LoJack Corporation Reports First Quarter 2009 Results
WESTWOOD, Mass., April 30 -- LoJack Corporation reported today that revenue for the first quarter ended March 31, 2009 declined 40% to $27.8 million, from $46.1 million in the same period of the prior year. The operating loss for the first quarter was $6.2 million compared to operating income of $1.0 million for the same quarter a year ago. The net loss for the first quarter was $6.4 million, or $0.38 per fully diluted share, compared to net income of $1.0 million, or $0.05 per fully diluted share for the first quarter in 2008.
In announcing the results, Richard T. Riley, Chairman of the Board said, "Our results in the first quarter were severely impacted by the worst global auto market in decades. Following 14 months of steady contraction in the domestic auto market through the end of 2008, auto sales in the first quarter of 2009 continued to decline. The problems with the auto industry started in the U.S., but are now being profoundly felt around the world.
"We have responded to the drop in auto sales by making further cost reductions that became effective April 1, 2009, which resulted in a $0.7 million charge in the first quarter and are expected to provide a $4.5 million benefit over the remainder of 2009, with an annualized benefit of approximately $5.9 million beginning in 2010. Our global workforce has been reduced by more than 20% since the first quarter of 2008. Additionally, we have taken actions to reduce total employee compensation and benefits for 2009 that will result in an expected savings of $5.5 million for the year. These reductions, in addition to those reductions made in the fourth quarter of 2008, will result in a total savings of approximately $15 million for 2009."
Gross margin dollars for the first quarter declined 43% to $13.6 million from $23.8 million in the prior year, while gross margin as a percentage of revenue was 49%, compared to 52% in the first quarter of 2008. Excluding the impact of $0.4 million in work force reduction related costs, gross margin in the quarter would have been 50%.
Ronald V. Waters, President and Chief Executive Officer, said, "For the first quarter our gross margin percentage and dollars declined compared to the same period in 2008, primarily as a result of significantly lower domestic and international unit volumes, against an infrastructure which contains a level of fixed costs, as well as the impact of severance related costs in the quarter. The cost reductions took place at the end of March and did not provide any benefit in the first quarter."
Domestic revenue in the first quarter declined 32% to $21.0 million from $30.9 million in the prior year, on a 45% reduction in unit volume.
Mr. Waters said, "The first quarter domestic auto sales reflect a 38% reduction and a seasonally adjusted annual rate of approximately 9.5 million vehicles. This is far below original industry expectations of 11.5 million vehicles for 2009. In particular, auto sales in California, our most highly penetrated market, were very hard hit."
International revenue in the first quarter declined 62% to $4.0 million, from $10.3 million in the prior year, on a 66% decline in unit volume.
Mr. Waters said, "Our international unit volume and revenue reflect the impact of the widening global credit crisis. The economic uncertainty in the international markets has impacted the buying patterns of our licensees. In recent months declines in volume from our licensees have been much more rapid than that experienced in the domestic market. Several of our larger licensees are working through existing inventory that was purchased from us in late 2008 based on optimistic expectations for early 2009."
Boomerang Tracking had revenue of $2.8 million compared to $4.9 million for the same quarter of the prior year. The devaluation of the Canadian dollar negatively affected revenue by $0.7 million or 19%.
Mr. Waters said, "During the first quarter, the Boomerang business was impacted by the same credit challenges as our domestic auto business, as well as the continued shift in the Canadian auto market away from high end vehicles, where Boomerang has historically had a high penetration. In response to the business dynamics, we have again taken significant steps to reduce our operating expenses to reflect the size of the business in Canada and are executing our programs to respond to the changes in the auto market.
"Despite the uncertain and volatile economic conditions, we remain committed to investing in those strategic programs that will continue to diversify the business, leverage the strength of the LoJack brand and drive long term profitable growth. These strategic programs include: technology and product development, our cargo security initiative and LoJack SafetyNet, our solution for people at risk. We continue to tightly and aggressively manage our operating expenses and effectively maintain our liquidity. At the end of the first quarter, our liquidity remained strong with a cash balance of $56.4 million.
"Based on the significant volatility in the global auto industry and the credit markets, and declining consumer spending globally, we are suspending our practice of providing specific guidance for the full year. The expectations that we communicated on February 18th of this year, when industry analysts were predicting domestic auto sales of 11.5 million vehicles, are no longer consistent with our view of the business for 2009. However, we do expect to generate a modest profit for the year, deliver solid cash flow, sustain a healthy margin and maintain a strong balance sheet for 2009. We will continue to closely monitor our various businesses, both domestically and internationally, and take appropriate steps to ensure that our operating costs effectively reflect revenue potential and preserve our liquidity. We will also continue to invest in our strategic programs to diversify our business."
During the first quarter of 2009, we did not repurchase any shares. As of December 31, 2008, we had outstanding repurchase authority to repurchase 1,681,778 shares.