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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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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 28, 1997
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
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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)
(617) 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 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 Common Stock of the registrant held by non-
affiliates was approximately $196,939,600 as of May 21, 1997.
As of May 21, 1997, there were issued and outstanding 18,931,841 shares of the
registrant's Common Stock, $.01 par value.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Stockholders for the fiscal
year ended February 28, 1997 (Items 5, 6, 7, 8 and 14(a)(1))
(2) Portions of the definitive Proxy Statement for Registrant's Annual Meeting
of Stockholders to be held on July 16, 1997 (Items 1, 10, 11, and 12)
LOJACK CORPORATION
Securities and Exchange Commission
Item Number and Description Page
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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 8. Financial Statements and Supplementary Data.................................... 7
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................................ 7
PART III
ITEM 10. Directors and Executive Officers of the Registrant............................. 7
ITEM 11. Executive Compensation......................................................... 8
ITEM 12. Security Ownership of Certain Beneficial Owners and Management................. 8
ITEM 13. Certain Relationships and Related Transactions................................. 8
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................ 8
SIGNATURES.................................................................................. 12
INDEX TO AUDITORS' REPORT AND FINANCIAL STATEMENT SCHEDULE.................................. 13
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 21, 1997.
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 (617) 326-4700.
LoJack developed and markets the LoJack System, a unique, patented system
designed to assist law enforcement personnel in locating, tracking and
recovering stolen vehicles. In addition, LoJack developed and markets
CarSearch, a product line of its patented LoJack System, designated for use in
international markets where it may not be practicable or desirable to implement
the fully integrated LoJack System.
The LoJack System is comprised of a Registration System maintained and operated
by LoJack; a Sector Activation System and Police Tracking Computers operated by
law enforcement officials (the "Law Enforcement Components"); and the LoJack
Unit, a VHF (very high frequency) transponder sold to consumers. The LoJack
System is designed to be integrated into existing law enforcement computers and
telecommunication networks and procedures. If a car equipped with a LoJack Unit
is stolen, its owner reports the theft as usual to the local police department.
Existing law enforcement computer and communication networks and procedures
operate in the normal manner for a report of a stolen vehicle. If the theft
involves a vehicle equipped with a LoJack Unit, a unique radio signal will be
transmitted automatically to the LoJack Unit in the stolen vehicle activating
its tracking signal. The tracking signal emitted from the LoJack Unit can be
detected by the Police Tracking Computer installed in police patrol cars and
aircraft throughout the coverage areas and used to lead law enforcement officers
to the stolen vehicle. The Company also sells conventional vehicle security
devices, which may be purchased as options with the LoJack Unit, under the names
"LoJack Prevent" and "LoJack Alert."
Operation of the LoJack System in the United States
Under agreements with state police agencies, LoJack generally furnishes the Law
Enforcement Components for distribution to state, county, and municipal law
enforcement agencies for a nominal rent. The installation, testing and
maintenance of the Law Enforcement Components are primarily the responsibility
of LoJack. The Law Enforcement Components are generally owned by LoJack or a
LoJack subsidiary; the respective state, county or city law enforcement agency
provides the necessary staff to operate the LoJack System as required during the
term of each such agreement. The agreements with the applicable law enforcement
agencies are generally for initial terms of up to five (5) years. To date, any
such agreements which have expired have been renewed or are in the process of
renewal. Renewal or extension of any such agreement may be subject to
competitive bidding.
The LoJack System has been implemented in the following domestic jurisdictions
pursuant to agreements with applicable law enforcement agencies:
Jurisdiction Date Operational
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Massachusetts July 1986
Rhode Island June 1994
Connecticut April 1995
New York June 1994
New Jersey March 1990
Pennsylvania March 1997
Maryland February 1997
District of Columbia September 1994
Virginia August 1993
Georgia August 1992
Florida:
Dade, Broward,
Palm Beach and surrounding counties; December 1988
Tampa, St. Petersburg and
surrounding counties in West Florida; and July 1994
Orlando April 1996
Michigan April 1990
1
Illinois November 1990
Texas May 1997
California:
Los Angeles County; July 1990
San Diego and Orange County June 1995
San Bernadino March 1997
The Company is presently pursuing negotiations with several law enforcement
agencies in the United States regarding the implementation of the LoJack System
in jurisdictions in addition to those mentioned above. The Company's strategy
is to expand the LoJack System to those jurisdictions where the combination of
new vehicle sales, population density, and the incidence of vehicle theft is
high. To date, LoJack has expanded into 15 of the original 16 markets it has
targeted. Certain improvements to the Company's technology and interface with
law enforcement systems have made expansion beyond the 16 targeted states
economically feasible for the Company. Accordingly, over the next two years the
Company plans to expand to certain jurisdictions which are contiguous to
existing LoJack coverage areas as well 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 a
computerized system that controls and commands the LoJack System and activates
LoJack Units in stolen vehicles. It is designed to function with existing law
enforcement computer and telecommunication networks and procedures. Routine and
normal processing of a stolen vehicle report activates the SAS, even if the
person reporting the theft and the officer responding are unfamiliar with the
LoJack System.
The Sector Activation Computer ("SAC") contains a file with up-to-date
information on vehicles equipped with LoJack Units. This computer works in
conjunction with pre-existing law enforcement computer and communication
systems. This file contains, for each LoJack equipped vehicle, the vehicle
identification number ("VIN") assigned by the vehicle's manufacturer, and the
activation and reply codes for the LoJack Unit installed in that vehicle.
When the VIN of a stolen vehicle is entered into existing stolen vehicle
reporting systems, it is compared automatically to those contained in the LoJack
file. When a match occurs, the SAC automatically transmits the appropriate
activation code.
2
Police officers who have detected the transmissions of an activated LoJack Unit
call into a dispatcher for a description of the transmitting vehicle. After the
vehicle is recovered, the VIN is again entered into the SAC to generate the
appropriate deactivation code and to reset the LoJack Unit for future use.
The SAC controls a network of radio transmitters positioned on sites throughout
the coverage area. The SAC accepts stolen vehicle reports from the state law
enforcement computer and initiates activations and deactivations of LoJack
Units.
Registration System. The Registration System is a proprietary method of
assigning digital codes to be transmitted and received by LoJack Units in such
manner that unique activation codes are permanently correlated with the unique
VIN assigned to the vehicle in which the LoJack Unit has been installed.
Marketing and Distribution of LoJack Units - United States
LoJack's marketing approach in each jurisdiction focuses on franchised new car
dealers who will offer the LoJack Unit as an option on both their new and used
car sales. LoJack also markets conventional vehicle security devices sold under
the names "LoJack Prevent" and "LoJack Alert."
LoJack's sales force routinely visits franchised new car dealers to educate and
train dealership personnel in 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 and demand.
LoJack also has plans to intensify its efforts to market 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 new 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. The Company does not anticipate making any direct
investment in the operations of foreign licensees in the foreseeable future.
However, the Company has been granted an option, exercisable through March 1998,
to purchase up to 5% of the outstanding common stock of its United Kingdom
licensee. 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.
3
As of February 28, 1997, the Company had Licensees operating stolen vehicle
recovery systems using LoJack's technology in the following countries: the
United Kingdom, Slovak Republic, the Czech Republic, Greece, Ecuador, Colombia,
Trinidad and Tobago, Hong Kong, Argentina, Russia, Venezuela, South Africa,
Kenya and Korea. The Company also has entered into agreements to license the use
of LoJack's technology in countries such as Germany, Mexico, Brazil and the
Peoples Republic of China. 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 certain governmental approval which may be time consuming or
may not be obtained, as well as adequate financing. The Company is also pursuing
similar agreements for other countries.
Approximately 16% of the Company's revenues in fiscal 1997 were derived from
export revenues. These revenues were comprised of product sales and licensing
revenues from unaffiliated customers in foreign countries. Approximately 95% of
the Company's foreign product sales are covered by letters of credit or require
payment in advance from the licensee. (See Note 9 to the Notes to Financial
Statements which are included in LoJack's 1997 Annual Report which is filed as
Exhibit 13 hereto.)
Government Regulation and Approval
In 1989, the FCC put into effect a rule change to allocate frequency 173.075 MHz
for nationwide use by state and local law enforcement agencies for stolen
vehicle recovery systems. Law enforcement agencies in jurisdictions where the
Company operates have been granted authority by the FCC to use this frequency
for LoJack's stolen vehicle recovery system.
In connection with its domestic operations, the Company must obtain the approval
of law enforcement agencies, as well as executive or legislative bodies, for
implementation of the LoJack System before sales of LoJack Units can commence in
a given jurisdiction. The approval process may be time consuming and costly and
is subject to considerations generally affecting the process of governmental
decision making. In some jurisdictions, governmental approval may be terminable
at the convenience of the executive or legislative body. Any such termination
could have a material effect on future sales in any such jurisdiction.
If LoJack were to seek to charge more than nominal prices for the Law
Enforcement Components, governmental appropriation of funds will be required.
Most government agencies have established, by policy, statute or regulation, a
process requiring competitive bidding for all acquisitions of products and
equipment. This process may cause delay and expense to the Company. To date,
the Company has not sought to charge law enforcement agencies more than nominal
prices for the Law Enforcement Components, and does not expect to do so in the
near future.
Automobile Insurance Benefits
Management considers automobile insurance premium discounts to be an inducement
for the purchase of LoJack Units by vehicle owners. The application of insurance
premium discounts, which are generally applied to the vehicle owner's
comprehensive insurance, varies from state to state and, in some cases, from
insurance company to insurance company. For example, insurance regulations in
some states, such as Massachusetts, Rhode Island, New York and New Jersey,
provide for mandated insurance discounts for automobiles protected by automobile
security systems. In other states, such as California, where the granting of
such discounts is not regulated, the determination is made by individual
insurance carriers. Currently, insurance discounts, which vary from state to
state, and nationally by certain insurance carriers, provide for discounts of up
to 35% on comprehensive insurance premiums for vehicles equipped with a vehicle
recovery and anti-theft device. There is also pending legislation in some states
where the LoJack System is operational which would establish or increase
discounts available to vehicle owners who install the LoJack Unit. Since the
insurance industry is, in general, heavily regulated, the process of seeking
voluntary or mandatory discounts for vehicles may involve significant time and
effort by LoJack.
Product Warranty
LoJack warrants to consumers that the LoJack Unit will be free from defects in
material or workmanship for a period of two years, subject to extension at the
customer's option for an additional charge. LoJack also warrants to purchasers
of LoJack Units that if their LoJack equipped vehicle is stolen within two years
of installation and not recovered within 24 hours from the time that the report
of the theft is reported to the police, LoJack will refund the full purchase
price of the LoJack Unit up to a maximum of $595.
Patents and Trademarks
4
LoJack holds United States Patent Nos. 4,818,998 and 4,908,629, which expire in
2006 and 2007, respectively, covering the LoJack System. The Company also holds
patents in various countries in Europe, Asia, South America, and North America.
Patent protection has also been sought by LoJack in several other countries.
Although management believes the patents have value, there can be no assurance
such patents will effectively deter others from manufacturing and marketing a
stolen vehicle recovery system. LoJack's name and logo are registered
trademarks in the United States and many foreign countries.
Competition
Several competitors or potential competitors are marketing or have announced the
development of products, including those which are GPS-based, which claim to
have stolen vehicle recovery features which 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 potential competitors require consumers 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 stolen vehicle recovery
industry may 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 Units, 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.
LoJack subcontracts with Micrologic, Inc. ("Micrologic") of Waltham,
Massachusetts, to perform a substantial portion of the engineering, design and
implementation of the LoJack and CarSearch Systems in new jurisdictions as well
as to perform certain research and development. LoJack owns all rights in any
new developments created by Micrologic as a subcontractor of LoJack.
LoJack has granted to Micrologic, through April 2000, the exclusive rights to
assemble Police Tracking Computers. LoJack believes that other companies have
the same capabilities as Micrologic, but that changing to a new subcontractor
for these tasks could involve delays and additional cost to LoJack.
Inventory
LoJack seeks to maintain a 60-day supply of LoJack Units, which it believes is
in line with sales levels and sufficient to rapidly fulfill orders. The Company
maintains an inventory of certain Law Enforcement Components beyond its current
requirements in order to facilitate expansion into additional domestic markets.
Research and Development
During fiscal years 1997, 1996 and 1995 the approximate amounts spent by LoJack
on company-sponsored research and development activities were $518,000,
$516,000, and $330,000, respectively.
In December 1995, LoJack Venture Corporation, a wholly owned subsidiary of
LoJack and Micrologic entered into a joint venture for the purpose of developing
the next generation of the LoJack Unit and other related exploitable technology.
LoJack Venture Corporation and Micrologic have equal ownership interests in the
joint venture. The joint venture shall own all technology and other
intellectual property that is developed by the joint venture or by Micrologic
under contract to the joint venture, excluding any improvements on United States
Patents held by LoJack. The joint venture has granted LoJack exclusive rights,
with the right to sublicense, to make, use and sell all products relating to the
next generation of the LoJack Unit ("LJU III") in exchange for certain royalty
payments based on the number of units sold. The technology contemplated by the
joint venture, the LJU III, is currently undergoing production validation
testing. Barring any unforeseen delays, the Company estimates that this product
could be ready for manufacturing by year end, although the Company can give no
assurances concerning the timing of commercial introduction of the LJU III or
its potential commercial success.
5
Employees
As of May 21, 1997, the Company and its subsidiaries had a total of 377 full-
time employees.
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 16, 1997, 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 44 President and Chief Operating Officer
William R. Duvall 45 Senior Vice President (Operations and Technical Development)
Peter J. Conner 56 Vice President (Government Relations)
Kevin M. Mullins 42 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 since 1985. Mr.
Abely is a Certified Public Accountant.
Mr. Duvall joined LoJack in 1985 and is Senior Vice President of Operations and
Technical Development. From 1984 to 1985, he was a part owner and manager of
Rich's Car Tunes, a company engaged in the sale and installation of consumer
electronic products in the automotive aftermarket. For six years prior to 1984,
Mr. Duvall was Vice President of Marketing and Sales for Analog and Digital
Systems, Inc., a manufacturer of consumer electronic products.
Mr. Mullins joined LoJack in February 1996 and was appointed Vice President of
Sales and Marketing as of March 1, 1996. From 1976 until joining LoJack Mr.
Mullins served in a variety of positions at Proctor & Gamble Company, Inc.,
including District Sales Manager, Customer Business Development Manager, and
most recently as Northeast Operation Manager.
Mr. Conner joined LoJack in 1985 and is Vice President of Government Relations.
From 1982 to 1985, he was a franchise director for Continental Cablevision of
Boston, Massachusetts. From 1980 to 1982, Mr. Conner was a franchise director
for American Television Communications of Denver, Colorado, a cable television
operator.
Each executive officer is elected for a term scheduled to expire at the meeting
of Directors following the annual meeting of Stockholders or until a successor
is duly chosen and qualified. There are no arrangements or understandings
pursuant to which any executive officer was or is to be selected for election or
reelection. There are no family relationships among any Directors or executive
officers, except that C. Michael Daley, a Director and executive officer, and
James A. Daley, a Director, are brothers.
ITEM 2 - PROPERTIES
The Company's executive offices are located at 333 Elm Street, Dedham,
Massachusetts, under a lease for such space expiring in May 2001. In addition,
the Company leases various facilities in Massachusetts, New Jersey, Michigan,
California, Illinois, Georgia, Virginia, Florida and Texas under operating
leases whose terms expire from 1998 to 2002. 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.
6
ITEM 3 - LEGAL PROCEEDINGS
None.
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 the inside front cover of the Company's 1997 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 1997
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 1997 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 auditors' report thereon appearing on pages 9 through 19 of the
Company's 1997 Annual Report, which is filed herewith as Exhibit 13.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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 16, 1997.
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 16, 1997 the information with respect to
any delinquent filings of reports pursuant to Section 16(a) of the Securities
Exchange Act of 1934.
7
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 16, 1997 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 16, 1997 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 included as part of this report:
(1) Financial Statements
The following financial statements of the Company and
the independent auditors' report are incorporated by reference
to the Company's 1997 Annual Report:
Independent Auditors' Report Relating to the Consolidated
Financial Statements (and notes thereto)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule
The following report and 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 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
8
Practice. The location of each document so incorporated by
reference is indicated by footnote.
3A. Restated Articles of Organization (incorporated by reference to exhibit
3A filed with the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1994 (the "1994 Form 10-K"))
3B. Amended By-Laws (incorporated by reference to exhibit 3B filed with the
Company's Annual Report on Form 10-K for the fiscal year ended February
29, 1992 (the "1992 Form 10-K"))
4A. Specimen Share Certificate (incorporated by reference to exhibit 4A to
File No. 2-74238-B)
4A1. Amended Specimen Share Certificate (incorporated by reference to exhibit
4B to File No. 2-98609)
10A. Volume Assembly Contract with Micrologic, Inc. (incorporated by
reference to exhibit 10I to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1986 (the "1986 Form 10-K"))
10B. Supply Agreement with Motorola (incorporated by reference to exhibit 10J
to the 1986 Form 10-K)
10C. Agreement with the City of Los Angeles dated March 9, 1989 (incorporated
by reference to exhibit 10K to File No. 33-27457)
10D. Contract between the State of Michigan and LoJack Corporation dated as
of April 24, 1989 (incorporated by reference to exhibit 10O filed with
the Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1990 (the "1990 Form 10-K"))
10E. Agreement between LoJack Corporation and the Illinois State Police dated
as of August 23, 1990 (incorporated by reference to exhibit 10P to the
1990 Form 10-K)
10F.++ 1985 Non-Qualified Stock Option Plan, as amended (incorporated by
reference to exhibit 10F to 1992 Form 10-K)
10G.++ Directors' Compensation Plan (incorporated by reference to exhibit 10G
to 1992 Form 10-K)
10H.++ LoJack Corporation Restated and Amended Stock Incentive Plan
(incorporated by reference to Exhibit 10H to the 1994 Form 10-K)
10I.++ Amendment Number One to Restated and Amended Stock Incentive Plan
(incorporated by reference to Exhibit 10ss filed with the Company's
Annual Report on Form 10-K for the fiscal year ended February 29, 1996
(the "1996 Form 10-K"))
10J.*++ Amendment Number Two to Restated and Amended Stock Incentive Plan
10K. Form of Agreement with respect to options granted to certain officers
and employees (incorporated by reference to exhibit 10H to File No. 33-
27457)
10L. Lease Agreement LoJack Sector Activation System dated February 23, 1988
between Recovery Systems, Inc. and the Florida Department of Motor
Vehicles (incorporated by reference to exhibit 10K to 1992 Form 10-K)
10M. Accepted Proposal by LoJack Corporation to the Massachusetts Department
of Public Safety (incorporated by reference to exhibit 10F to File No.
2-74238-B)
10N. Lease Agreement between Auto Recovery Systems, Inc. and the State of New
Jersey dated July 31, 1989 (incorporated by reference to exhibit 10M to
1992 Form 10-K)
10O. Loan Agreement dated December 10, 1993 among The First National Bank of
Boston and LoJack Corporation, LoJack Midwest Corporation, LoJack of New
Jersey Corporation, Recovery Systems, Inc. and CarSearch Corporation
(incorporated by reference to Exhibit 10N to the 1994 Form 10-K)
10P. Lease Agreement Number VA-901212-LOJ between LoJack Corporation and the
Commonwealth of Virginia dated September 17, 1991 (incorporated by
reference to exhibit 10W to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1993 (the "1993 Form 10-K"))
10Q. Lease Agreement between LoJack Corporation and the State of Georgia
Department of Public Safety dated June 6, 1991 (incorporated by
reference to exhibit 10X to 1993 Form 10-K)
10R.++ Form of Senior Management Option (incorporated by reference to exhibit
10Z to 1993 Form 10-K)
10S. License, Trademark and Supply Agreement dated July 16, 1992, by and
between Carsearch Corporation, a subsidiary of LoJack Corporation, and
Secar, Ltd. Kutuzovovn, Bratislava, Czechoslovakia (incorporated by
reference to exhibit 10aa to 1993 Form 10-K)
10T. Patent License and Ancillary Know-How Agreement dated December 30, 1991,
and Second Amendment (relating to the Patent, License and Know-How
Agreement of December 30, 1991), dated January 29, 1993, (the Second
Amendment incorporates by reference the First Amendment to the Patent,
License and Know-How Agreement dated April 27, 1992 which is
superseded), each by and between LoJack Corporation and Stolen Vehicle
Recovery Systems Limited, Aylesbury, Buckingham, UK (incorporated by
reference to exhibit 10bb to 1993 Form 10-K)
10U. Agreement dated January 21, 1994 between the New York Division of State
Police and LoJack Corporation (incorporated by reference to Exhibit 10aa
to the 1994 Form 10-K)
10V. Memorandum of Understanding dated July 29, 1993 with the District of
Columbia Metropolitan Police Department (incorporated by reference to
Exhibit 10cc filed with the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1995 (the "1995 Form 10-K"))
10W. Memorandum of Understanding dated February 28, 1994 with Rhode Island
State Police (incorporated by
9
reference to Exhibit 10dd to the 1995 Form 10-K)
10X. Contract dated July 15, 1993 with the State of Connecticut (incorporated
by reference to Exhibit 10ee to the 1995 Form 10-K)
10Y. License, Trademark, and Supply Agreement dated August 10, 1993 between
CarSearch Corporation and Vehicles Security Resources Limited, Nassau,
Bahamas (incorporated by reference to Exhibit 10ii to the 1995 Form 10-
K)
10Z. License, Trademark, and Supply Agreement dated August 23, 1993 between
CarSearch Corporation and MaxRich Consultants, Ltd., Kowloon, Hong Kong
(incorporated by reference to Exhibit 10jj to the 1995 Form 10-K)
10aa. License, Trademark, and Supply Agreement dated April 15, 1994 between
CarSearch Corporation and Triones Taiwan Co., Ltd., Taichung, Taiwan,
R.O.C. (incorporated by reference to Exhibit 10ll to the 1995 Form 10-K)
10bb. Patent, License, Trademark, and Supply Agreement dated October 4, 1994
between LoJack International Corporation, a subsidiary of LoJack
Corporation, and Sucess Trading, S.A., Buenos Aires, Argentina
(incorporated by reference to Exhibit 10mm to the 1995 Form 10-K)
10cc. License, Trademark, and Supply Agreement dated October 13, 1994 between
LoJack International Corporation and Tracker Vehicle Location Systems
(PTY) Ltd., Cape Town, South Africa (incorporated by reference to
Exhibit 10nn to the 1995 Form 10-K)
10dd. License and Ancillary Know-How Agreement dated October 1, 1995 between
LoJack International Corporation and Detektor, Bad Homburg, Germany
(incorporated by reference to Exhibit 10oo to the 1996 Form 10-K)
10ee. Patent License and Ancillary Know-How Agreement dated November 30, 1994
between LoJack International Corporation and LoJack Italia, Bologna,
Italy (incorporated by reference to Exhibit 10pp to the 1995 Form 10-K)
10ff. License and Supply Agreement dated April 25, 1995 between LoJack
International Corporation and United States Consolidated Technologies
Corporation (incorporated by reference to Exhibit 10qq to the 1995 Form
10-K)
10gg. Second Amendment to Loan Agreement dated as of February 20, 1996 among
The First National Bank of Boston and LoJack Corporation, LoJack
International Corporation, LoJack of New Jersey Corporation, Recovery
Systems, Inc. and LoJack Holdings Corporation (incorporated by reference
to Exhibit 10tt to the 1996 Form 10-K)
10hh. Amended and Restated Revolving Credit and Term Note dated as of February
20, 1996 in the amount of $7,500,000 made by LoJack Corporation, LoJack
International Corporation, LoJack of New Jersey Corporation, Recovery
Systems, Inc. and LoJack Holdings Corporation payable to the order of
The First National Bank of Boston (incorporated by reference to Exhibit
10mm to the 1996 Form 10-K)
10ii. Trademark and Supply Agreement dated August 15, 1995 between LoJack
International and CarTrack Kenya Limited, Nairobi, Kenya (incorporated
by reference to Exhibit 10yy to the 1996 Form 10-K)
10jj.* Third Amendment to Loan Agreement dated as of October 31, 1996 among The
First National Bank of Boston and LoJack Corporation, LoJack
International Corporation, LoJack of New Jersey Corporation, Recovery
Systems, Inc., LoJack Holdings Corporation and LoJack Venture
Corporation
10kk.* Second Amended and Restated Revolving Credit and Term Note dated as of
October 31, 1996 in the amount of $7,500,000 made by LoJack Corporation,
LoJack International Corporation, LoJack of New Jersey Corporation,
Recovery Systems, Inc., LoJack Holdings Corporation and LoJack Venture
Corporation
10ll.* 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 Holdiackngs Corporation, LoJ Venture Corporation,
LoJack of Pennsylvania, Inc. and LoJack FSC, Ltd.
10mm.* Third Amended and Restated Revolving Credit and Term Note payable to the
order of The First National Bank of Boston dated as of February 28, 1997
in the amount of $7,500,000 made by LoJack Corporation, LoJack
International Corporation, LoJack of New Jersey Corporation, Recovery
Systems, Inc., LoJack Holdings Corporation, LoJack Venture Corporation,
LoJack of Pennsylvania, Inc. and LoJack FSC, Ltd.
10nn.* License, Trademark and Supply Agreement dated September 10, 1996 between
LoJack International and S1 Corporation, Seoul, Korea
10oo.* Agreement dated September 1, 1996 between LoJack Corporation and the
Texas Department of Public Safety
10pp.* Agreement between Commonwealth of Pennsylvania, Pennsylvania State
Police and LoJack Corporation dated May 14, 1996
10qq.* Agreement between the Maryland Department of State Police and LoJack
Corporation dated November 8, 1996
10rr.* Joint Venture Agreement dated as of December 1, 1995 by and between
LoJack Venture Corporation and Micrologic, Inc.
10ss.* License Agreement dated as of December 1, 1995, between SCT Development
Venture and LoJack Corporation
10tt.* Development Agreement dated as of December 1, 1995 by and between SCT
Development Venture and Micrologic, Inc.
11.* Statement re: Computation of per share earnings
13.* 1997 Annual Report to Stockholders
10
21.* Subsidiaries of the Registrant
23.* Consent of Deloitte & Touche LLP
27.* Financial Data Schedule
99. "Safe Harbor" Statement under Private Securities Litigation Reform Act of
1995 (incorporated by reference to Exhibit 99 to the 1996 Form 10-K)
- - -----------------------------
* Indicates an exhibit which 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 21st day of May 1997.
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 21, 1997
- - -------------------- Executive Officer, and Treasurer
C. Michael Daley (Principal Executive Officer)
/s/ Robert J. Murray Director May 21, 1997
- - --------------------
Robert J. Murray
/s/ James A. Daley Director May 21, 1997
- - ------------------
James A. Daley
/s/ Harold W. Shad, III Director May 21, 1997
- - -----------------------
Harold W. Shad, III
/s/ Lee T. Sprague Director May 21, 1997
- - ------------------
Lee T. Sprague
/s/ Larry C. Renfro Director May 21, 1997
- - -------------------
Larry C. Renfro
/s/ Joseph F. Abely President and Chief Operating May 21, 1997
- - ------------------- 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 28, 1997 and February 29, 1996, and for each of the
three years in the period ended February 28, 1997, and have issued our report
thereon dated April 18, 1997; such consolidated financial statements and report
are included in your 1997 Annual Report to Stockholders and are incorporated
herein by reference. Our audits also included the consolidated financial
statement schedule of LoJack Corporation, listed in Item 14. This consolidated
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 18, 1997
F-1
SCHEDULE II
LOJACK CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED FEBRUARY 28, 1997, FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
- - --------------------------------------------------------------------------------
Column C
Column B Additions Column E
Balance at Charged to Balance
Column A Beginning Costs and Column D at End
Description of Period Expenses Deductions of Period
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:
For the year ended:
February 28, 1997 $395,202 $223,384 $ (65,144) (1) $553,442
======== ======== ========= ========
February 29, 1996 $193,381 $230,942 $ (29,121) (1) $395,202
======== ======== ========= ========
February 28, 1995 $109,097 $117,831 $ (33,547) (1) $193,381
======== ======== ========= ========
WARRANTY RESERVE:
For the year ended:
February 28, 1997 $324,813 $371,275 $(307,409) $388,679
======== ======== ========= ========
February 29, 1996 $223,509 $267,036 $(165,732) $324,813
======== ======== ========= ========
February 28, 1995 $191,479 $134,732 $(102,702) $223,509
======== ======== ========= ========
(1) Net accounts written off.
F-2