<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-11402
-------------
TELXON CORPORATION
- - --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 74-1666060
- - --------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3330 West Market Street, Akron, Ohio 44333
- - --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (216) 867-3700
-----------------------
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 .
--- ---
At December 31, 1994, there were 15,544,501 outstanding shares of the
registrant's Common Stock, $.01 par value per share ("Common Stock").
<PAGE> 2
<TABLE>
TELXON CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<CAPTION>
Page No.
--------
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1: Consolidated Financial Statements
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 6-8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 9-12
PART II. OTHER INFORMATION:
Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
<PAGE> 3
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except per share amounts)
<CAPTION>
December 31, March 31,
1994 1994
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash (including cash equivalents of $15,083
and $8,478) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,772 $ 24,041
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801 764
Accounts receivable, net of allowance for
doubtful accounts of $1,958 and $1,635 . . . . . . . . . . . . . . . . . . . 71,611 64,009
Notes and other accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 3,941 5,723
Refundable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 778 1,848
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,815 79,267
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,808 10,288
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 190,526 185,940
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,660 41,561
Goodwill, net of amortization of $10,185
and $7,551 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,616 19,354
Intangible and other assets, net . . . . . . . . . . . . . . . . . . . . . . . . 10,514 13,113
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $262,316 $259,968
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,942 $ 24,329
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,615 43,344
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 1,332 244
Capital lease obligations due within one
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 391
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,047 2,162
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,226 35,404
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 95,896 105,874
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,824 463
Convertible subordinated debentures . . . . . . . . . . . . . . . . . . . . . . . 24,734 24,734
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,598 1,837
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,143 2,345
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 129,195 135,253
-------- --------
Stockholders' equity:
Preferred Stock, $1.00 par value per share;
500,000 shares authorized, none issued . . . . . . . . . . . . . . . . . . . -- --
Common Stock, $.01 par value per share;
50,000,000 shares authorized, 15,544,501
and 15,346,329 shares outstanding . . . . . . . . . . . . . . . . . . . . . 155 153
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,561 74,830
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,463 54,653
Equity adjustment for foreign currency
translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,621) (3,587)
Unearned compensation relating to restricted
stock awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,437) (1,334)
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 133,121 124,715
-------- --------
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $262,316 $259,968
======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
<PAGE> 4
<TABLE>
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except shares and per share amounts)
(Unaudited)
<CAPTION>
Three Months Nine Months
Ended December 31, Ended December 31,
1994 1993 1994 1993
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product . . . . . . . . . . . . . . . . . . . . . . . $84,129 $65,569 $237,716 $164,219
Customer service . . . . . . . . . . . . . . . . . . 14,067 11,399 39,799 32,375
---------- ---------- ---------- -----------
Total revenues . . . . . . . . . . . . . . . . . 98,196 76,968 277,515 196,594
Cost of revenues:
Product . . . . . . . . . . . . . . . . . . . . . . . 49,946 37,781 139,835 93,096
Customer service . . . . . . . . . . . . . . . . . . 8,407 7,317 22,788 21,747
---------- ---------- ---------- -----------
Total cost of revenues . . . . . . . . . . . . . 58,353 45,098 162,623 114,843
Gross profit . . . . . . . . . . . . . . . . . . . . . 39,843 31,870 114,892 81,751
Operating expenses:
Selling expenses . . . . . . . . . . . . . . . . . . 16,614 15,459 49,559 41,705
Product development and engi-
neering expenses . . . . . . . . . . . . . . . . . . 9,193 7,265 25,782 19,346
General and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . 8,297 8,600 26,033 23,343
---------- ---------- ---------- -----------
Total operating expenses . . . . . . . . . . . . 34,104 31,324 101,374 84,394
Income (loss) from
operations . . . . . . . . . . . . . . . . . 5,739 546 13,518 (2,643)
Interest income . . . . . . . . . . . . . . . . . . . . . . 135 99 396 512
Interest expense . . . . . . . . . . . . . . . . . . . . . (1,209) (564) (3,483) (1,640)
---------- ---------- ---------- -----------
Income (loss) before income
taxes . . . . . . . . . . . . . . . . . . . . 4,665 81 10,431 (3,771)
Provision (benefit) for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . 2,201 698 5,075 (87)
---------- ---------- ---------- -----------
Net income (loss) . . . . . . . . . . . . . . . $ 2,464 $ (617) $ 5,356 $ (3,684)
========== ========== ========== ===========
Earnings per common and common
equivalent share:
Net income (loss) per share . . . . . . . . . . $ .16 $ (.04) $ .34 $ (.24)
========== ========== ========== ===========
Average number of common and
common equivalent shares
outstanding . . . . . . . . . . . . . . . . . . . . . 15,620,000 15,417,000 15,788,000 15,377,000
========== ========== ========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
<PAGE> 5
<TABLE>
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Nine Months Ended December 31,
------------------------------
1994 1993
-------- --------
<S> <C> C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,356 $ (3,684)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 15,923 15,413
Non-cash compensation related to
restricted stock awards . . . . . . . . . . . . . . . . . . . . . 538 591
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . 936 547
Provision for inventory obsolescence . . . . . . . . . . . . . . . . 5,444 3,675
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . (70) 954
Loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . 671 478
Changes in assets and liabilities:
Accounts and notes receivable . . . . . . . . . . . . . . . . . (6,374) (12,784)
Refundable income taxes . . . . . . . . . . . . . . . . . . . . 1,070 1,875
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 89 (23,524)
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . 299 (644)
Intangible and other assets . . . . . . . . . . . . . . . . . . 8 2,530
Accounts payable and accrued
liabilities . . . . . . . . . . . . . . . . . . . . . . . . (10,786) 8,992
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . 2,885 1,076
Other long-term liabilities . . . . . . . . . . . . . . . . . . (1,201) (1,350)
-------- --------
Total adjustments . . . . . . . . . . . . . . . . . . . 9,432 (2,171)
-------- --------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,788 (5,855)
Cash flows from investing activities:
Proceeds from disposal of fixed assets . . . . . . . . . . . . . . . . . . . -- 750
Additions to property and equipment . . . . . . . . . . . . . . . . . . . . . (11,249) (16,414)
Payments for acquisitions, net of cash
acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,092) (4,996)
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (37) 306
Software investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (576) (126)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (295)
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . (12,954) (20,775)
Cash flows from financing activities:
Notes payable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,641 9,435
Principal payments on capital leases . . . . . . . . . . . . . . . . . . . . (453) (912)
Principal payments for long-term borrowing . . . . . . . . . . . . . . . . . (179) --
Proceeds from exercise of stock options
(includes tax benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,545 77
-------- --------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . 3,554 8,600
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . 343 153
-------- --------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . 5,731 (17,877)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 24,041 26,515
-------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . $ 29,772 $ 8,638
======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
<PAGE> 6
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Management Representation
The consolidated financial statements of Telxon Corporation and its
subsidiaries (the "Company") have been prepared without audit. In the
opinion of the Company, all adjustments necessary for a fair statement of
results for the interim periods have been made. The financial statements,
which do not include all of the information and notes required by
generally accepted accounting principles for complete financial
statements, should be read in conjunction with the audited consolidated
financial statements as contained in the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1994.
2. Earnings Per Share
Computations of earnings per common and common equivalent share of
common stock are based on the weighted average number of common shares
outstanding during the period increased by the net shares issuable on the
assumed exercise of stock options using the treasury stock method and the
dilutive effect of restricted stock awards. All securities having an
anti-dilutive effect on earnings per share have been excluded from such
computations. Common stock purchase rights outstanding under the
Company's stockholder rights plan, which potentially have a dilutive
effect, have been excluded from the weighted common shares computation as
preconditions to the exercisability of such rights were not satisfied.
3. Reclassifications
Certain items in the fiscal 1994 consolidated financial statements have
been reclassified to conform to the fiscal 1995 presentation.
4. Inventories
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1994
(Unaudited) March 31, 1994
------------------ --------------
<S> <C> <C>
Purchased components . . . . . . . . . . . . . . . . . . . . . $42,190 $44,378
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . 11,587 18,664
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . 20,038 16,225
------- -------
$73,815 $79,267
======= =======
5. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
December 31, 1994
(Unaudited) March 31, 1994
------------------ --------------
Accrued payroll and other employee
compensation . . . . . . . . . . . . . . . . . . . . . . . $ 8,673 $10,610
Accrued commissions . . . . . . . . . . . . . . . . . . . . . . 2,116 2,362
Accrued taxes other than payroll
and income taxes . . . . . . . . . . . . . . . . . . . . . 3,690 1,715
Deferred customer service revenues . . . . . . . . . . . . . . 9,760 9,240
Accrued royalties . . . . . . . . . . . . . . . . . . . . . . . 2,228 3,737
Other accrued liabilities . . . . . . . . . . . . . . . . . . . 8,759 7,740
------- -------
$35,226 $35,404
======= =======
</TABLE>
6
<PAGE> 7
6. Supplemental Cash Flow Information
Cash paid during the period for (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1994 1993
-------- ---------
(Unaudited)
<S> <C> <C>
Interest $3,770 $2,139
Income taxes 1,053 1,286
</TABLE>
Capital lease additions or disposals are non-cash transactions, and
accordingly, $2,157 and $990, respectively, have been excluded from
property and equipment additions in the fiscal year 1995 and 1994
Statements of Cash Flows. The Company received federal income tax refunds
aggregating $807 during the second quarter of fiscal 1995.
During the second quarter of fiscal 1995, the Company converted $5,438
borrowed under the revolving credit provisions of the Company's credit
facility to a 5 year term loan under that facility. Principal amounts due
under the term loan are funded as revolving credit advances. The
conversion and subsequent funding of $411 in principal due for the nine
months ended December 31, 1994, have been treated as non-cash transactions
and, accordingly, have been excluded from the fiscal year 1995 Statement of
Cash Flows.
7. Litigation
In December 1992, four class action suits were filed in the United
States District Court, Northern District of Ohio, by certain alleged
stockholders of the Company on behalf of themselves and purported classes
consisting of Telxon stockholders, other than defendants and their
affiliates, who purchased the Company's common stock between May
20, 1992 and January 19, 1993. The named defendants are the Company, former
President and Chief Executive Officer Raymond D. Meyo, and then current
President, Chief Operating Officer and Chief Financial Officer Dan R.
Wipff. On February 1, 1993, the Plaintiffs filed their Amended and
Consolidated Class Action Complaint related to the four actions, alleging
claims for fraud on the market and negligent misrepresentation, arising
from alleged misrepresentations and omissions with respect to the Company's
financial performance and prospects, and alleged trading activities of the
named individual defendants. The Amended Complaint seeks certification of
the purported class, unspecified compensatory damages, the imposition of a
constructive trust on certain of the defendants' assets and other
unspecified extraordinary equitable and/or injunctive relief, interest,
attorneys' fees and costs. The defendants, including the Company, filed a
Motion to Dismiss, which was denied by the court on June 3, 1993.
On April 16, 1993, the Plaintiffs filed their Motion for Class
Certification. The defendants, including the Company, filed their briefs
in opposition to Class Certification on October 13, 1993. On December 17,
1993, the District Court certified the class, consisting of Telxon
stockholders, other than defendants and their affiliates, who purchased
Telxon common stock between May 20, 1992 and December 14, 1992.
Discovery (other than of experts) has just been completed, and the
Consolidated Class Action is scheduled for
7
<PAGE> 8
trial commencing November 13, 1995.
The defendants intend to continue vigorously defending this Consolidated
Class Action. However, since the ultimate outcome of this litigation
cannot presently be determined, no provision for any liability that may
result from adjudication has been made in the accompanying consolidated
financial statements.
On September 21, 1993, a derivative Complaint was filed in the Court of
Chancery of the State of Delaware, in and for Newcastle County, by an
alleged stockholder of Telxon derivatively on behalf of Telxon. The named
defendants are the Company; Robert F. Meyerson, Chairman of the Board and
Chief Executive Officer; Dan R. Wipff, President and Chief Executive
Officer of the Company's Telxon Products Division and a former director;
Robert A. Goodman, Corporate Secretary and outside director; Norton W.
Rose, outside director, and Dr. Raj Reddy, outside director. The
Complaint alleges breach of fiduciary duty to the Company and waste of the
Company's assets in connection with certain transactions entered into by
Telxon and compensation amounts paid by the Company. The Complaint seeks
an accounting, injunction, rescission, attorneys' fees and costs. While
the Company is nominally a defendent in this derivative action, no
monetary relief is sought by the plaintiff from the Company; accordingly,
no provision therefor has been made in the accompanying consolidated
financial statements. On November 12, 1993, Telxon and the individual
director defendants filed a Motion to Dismiss. The plaintiff filed his
brief in opposition to the Motion on May 2, 1994, and the defendants have
filed a responsive final brief. Oral argument on the Motion to Dismiss
is scheduled for March 29, 1995. The defendants intend to vigorously
defend this action.
In the normal course of its operations, the Company is subject to
performance under contracts, and has various legal actions pending.
However, in management's opinion, any such outstanding matters have been
reflected in the consolidated financial statements, are covered by
insurance or would not have a material adverse effect on the Company's
consolidated financial position.
8. Short-Term and Long-Term Financing
The Company has a revolving credit, term loan and security agreement
expiring March 31, 1996. The agreement permits the Company to borrow up
to $50 million subject to availability based on qualifying accounts
receivable and inventory and bears interest at the bank's prime lending
rate plus 1% or LIBOR plus 2.5%. Outstanding amounts are secured by
substantially all of the United States assets of the Company. The
agreement contains restrictive covenants, certain of which require the
Company to maintain specified levels of net worth and working capital and
to meet certain current ratios, debt to net worth ratios, and fixed charge
coverages. At December 31, 1994 and March 31, 1994 the Company had
$26,970 and $24,573, respectively, outstanding under this agreement and
was in compliance with all restrictive covenants contained in the
agreement.
8
<PAGE> 9
TELXON CORPORATION AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
---------------------
Revenues
--------
Consolidated revenues for the quarter and nine months ended December
31, 1994, increased $21.2 million or 28% and $80.9 million or 41%
compared to the same periods in the previous fiscal year. Product
revenues increased $18.6 million or 28% and $73.5 million or 45% for
those same periods. Product revenues include the sale of Portable
Tele-Transaction Computer ("PTC") units (including pen-based and
touch-screen workslates), hardware accessories, custom application
software and software license fees and wireless data communication
products. The increase in product revenues was due to increased average
selling price per PTC unit as the current sales mix moved towards more
comprehensive systems comprising higher priced units with spread-spectrum
technology as well as an increase in the number of units shipped.
Customer service revenues for the quarter and nine months ended December
31, 1994 increased $2.7 million or 23% and $7.4 million or 23% as
compared to the same periods in the previous fiscal year. These revenue
increases were primarily due to growth in the installed based of the
Company's equipment.
Revenues for the Company's international operations (including Canada)
for the quarter and nine months ended December 31, 1994 increased $8.7
million or 38% and $26.3 million or 48% compared to the same periods in
the previous fiscal year. Changes in currency exchange rates and
intercompany hedging activities did not materially affect the results of
the Company's international operations.
The Company continues to anticipate increases in consolidated revenues
for fiscal year 1995 as compared to fiscal year 1994.
Costs of Revenues
-----------------
Cost of product revenues as a percentage of product revenues increased to
59% for the quarter ended December 31, 1994, as compared to 58% for the
same period in the previous fiscal year. Cost of product revenues as a
percentage of product revenues increased to 59% for the nine months ended
December 31, 1994, as compared to 57% for the same period in the previous
fiscal year. These increased cost percentages were primarily caused by
low gross margin business with a few high volume customers.
Cost of customer service revenues as a percentage of customer service
revenues decreased to 60% for the quarter ended December 31, 1994 as
compared to 64% for the same period in the previous fiscal year. Cost of
customer service revenues as a percentage of customer service revenues
decreased to 57% for the nine months ended December 31, 1994 as compared
to 67% for the same period in the previous fiscal year. These decreases
reflect efficiencies gained from the consolidation of the Company's U.S.
service depots to a single National Service Center in Houston, Texas.
That consolidation was completed in the fourth quarter of fiscal 1994.
9
<PAGE> 10
For the nine months ended December 31, 1994, inventory valuation accounts
were increased to cover the risk of obsolescence due to new product
introductions and continuing technological change. At December 31, 1994,
inventory valuation accounts increased to $10.9 million of gross
inventories from $9.9 million or 11% of gross inventories at March 31,
1994.
Operating Expenses
------------------
Selling expenses as a percentage of total revenues for the quarter and
nine months ended December 31, 1994, as compared to the same periods in
the previous fiscal year, decreased from 20% to 17% and from 21% to 18%
reflecting the leveraging of fixed selling expenses over the increased
revenue base. On a dollar basis, selling expenses for the quarter and
nine months ended December 31, 1994 increased $1.2 million or 7% and
$7.9 million or 19% as compared to the same periods in the previous
fiscal year. These increases reflect the impact of increased revenues on
related variable selling expenses as well as additional expenses of the
Vertical Systems Group, which is composed of five industry specific
marketing groups established in the third quarter of fiscal 1994.
Product development and engineering expenses as a percentage of total
revenues for the quarter and nine months ended December 31, 1994 remained
constant, as compared to the same periods in the previous year, in
accordance with management's target for such expenses. On a dollar basis,
product development and engineering expenses for the quarter and nine
months ended December 31, 1994 increased $1.9 million or 27% and $6.4
million or 33% as compared to the same periods in the previous fiscal
year. These increases were primarily attributable to research and
development activities related to new product development including
wireless data communications and spread spectrum technology, pen-based
technology, mobile workforce products and other product improvements.
General and administrative expenses as a percentage of total revenues for
the quarter and nine months ended December 31, 1994, as compared to the
same periods in the previous fiscal year, decreased from 11% to 8% and
from 12% to 9%, respectively. These decreases reflect the leveraging of
fixed corporate expenses over the increased revenue base as well as
continued focus on controlling costs. On a dollar basis, general and
administrative expenses for the quarter and nine months ended December
31, 1994 decreased $.3 million or 4% and increased $2.7 million or 12%
as compared to the same periods in the previous fiscal year.
The Company continues to anticipate decreases in its operating expenses
as a percentage of total revenues for fiscal year 1995 as compared to
fiscal year 1994 primarily due to anticipated increased revenue levels.
Income Taxes
------------
The Company's consolidated effective income tax rate was 47% and 49% for
the quarter and nine months ended December 31, 1994, respectively. The
consolidated effective income tax rate reflects the graduated United
States statutory rate increased by nondeductible goodwill amortization
and international rate differentials. These increases to the statutory
rates were partially offset by foreign export incentives.
10
<PAGE> 11
Liquidity
---------
At December 31, 1994, the Company had cash, cash equivalents and
short-term investments of $30.6 million as compared to $24.8 million at
March 31, 1994. The Company's current ratio (current assets divided by
current liabilities) increased to 2.0:1 from 1.8:1 from the period March
31, 1994 to December 31, 1994. This improvement in the current
ratio was caused by the changes in current assets and liabilities as
described below.
Current assets increased $4.6 million, caused primarily by the increases
in cash, cash equivalents and short-term investments of $5.8 million and
accounts and notes receivable of $5.8 million. These increases were
partially offset by decreases in inventories of $5.4 million and
refundable income taxes and other of $1.6 million. Accounts receivable
have increased primarily due to the granting of extended payment terms
to selected customers.
Current liabilities decreased from $105.9 million at December 31, 1994 to
$95.9 million, caused primarily by decreases in accounts payable of $11.7
million and notes payable, current portion of long-term debt and accruals
of $1.5 million offset by increases in income taxes payable and current
lease obligations aggregating $3.2 million.
The Company believes that its existing resources, including available
cash, cash equivalents and short-term investments, internally generated
funds and the credit facility will be sufficient to meet working capital
requirements for the next twelve months.
Cash Flows from Operating Activities
------------------------------------
Net cash flows provided by (used in) operating activities were $14.8
million and $(5.9) million for the nine months ended December 31, 1994
and 1993, respectively. Cash flows from operating activities were
positively impacted by the $9.0 million change from the net loss incurred
during the nine months ended December 31, 1993 to the net income recorded
for the nine months ended December 31, 1994, the net change in the cash
flow impact of inventories of $23.6 million, the net change in accounts
and notes receivable of $6.4 million, the increase in non-cash provisions
for inventory obsolescence and doubtful accounts of $2.2 million, the
change in income taxes payable of $1.8 million and other positive impacts
of $1.7 million. These positive cash flow impacts were partially offset
by decreases in accounts payable and accrued liabilities of $19.8
million, intangible and other assets of $2.5 million and other negative
cash flow impacts of $1.6 million.
Investing Activities
--------------------
Net cash used in investing activities decreased to $13.0 million for the
nine months ended December 31, 1994 from $20.8 million for the nine
months ended December 31, 1993. This decrease was primarily caused by a
decrease in additions to property and equipment, reflecting the
completion of the new manufacturing and customer service facilities in
Houston, Texas of $5.2 million and reduced payments for acquisitions of
$3.9 million. These positive cash flow impacts were partially offset by
a decrease in proceeds from the disposal of fixed assets of $.8 million
and decreased utilization of short-term investments and other of $.5
million.
11
<PAGE> 12
Financing Activities
--------------------
Cash flows from financing activities decreased $5.0 million for the nine
months ended December 31, 1994 as compared to the same period in the
previous fiscal year. This increase was primarily due to decreased
borrowings under the Company's credit facility described in Note 8 of $6.8
million and increased proceeds from the exercise of stock options of $1.5
million.
12
<PAGE> 13
TELXON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ------- --------------------------------
(a) Exhibits
4.1 Portions of the Restated Certificate of
Incorporation of Registrant pertaining to the
rights of holders of Registrant's Common Stock, par
value $.01 per share incorporated by reference to
Exhibit 3.1 to Registrant's Form 10-K for the year
ended March 31, 1993.
4.2 Form of Certificate for the Registrant's Common
Stock, par value $.01 per share, incorporated
herein by reference to Exhibit 4.2 to Registrant's
Form 10-K filed for the year ended March 31, 1990.
4.3 Rights Agreement between Registrant and AmeriTrust
Company National Association, as Rights Agent,
dated as of August 25, 1987, incorporated herein by
reference to Exhibit 2(c) to Amendment No. 1, dated
May 21, 1992, to Registrant's Registration
Statement on Form 8-A, filed December 19, 1983,
with respect to Registrant's Common Stock.
4.3.1 Form of Rights Certificate (included
as Exhibit A to the Rights Agreement
included as Exhibit 4.3 to this
Quarterly Report on Form 10-Q).
Until the Distribution Date (as
defined in the Rights Agreement),
the Rights Agreement provides that
the common stock purchase rights
created thereunder are evidenced by
the certificates for Registrant's
Common Stock (the form of which is
included as Exhibit 4.3 to this
Quarterly Report on Form 10-Q, which
stock certificates are deemed also
to be certificates for such common
stock purchase rights) and not by
separate Rights Certificates; as
soon as practicable after the
Distribution Date, Rights
Certificates will be mailed to each
holder of Registrant's Common Stock
as of the close of business on the
Distribution Date.
4.4 Indenture by and between the Registrant and
AmeriTrust Company National Association, as
Trustee, dated as of June 1, 1987, regarding
Registrant's 7-1/2% Convertible Subordinated
Debentures Due 2012, incorporated herein by
reference to Exhibit 4.2 to Registrant's
Registration Statement on Form S-3, Registration
No. 33-14348, filed May 18, 1987.
4.4.1 Form of the Registrant's 7-1/2%
Convertible Subordinated Debentures
Due 2012 (set forth in the Indenture
included as Exhibit 4.4 to this
Quarterly Report on Form 10-Q).
13
<PAGE> 14
10.1 Compensation and Benefits Plans of the Registrant.
10.1.1 Amended and Restated Retirement and
Uniform Matching Profit-Sharing Plan
of Registrant, effective July 1,
1993, incorporated herein by
reference to Exhibit 10.1.1 to
Registrant's Form 10-K filed for the
year ended March 31, 1994.
10.1.1.a Amendment, dated
January 1, 1994,
incorporated herein by
reference to Exhibit
10.1.1.a to
Registrant's Form 10-K
filed for the year
ended March 31, 1994.
10.1.1.b Amendment, dated April
1, 1994, incorporated
herein by reference to
Exhibit 10.1.1.b to
Registrant's Form 10-K
filed for the year ended
March 31, 1994.
10.1.1.c Amendment, dated January
1, 1994, filed herewith.
10.1.2 1988 Stock Option Plan of
Registrant, incorporated herein by
reference to Exhibit 10.1.2 to
Registrant's Form 10-K filed for the
year ended March 31, 1994.
10.1.2.a Amendment, dated
January 31, 1990,
incorporated herein by
reference to Exhibit
10.1.2.a to
Registrant's Form 10-K
filed for the year ended
March 31, 1994.
10.1.3 1990 Stock Option Plan of the
Registrant, as amended, incorporated
herein by reference to Exhibit
10.1.3 to Registrant's Form 10-Q
filed for the quarter ended
September 30, 1994.
10.1.4 1990 Stock Option Plan of the
Registrant for non-employee
directors, as amended, incorporated
herein by reference to Exhibit
10.1.4 to Registrant's Form 10-K
filed for the year ended March 31,
1994.
10.1.5 Non-Qualified Stock Option Agreement
between the Registrant and Dan R.
Wipff, dated October 17, 1988,
incorporated herein by reference to
Exhibit 10.1.5 to Registrant's Form
10-K filed for the year ended March
31, 1994.
10.1.5.a Description of
amendment extending
option term,
incorporated herein by
reference to Exhibit
10.1.5.a to
Registrant's Form 10-Q
filed for the quarter
ended September 30,
1994.
10.1.6 Non-Qualified Stock Option Agreement
between the Registrant and Raj
Reddy, dated as of October 17, 1988,
incorporated herein by reference to
Exhibit 10.1.6 to Registrant's Form
10-K filed for the year ended March
31, 1994.
14
<PAGE> 15
10.1.6.a Description of
amendment extending
option term,
incorporated herein by
reference to Exhibit
10.1.6.a to
Registrant's Form 10-Q
filed for the quarter
ended September 30,
1994.
10.1.7 Description of compensation
arrangements between the Registrant
and Robert F. Meyerson, Chairman of
the Board of Registrant,
incorporated herein by reference to
Exhibit 10.14 to Registrant's Form
10-K filed for the year ended March
31, 1990.
10.1.8 Employment Agreement between Telxon
Products, Inc., a wholly owned
subsidiary of the Registrant, and
Dan R. Wipff, dated September 29,
1994, incorporated herein by
reference to Exhibit 10.1.8 to
Registrant's Form 10-Q filed for the
quarter ended September 30, 1994.
10.1.9 Consulting Agreement between the
Registrant and Accipiter
Corporation, dated March 6, 1992,
incorporated herein by reference to
Exhibit 10.17 to the Registrant's
Form 10-K filed for the year ended
March 31, 1992.
10.1.10 Services and Non-Competition
Agreement, dated as of January 18,
1993, among Accipiter Corporation,
Robert F. Meyerson and the
Registrant, incorporated herein by
reference to Exhibit 10.28 to the
Registrant's Form 10-Q filed for the
quarter ended December 31, 1992.
10.1.11 Employment Agreement between the
Registrant and John H. Cribb
effective as of April 1, 1993,
incorporated herein by reference to
Exhibit 10.1.11 to Registrant's Form
10-K filed for the year ended March
31, 1994.
10.1.12 Severance and Settlement Agreement,
dated as of December 23, 1992,
between the Registrant and Raymond
D. Meyo, incorporated herein by
reference to Exhibit 10.26 to the
Registrant's Form 10-Q filed for
the quarter ended December 31,
1992.
10.1.13 Consulting Agreement, dated as of
December 23, 1992, between the
Registrant and Raymond D. Meyo,
incorporated herein by reference to
Exhibit 10.26 to the Registrant's
Form 10-Q filed for the quarter
ended December 31, 1992.
10.1.14 Employment Agreement between the
Registrant and D. Michael Grimes,
dated as of February 25, 1993,
incorporated herein by reference to
Exhibit 10.1.14 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
15
<PAGE> 16
10.1.15 Employment Agreement between the
Registrant and William J. Murphy,
dated as of March 12, 1993,
incorporated herein by reference to
Exhibit 10.1.15 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
10.1.16 Employment Agreement between the
Registrant and Frank Brick,
effective as of October 15, 1993,
incorporated herein by reference to
Exhibit 10.1.16 to Registrant's Form
10-Q filed for the quarter ended
September 30, 1994.
10.1.17 1992 Restricted Stock Plan of the
Registrant, incorporated herein by
reference to Exhibit 10.1.17 to the
Registrant's Form 10-Q filed for the
quarter ended December 31, 1993.
10.1.17.a Amendment, dated
December 7, 1993,
incorporated herein by
reference to Exhibit
10.1.17.a to the
Registrant's Form 10-Q
filed for the quarter
ended December 31, 1993.
10.1.17.b Amendment, dated July
18, 1994, incorporated
herein by reference to
Exhibit 10.1.17.b to
Registrant's Form 10-Q
filed for the quarter
ended September 30,
1994.
10.1.18 Employment Agreement between the
Registrant and David B. Swank,
effective as of August 22, 1994,
incorporated herein by reference to
Exhibit 10.1.18 to Registrant's Form
10-Q filed for the quarter ended
September 30, 1994.
10.2 Material Leases of the Registrant.
10.2.1 Lease between Registrant and 3330 W.
Market Properties, dated as of
December 30, 1986, incorporated
herein by reference to Exhibit
10.2.1 to Registrant's Form 10-K
filed for the year ended March 31,
1994.
10.2.2 Lease between Itronix Corporation, a
wholly owned subsidiary of the
Registrant, and Hutton Settlement,
Inc., dated as of April 5, 1993,
incorporated herein by reference to
Exhibit 10.2.3 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
10.3 Credit Agreements of the Registrant.
10.3.1 Revolving Credit, Term Loan and
Security Agreement between the
Registrant and the Bank of New York
Commercial Corporation, dated as of
October 20, 1993, incorporated by
reference to Exhibit 10.3 to the
Registrant's Form 10-Q filed for the
quarter ended September 30, 1993.
16
<PAGE> 17
10.3.1.a First Amendment to
Revolving Credit, Term
Loan and Security
Agreement between the
Registrant and the Bank
of New York Commercial
Corporation dated as of
March 30, 1994,
incorporated herein by
reference to Exhibit
10.3.1.a to
Registrant's Form 10-K
filed for the year ended
March 31, 1994.
10.3.1.b Second Amendment to
Revolving Credit, Term
Loan and Security
Agreement between the
Registrant and Bank of
New York Commercial
Corporation dated as of
June 10, 1994,
incorporated herein by
reference to Exhibit
10.3.1.b to
Registrant's Form 10-K
filed for the year ended
March 31, 1994.
10.4 Amended and Restated Agreement between the
Registrant and Symbol Technologies, Inc., dated as
of September 30, 1992, incorporated herein by
reference to Exhibit 10.4 to Registrant's Form 10-K
for the year ended March 31, 1993.
10.5 Stock Purchase Agreement by and among the
Registrant, Robert F. Meyerson and members of the
Meyerson family dated as of March 18, 1992,
incorporated herein by reference to Exhibit 10.22
to the Registrant's Form 10-K filed for the year
ended March 31, 1992.
10.6 Stock Purchase Agreement, dated December 31, 1992,
among the Registrant, Robert F. Meyerson and
certain members of Mr. Meyerson's family,
incorporated herein by reference to Exhibit 10.30
to the Registrant's Form 10-Q filed for the quarter
ended December 31, 1992.
10.7 Plan and Agreement of Merger, dated as of January
18, 1993, among the Registrant, WSACO, Inc. and
Tele-transaction, Inc., incorporated herein by
reference to Exhibit 10.29 to the Registrant's Form
10-Q filed for the quarter ended December 31, 1992.
10.7.1 Notice of Termination by WSACO,
Inc., as contemplated by Section 5.7
of the Plan and Agreement of Merger,
of Amended and Restated Consulting
Agreement between Accipiter
Corporation and Teletransaction,
Inc., incorporated herein by
reference to Exhibit 10.7.1 to
Registrant's Form 10-K for the year
ended March 31, 1993.
10.8 Asset Purchase Agreement between the Registrant and
Retail Management Systems Corporation, dated as of
April 3, 1992, incorporated herein by reference to
Exhibit 10.23 to the Registrant's Form 10-K filed
for the year ended March 31, 1992.
10.9 Agreement of Merger among the Registrant,
Itracquico Corporation and Itronix Corporation
dated as of March 22, 1993, incorporated herein by
reference to Exhibit 10.10 to the Registrant's Form
10-K for the year ended March 31, 1993.
17
<PAGE> 18
10.10 Agreement for Sale and Licensing of Assets between
AST Research, Inc. and PenRight! Corporation, a
wholly owned subsidiary of the Registrant, dated as
of January 26, 1994, incorporated herein by
reference to Exhibit 10.11 to the Registrant's Form
10-Q for the quarter ended December 31, 1993.
11.01 Computation of Common Shares outstanding and
earnings per share for the three and nine month
periods ended December 31, 1993 and 1994, filed
herewith.
27.01 Financial Data Schedule as of December 31, 1994 and
1993 and three months and nine months then ended,
filed herewith.
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed by the Registrant during the
fiscal quarter ended December 31, 1994 for which this Quarterly Report
on Form 10-Q is filed.
18
<PAGE> 19
TELXON CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements 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.
Date: February 14, 1995
TELXON CORPORATION
------------------
(Registrant)
/s/ David B. Swank
--------------------------------------
David B. Swank
Sr. Vice President and Chief
Financial Officer
19
<PAGE> 20
TELXON CORPORATION
EXHIBITS TO
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1994
20
<PAGE> 21
INDEX TO EXHIBITS
-----------------
* 4.1 Portions of the Restated Certificate of
Incorporation of Registrant pertaining to the
rights of holders of Registrant's Common Stock, par
value $.01 per share incorporated by reference to
Exhibit 3.1 to Registrant's Form 10-K for the year
ended March 31, 1993.
* 4.2 Form of Certificate for the Registrant's Common
Stock, par value $.01 per share, incorporated
herein by reference to Exhibit 4.2 to Registrant's
Form 10-K filed for the year ended March 31, 1990.
* 4.3 Rights Agreement between Registrant and AmeriTrust
Company National Association, as Rights Agent,
dated as of August 25, 1987, incorporated herein by
reference to Exhibit 2(c) to Amendment No. 1, dated
May 21, 1992, to Registrant's Registration
Statement on Form 8-A, filed December 19, 1983,
with respect to Registrant's Common Stock.
* 4.3.1 Form of Rights Certificate (included
as Exhibit A to the Rights Agreement
included as Exhibit 4.3 to this
Quarterly Report on Form 10-Q).
Until the Distribution Date (as
defined in the Rights Agreement),
the Rights Agreement provides that
the common stock purchase rights
created thereunder are evidenced by
the certificates for Registrant's
Common Stock (the form of which is
included as Exhibit 4.3 to this
Quarterly Report on Form 10-Q, which
stock certificates are deemed also
to be certificates for such common
stock purchase rights) and not by
separate Rights Certificates; as
soon as practicable after the
Distribution Date, Rights
Certificates will be mailed to each
holder of Registrant's Common Stock
as of the close of business on the
Distribution Date.
* 4.4 Indenture by and between the Registrant and
AmeriTrust Company National Association, as
Trustee, dated as of June 1, 1987, regarding
Registrant's 7-1/2% Convertible Subordinated
Debentures Due 2012, incorporated herein by
reference to Exhibit 4.2 to Registrant's
Registration Statement on Form S-3, Registration
No. 33-14348, filed May 18, 1987.
* 4.4.1 Form of the Registrant's 7-1/2%
Convertible Subordinated Debentures
Due 2012 (set forth in the Indenture
included as Exhibit 4.4 to this
Quarterly Report on Form 10-Q).
* 10.1 Compensation and Benefits Plans of the Registrant.
* 10.1.1 Amended and Restated Retirement and
Uniform Matching Profit-Sharing Plan
of Registrant, effective July 1,
1993, incorporated herein by
reference to Exhibit 10.1.1 to
Registrant's Form 10-K filed for the
year ended March 31, 1994.
21
<PAGE> 22
* 10.1.1.a Amendment, dated
January 1, 1994,
incorporated herein by
reference to Exhibit
10.1.1.a to
Registrant's Form 10-K
filed for the year
ended March 31, 1994.
* 10.1.1.b Amendment, dated April
1, 1994, incorporated
herein by reference to
Exhibit 10.1.1.b to
Registrant's Form 10-K
filed for the year
ended March 31, 1994.
** 10.1.1.c Amendment dated January
1, 1994, filed herewith.
* 10.1.2 1988 Stock Option Plan of
Registrant, incorporated herein by
reference to Exhibit 10.1.2 to
Registrant's Form 10-K filed for the
year ended March 31, 1994.
* 10.1.2.a Amendment, dated
January 31, 1990,
incorporated herein by
reference to Exhibit
10.1.2.a to
Registrant's Form 10-K
filed for the year ended
March 31, 1994.
* 10.1.3 1990 Stock Option Plan of the
Registrant, as amended, incorporated
herein by reference to Exhibit
10.1.3 to Registrant's Form 10-Q
filed for the quarter ended
September 30, 1994.
* 10.1.4 1990 Stock Option Plan of the
Registrant for non-employee
directors, as amended, incorporated
herein by reference to Exhibit
10.1.4 to Registrant's Form 10-K
filed for the year ended March 31,
1994.
* 10.1.5 Non-Qualified Stock Option Agreement
between the Registrant and Dan R.
Wipff, dated October 17, 1988,
incorporated herein by reference to
Exhibit 10.1.5 to Registrant's Form
10-K filed for the year ended March
31, 1994.
* 10.1.5.a Description of
amendment extending
option term,
incorporated herein by
reference to Exhibit
10.1.5.a to
Registrant's Form 10-Q
filed for the quarter
ended September 30,
1994.
* 10.1.6 Non-Qualified Stock Option Agreement
between the Registrant and Raj
Reddy, dated as of October 17, 1988,
incorporated herein by reference to
Exhibit 10.1.6 to Registrant's Form
10-K filed for the year ended March
31, 1994.
* 10.1.6.a Description of
amendment extending
option term,
incorporated herein by
reference to Exhibit
10.1.6.a to
Registrant's Form 10-Q
filed for the quarter
ended September 30,
1994.
22
<PAGE> 23
* 10.1.7 Description of compensation
arrangements between the Registrant
and Robert F. Meyerson, Chairman of
the Board of Registrant,
incorporated herein by reference to
Exhibit 10.14 to Registrant's Form
10-K filed for the year ended March
31, 1990.
* 10.1.8 Employment Agreement between Telxon
Products, Inc., a wholly owned
subsidiary of the Registrant, and
Dan R. Wipff, dated September 29,
1994, incorporated herein by
reference to Exhibit 10.1.8 to
Registrant's Form 10-Q filed for the
quarter ended September 30, 1994.
* 10.1.9 Consulting Agreement between the
Registrant and Accipiter
Corporation, dated March 6, 1992,
incorporated herein by reference to
Exhibit 10.17 to the Registrant's
Form 10-K filed for the year ended
March 31, 1992.
* 10.1.10 Services and Non-Competition
Agreement, dated as of January 18,
1993, among Accipiter Corporation,
Robert F. Meyerson and the
Registrant, incorporated herein by
reference to Exhibit 10.28 to the
Registrant's Form 10-Q filed for the
quarter ended December 31, 1992.
* 10.1.11 Employment Agreement between the
Registrant and John H. Cribb
effective as of April 1, 1993,
incorporated herein by reference to
Exhibit 10.1.11 to Registrant's Form
10-K filed for the year ended March
31, 1994.
* 10.1.12 Severance and Settlement Agreement,
dated as of December 23, 1992,
between the Registrant and Raymond
D. Meyo, incorporated herein by
reference to Exhibit 10.26 to the
Registrant's Form 10-Q filed for
the quarter ended December 31,
1992.
* 10.1.13 Consulting Agreement, dated as of
December 23, 1992, between the
Registrant and Raymond D. Meyo,
incorporated herein by reference to
Exhibit 10.26 to the Registrant's
Form 10-Q filed for the quarter
ended December 31, 1992.
* 10.1.14 Employment Agreement between the
Registrant and D. Michael Grimes,
dated as of February 25, 1993,
incorporated herein by reference to
Exhibit 10.1.14 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
* 10.1.15 Employment Agreement between the
Registrant and William J. Murphy,
dated as of March 12, 1993,
incorporated herein by reference to
Exhibit 10.1.15 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
23
<PAGE> 24
* 10.1.16 Employment Agreement between the
Registrant and Frank Brick,
effective as of October 15, 1993,
incorporated herein by reference to
Exhibit 10.1.16 to Registrant's Form
10-Q filed for the quarter ended
September 30, 1994.
* 10.1.17 1992 Restricted Stock Plan of the
Registrant, incorporated herein by
reference to Exhibit 10.1.17 to the
Registrant's Form 10-Q filed for the
quarter ended December 31, 1993.
* 10.1.17.a Amendment, dated
December 7, 1993,
incorporated herein by
reference to Exhibit
10.1.17.a to the
Registrant's Form 10-Q
filed for the quarter
ended December 31, 1993.
* 10.1.17.b Amendment, dated July
18, 1994, incorporated
herein by reference to
Exhibit 10.1.17.b to
Registrant's Form 10-Q
filed for the quarter
ended September 30,
1994.
* 10.1.18 Employment Agreement between the
Registrant and David B. Swank,
effective as of August 22, 1994,
incorporated herein by reference to
Exhibit 10.1.18 to Registrant's Form
10-Q filed for the quarter ended
September 30, 1994.
* 10.2 Material Leases of the Registrant.
* 10.2.1 Lease between Registrant and 3330 W.
Market Properties, dated as of
December 30, 1986, incorporated
herein by reference to Exhibit
10.2.1 to Registrant's Form 10-K
filed for the year ended March 31,
1994.
* 10.2.2 Lease between Itronix Corporation, a
wholly owned subsidiary of the
Registrant, and Hutton Settlement,
Inc., dated as of April 5, 1993,
incorporated herein by reference to
Exhibit 10.2.3 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
* 10.3 Credit Agreements of the Registrant.
* 10.3.1 Revolving Credit, Term Loan and
Security Agreement between the
Registrant and the Bank of New York
Commercial Corporation, dated as of
October 20, 1993, incorporated by
reference to Exhibit 10.3 to the
Registrant's Form 10-Q filed for the
quarter ended September 30, 1993.
24
<PAGE> 25
* 10.3.1.a First Amendment to
Revolving Credit, Term
Loan and Security
Agreement between the
Registrant and the Bank
of New York Commercial
Corporation, dated as
of March 30, 1994,
incorporated herein by
reference to Exhibit
10.3.1.a to
Registrant's Form 10-K
filed for the year ended
March 31, 1994.
* 10.3.1.b Second Amendment to
Revolving Credit, Term
Loan and Security
agreement between the
Registrant and Bank of
New York Commercial
Corporation dated as of
June 10, 1994,
incorporated herein by
reference to Exhibit
10.3.1.b to
Registrant's Form 10-K
filed for the year ended
March 31, 1994.
* 10.4 Amended and Restated Agreement between the
Registrant and Symbol Technologies, Inc., dated as
of September 30, 1992, incorporated herein by
reference to Exhibit 10.4 to Registrant's Form 10-K
for the year ended March 31, 1993.
* 10.5 Stock Purchase Agreement by and among the
Registrant, Robert F. Meyerson and members of the
Meyerson family dated as of March 18, 1992,
incorporated herein by reference to Exhibit 10.22
to the Registrant's Form 10-K filed for the year
ended March 31, 1992.
* 10.6 Stock Purchase Agreement, dated December 31, 1992,
among the Registrant, Robert F. Meyerson and
certain members of Mr. Meyerson's family,
incorporated herein by reference to Exhibit 10.30
to the Registrant's Form 10-Q filed for the quarter
ended December 31, 1992.
* 10.7 Plan and Agreement of Merger, dated as of January
18, 1993, among the Registrant, WSACO, Inc. and
Teletransaction, Inc., incorporated herein by
reference to Exhibit 10.29 to the Registrant's Form
10-Q filed for the quarter ended December 31, 1992.
* 10.7.1 Notice of Termination by WSACO,
Inc., as contemplated by Section 5.7
of the Plan and Agreement of Merger,
of Amended and Restated Consulting
Agreement between Accipiter
Corporation and Teletransaction,
Inc., incorporated herein by
reference to Exhibit 10.7.1 to
Registrant's Form 10-K for the year
ended March 31, 1993.
* 10.8 Asset Purchase Agreement between the Registrant and
Retail Management Systems Corporation, dated as of
April 3, 1992, incorporated herein by reference to
Exhibit 10.23 to the Registrant's Form 10-K filed
for the year ended March 31, 1992.
* 10.9 Agreement of Merger among the Registrant,
Itracquico Corporation and Itronix Corporation
dated as of March 22, 1993, incorporated herein by
reference to Exhibit 10.10 to the Registrant's Form
10-K for the year ended March 31, 1993.
25
<PAGE> 26
* 10.10 Agreement for Sale and Licensing of Assets between
AST Research, Inc. and PenRight! Corporation, a
wholly-owned subsidiary of the Registrant, dated as
of January 26, 1994, incorporated herein by
reference to Exhibit 10.11 to the Registrant's Form
10-Q for the quarter ended December 31, 1993.
** 11.01 Computation of Common Shares outstanding and
earnings per share for the three and nine month
periods ended December 31, 1993 and 1994, filed
herewith.
** 27.01 Financial Data Schedule as of December 31, 1994 and
1993 and three months and nine months then ended,
filed herewith.
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed by the Registrant dueing the
fiscal quarter ended December 31, 1994 for which this Quarterly Report
on Form 10-Q is filed.
__________________________________________
* Previously filed.
** Filed herewith.
26
<PAGE> 1
AMENDMENT NUMBER THREE TO THE
TELXON'S RETIREMENT & UNIFORM MATCHING PROFIT SHARING PLAN
Effective Date: January 1, 1994
Section 1.8 "Compensation" has been amended to add:
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is $150,000,
as adjusted by the Commissioner for increases in the cost of living in
accordance with Code Section 401(a)(17)(B). The cost of living adjustment in
effect for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
Section 1.25 "414(s) Compensation" has been amended to add:
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first Plan Year beginning on or after January 1, 1994, the
OBRA '93 annual compensation limit is $150,000.
IN WITNESS WHEREOF, this Amendment has been executed as of this 31st day
of December, 1994. -----------
TELXON CORPORATION
/s/ David B. Swank
--------------------------------
Employer
<PAGE> 1
<TABLE>
EXHIBIT 11.01
-------------
EXHIBIT 11.01* TO REPORT ON FORM 10-Q
TELXON CORPORATION AND SUBSIDIARIES
COMPUTATION OF COMMON SHARES OUTSTANDING
AND EARNINGS PER SHARE
(Dollars in thousands except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------ ---------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) applicable to
common shares $ 2,464 $ (617) $ 5,356 $(3,684)
======= ======= ======= =======
Weighted average common and
common equivalent shares
outstanding for the period 15,620 15,417 15,788 15,377
Increase in weighted average
from dilutive effect of stock
options -- -- -- --
------- ------- ------- -------
Weighted average common shares,
assuming issuance of the
above securities 15,620 15,417 15,788 15,377
======= ======= ======= =======
Earnings (loss) per common share:
On the weighted average
common shares outstand-
ing for the year $ .16 $ (.04) $ .34 $ (.24)
Assuming issuance of shares
for dilutive stock
options** $ .16 $ (.04) $ .34 $ (.24)
<FN>
* Numbered in accordance with Item 601 of Regulation S-K.
** This calculation is submitted in accordance with Regulation S-K Item
601(b)(1) although not required for income statement presentation
because it results in dilution of less than three percent. The
Company's 7-1/2% Convertible Debentures were omitted from the fully
diluted calculation due to their antidilutive effect.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> DEC-31-1994
<CASH> $29,772
<SECURITIES> 801
<RECEIVABLES> 73,568
<ALLOWANCES> 1,957
<INVENTORY> 73,815
<CURRENT-ASSETS> 190,526
<PP&E> 102,753
<DEPRECIATION> 58,093
<TOTAL-ASSETS> 262,316
<CURRENT-LIABILITIES> 95,896
<BONDS> 32,156
<COMMON> 155
0
0
<OTHER-SE> 132,966
<TOTAL-LIABILITY-AND-EQUITY> 262,316
<SALES> 237,716
<TOTAL-REVENUES> 277,515
<CGS> 139,853
<TOTAL-COSTS> 162,623
<OTHER-EXPENSES> 101,374
<LOSS-PROVISION> 936
<INTEREST-EXPENSE> 3,087
<INCOME-PRETAX> 10,431
<INCOME-TAX> 5,075
<INCOME-CONTINUING> 5,356
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,356
<EPS-PRIMARY> .34
<EPS-DILUTED> 0
</TABLE>
