Back to GetFilings.com
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[ ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year
or
[X] Transition Report pursuant Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from March 1, 2001 to December 31,
2001
Commission File No. 1-8439
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.)
200 Lowder Brook Drive, Suite 1000
Westwood, Massachusetts 02090
(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: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Preferred Share Purchase Rights
(Title of Class)
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 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 registrant's common stock, $.01 par value (the
"Common Stock") held by non-affiliates was approximately $77,265,000 as of March
27, 2002. The aggregate market value of Common Stock indicated is based upon the
last traded price of the Common Stock as reported by NASDAQ on March 27, 2002.
As of March 27, 2002, there were issued and outstanding 14,998,321 shares of the
registrant's Common Stock.
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Stockholders for the ten
months ended December 31, 2001 (Items 5, 6, 7, 7A, 8 and 14(a)(1))
(2) Portions of the definitive Proxy Statement for the registrant's Annual
Meeting of Stockholders to be held on May 30, 2002 (Items 10, 11, and 12)
LOJACK CORPORATION
Table of Contents
Securities and Exchange Commission
Item Number and Description Page
- --------------------------- ----
PART I
ITEM 1. Business................................................................................................1
ITEM 2. Properties..............................................................................................8
ITEM 3. Legal Proceedings.......................................................................................8
ITEM 4. Submission of Matters to a Vote of Security Holders.....................................................8
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters...............................8
ITEM 6. Selected Financial Data.................................................................................8
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................................................8
ITEM 7A. Quantitative and Qualitative
Disclosures about Market Risk...........................................................................8
ITEM 8. Financial Statements and Supplementary Data.............................................................8
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.....................................................................9
PART III
ITEM 10. Directors and Executive Officers of the Registrant......................................................9
ITEM 11. Executive Compensation..................................................................................9
ITEM 12. Security Ownership of Certain Beneficial Owners and Management..........................................9
ITEM 13. Certain Relationships and Related Transactions..........................................................9
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........................................9
SIGNATURES..........................................................................................................13
INDEX TO INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENT SCHEDULE..............................................14
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. All outstanding shares beneficially owned by executive officers and
directors of the registrant or by any shareholder beneficially owning more than
10% of the 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 corporate offices are located at 200 Lowder Brook
Drive, Suite 1000 in Westwood, MA 02090. Its telephone number is (781) 326-4700.
LoJack develops 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 develops and markets 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 vehicle 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, and is reported in a
jurisdiction where the LoJack System is operational, a unique radio signal will
be transmitted automatically to the LoJack Unit in the stolen vehicle activating
its tracking signal. 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, can detect the tracking signal emitted from the
LoJack Unit.
The Company's revenues in the United States are derived primarily from the sale
of LoJack Units and related products, including alarms and extended warranties,
to consumers. Approximately 94% of domestic sales are made through a
distribution network consisting of new and used automobile dealers. The Company
has strong consumer brand awareness in the United States, originally built in
the cars and light trucks market, and is expanding its brand awareness to the
commercial fleet and construction markets.
The Company also derives revenues from license fees, sales of products, and
royalties pursuant to agreements to license the use of the Company's stolen
vehicle recovery system technology, to over 25 international markets. In
connection with this international expansion, the Company modified its stolen
vehicle recovery technology to have the flexibility of operating independently
of existing law enforcement communication networks.
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. LoJack or a LoJack subsidiary generally owns the Law Enforcement
Components. 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 years. To date, all such
agreements that 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 Company has no legal obligation to retail customers to
provide ongoing systems support and maintenance or to refund any of the purchase
price if these contracts expire and are not renewed, or are terminated either by
LoJack or by the local law enforcement agencies.
1
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 Year Operational
- ------------ ----------------
Arizona 1998
California:
Los Angeles County 1990
Northern California 2000
San Diego and Orange County 1995
San Bernadino, and Riverside 1997
San Francisco and San Jose Counties 2000
Ventura County 1998
Colorado 2001
Connecticut 1995
Delaware 1998
District of Columbia 1994
Florida:
Dade, Broward,
Palm Beach and surrounding areas; 1988
St. Lucie and Martin
Counties, and surrounding areas; 1994
Tampa, St. Petersburg and
surrounding areas in West Florida; 1994
Orlando and surrounding area; 1996
Ft. Myers and Jacksonville 1999
Georgia 1992
Illinois 1990
Louisiana 2001
Maryland 1997
Massachusetts 1986
Michigan 1990
Nevada 2000
New Hampshire 1998
New Jersey 1990
New York 1994
Pennsylvania 1997
Rhode Island 1994
Texas:
Dallas 1997
Houston 1998
San Antonio and Austin 2000
Virginia 1993
The Company's strategic plan for the operation of its stolen vehicle recovery
network in the United States is to increase dealer penetration in its existing
domestic markets and to expand the use of its technology to those international
markets where the combination of new vehicle sales, population density, and the
incidence of vehicle theft is high.
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. The
microprocessor activates the Unit's transmitter upon receipt of its unique
2
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 automatically upon entry of information in the police
computer system in a jurisdiction in which the LoJack System is operational that
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.
For each vehicle equipped with a LoJack Unit, the SAC contains the vehicle
identification number ("VIN") assigned by the vehicle's 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. If
a match is found, the SAC causes the SAT network to broadcast the appropriate
activation command. Police officers who receive the corresponding reply code
through their PTC's call dispatch and receive a description of the transmitting
vehicle. After recovery, the officer reports to dispatch, which enters the
vehicle as recovered. That 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.
NEW DEVELOPMENTS
LoJack Uplink. LoJack Uplink is being developed to provide the capability for
communications from the LoJack Unit in the customer vehicle back to the LoJack
Control Center. LoJack Uplink has been approved by the FCC. The uplink
capability opens the possibility for new features and services to be added to
LoJack's stolen vehicle recovery system. LoJack Early Warning(TM), the first
Uplink product, will provide early notification to the vehicle owner in the
event an unauthorized user is operating the vehicle. LoJack expects to introduce
LoJack Early Warning(TM) in 2002.
LoJack Unit #4 and #5. LoJack is continuing the parallel development of two new
LoJack Units, which will replace the current LoJack Unit #3. While functionally
the same as the current LoJack Unit, the new versions will be re-engineered to
take advantage of leading Radio Frequency (RF) technology. It is anticipated
that both the LoJack Unit #4 and #5 will be available in 2003.
LoJack LoCate. LoJack continues its development of a Global Positioning
Satellite System (GPS) based telematics product and service to address potential
market opportunities. The Company continues to evaluate markets of potential
interest and anticipates the introduction of LoJack LoCate during 2003.
3
MARKETING AND DISTRIBUTION OF LOJACK UNITS - UNITED STATES
LoJack's marketing approach 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 and extended warranties. The
Company markets through a national sales force that routinely visits franchised
new car dealers to educate and train dealership personnel on the benefits of the
LoJack System. Like other options, the LoJack Unit and related products usually
can 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. LoJack also offers an extended
warranty at point of sale to new customers and through direct sales efforts to
existing customers.
LoJack is exploring additional channels of distribution, including marketing
through insurers, retail electronic stores, and direct through partnerships.
In addition to distributing LoJack Units through its internal sales force and
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. Unlike the LoJack System currently
operational in the United States, the product available to our international
markets has the flexibility of operating independently of existing law
enforcement communication networks.
The Company targets its product 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 the LoJack System in other selected
international markets on the same basis as described above.
LoJack Corporation has decided to make direct investments in licensee operations
which offer significant market opportunity for LoJack Unit sales. The Company
focuses on markets that have high per capita thefts, high annual recurring sales
of new vehicles, and large numbers of vehicles operating in the area. The
Company expects to leverage its close relationship with its international
partners to continue to better understand the business models of its licensees
and to develop a global technology roadmap. In December 2001, the Company
acquired a 7.9% equity interest in its French licensee.
In accordance with SEC Staff Accounting Bulletin No. 101, effective March 1,
2000, the Company recognizes up-front international license fee revenues over
the initial term of the license, typically ten years. Prior to fiscal 2001,
non-refundable fees received in connection with the granting of international
licenses to implement and operate components of the LoJack System were generally
recognized upon the receipt of the fees, or in the case of deposits, once they
became non-refundable.
As of December 31, 2001, the Company had licensees to provide stolen vehicle
recovery systems using LoJack's technology in the following countries:
Argentina, Bahamas, Belize, Brazil, Colombia, Costa Rica, Ecuador, El Salvador,
France, Germany, Greece, Guatemala, Honduras, Hong Kong, Kenya, Korea, Mexico,
Nicaragua, Nigeria, Panama, Poland, Portugal, Russia, South Africa, Spain,
Trinidad and Tobago, Uganda, United Kingdom, Uruguay and Venezuela. The Company
is also pursuing similar agreements for other countries.
Approximately 17% of the Company's revenues in the ten months ended December 31,
2001 were derived from sales and license fees to international customers. These
revenues were comprised of product sales and licensing revenues from
unaffiliated customers in foreign countries. Most of the Company's foreign
product sales are covered by letters of credit, are
4
insured through EXIM Bank, or require payment in advance from the licensee. The
Company, from time to time, may grant extended payment terms to its customers
for amounts not covered by export insurance or prepayments. In those cases, the
Company recognizes revenue upon shipment of the product, or when payment becomes
reasonably assured, whichever is later. (See Notes 1, 10 and 11 in the Notes to
the Consolidated Financial Statements, which are included in the portions of
LoJack's December 31, 2001 Annual Report 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 a stolen vehicle recovery system.
In connection with its domestic operations, the Company must obtain the approval
of law enforcement agencies 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 adverse 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, individual insurance carriers make the
determination. 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 is working directly with the
insurance industry to explore the feasibility of initiating marketing programs
directly with insureds. 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.
PRODUCT WARRANTY
LoJack Unit, Starter Disabler, LoJack Shock Sensor or LoJack Alarm System.
LoJack warrants to consumers that the LoJack Unit and related products will be
free from defects in material or workmanship for a period of two years from the
date of installation. If the product proves to be defective in material or
workmanship, the Company will, at its option, either replace the product or will
provide without charge the labor and parts necessary to remedy any such defects
at a LoJack operated installation center.
Limited recovery warranty. LoJack also warrants to original purchasers of LoJack
Units that if their LoJack equipped vehicle is stolen and reported in a covered
jurisdiction within two years of installation and not recovered within 24 hours
from the time that the theft is reported to the police, LoJack will pay the
consumer an amount equal to the full purchase price of the LoJack Unit up to a
maximum of $595.
LoJack Guarantee Plus 5000. If this additional warranty is purchased, LoJack
warrants to the original purchaser of a LoJack Unit, for a period of five years
from the date of installation, that if the purchaser's vehicle becomes a total
loss due to theft or is not recovered in 30 days from the time the theft is
reported to the police, the consumer will receive $2,500 plus an additional
$2,500 toward the purchase or lease of a replacement vehicle if the purchaser
returns to the original dealer. Presently, the risk relating to warranty claims
is fully covered by third party insurance companies.
5
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. The
Company has sought, and in the future intends to seek, patent protection when
appropriate to protect the results of its research and development efforts.
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 tracking 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.
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. Management believes the
competition is based on the choice between the functionality of a theft
prevention device versus a vehicle recovery device.
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.
CONTRACT MANUFACTURER ARRANGEMENTS
LoJack has contract manufacturer arrangements for the LoJack Unit, new products
and LoJack System Components. The Company has utilized Motorola, Inc. for over
15 years to manufacture the LoJack Unit, which is designed for automated
production using surface mounted technology. 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.
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 the ten months ended December 31, 2001 and fiscal years ended February
28, 2001 and February 29, 2000, LoJack had company-sponsored research and
development expenses of approximately $2,634,000, $1,200,000 and $1,057,000,
respectively, while software product development costs of $194,000, $534,000 and
$291,000, respectively, were capitalized.
EMPLOYEES
As of December 31, 2001, the Company and its subsidiaries had approximately 620
full-time employees.
6
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's executive officers is set forth below.
Name Age Title
- ---- --- -----
Ronald J. Rossi 62 Chairman and Chief Executive Officer
Joseph F. Abely 49 President, Treasurer and Chief Operating Officer
William R. Duvall 50 Senior Vice President
Peter J. Conner 61 Vice President (Government Relations)
Kevin M. Mullins 47 Vice President (Sales)
Keith E. Farris 54 Vice President (Finance) and Chief Financial Officer
Donna M. Driscoll 49 Vice President (Marketing)
Mr. Rossi joined LoJack in November 2000 as Chief Executive Officer. He became a
director and was elected Chairman of the Board effective May 21, 2001. Prior to
joining LoJack, Mr. Rossi spent 35 years with the Gillette Company, progressing
through a variety of management positions in sales, marketing, and general
management in the United States, Canada and Puerto Rico. Mr. Rossi served as
President of Oral-B Worldwide, a Gillette Company, from 1998 to 2000. From 1988
to 1998 he was President of Gillette North America; previous positions include
President of Gillette Canada and President of Braun/Canada. Mr. Rossi has been a
member of the board of the Mentor Corporation since January, 2000 and has served
on the executive board of the Massachusetts Bay Red Cross from 1993 to 1998, on
the board of the New England Sports Museum from 1993 to 1998, and as chairman of
the Canadian Cosmetic and Toiletry Fragrance Association since 1987.
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 and a director in November 2000. 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. He was appointed President of LoJack International in
2001. 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. 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.
Mr. Mullins joined LoJack in February 1996 and is Vice President of Sales.
Mr. Mullins served as Vice President of Sales and Marketing of LoJack from
February 1996 until May 2001. 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. Farris joined LoJack in October 2000 as Vice President of Finance and Chief
Financial Officer. From August 1996 to October 2000, Mr. Farris served as Vice
President of Finance and Chief Financial Officer of Arkwright, Inc., a
manufacturer of digital imaging supplies. From 1981 to August 1996, Mr. Farris
held various financial management positions at Digital Equipment Corporation.
Mr. Farris is a Certified Public Accountant.
Ms. Driscoll joined LoJack in May 2001 and is Vice President of Marketing. From
1999 to 2000, she was Chief Marketing Officer for Roxy.com, an on-line retailer
of consumer electronics. Ms. Driscoll previously served in a variety of
executive marketing positions at Citigroup from 1987 to 1992 and then again from
1997 to 1999; AT&T Capital Corp from 1994 to 1997 and Fidelity Investments from
1992 to 1994.
7
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.
ITEM 2 - PROPERTIES
The Company's executive offices are located at 200 Lowder Brook Drive, Westwood,
Massachusetts, under a lease for such space expiring in January 2007. In
addition, the Company leases various facilities in Arizona, Colorado,
California, Florida, Georgia, Illinois, Massachusetts, Michigan, Nevada, New
Jersey, Pennsylvania, Texas and Virginia under operating leases whose terms
expire from 2002 to 2006. 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.
ITEM 3 - LEGAL PROCEEDINGS
The Company was not a party to any material legal proceedings during the ten
months ended December 31, 2001, and the Company is not currently a party to any
material legal proceedings.
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" of the Company's December 31, 2001 Annual Report, which is filed
herewith as part of 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" of the Company's December 31, 2001
Annual Report, which is filed herewith as part of 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," of the Company's December 31, 2001 Annual Report,
which is filed herewith as part of Exhibit 13.
ITEM 7A - 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," of the Company's December 31, 2001 Annual Report,
which is filed herewith as part of 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 (including the notes thereto) and the
independent auditors' report thereon appearing in the December 31, 2001 Annual
Report, which is filed herewith as part of Exhibit 13.
8
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
Pursuant to General Instruction G(3) of Form 10-K and instruction 3 to Item
401(b) of Regulation S-K, 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" and information concerning Directors 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 May 30, 2002.
The discussion under "Section 16(a) Beneficial Ownership Reporting Compliance"
in the Company's definitive Proxy Statement for its Annual Meeting of
Stockholders to be held May 30, 2002 contains the information with respect to
any delinquent filings of reports pursuant to Section 16(a) of the Securities
Exchange Act of 1934 and is incorporated herein by reference.
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 May 30, 2002 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 May 30, 2002 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) (1) Consolidated Financial Statements
---------------------------------
The following financial statements and the report of the
independent auditors are incorporated by reference to the portions of
the Company's December 31, 2001 Annual Report, which are filed
herewith as Exhibit 13:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report Relating to the Consolidated Financial
Statements (and notes thereto)
(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):
9
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.
(b) Reports on Form 8-K
-------------------
On November 1, 2001, the Company filed a report on Form 8-K
indicating that on October 24, 2001, the Company's Board of Directors
approved a change in the Company's fiscal year end from the last day
of February to December 31, to be effective beginning December 31,
2001 and that a report on Form 10-K covering the ten months ended
December 31, 2001 (the transition period) will be filed in accordance
with the Securities and Exchange Commission filing requirements.
(c) Exhibits
--------
Certain of the exhibits listed hereunder have been previously
filed with the Commission as exhibits to certain registration
statements and periodic reports and, where indicated below, are
incorporated herein by reference pursuant to Rule 12b-32 promulgated
under the Securities Exchange Act of 1934.
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)
10
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 the 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, 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 (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"))
11
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"))
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)
10ll. Employment Agreement with Ronald J. Rossi dated November 20, 2000
(incorporated by reference to Exhibit 10ll to the 2001 Form 10-K).
10mm.* Seventh Amendment to Loan Agreement dated February 19, 2002 among
Fleet National Bank (formerly known as BankBoston NA) 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.
10nn.* Promissory Note dated October 4, 2001 between Car Security S.A. and
LoJack Corporation
10oo.* Guarantee dated as of October 4, 2001 by Carlos MacKinley in favor of
LoJack Corporation
10pp.* Pledge and Security Agreement dated as of October 4, 2001 made by
Carlos Roberto MacKinley in favor of LoJack Corporation.
10qq.* Pledge and Security Agreement dated as of October 4, 2001 made by
Roberto Bonanni Rey in favor of LoJack Corporation
13.* Portions of Annual Report to Stockholders which are incorporated by
reference in this Form 10-K
21.* Subsidiaries of the Registrant
23.* Consent of Deloitte & Touche LLP
- ----------
* Indicates an exhibit which is filed herewith.
++ Indicates an exhibit which constitutes an executive compensation plan.
12
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 Westwood,
Commonwealth of Massachusetts, on the 28th day of March 2002.
LOJACK CORPORATION
(Registrant)
BY: /s/Ronald J.Rossi
-------------------------------
Ronald J. Rossi
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/ Ronald J. Rossi Director, Chairman, and Chief Executive March 28, 2002
- ---------------------
Ronald J. Rossi Officer
/s/ Joseph F. Abely Director, President and Chief Operating March 28, 2002
- ---------------------
Joseph F. Abely Officer
/s/ Robert J. Murray Director March 27, 2002
- ---------------------
Robert J. Murray
/s/ Lee T. Sprague Director March 27, 2002
- ---------------------
Lee T. Sprague
/s/ Larry C. Renfro Director March 22, 2002
- ---------------------
Larry C. Renfro
/s/ Harvey Rosenthal Director March 24, 2002
- ---------------------
Harvey Rosenthal
/s/ John H. MacKinnon Director March 27, 2002
- ---------------------
John H. MacKinnon
/s/ Robert L. Rewey Director March 27, 2002
- ---------------------
Robert L. Rewey
/s/ Keith E. Farris Vice President (Finance) and Chief March 28, 2002
- ---------------------
Keith E. Farris Financial Officer
13
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
14
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 (the "Company") as of December 31, 2001 and February 28, 2001, and
for the ten month period ended December 31, 2001 and for the years ended
February 28, 2001 and February 29, 2000, and have issued our report thereon
dated March 6, 2002. Such consolidated financial statements and report are
included in your December 31, 2001 Annual Report to Stockholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedule of the Company, 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
Boston, Massachusetts
March 6, 2002
F-1
SCHEDULE II
LOJACK CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
TEN MONTHS ENDED DECEMBER 31, 2001 AND YEARS ENDED FEBRUARY 28,
2001 AND FEBRUARY 29, 2000.
- --------------------------------------------------------------------------------
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 ten months ended:
December 31, 2001 $602,000 $1,275,000 $(326,000)(1) $1,551,000(2)
======== ========== ========= ==========
For the year ended:
February 28, 2001 $630,000 $ 242,000 $(270,000)(1) $ 602,000
======== ========== ========= ==========
February 29, 2000 $527,000 $ 212,000 $(109,000)(1) $ 630,000
======== ========== ========= ==========
WARRANTY RESERVE:
For the ten months ended:
December 31, 2001 $459,000 $ 67,000 $ (96,000) $ 430,000
======== ========== ========= ==========
For the year ended:
February 28, 2001 $484,000 $ 98,000 $(123,000) $ 459,000
======== ========== ========= ==========
February 29, 2000 $477,000 $ 168,000 $(161,000) $ 484,000
======== ========== ========= ==========
(1) Net accounts written off
(2) Total includes $1,275,000 of bad debt reserves relating mainly to the
Company's licensee located in Argentina, a country experiencing
economic uncertainties.
F-2