LoJack Corporation Reports Financial Results for the Fourth Quarter and Full-Year 2012


lojack

Highlights

- Full-Year Revenue in Line with Guidance; Adjusted EBITDA at High End of Guidance

- Fourth-Quarter LoJack U.S. Dealer Channel Unit Volume Up 21%, Nearly Doubling Auto Industry Growth

- Argentina Import Restrictions Continue to Affect International Business

- New Strategic Alliance with TomTom Adds Recurring Revenue Business Model

- Company Expects Double-Digit Revenue Growth for Full-Year 2013

CANTON, MA--Feb. 27, 2013: LoJack Corporation (NASDAQ GS: LOJN), the company that created the stolen vehicle recovery market, today reported financial results for the fourth quarter and 12 months ended December 31, 2012.

"Our strategic focus on top-volume accounts generated strong unit volume for LoJack in the fourth quarter," said Randy L. Ortiz, the Company's Chief Executive Officer and President. "Unit volume in our U.S. dealer channel increased 21 percent for the quarter, nearly double the 11 percent increase for the U.S. retail auto industry as a whole, as we successfully capitalized on the strong domestic auto market with a refocused sales effort. The growth in our U.S. dealer channel underscores the powerful value proposition inherent in our pre-install program. This program is being embraced by our dealer partners, who recognized that LoJack's outstanding brand, unique integration with law enforcement and broad distribution network represent key benefits for consumers."

"We also achieved a milestone in our growth strategy with our new alliance with TomTom," Ortiz said. "This relationship signals our intention to reposition the LoJack brand beyond stolen vehicle recovery into the telematics market, with recurring revenue from a subscription-based, software-as-a-service business model. We are excited about the resulting opportunities to market these fleet management solutions and software services through our commercial and domestic dealer sales force."

For the 12 months ended December 31, 2012, consolidated revenue was $132.5 million, in line with the Company's guidance of $132 million to $134 million. U.S. revenue increased 5% to $89.2 million from $84.8 million for full-year 2011. International licensee revenue totaled $26.4 million, declining 32% from $38.8 million in 2011, due primarily to the ongoing trade and import restrictions in Argentina.

Consolidated revenue for the fourth quarter of 2012 was $33.8 million, compared with $42.5 million for the fourth quarter of 2011. The decrease primarily reflected weakness in the Company's International segment related to trade and import restrictions in Argentina. U.S. revenue declined 9% to $20.8 million from $22.8 million for the same quarter a year earlier. Revenue for the 2011 period reflected the transfer of extended warranty obligations to a third party, resulting in recognizing $2.6 million in revenue. International licensee revenue was $8.7 million in the fourth quarter of 2012 versus $15.2 million in the comparable quarter of 2011.

Consolidated gross profit for the fourth quarter of 2012 was $17.9 million, or 52.8% of revenue, compared with $23.0 million, or 54.1% of revenue, in the same quarter of 2011. Gross profit for the fourth quarter of 2011 included $2.3 million of gross margin related to the extended warranty liability transfer. Operating expenses in the fourth quarter of 2012 were $16.8 million, a decrease of 3.3% from $17.3 million in the fourth quarter of 2011. This reduction reflected lower G&A and depreciation expenses, partially offset by the write-down of goodwill in the Company's SafetyNet business, resulting in a non-cash charge of $472,000 in the fourth quarter of 2012. Outside legal expenses decreased $288,000, or 35%, in the 2012 fourth quarter, primarily due to the previously announced settlement agreement in the California wage and hour class action litigation.

Net income attributable to LoJack Corporation for the fourth quarter of 2012 was $1.5 million, or $0.08 per diluted share, compared with net income of $4.6 million, or $0.26 per diluted share, in the comparable period of 2011. For the full year, the net loss attributable to LoJack Corporation was $8.4 million, or $0.48 per share, compared with net income of $1.4 million, or $0.08 per diluted share, in 2011. Results for the full-year 2012 period included a charge of $6.9 million, or $0.40 per diluted share, related to the previously announced settlement of the remaining claims in two California wage-and-hour class action lawsuits against the Company. Adjusted EBITDA for the fourth quarter of 2012, which excludes the items reflected in Table 1, was $3.2 million, compared with adjusted EBITDA of $7.7 million in the fourth quarter of 2011. For the full year, adjusted EBITDA was $6.9 million, at the high end of the Company's guidance range of $5 to $7 million, compared with adjusted EBITDA for 2011 of $13.3 million.

Business Outlook
"Looking ahead, we plan to meet or exceed the growth of the U.S. retail automotive market in 2013 through a number of key initiatives," said Ortiz. "First, we are becoming a data-driven company to capitalize on the technology and opportunities that are reshaping the automobile industry. We also are establishing sales and marketing partnerships with the nation's top-volume dealer groups. An important component of this effort will be the continued focus on our successful pre-install programs, which we see as the foundation for broader and deeper relationships with our dealer partners and consumers. Our international business is expected to remain variable during the year, particularly in light of Argentina's trade restrictions."

"In addition, we plan to enrich the LoJack experience for consumers through additional products and services and generate new revenue streams through initiatives such as our TomTom alliance," Ortiz said. "Building this business will require significant investment in the people, technology and systems to establish our infrastructure and support the rollout of new offerings. As a result, we expect our fleet management business to be accretive to earnings on a GAAP basis beginning in the fourth quarter of this year."

For full-year 2013, LoJack expects that consolidated revenue will increase approximately 10% over 2012, and that Adjusted EBITDA will be 3-7% of consolidated revenue for the full year.

Fourth-Quarter and Full-Year Financial Results Conference Call
In conjunction with its fourth-quarter and full-year 2012 financial results, LoJack will host a conference call for investors and analysts at 8:30 a.m. ET today. To access the webcast of the call, log onto LoJack w (click "About Us," "Investor Relations," and then click "Events and Presentations"). The live call can also be accessed by 877-868-1835 (toll-free) or 914-495-8581 (international) and using 94669955 as the conference ID. An archive of the webcast will be available on the Company's website.

Readers should not place undue reliance on any forward-looking statements, which only speak as of the date made. Except as required by law, the Company undertakes no obligation to release publicly the result of any revision to the forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release also contains the non-GAAP financial measure, adjusted EBITDA. The Company believes that the inclusion of this non-GAAP financial measure in this press release helps investors to gain a meaningful understanding of changes in the Company's core operating results, and can also help investors who wish to make comparisons between LoJack and other companies on both a GAAP and a non-GAAP basis. LoJack management uses this non-GAAP measure, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. These measures are also used by management to assist with their financial and operating decision making.

The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this press release may be different from, and therefore may not be comparable to, similar measures used by other companies. Reconciliations of the non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures are set forth in the text of, and the accompanying tables to, this press release.

Table 1 €“ Adjusted EBITDA Computation

GAAP to Pro Forma Non-GAAP Reconciliation

(in thousands)












Three Months Ended


Three Months Ended





December 31, 2012


December 31, 2011





$


$








Net income, as reported


1,496



4,609



Adjusted for:







Provision for income taxes


(383)



1,409




Other income (expense)


10



369


Operating income


1,103



5,649



Adjusted for:







Depreciation and amortization


1,204



1,507




Stock compensation expense


462



520




Impairment of intangible assets and goodwill


472




Adjusted EBITDA


3,241



7,676













Year Ended


Year Ended





December 31, 2012


December 31, 2011





$


$








Net income (loss), as reported


(8,288)



1,388



Adjusted for:







Provision for income taxes


472



2,566




Other income (expense)


(197)



1,389


Operating income (loss)


(7,619)



2,565



Adjusted for:







Depreciation and amortization


4,711



6,426




Stock compensation expense


2,441



2,436




Legal settlement


6,930



1,869




Impairment of intangible assets and goodwill


472



--


Adjusted EBITDA


6,935



13,296


LoJack Corporation and Subsidiaries

Condensed Consolidated Statement of Operations

(in thousands, except share and per share amounts)






Three Months Ended



December 31,



2012


2011




(unaudited)







Revenue

$

33,824



$

42,469








Cost of goods sold

15,969



19,504








Gross profit

17,855



22,965








Costs and expenses:





Product development

1,162



1,312



Sales and marketing

7,093



6,782



General and administrative

6,891



7,789



Depreciation and amortization

1,134



1,433



Impairment of goodwill

472



-



Total

16,752



17,316








Operating income

1,103



5,649








Other income (expense):





Interest income

25



59



Interest expense

(190)



(152)



Other, net

175



462



Total

10



369








Income before provision for income taxes

1,113



6,018



Provision (benefit) for income taxes

(383)



1,409



Net income

1,496



4,609



Net income attributable to noncontrolling interest in
consolidated subsidiary

34



12



Net income attributable to LoJack Corporation

$

1,462



$

4,597








Net income per diluted share attributable to

LoJack Corporation

$

0.08



$

0.26








Weighted average diluted common

shares outstanding

17,824,910



17,855,201



LoJack Corporation and Subsidiaries

Condensed Consolidated Statement of Operations

(in thousands, except share and per share amounts)




Full Year Ended


December 31,


2012


2011


(unaudited)





Revenue

$

132,528



$

140,821






Cost of goods sold

61,358



67,932






Gross profit

71,170



72,889






Costs and expenses:




Product development

5,410



5,318


Sales and marketing

29,018



26,880


General and administrative

32,546



30,189


Legal settlement

6,930



1,869


Depreciation and amortization

4,413



6,068


Impairment of goodwill

472



--


Total

78,789



70,324






Operating income (loss)

(7,619)



2,565






Other income (expense):




Interest income

141



1,005


Interest expense

(730)



(638)


Other, net

392



1,022


Total

(197)



1,389






Income (loss) before provision for income taxes

(7,816)



3,954


Provision for income taxes

472



2,566


Net income (loss)

(8,288)



1,388


Net income (loss) attributable to noncontrolling interest in
consolidated subsidiary

95



(41)


Net income (loss) attributable to LoJack Corporation

$

(8,383)



$

1,429






Net income (loss) per diluted share attributable to

LoJack Corporation

$

(0.48)



$

0.08






Weighted average diluted common

shares outstanding

17,515,903



17,967,394


LoJack Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)



December 31,
2012


December 31,
2011


(unaudited)

ASSETS

CURRENT ASSETS:




Cash and cash equivalents

$

48,592




$

49,645



Restricted cash

225




225



Marketable securities at fair value

1,877




1,778



Accounts receivable, net

20,037




28,492



Inventories

7,123




6,628



Prepaid and other expenses

2,917




3,016



Prepaid and receivable income taxes

1,319




429



Deferred income taxes

586




504



Total current assets

82,676




90,717



PROPERTY AND EQUIPMENT

11,686




13,426



DEFERRED INCOME TAXES

145




124



INTANGIBLE ASSETS--NET

100




110



GOODWILL

1,245




1,717



OTHER ASSETS--NET

6,076




8,189



TOTAL ASSETS

$

101,928




$

114,283



LIABILITIES AND EQUITY




CURRENT LIABILITIES:




Short term debt

$

274




$

274



Accounts payable

5,979




6,222



Accrued and other liabilities

15,827




12,107



Current portion of deferred revenue

13,274




19,007



Accrued compensation

3,290




4,211



Total current liabilities

38,644




41,821



LONG TERM DEBT

13,820




11,013



DEFERRED REVENUE

13,395




19,430



DEFERRED INCOME TAXES

586




313



OTHER ACCRUED LIABILITIES

3,994




3,684



ACCRUED COMPENSATION

1,243




1,241



Total liabilities

71,682




77,502



COMMITMENTS AND CONTINGENT LIABILITIES




EQUITY:




Preferred stock--$.01 par value; authorized, 10,000,000 shares

--




--



Common stock--$.01 par value; authorized, 35,000,000 shares; issued and outstanding 18,187,703 at December 31, 2012 and 18,101,003 at December 31, 2011

182




181



Additional paid-in capital

23,261




21,265



Accumulated other comprehensive income

6,191




6,435



Retained earnings

737




9,120



Total LoJack Corporation equity

30,371




37,001



Noncontrolling interest in subsidiary

(125)




(220)



Total equity

30,246




36,781



TOTAL LIABILITIES AND EQUITY

$

101,928




$

114,283



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