1998 the approximate amounts spent by
LoJack on company-sponsored research and development activities were $678,000,
$201,000, and $244,000, respectively.
EMPLOYEES
As of May 1, 2000, the Company and its subsidiaries had a total of 510 full-time
employees.
-5-
EXECUTIVE OFFICERS OF THE REGISTRANT
There is incorporated herein by reference the information concerning C. Michael
Daley, who is Chairman of the Board, Chief Executive Officer and Treasurer of
the Company, from the Company's definitive Proxy Statement for its Annual
Meeting of Stockholders to be held on July 19, 2000, under the headings
"Proposal No. 1 - Election of Directors" and "Board of Directors." Information
concerning the Company's other executive officers is set forth below.
Name Age Title
---- --- -----
Joseph F. Abely 47 President and Chief Operating Officer
William R. Duvall 48 Senior Vice President (Operations and Technical
Development)
Peter J. Conner 59 Vice President (Government Relations)
Kevin M. Mullins 45 Vice President (Sales and Marketing)
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 from 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 2000 to 2004. 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.
-6-
ITEM 3 - LEGAL PROCEEDINGS
There was no material litigation during fiscal 2000.
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 2000 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 2000
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 2000 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 2000 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 20 of
the Company's 2000 Annual Report, which is filed herewith as Exhibit 13.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-7-
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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, including certain information incorporated herein by reference to the
information appearing in the Company's definitive Proxy Statement concerning
C. Michael Daley, who is also Chairman of the Board, Chief Executive Officer and
Treasurer of the Company, is set forth in Part I, Item 1 under the heading
"Executive Officers of the Registrant" and information concerning Directors,
including Mr. Daley, is incorporated by reference to the sections entitled
"Proposal No. 1 - Election of Directors" and "Board of Directors" in the
Registrant's definitive Proxy Statement for its Annual Meeting of Stockholders
to be held July 19, 2000.
There is incorporated herein by reference to the discussion under "Principal and
Management Stockholders - Compliance with Section 16(a) of the Securities
Exchange Act of 1934" in the Company's definitive Proxy Statement for its Annual
Meeting of Stockholders to be held July 19, 2000 the information with respect to
any delinquent filings of reports pursuant to Section 16(a) of the Securities
Exchange Act of 1934.
ITEM 11 - EXECUTIVE COMPENSATION
Information required by this Item is incorporated herein by reference to the
information appearing in the Company's definitive Proxy Statement for its Annual
Meeting of Stockholders to be held on July 19, 2000 under the heading "Executive
Compensation."
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated herein by reference to the
information appearing in the Company's definitive Proxy Statement for its Annual
Meeting of Stockholders to be held on July 19, 2000 under the heading "Principal
and Management Stockholders."
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 incorporated by reference and attached as
exhibit 13:
(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 2000 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
-8-
(2) CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
-----------------------------------------
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. Supply Agreement with Motorola (incorporated by reference to exhibit 10J
to the Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1986 (the "1986 Form 10-K"))
10B. Agreement with the City of Los Angeles dated March 9, 1989 (incorporated
by reference to exhibit 10K to File No. 33-27457)
10C. 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")
10D. 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)
10E.++ 1985 Non-Qualified Stock Option Plan, as amended (incorporated by
reference to exhibit 10F to the 1992 Form 10-K)
10F.++ Directors' Compensation Plan (incorporated by reference to exhibit 10G
to the 1992 Form 10-K)
10G.++ LoJack Corporation Restated and Amended Stock Incentive Plan
(incorporated by reference to Exhibit 10H to the
1994 Form 10-K)
10H.++ 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")
10I.++ Amendment Number Two to Restated and Amended Stock Incentive Plan
10J. Form of Agreement with respect to options granted to certain officers and
employees (incorporated by reference to exhibit 10H to File No. 33-27457)
10K. 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 the 1992 Form 10-K)
10L. Accepted Proposal by LoJack Corporation to the Massachusetts
Department of Public Safety (incorporated by reference to exhibit 10F to
File No. 2-74238-B)
10M. 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)
10N. 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)
-9-
10O. 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"))
10P. 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 the 1993 Form 10-K)
10Q.++ Form of Senior Management Option (incorporated by reference to exhibit
10Z to 1993 Form 10-K)
10R. 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 the 1993 Form 10-K)
10S. 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 the 1993 Form 10-K)
10T. 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)
10U. 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")
10V. Memorandum of Understanding dated February 28, 1994 with Rhode Island
State Police (incorporated by reference to Exhibit 10dd to the 1995
Form 10-K)
10W. Contract dated July 15, 1993 with the State of Connecticut (incorporated
by reference to Exhibit 10ee to the 1995 Form 10-K)
10X. 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)
10Y. 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)
10Z. 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)
10aa. 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)
10bb. 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)
10cc. 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 (incorporated by reference to Exhibit 10jj to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1997
(the "1997 Form 10-K"))
10dd. Fourth Amendment to Loan Agreement dated as of February 28, 1997 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 (incorporated by reference to Exhibit 10ll to the 1997
Form 10-K)
10ee. License, Trademark and Supply Agreement dated September 10, 1996 between
LoJack International and S1 Corporation, Seoul, Korea (incorporated by
reference to Exhibit 10nn to the 1997 Form 10-K)
10ff. Agreement dated September 1, 1996 between LoJack Corporation and the
Texas Department of Public Safety (incorporated by reference to
Exhibit 10oo to the 1997 Form 10-K)
10gg. Agreement between Commonwealth of Pennsylvania, Pennsylvania State Police
and LoJack Corporation dated May 14, 1996 (incorporated by reference to
Exhibit 10pp to the 1997 Form 10-K)
10hh. Agreement between the Maryland Department of State Police and LoJack
Corporation dated November 8, 1996 (incorporated by reference to Exhibit
10qq to the 1997 Form 10-K)
10ii. 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. (incorporated by reference to Exhibit
10uu to the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1998 (the "1998 Form 10-K"))
10jj. 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.
(incorporated by reference to Exhibit 10ww to the Company's Annual Report
on Form 10-K for the fiscal year ended February 28, 1999 (the "1999 Form
10-K"))
-10-
10kk. 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. (incorporated by reference to Exhibit 10xx to
the 1999 Form 10-K)
13.* 2000 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
- --------------------
* Indicates an exhibit which is filed herewith.
++ 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.
-11-
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 26th day of May 2000.
LOJACK CORPORATION
(Registrant)
BY: /s/ C. Michael Daley
-----------------------
C. Michael Daley
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in their capacities and on the date indicated.
Signature Capacity Date
- --------- -------- ----
/s/ C. Michael Daley Director, Chairman, Chief May 26, 2000
- -------------------- Executive Officer, and Treasurer
C. Michael Daley (Principal Executive Officer)
/s/ Robert J. Murray Director May 26, 2000
- --------------------
Robert J. Murray
/s/ James A. Daley Director May 26, 2000
- ------------------
James A. Daley
/s/ Lee T. Sprague Director May 26, 2000
- ------------------
Lee T. Sprague
/s/ Larry C. Renfro Director May 26, 2000
- ----------------------
Larry C. Renfro
/s/ Harvey Rosenthal Director May 26, 2000
- ----------------------
Harvey Rosenthal
/s/ Joseph F. Abely President and Chief Operating May 26, 2000
- ---------------------- Officer (Principal Financial
Joseph F. Abely and Accounting Officer)
-12-
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
-13-
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 29, 2000 and February 28, 1999, and for each of the
three years in the period ended February 29, 2000, and have issued our report
thereon dated April 20, 2000. Such consolidated financial statements and report
are included in your 2000 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(a)(2). 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 20, 2000
F-1
SCHEDULE II
LOJACK CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED FEBRUARY 29, 2000
AND FEBRUARY 28, 1999 AND 1998
- --------------------------------------------------------------------------------
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 29, 2000 $526,537 $212,290 $(108,445) (1) $630,382
======== ======== ========= ========
February 28, 1999 $579,187 $ 99,103 $(151,753) (1) $526,537
======== ======== ========= ========
February 28, 1998 $553,442 $217,139 $(191,394) (1) $579,187
======== ======== ========= ========
WARRANTY RESERVE:
For the year ended:
February 29, 2000 $476,966 $168,476 $(161,178) $484,264
======== ======== ========= ========
February 28, 1999 $482,731 $185,584 $(191,349) $476,966
======== ======== ========= ========
February 28, 1998 $388,679 $358,447 $(264,395) $482,731
======== ======== ========= ========
(1) Net accounts written off
F-2