LoJack Corp. Reports Record Increases in Revenue and Net Income for Fourth Quarter and 2005; Provides 2006 Guidance
* Revenue Increases 17% for the Fourth Quarter, 31% for the Year * Net Income Increases 62% for the Quarter, 77% for the Year * Earnings Per Share Increased to $0.96 for the Year Compared to $0.64 for 2004
WESTWOOD, Mass., Feb. 21, 2006: LoJack Corporation reported today that revenue for the fourth quarter ended December 31, 2005 increased 17% to $46,358,000, from $39,587,000 in the same period a year ago. For the year ended December 31, 2005, revenue increased 31% to $190,726,000 from $145,691,000 in the prior year.
Net income for the fourth quarter increased 62% to $5,017,000, or $0.25 per diluted share, from $3,106,000, or $0.18 per diluted share, for the same quarter a year ago. For the year ended December 31, 2005, net income increased 77% to $18,439,000 or $0.96 per diluted share, from $10,400,000, or $0.64 per diluted share, in the prior year.
Gross margin for the fourth quarter increased 15% to $24,067,000 compared to $20,886,000 in the same period last year, while gross margin as a percentage of revenue was 52% for the fourth quarter compared to 53% in the prior year. Fourth quarter gross margin was impacted by a higher mix of sales to high volume automotive dealers at a lower average selling price, an increase in installation technicians in anticipation of increased volume in 2006, severance payments relating to the closure of a call center, start up costs related to recently opened markets and various other one-time items. For the year ended December 31, 2005, gross margin increased 33% to $101,723,000 from $76,441,000 in 2004, and gross margin as a percentage of revenue was 53% compared to 52% in the prior year.
Operating income for the fourth quarter increased 26% to $6,387,000 compared to $5,054,000 for the same period a year ago, and operating income as a percentage of revenue was 14% compared to 13% in the prior year. For the year ended December 31, 2005, operating income increased 66% to $26,851,000, from $16,177,000 in the prior year, and operating income as a percentage of revenue was 14% compared to 11% in 2004.
The company's effective tax rate in the fourth quarter was 22%, reflecting several favorable one-time tax events including a partial reversal of a tax accrual relating to state income tax and a cumulative change in the international effective tax rate. These are one-time changes and should not be used to evaluate the company's effective tax rate in the future.
Domestic unit volume grew 19% in the fourth quarter compared to the same period a year ago, while new vehicle sales decreased by 7% during this same period. Domestic revenue in the fourth quarter increased 13% to $30,487,000 from $27,058,000 in the prior year, reflecting increased penetration in targeted high volume automotive dealers and strong sales in all regions of the country.
International revenue in the fourth quarter grew 24% to $10,787,000 from $8,729,000 in the prior year, attributable to a 39% increase in unit volume. This growth was led by strong product sales in Latin America as well as increased royalties from several licensees.
Boomerang Tracking had revenue of $5,084,000 for the fourth quarter, down 10%, excluding the impact of foreign exchange, compared to the standalone revenue in the same period a year ago, which was in line with the company's expectations.
In announcing the results, Joseph F. Abely, Chief Executive Officer, said, "Our continued growth in revenue, net income, and earnings per share for the fourth quarter, and for the year, exceeded our expectations. We are particularly pleased that this growth in the fourth quarter came despite a decline in new car sales of 7%. Our net income increased for the 13th straight quarter, despite several one-time adjustments during the quarter. This exceptional growth was the result of strong performance in our core domestic and international businesses.
"Our results reflect a strategic decision to focus on absolute margin dollars, rather than on margin as a percentage of revenue. We gained increased market share through lower margins and offset effects of this lower pricing by increased efficiency of installations. This strategy produced higher overall margins and profitability for the company and is a catalyst for future growth.
"For 2006, we estimate that revenue will grow by approximately 10% to 12%, net income will grow 12% - 14% and earnings per diluted share will grow by approximately 8% to 10%. These estimates include approximately $2.4 to $2.8 million ($0.09 to $0.11 per diluted share) of incremental non-cash stock-based compensation expense (the majority of which reflects the effect of new accounting rules which require us to expense grants of stock options), partially offset by anticipated changes in our effective tax rate. Excluding the incremental non-cash stock based compensation, our non-GAAP growth in earnings per diluted share would be in the range of 19% to 21%.
"Our growth estimates also reflect costs related to the build-out of the stolen vehicle recovery networks in Italy and China, and to developing tracking and recovery products which have nationwide application for markets such as cargo and hazardous materials.
"We are confident that LoJack will deliver this growth as we continue to increase our penetration in the domestic automotive, construction and motorcycle channels, develop new domestic markets, and increase penetration of global new vehicle sales through increased unit sales to our existing licensee network. We expect initial sales from our majority owned Italian operations and some improvements in our Canadian market to contribute to growth in 2006."
LoJack Corporation
Condensed Income Statement Data
(Dollars in thousands except share and per share amounts)
Three Months Ended December 31,
2005 2004
Revenues $46,358 $39,587
Gross margin 24,067 20,886
Product development 1,099 529
Sales & marketing 8,583 7,697
General and administrative 6,391 6,267
Depreciation and amortization 1,607 1,339
Operating income 6,387 5,054
Other income (expense) (16) 43
Pre-tax income 6,371 5,097
Net income before minority interest 4,993 3,106
Minority interest (24) -
Net income 5,017 3,106
Diluted earnings per share $0.25 $0.18
Weighted average diluted common
shares outstanding 19,915,009 17,744,072
Twelve Months Ended December 31,
2005 2004
Revenues $190,726 $145,691
Gross margin 101,723 76,441
Product development 4,831 4,661
Sales & marketing 38,411 32,912
General and administrative 25,711 19,299
Depreciation and amortization 5,919 3,392
Operating income 26,851 16,177
Other income (expense) 645 875
Pre-tax income 27,496 17,052
Net income before minority interest 18,415 10,400
Minority interest (24) -
Net income 18,439 10,400
Diluted earnings per share $0.96 $0.64
Weighted average diluted common
shares outstanding 19,189,525 16,281,720
LoJack Corporation
Condensed Balance Sheets
(Dollars in thousands)
December 31, 2005 December 31, 2004
Assets
Current assets:
Cash and short term investment $47,608 $21,437
Accounts receivable, net 33,430 29,687
Inventories 17,952 12,613
Deferred taxes and other assets 12,451 6,996
Total current assets 111,441 70,733
Property and equipment, net 18,105 15,600
Intangible assets -- net 7,628 8,446
Goodwill 46,303 44,584
Deferred taxes and other assets 8,086 10,159
Total assets $191,563 $149,522
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt,
capital leases obligations, and
short-term borrowings $5,274 $4,241
Accounts payable 9,231 8,040
Accrued and other liabilities 4,350 6,431
Deferred revenue 18,856 15,856
Deferred taxes - 110
Accrued compensation 6,390 5,495
Total current liabilities 44,101 40,173
Deferred revenue 25,733 21,343
Deferred income taxes 2,503 3,115
Long-term debt, capital
lease obligations, and
accrued expenses 14,970 20,941
Total liabilities 87,307 85,572
Minority interest 278 -
Stockholders' equity 103,978 63,950
Total liabilities and
Stockholders' equity $191,563 $149,522
