LoJack Corp. Reports Third Quarter Results
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WESTWOOD, Mass., Nov. 2, 2006 -- LoJack Corporation reported today that revenue for the third quarter ended September 30, 2006 increased 5% to $54,866,000, from $52,253,000 in the same period a year ago. For the nine months ended September 30, 2006, revenue increased 12% to $162,228,000, from $144,368,000 in the same period of the prior year.
Net income, computed in accordance with generally accepted accounting principles ("GAAP") declined 10% to $5,201,000 for the third quarter, and GAAP earnings per fully diluted share declined 7% to $0.28 per fully diluted share, from $5,801,000, or $0.30 per fully diluted share, in the same quarter a year ago. For the nine months ended September 30, 2006, GAAP net income increased 2% to $13,651,000, from $13,422,000, and GAAP earnings per fully diluted share was $0.71, consistent with the same period of the prior year.
Excluding the effects of stock based compensation expense, pro forma net income for the third quarter declined 2% to $5,777,000, while pro forma earnings per fully diluted share increased 3% to $0.31 per fully diluted share. Pro forma net income for the nine months ended September 30, 2006, increased 15% to $15,645,000, and pro forma earnings per fully diluted share increased 13% to $0.81 per fully diluted share.
The third quarter earnings per fully diluted share included the impact of approximately $0.04 per diluted share primarily related to the favorable results of recently completed and pending tax audits.
GAAP operating income for the third quarter declined 18% to $7,179,000, from $8,761,000 for the same quarter a year ago. For the nine months ended September 30, 2006, GAAP operating income declined 5% to $19,393,000, compared to the same period a year ago. Excluding the effects of stock based compensation expense, pro forma operating income for the third quarter was $7,979,000, representing a decline of 10% compared to the same period last year. Pro forma operating income for the nine months ended September 30, 2006 was $22,213,000, representing an increase of 7% compared to the same period last year.
Gross margin dollars for the third quarter increased 3% to $29,664,000, compared to $28,686,000 for the same quarter last year, while gross margin as a percentage of revenue was 54%, as compared to 55% for the third quarter of 2005. For the nine months ended September 30, 2006, gross margin dollars increased 11% to $86,525,000 from $77,656,000 in the same period of the prior year, and gross margin as a percentage of revenue was 53%, as compared to 54% for the same period in 2005.
Third quarter domestic unit volume grew 12% compared to the same period a year ago. Domestic revenue in the third quarter increased 5% to $37,795,000 from $36,000,000 in the prior year. Domestic gross margin dollars grew 2% over the prior year and gross margin as a percentage of revenue was 55% compared to 57% for the third quarter of 2005.
International revenue in the third quarter grew 5% to $12,014,000, from $11,397,000 in the prior year, attributable to an 18% increase in unit volume. International gross margin dollars increased 8% compared to the same period a year ago, while gross margin as a percentage of revenue was 49% compared to 48% for the same period a year ago.
Boomerang Tracking had revenue of $5,057,000 compared to $4,856,000 for the same period of the prior year. Boomerang gross margin dollars grew 6% over the prior year, and gross margin as a percentage of revenue was 58%, as compared to 57% in the third quarter of 2005. Both the increases in revenue and gross margin are primarily due to the effects of foreign currency exchange.
In announcing the results, Joseph F. Abely, Chairman and Chief Executive Officer said, "Our financial results for the third quarter were disappointing. There were, however, many bright spots during the quarter including the continued strong performance of our international segment and our domestic rate of unit growth, which, while below expectations, continued to significantly outpace industry automobile sales. Our quarter-over-quarter comparison continued to reflect the mix of our domestic sales shifting more towards national accounts, accounts doing bulk installations and accounts certified to do their own installations. Our third quarter results also reflect the planned significant investments in our business to build out the LoJack operation in Italy, develop our new domestic markets and roll out the motorcycle product, which all will serve to drive long term growth.
"Product sales to national, bulk install and certified dealer accounts, which have been important elements of our growth strategy, reduce our average revenue per unit. Recognizing this dynamic, we have been refining our installation model and have been able to mitigate some of the impact of the reduction in average revenue per unit through installation efficiencies. Our progress in the quarter is highlighted by the fact that our gross margin as a percentage of revenue was down less than one percentage point over the prior year, despite significant changes in mix. While we have made progress over the last several quarters, we recognize the need to continue to bring our historical cost structure more in line with our national accounts, bulk installation and certified dealer installation programs.
"Although our unit volume in the domestic automotive channel did not meet our expectations in the quarter, we did make progress in aligning our business with those brands which are rapidly increasing their share of the U.S. automobile market. Our growth with many of the dealerships selling these brands is already quite strong, and we believe there is still a significant opportunity for incremental revenue and unit growth.
"Reflected in the third quarter results are significant investments for the long term which include developing our new domestic markets, introducing the motorcycle product throughout the U.S. and building out the LoJack operation in Italy.
"We anticipate that our business for the fourth quarter will return to double-digit revenue growth. However, we do not expect to be able to recoup the lost revenue from the third quarter. Additionally, our results for the fourth quarter will be impacted by our previously announced investment in SC-integrity. As a result, it is now our expectation that for the year, revenue will grow by 11% to 12% compared to the prior year, and GAAP earnings will be $0.95 to $0.97 per fully diluted share. The earnings per share guidance includes the effect of stock based compensation expense that equates to approximately $0.10 per fully diluted share for the year. Additionally, we expect gross margin as a percentage of revenue to be approximately 54%. We remain very positive about the long term strength of our business model and the opportunities for continued profitable growth."
For the nine months ending September 30, 2006, the company has repurchased approximately 1,294,000 shares at an average price of $19.67. In February of this year, LoJack announced a stock repurchase program, which authorized the repurchase of up to 2,000,000 shares of the company's common stock over the next two years. At September 30, 2006, approximately 755,000 shares of LoJack common stock remain authorized for repurchase under this program.
About LoJack
LoJack Corporation, the premier worldwide marketer of wireless tracking and recovery systems for valuable mobile assets, is the undisputed leader in global stolen vehicle recovery. Its Stolen Vehicle Recovery System delivers a better than 90% success rate and has helped recover more than $3 billion in global stolen assets. The system is uniquely integrated into law enforcement agencies in the United States that use LoJack's in-vehicle tracking equipment to recover stolen assets, including cars, trucks, commercial vehicles, construction equipment and motorcycles. LoJack operates in 26 states and the District of Columbia, representing areas of the country with the greatest population density, and highest number of new vehicle sales and incidence of vehicle theft. In addition, LoJack technology is utilized by law enforcement and security organizations in more than 28 countries throughout Europe, Africa and Latin America. Boomerang Tracking, Inc., the dominant marketer of stolen vehicle recovery technology in Canada operates as a wholly owned subsidiary of LoJack Corporation.
To access the webcast of the company's conference call to be held at 9:00 AM EST, Thursday, November 2, 2006, log onto http://www.lojack.com/ (click "Investors", click "Earnings Conference Call Webcast"). An archive of the webcast will be available through http://www.lojack.com/ until superseded by the next quarter's earnings release and related webcast.
LoJack Corporation
Condensed Income Statement Data
(Dollars in thousands except share and per share amounts)
Three Months Ended September 30,
2006 2005
(unaudited)
Revenues $54,866 $52,253
Gross margin 29,664 28,686
Product development 1,280 1,247
Sales & marketing 12,198 10,776
General and administrative 7,361 6,390
Depreciation and amortization 1,646 1,512
Operating income 7,179 8,761
Other income, net 76 136
Pre-tax income 7,255 8,897
Net income 5,201 5,801
Diluted earnings per share $0.28 $0.30
Weighted average fully diluted common
shares outstanding 18,820,793 19,495,412
Nine Months Ended September 30,
2006 2005
(unaudited)
Revenues $162,228 $144,368
Gross margin 86,525 77,656
Product development 4,278 3,732
Sales & marketing 35,133 29,828
General and administrative 22,789 19,320
Depreciation and amortization 4,932 4,312
Operating income 19,393 20,464
Other income, net 389 661
Pre-tax income 19,782 21,125
Net income before minority interest 13,569 13,422
Minority interest 82 -
Net income 13,651 13,422
Diluted earnings per share $0.71 $0.71
Weighted average fully diluted common
shares outstanding 19,340,290 18,985,178
LoJack Corporation
Condensed Balance Sheets
(Dollars in thousands)
September 30, 2006 December 31, 2005
(unaudited)
Assets
Current assets:
Cash and short term investments $43,299 $47,608
Accounts receivable, net 39,510 33,430
Inventories, net 17,322 17,952
Deferred taxes and other assets 10,215 12,451
Total current assets 110,346 111,441
Property and equipment, net 21,104 18,105
Intangible assets, net 7,019 7,628
Goodwill 48,456 46,303
Deferred taxes and other assets 9,882 8,086
Total assets $196,807 $191,563
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt,
and short-term borrowings $8,883 $5,274
Accounts payable 8,367 9,231
Accrued and other liabilities 8,723 4,350
Deferred revenue 20,128 18,856
Accrued compensation 4,791 6,390
Total current liabilities 50,892 44,101
Deferred revenue 28,596 25,733
Deferred income taxes 2,381 2,503
Long-term debt and
accrued expenses 12,098 14,970
Total liabilities 93,967 87,307
Minority interest -- 278
Stockholders' equity 102,840 103,978
Total liabilities and
Stockholders' equity $196,807 $191,563
LoJack Corporation
GAAP to Non-GAAP Reconciliation
(Dollars in thousands except per share amounts)
Operating Income
Three Months Ended September 30,
2006 2005
Operating income, as reported $7,179 $8,761
Stock based compensation 800 137
Non-GAAP Operating Income $7,979 $8,898
Nine Months Ended September 30,
2006 2005
Operating income, as reported $19,393 $20,464
Stock based compensation 2,820 323
Non-GAAP Operating Income $22,213 $20,787
Net Income and Fully Diluted Earnings Per Share
Three Months Ended September 30,
2006 2005
Diluted EPS Diluted EPS
Net income, as reported $5,201 $0.28 $5,801 $0.30
Stock based compensation,
net of tax 576 0.03 85 --
Non-GAAP Net Income $5,777 $0.31 $5,886 $0.30
Nine Months Ended September 30,
2006 2005
Diluted EPS Diluted EPS
Net income, as reported $13,651 $0.71 $13,422 $0.71
Stock based compensation,
net of tax 1,994 0.10 198 0.01
Non-GAAP Net Income $15,645 $0.81 $13,620 $0.72
Included in pretax stock based compensation expense for the nine months ended September 30, 2006, is $446 relating to modifications of stock option agreements arising from severance activity in the first quarter of 2006.