<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 June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-11402
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TELXON CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 74-1666060
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization
3330 West Market Street, Akron, Ohio 44333
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (330) 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 June 30, 1996, there were 16,048,923 outstanding shares of the registrant's
Common Stock, $.01 par value per share ("Common Stock").
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TELXON CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page No.
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<S> <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........................................... 6-10
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................. 11-17
PART II. OTHER INFORMATION:
Item 1: Legal Proceedings......................................................................... 18
Item 6: Exhibits and Reports on Form 8-K.......................................................... 18-26
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, March 31,
ASSETS 1996 1996
----------- ---------
<S> <C> <C>
Current assets: (Unaudited)
Cash (including cash equivalents of $8,851 and
$23,411) ......................................... $ 17,805 $ 34,828
Trading securities ................................... 876 902
Accounts receivable, net of allowance for doubtful
accounts of $1,821 and $1,731 .................... 119,051 133,592
Notes and other accounts receivable .................. 9,349 9,522
Inventories .......................................... 107,581 111,132
Prepaid expenses and other ........................... 9,846 9,939
--------- ---------
Total current assets ........................ 264,508 299,915
Property and equipment, net .......................... 54,710 54,673
Intangible and other assets, net ..................... 37,598 34,621
--------- ---------
Total ....................................... $ 356,816 $ 389,209
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ........................................ $ 7,870 $ 66
Current portion of long-term debt .................... 1,156 1,156
Accounts payable ..................................... 37,970 59,620
Capital lease obligations due within one year ........ 812 897
Accrued liabilities .................................. 38,982 52,181
--------- ---------
Total current liabilities ................... 86,790 113,920
Capital lease obligations ............................ 1,787 1,982
Convertible subordinated debentures .................. 107,224 107,224
Long-term debt ....................................... 1,265 1,331
Other long-term liabilities .......................... 3,914 3,562
--------- ---------
Total liabilities ........................... 200,980 228,019
Stockholders' equity:
Preferred Stock, $1.00 par value per share; 500 shares
authorized, none issued ............................ -- --
Common Stock, $.01 par value per share; 50,000 shares
authorized, 16,049 and 16,096 shares outstanding ... 161 161
Additional paid-in capital ........................... 86,287 85,750
Retained earnings .................................... 73,251 78,096
Equity adjustment for foreign currency translation ... (2,182) (2,064)
Unearned compensation relating to restricted stock
awards ............................................. (630) (753)
Treasury stock, 100 shares at cost ................... (1,051) --
--------- ---------
Total stockholders' equity .................. 155,836 161,190
Commitments and contingencies ........................ -- --
========= =========
Total ....................................... $ 356,816 $ 389,209
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
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TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1996 1995
--------- --------
Revenues:
<S> <C> <C>
Product .................................. $ 94,025 $ 87,944
Customer service ......................... 18,358 15,597
--------- ---------
Total revenues .................. 112,383 103,541
Cost of revenues:
Product .................................. 65,825 51,411
Customer service ......................... 11,048 9,003
--------- ---------
Total cost of revenues .......... 76,873 60,414
--------- ---------
Gross profit ............................. 35,510 43,127
Operating expenses:
Selling expenses ......................... 21,183 19,668
Product development and engineering
expenses ............................ 11,108 9,585
General and administrative expenses ...... 11,163 9,136
--------- ---------
43,454 38,389
--------- ---------
(Loss) income from operations ... (7,944) 4,738
Interest income ............................... 215 143
Interest expense .............................. (1,970) (1,166)
Other non-operating income .................... 105 --
--------- ---------
(Loss) income before income taxes (9,594) 3,715
(Benefit) provision for income taxes .......... (4,797) 1,486
--------- ---------
Net (loss) income ............... $ (4,797) $ 2,229
========= =========
Earnings per common and common equivalent
share:
Net (loss) income per share ..... $ (.29) $ .14
========= =========
Average number of common and common
equivalent shares outstanding ........... 16,544 16,102
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
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TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income .................................... $ (4,797) $ 2,229
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation and amortization ............... 6,874 5,288
Non-cash compensation related to
restricted stock awards ................ 123 254
Provision for doubtful accounts ............. 124 506
Provision for inventory obsolescence ........ 2,298 1,352
Deferred income taxes ....................... (1,026) (323)
Loss on disposal of assets .................. 277 22
Proceeds from sale of trading securities .... 135 --
Gain on sale of trading securities .......... (23) --
Non-cash gain on trading securities ......... (86) --
Changes in assets and liabilities:
Accounts and notes receivable .......... 11,558 (733)
Refundable income taxes ................ -- (904)
Inventories ............................ 1,192 (4,932)
Prepaid expenses and other ............. 1,266 579
Intangible and other assets ............ (679) (326)
Accounts payable and accrued liabilities (35,779) (3,188)
Other long-term liabilities ............ 1,455 3
-------- --------
Total adjustments ........... (12,291) (2,402)
-------- --------
Net cash used in operating activities ................ (17,088) (173)
Cash flows from investing activities:
Additions to property and equipment .................. (5,012) (3,257)
Proceeds from the sale of assets ..................... 150 --
Payments for acquisitions, net of cash acquired ...... -- (551)
Software investments ................................. (1,714) (264)
Other ................................................ (93) --
-------- --------
Net cash used in investing activities ................ (6,669) (4,072)
Cash flows from financing activities:
Notes payable, net ................................... 7,804 (545)
Purchase of treasury stock ........................... (1,051) --
Principal payments on capital leases ................. (280) (197)
Principal payments on long-term borrowing ............ (66) (40)
Debt issue costs paid ................................ (38) --
Proceeds from exercise of stock options
(includes tax benefit) .......................... 490 2,159
-------- --------
Net cash provided by financing activities ............ 6,859 1,377
Effect of exchange rate changes on cash .............. (125) (54)
-------- --------
Net decrease in cash and cash equivalents ............ (17,023) (2,922)
Cash and cash equivalents at beginning of period ..... 34,828 31,364
-------- --------
Cash and cash equivalents at end of period ........... $ 17,805 $ 28,442
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
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TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
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, consisting of normal recurring
adjustments necessary for a fair statement of results for the interim
periods, have been made. The 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, 1996.
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.
All securities having a 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. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
June 30,
1996 March 31,
(Unaudited) 1996
-------- --------
<S> <C> <C>
Purchased components ................... $ 45,229 $ 50,022
Work-in-process ........................ 36,426 35,379
Finished goods ......................... 25,926 25,731
-------- --------
$107,581 $111,132
======== ========
</TABLE>
4. Accrued Liabilities
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
June 30,
1996 March 31,
(Unaudited) 1996
------- -------
<S> <C> <C>
Deferred customer service revenues ........................ $17,271 $15,063
Accrued payroll and other employee compensation ........... 9,951 10,586
Accrued interest .......................................... 2,877 2,136
Accrued royalties ......................................... 2,536 3,430
Accrued commissions ....................................... 2,236 3,808
Accrued taxes other than payroll and income taxes ......... 1,961 4,035
Other accrued liabilities ................................. 2,150 13,123
------- -------
$38,982 $52,181
======= =======
</TABLE>
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TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
5. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Three Months Ended June 30,
1996 1995
---------------------- ----------------------
(Unaudited)
<S> <C> <C>
Cash paid during the period for
Interest........................................... $ 1,173 $ 1,587
Income taxes....................................... 2,613 3,348
</TABLE>
Capital lease additions are non-cash transactions and, accordingly,
$162 has been excluded from property and equipment additions in the
fiscal 1996 Consolidated Statement of Cash Flows.
The $6,200 of secured promissory notes received in connection with the
Company's sale of certain retail application software operations has
been excluded from the fiscal 1997 Consolidated Statement of Cash Flows
as a non-cash transaction. See Note 8 - Divestiture for further details
of the sale.
6. Litigation and Contingencies
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.
Following the completion of discovery (other than of experts), each
defendant filed a Motion for Summary Judgment on May 19, 1995, all of
which were opposed by the plaintiffs. On September 14, 1995, the Court
granted
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TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
each defendant summary judgment on all counts, which the plaintiffs
have appealed to the defendants to the United States Sixth Circuit
Court of Appeals. The parties' briefing of the appeal has been
completed, but no date for oral argument of the appeal has yet been
set. The defendants intend to continue vigorously defending the
Consolidated Class Action. Though there can be no assurance that the
Company's summary judgment will be upheld on appeal on all counts or
as to the ultimate outcome of any portion of the case with respect to
which the summary judgment may be reversed, no provision has been made
in the accompanying consolidated financial statements for any
liability that may result to the Company in such an event.
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, then President, Chief
Operating Officer and Chief Financial Officer and 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 defendant in this derivative action,
no monetary relief is sought by the plaintiff from the Company;
accordingly, no provisions for any loss nor any related insurance
recovery therefor have 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
filed a final responsive brief. The Motion was argued before the Court
on March 29, 1995, and on July 18, 1995, the Court issued its ruling.
The Court dismissed all of the claims relating to the plaintiff's
allegations of corporate waste. The claims relating to breach of
fiduciary duty survived the Motion to Dismiss and are now the subject
of discovery, which is in its early stages. The defendants believe that
the remaining claims lack merit, and they intend to vigorously defend
this action. While the ultimate outcome of this action cannot presently
be determined, the Company does not anticipate that this matter will
have a material adverse effect on the Company's consolidated financial
position, results of operations or cash flows.
In the normal course of its operations, the Company is subject to
performance under contracts, and has various legal actions and certain
contingencies pending, including a claim made by the owner of a
manufacturing facility formerly leased by the Company that the Company
caused and should remediate alleged soil contamination at the facility.
The Company, with professional assistance, is investigating the
existence, scope, nature and cause of the claimed contamination.
Information necessary to support a reasonable estimate of the scope of
loss, if any, is not
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TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
presently available and, accordingly, no provision has been made in
accompanying financial statements. The Company, while not conceding
denial of coverage, has been advised by its insurers that coverage is
not available concerning this matter. While the Company, based on its
initial assessment of the situation, believes the matter's ultimate
resolution will not have a material adverse effect on the Company's
business or financial condition, if the Company were ultimately
required to remediate such contamination, the associated costs could
have a material adverse effect on results of operations for one or
more quarters in which the associated charge(s) would be taken. In
management's opinion, all other such outstanding matters have either
been reflected in the consolidated financial statements, are covered
by insurance or would not have a material adverse effect on the
Company's business, consolidated financial position or results of
operations or cash flows.
7. Short-Term and Long-Term Financing
Effective March 8, 1996, the Company replaced its previous revolving
credit, term loan, and security agreement with a new, unsecured credit
agreement with a group of eight banks. The credit agreement, which
expires on March 8, 2001, provides the Company with a maximum credit
facility of $100,000 and permits the Company to borrow funds as
domestic or Eurodollar advances. Funds borrowed as domestic advances
bear interest at the greater of the agent bank's "Prime Commercial
Lending Rate" or the Federal Funds Rate plus .50% while Eurodollar
advances bear interest at the agent bank's Eurodollar Rate plus .50% to
1.25% based on certain capitalization levels. At June 30, 1996, the
annualized interest rate in effect under the new credit agreement for
domestic advances was 8.25% and 6.50% for Eurodollar advances. In
addition, the agreement requires the Company to pay a commitment fee of
.15% to .375% per annum, based on certain capitalization levels, on the
unused portion of the revolving commitment amount. The Company is also
required to pay a utilization fee of .125% to .25% per annum on
Eurodollar advances based on certain capitalization levels. At June 30,
1996, the commitment fee and utilization fee rates were equal to .20%
and .25% per annum, respectively. The agreement also contains certain
restrictive covenants which requires the Company to maintain certain
leverage, net worth and fixed charge coverage ratios. The Company had
no borrowings outstanding under the $100,000 credit agreement at June
30, 1996 and was in compliance with all restrictive covenants contained
in the agreement at June 30, 1996.
Additionally, effective March 20, 1996, the Company entered into an
unsecured business purpose revolving promissory note with a bank. The
note, which expires March 19, 1997, provides the Company with a maximum
credit facility of $20,000 and bears interest at the lending bank's
"Money Market Rate" plus .50% to 1.25% per annum, based on certain
capitalization levels. The Company had $7,820 outstanding under this
unsecured promissory note at June 30, 1996. At June 30, 1996, the note
was bearing interest at an annual rate of 6.525%.
9
<PAGE> 10
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
8. Divestiture
Effective April 1, 1996, the Company sold certain retail application
software operations, with net assets of approximately $5,000, to a
third-party for cash and secured promissory notes including interest,
totaling $6,400. Under the terms of the sale, the Company also is to
receive, over the next five years, license fees amounting to 20% of
the revenue generated by the subject software, with minimum required
payments aggregating $6,600. Although no gain has been recorded at
June 30, 1996, as a result of this transaction, the Company will
recognize gain from the sale as cash proceeds are received.
9. Other Transactions and Events
On June 20, 1996, the Company repurchased 100,000 shares of its common
stock at a weighted average price per share of $10.43. These
repurchased shares have been accounted for at cost plus brokerage fees
under the caption of treasury stock in the fiscal 1997 Consolidated
Balance Sheet.
10. Reclassifications
Certain items in the 1996 consolidated financial statements and notes
thereto have been reclassified to conform to the 1997 presentation.
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TELXON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
IN ADDITION TO DISCUSSING AND ANALYZING THE COMPANY'S RECENT HISTORICAL
FINANCIAL RESULTS AND CONDITION, THE FOLLOWING MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCLUDES
STATEMENTS CONCERNING CERTAIN TRENDS AND OTHER FORWARD-LOOKING
INFORMATION AFFECTING OR RELATING TO THE COMPANY WHICH ARE INTENDED TO
QUALIFY FOR THE PROTECTIONS AFFORDED "FORWARD-LOOKING STATEMENTS" UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, PUBLIC LAW
104-67. THE FORWARD-LOOKING STATEMENTS MADE HEREIN AND ELSEWHERE IN
THIS FORM 10-Q ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES WHICH
COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS. SEE "FACTORS THAT MAY AFFECT FUTURE
RESULTS" BELOW AND CAUTIONARY STATEMENTS APPEARING UNDER "ITEM 1.
BUSINESS" AND ELSEWHERE IN THE FORM 10-K FILED BY THE COMPANY WITH
RESPECT TO ITS FISCAL YEAR ENDED MARCH 31, 1996 FOR A DISCUSSION OF THE
IMPORTANT FACTORS AFFECTING THE REALIZATION OF THOSE RESULTS.
OVERVIEW
The Company anticipates its first half of fiscal 1997 results to
reflect approximately 5% to 10% revenue growth and a loss of
approximately $.50 per share due to changing market conditions as
described below. The Company anticipates a return to profitability in
the second half of fiscal 1997 as the results of streamlining
operations are realized. The Company is taking initiatives to narrow
its product line and to achieve greater efficiencies in
manufacturing. Workforce reductions have reduced employee headcount by
200, or approximately 10 percent. These actions are expected to
decrease costs by $4.5 to $5.0 million per quarter from historical
run-rates. The Company will continue to review all aspects of its
business and expects to take further actions to achieve more effective
and efficient operations, some of which may result in certain one-time
charges in addition to the anticipated operating loss for the first
half of fiscal 1997.
The Company's continuing strategic objectives are to increase revenues
and market penetration while reducing costs as a percentage of total
revenues, to drive new product development and use vertical systems
groups to expand into targeted markets. The Company's goal is to
deliver profitable growth and increased stockholder value over the
coming years.
The Company operates in a rapidly changing and dynamic market, and the
Company's strategies and plans are designed to adapt to changing market
conditions where and when possible. However, there can be no assurance
that the Company's strategies and plans will take into account all
market conditions and changes thereto. Accordingly, the historical
results presented in the Company's consolidated financial statements
and discussed herein are not necessarily indicative of future results.
See "Factors That May Affect Future Results" for a discussion of risk
factors which may affect the Company's future results of operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The risks and other important factors which may affect the Company's
business, operating results, and financial and other condition include,
without limitation, the following:
The Company's results of operations are affected by a variety of
factors, including economic conditions specific to the industries in
which it competes, decreases in average selling price over the life of
any particular product, the timing, manufacturing complexity and
expense of new product introductions (both by the Company and its
competitors), the timely implementation of new manufacturing
technologies, the ability to safeguard patents and other intellectual
property in a rapidly evolving market, the
11
<PAGE> 12
rapid increase in demand for some products and the rapid decline in
demand for others and the Company's ability to anticipate and plan for
that changing market demand. Certain of these factors are beyond the
Company's control.
The Company's shipments during any particular quarter generally
represent orders received either during that quarter or shortly before
the beginning of that quarter. The Company endeavors to maintain
sufficient levels of purchased components to meet the delivery
requirements of its customers. However, there can be no assurance that
during any given quarter, the Company has or can procure the
appropriate mix of purchased components to accommodate any given order.
Therefore, the Company's financial performance in any quarter is
dependent to a significant degree upon obtaining orders which can be
manufactured and delivered to its customers in that quarter. Financial
performance for any given quarter cannot be known or fully assessed
until near the end of that quarter.
The Company has historically recognized a substantial portion of its
product revenues in the last month of each quarter. A significant
portion of the Company's expenses are relatively fixed, and timing of
increases in such expenses is based in large part on the Company's
forecast of future revenues. As a result, if revenues do not meet
expectations, the Company may be unable to quickly adjust expenses to
levels appropriate to actual revenues, which could have a materially
adverse effect on the Company's results of operations.
The markets in which the Company competes are intensely competitive and
characterized by increasingly rapid technological change, introduction
of new products with improved performance characteristics, product
obsolescence and price erosion. Failure to keep pace with product and
technological advances could negatively affect the Company's
competitive position and prospects for growth. Customers' anticipation
of new or enhanced product offerings by the Company or a competitor may
lead them to defer purchases of the Company's existing products. In
addition, companies that are participants in the broader computer
industry are potential competitors. Some of the Company's competitors
and potential competitors have substantially greater financial,
technical, intellectual property, marketing and human resources than
the Company.
The Company's future success depends on its ability to develop and
rapidly bring to market technologically advanced products. From time to
time the Company invests in development stage and other entities who
possess or who could potentially possess strategically important
technologies. Due to the nature of these entities and the nature of
their operations, there can be no assurance that these investments will
be realizable or will result in marketable and/or successful products.
There can be no assurance that the Company's research and development
activities will lead to the commercially successful introduction of new
or improved products or that the Company will not encounter delays or
problems in connection therewith. The cost of perfecting new and
improved technologies to satisfy customer quality and delivery
expectations as they are brought to market cannot always be fully
anticipated and may adversely affect Company operating profits during
such introductions. In addition, the average selling prices for
computer
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<PAGE> 13
products generally decrease over the products' lives. To mitigate such
decreases, the Company seeks to reduce manufacturing costs of existing
products and to introduce new products, functions and other
price/performance-enhancing features. To the extent that these product
enhancements do not occur on a timely basis or do not result in a
sufficient increase in sales prices to end users, the Company's
operating results could be materially adversely affected.
To date, the Company's revenues have been concentrated in the retail
industry, historically representing over 50% of its total revenues. The
Company's future growth depends, in part, on its ability to
successfully penetrate and expand its revenues in new markets. There
can be no assurance that such penetration and expansion into new
markets can be achieved.
The Company believes its future success is also dependent, in part,
upon its ability to continue to enhance its product offerings
through internal development and the acquisition of new
businesses and technologies, but there can be no assurance that the
Company will be able to identify, acquire or profitably operate new
businesses or otherwise implement its growth strategy successfully. For
the Company to manage its growth and integrate any newly acquired
entities, it must continue to improve operations and financial and
management information systems and effectively motivate and manage
employees. If the Company is unable to successfully pursue and manage
such growth, its business and results of operations could be adversely
affected. In the event that, as part of its efforts to improve its
operating efficiencies or otherwise, the Company elects to divest
itself of a majority or greater interest in its technical
Subsidiaries, the Company's revenues may be adversely affected.
The Company regards certain of its hardware and software technologies
as proprietary and relies on a combination of United States and foreign
patent, copyright, trademark and trade secret laws, as well as license
and other contractual confidentiality provisions, to protect its
proprietary rights. Despite the Company's efforts to safeguard its
proprietary rights, there can be no assurance that the Company will be
successful in doing so or that the Company's competitors will not
independently develop or patent technologies that are substantially
equivalent or superior to or otherwise circumvent the Company's
technologies and proprietary rights.
The Company's products utilize hardware and software technologies
licensed from third parties. There can be no assurance that the Company
will be able to license needed technology in the future. An early
termination of certain of these license agreements (including patent
rights licensed from Symbol Technologies, Inc., one of its principal
competitors, necessary for the Company's manufacture and sale of its
integrated laser scanning terminals which account for a material
portion of the Company's current sales) could have a materially adverse
effect on the Company's ability to market certain of its products,
hence, on its business, results of operations and financial condition.
The Company believes that its products, processes and trademarks do not
infringe on the rights of third parties, but there can be no assurance
that third parties will not assert infringement or other related claims
against the Company or its licensors in the future. Any infringement
claim or related litigation against the Company, or any challenge to
the validity of the Company's own intellectual property rights, and the
expense of defending the same could materially adversely effect the
Company's
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<PAGE> 14
ability to market its products and hence, on its business, results of
operations and financial condition.
Certain components and sub-assemblies of the Company's products are
procured from outside the United States. Certain of the Company's
products, sub-assemblies and components are procured from a single
source supplier and others are procured from only a limited number of
suppliers. The Company has in the past encountered, and may in the
future encounter, shortages of supplies and delays in deliveries of
necessary components. Such shortages and delays could have a materially
adverse effect on the Company's ability to ship products.
As a substantial portion of the Company's total revenues, ranging from
approximately 25%-30% in recent years, is from customers located
outside of the United States, the Company's results could be negatively
affected by global and regional economic conditions, changes in foreign
currency exchange rates, trade protection measures, regulatory
acceptance of the Company's products in foreign countries, longer
accounts receivable collection patterns and other considerations
peculiar to the conduct of international business. The Company is
subject to similar risks in its procurement of certain of its materials
and components from foreign sources.
Certain of the Company's products intentionally transmit radio signals
as part of their normal operation. These products are subject to
regulatory approval, restrictions on the use of certain frequencies and
the creation of interference, and other requirements by the Federal
Communications Commission ("FCC") and corresponding authorities in each
country in which they are marketed. Regulatory changes could
significantly impact the Company's operations by restricting the
Company's development efforts, obsoleting current products or
increasing the opportunity for additional competition. The intentional
emission of electromagnetic radiation has also been the subject of
recent public concern regarding possible health and safety risks, and
though the Company believes that the low power output and the distance
typically maintained between a product and the user means that its
products do not pose material safety concerns, there can be no
assurance that such safety issues will not arise in the future and will
not have a materially adverse effect on the Company's business.
Among other things, the Company's future depends in large part on the
continued service of its key technical, marketing and management
personnel and on its ability to continue to attract and retain
qualified employees, particularly those highly skilled design, process
and test engineers involved in the manufacture of existing products and
the development of products and processes. The competition for such
personnel is intense, and the loss of key employees could have a
materially adverse effect on the Company's business, financial
condition and results of operations.
In addition to the factors discussed above and elsewhere in this Form
10-Q which may adversely affect the Company's conduct of its business
and the results thereof, the Company's financial condition is also
subject to the possible adverse effects of certain pending litigation
and other contingencies discussed above under Note 6 to the
consolidated financial statements included in Item 1 above.
14
<PAGE> 15
RESULTS OF OPERATIONS
REVENUES
Total consolidated revenues increased $8.8 million or 9% for the
first quarter of fiscal 1997 as compared to the same period in fiscal
1996.
Product revenues increased $6.1 million or 7% over the same period.
Product revenues include the sale of pen-based and touch-screen
workslates, rugged wireless mobile computers and other portable
tele-transaction computer ("PTC") units, hardware accessories, custom
application software and software licenses and a variety of
professional services including system integration and project
management. The increase in product revenues was primarily due to an
increase in average selling price per PTC unit offset by a moderate
decrease in PTC unit volume due to sales mix trending towards more
comprehensive products and systems.
Customer service revenues increased $2.8 million or 18% for the first
quarter of fiscal 1997 as compared to the same period in fiscal 1996.
This revenue increase was primarily due to volume increases and growth
in the installed base of the Company's products.
Revenues for the Company's international operations (including Canada)
increased $3.2 million or 11% for the first quarter of fiscal 1997 as
compared to the same period in fiscal 1996. Changes in currency
exchange rates and intercompany hedging activities did not materially
affect the results of the Company's international operations.
COSTS OF REVENUES
Cost of product revenues as a percentage of product revenues increased
to 70% for the first quarter of fiscal 1997 as compared to 59% for the
same period in fiscal 1996. The decrease in product gross margins from
those recorded during the first quarter of fiscal 1996 was primarily
due to the mix of large-volume, low-margin business, the slower than
expected growth in the Company's professional services revenues,
higher costs on early stage rollouts of new products and
manufacturing inefficiencies.
Cost of customer service revenues as a percentage of customer service
revenues for the first quarter of fiscal 1997 increased to 60% as
compared to 58% for the same period of fiscal 1996. This increase was
primarily due to increased direct material and labor costs to repair
the Company's more sophisticated and complex products.
Inventory valuation accounts for the first quarter of fiscal 1997 were
increased to cover the risk of obsolescence due to new product
introductions and continuing technological change. As of June 30, 1996,
inventory valuation accounts increased to $12.4 million or 10% of gross
inventory as compared to $10.1 million or 8% of gross inventory as of
March 31, 1996. The Company anticipates continued provisions for
obsolescence as revenue volumes from new product offerings replace
revenue from older products.
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<PAGE> 16
OPERATING EXPENSES
Selling expenses increased $1.5 million or 8% for the first quarter of
fiscal 1997 as compared to the same period in fiscal 1996. This
increase primarily reflects the increased revenues and related variable
expenses. Product development and engineering expenses increased $1.5
million or 16% from the first quarter of fiscal 1996's net product
development and engineering expenses, which included $1.0 million of
development expense reimbursement funding from a major customer that
was off-set against the related development expenses incurred. This
increase is primarily attributable to research and development
activities related to new and continued product development including
wireless data communications and spread spectrum technology, pen-based
technology, rugged wireless mobile computers, augmented reality
hardware and software, advanced image reading and two dimensional
bar-code technology, and other product improvements. General and
administrative expenses for the first quarter of fiscal 1997 increased
$2.0 million or 22% as compared to the same period in fiscal 1996 and
reflect the increase in Corporate resources necessary to support the
Company's overall growth.
INCOME TAXES
The Company's consolidated effective income tax rate for the first
quarter of fiscal 1997 was 50%. The consolidated effective income tax
rate reflects income before taxes plus nondeductible goodwill
amortization, which sum is multiplied by the United States statutory
rate and increased by international rate differentials.
LIQUIDITY
At June 30, 1996, the Company had cash and cash equivalents of $17.8
million, as compared to $34.8 million at March 31, 1996. The Company's
current ratio (current assets divided by current liabilities) was 3.0:1
at June 30, 1996 as compared to 2.6:1 at March 31, 1996. The Company's
current ratio increased as working capital (current assets less current
liabilities) decreased slightly for the changes in cash and cash
equivalents of $17.0 million, accounts receivable of $14.5 million,
inventories of $3.6 million, and notes payable of $7.8 million. These
working capital decreases were offset by an increase to working capital
as a result of a decrease in accounts payable of $21.7 million and a
decrease in accrued liabilities of $13.2 million. Inventory levels, in
total, decreased at June 30, 1996 as compared to those recorded at
March 31, 1996 as fewer purchased components were procured for
production levels in the second quarter of fiscal 1997. Accounts
payable decreased primarily due to decreased manufacturing inventory
levels and increased payments to vendors.
The Company believes that available cash and cash equivalents,
internally generated funds and credit availability, will be sufficient
to meet working capital requirements for the next twelve months.
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<PAGE> 17
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities was $17.1 million for the first
quarter of fiscal 1997, as compared to $.2 million for the same period
in fiscal 1996. Cash flows for the first quarter of fiscal 1997, as
compared to the same period in fiscal 1996, were negatively impacted by
the change in cash flow impact of accounts payable and accrued
liabilities of $32.6 million, the decrease in net earnings of $7.0
million and other items aggregating $1.7 million. These negative
impacts were offset by positive cash flow impacts in accounts and notes
receivable of $12.3 million, inventories of $6.1 million, other
long-term liabilities of $1.5 million, depreciation and amortization of
$1.6 million, and other items aggregating $2.9 million.
INVESTING ACTIVITIES
Net cash used in investing activities was $6.7 million for the first
quarter of fiscal 1997, as compared to $4.1 million for the same period
in fiscal 1996. The increase in the use of cash was primarily due to a
$1.8 million increase in additions to property and equipment and a $1.5
million increase in software investments, offset by other items
aggregating $.7 million.
FINANCING ACTIVITIES
Cash flows from financing activities increased $5.5 million during the
first quarter of fiscal 1997 as compared with the same period in fiscal
1996. This increase was primarily due to the increase in borrowing
under notes payable of $8.3 million offset by the purchase of $1.1
million of treasury stock and a decrease in proceeds from the exercise
of stock options of $1.7 million.
NON-CASH TRANSACTION
Effective April 1, 1996, the Company sold certain retail application
software operations, with net assets of approximately $5 million to a
third-party for $6.4 million. Of the $6.4 million sale price, $.2
million was received in cash while the balance was received in the form
of secured promissory notes and has been excluded from the fiscal 1997
Consolidated Statement of Cash Flows as a non-cash investing
transaction. Although no gain has been recorded at June 30, 1996, as a
result of this transaction, the Company will recognize gain from the
sale as cash proceed are received.
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 6 to the consolidated financial statements included in Part I of this
Quarterly Report on Form 10-Q for a discussion of the material pending legal
proceedings to which the Company is a party, which footnote discussion is
incorporated in this Part II by this reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Restated Certificate of Incorporation of
Registrant, incorporated herein by reference to
Exhibit No. 3.1 to Registrant's Form 10-K filed for
the year ended March 31, 1993.
3.2 Amended and Restated By-Laws of Registrant, as
amended, incorporated herein by reference to
Exhibit No. 2(b) to Registrant's Registration
Statement on Form 8-A with respect to its Common
Stock filed pursuant to Section 12(g) of the
Securities Exchange Act, as amended by Amendment
No. 1 thereto filed under cover of a Form 8 and
Amendment No. 2 thereto filed on Form 8-A/A.
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 herein by
reference to Exhibit 3.1 to Registrant's Form 10-K
for the year ended March 31, 1993.
4.2 Text of form of Certificate for the Registrant's
Common Stock, par value $.01 per share, and
description of graphic and image material appearing
thereon, incorporated herein by reference to
Exhibit 4.2 to the Registrant's Form 10-Q filed for
the quarter ended June 30, 1995.
4.3 Rights Agreement between Registrant and KeyBank
National Association, as Rights Agent, dated as of
August 25, 1987, Amended and Restated as of July
31, 1996, incorporated herein by reference to
Exhibit 4 to Registrant's Current Report on Form
8-K dated August 5, 1996 and filed August 6, 1996.
4.3.1 Form of Rights Certificate (included as
Exhibit A to the Rights Agreement
included as Exhibit 4.3 above). 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 text of which and
description thereof is included as
Exhibit 4.2 above, 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
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<PAGE> 19
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 Registrant's 7-1/2%
Convertible Subordinated Debentures
Due 2012 (set forth in the Indenture
included as Exhibit 4.4 above).
4.5 Indenture by and between the Registrant and Bank
One Trust Company, N.A., as Trustee, dated as of
December 1, 1995, regarding Registrant's 5-3/4%
Convertible Subordinated Notes due 2003,
incorporated herein by reference to Exhibit 4.1 to
Registrant's Registration Statement on Form S-3,
Registration No. 333-1189, filed February 23, 1996.
4.5.1 Form of Registrant's 5-3/4%
Convertible Subordinated Notes due
2003 issued under the Indenture
included as Exhibit 4.5 above,
incorporated herein by reference to
Exhibit 4.2 to Registrant's
Registration Statement on Form S-3,
Registration No. 333-1189,
filed February 23, 1996.
4.5.2 Registration Rights Agreement by and
among the Registrant and Hambrecht &
Quist LLC and Prudential Securities
Incorporated, as the Initial
Purchasers of Registrant's 5-3/4%
Convertible Subordinated Notes due
2003, with respect to the
registration of said Notes under
applicable securities laws,
incorporated herein by reference to
Exhibit 4.3 to Registrant's
Registration Statement on Form S-3,
Registration No. 333-1189, filed
February 23, 1996.
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
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<PAGE> 20
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,
incorporated
herein by
reference to
Exhibit 10.1.1.c
to Registrant's
Form 10-Q filed
for the quarter
ended December 31,
1994.
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 for employees
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, 1995.
10.1.4 1990 Stock Option Plan for
Non-Employee Directors of the
Registrant, as amended, incorporated
herein by reference to Exhibit
10.1.4 to Registrant's Form 10-Q
filed for the quarter ended
September 30, 1995.
10.1.5 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.
10.1.5.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.
10.1.6 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.
10.1.6.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.
10.1.6.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.
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<PAGE> 21
10.1.7 1995 Employee Stock Purchase Plan of
the Registrant, as amended,
incorporated herein by reference to
Exhibit 10.1.7 to Registrant's Form
10-Q filed for the quarter ended
September 30, 1995.
10.1.8 Description of compensation
arrangements between the Registrant
and Robert F. Meyerson, Chairman of
the Board of Registrant,
incorporated herein by reference to
10.1.7 to Registrant's Form 10-Q
filed for the quarter ended June 30,
1995.
10.1.9 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.
10.1.10 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 Employment Agreement between the
Registrant and Frank Brick,
effective as of October 15, 1993,
incorporated herein by reference to
Exhibit 10.1.16 on Registrant's Form
10-Q filed for the quarter ended
September 30, 1994.
10.1.13 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.
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<PAGE> 22
10.2.3 Commercial Lease and Condominium
Lease Agreement between Itronix
Corporation, a wholly owned
subsidiary of the Registrant, and
Metropolitan Mortgage & Securities
Company, Inc., dated May 26, 1994,
incorporated herein by reference to
Exhibit 10.2.3 to Registrant's
Form 10-K for the year ended March
31, 1995.
10.2.4 Standard Office Lease (Modified Net
Lease) between Registrant and John
D. Dellagnese III, dated as of July
19, 1995, including Addendum
thereto, incorporated herein by
reference to Exhibit 10.2.4 to
Registrant's Form 10-K filed for the
year ended March 31, 1996.
10.2.4.a Second Addendum to
Lease included as
Exhibit 10.2.4
above, dated as of
October 5, 1995,
incorporated
herein by
reference to
Exhibit 10.2.4.a
to Registrant's
Form 10-K filed
for the year ended
March 31, 1996.
10.2.4.b Third Addendum to
Lease included as
Exhibit 10.2.4
above, dated as of
March 1, 1996,
incorporated
herein by
reference to
Exhibit 10.2.4.b
to Registrant's
Form 10-K filed
for the year ended
March 31, 1996.
10.3 Credit Agreements of the Registrant.
10.3.1 Amended and Restated Revolving
Credit, Term Loan and Security
Agreement between the Registrant and
the Bank of New York Commercial
Corporation, dated as of March 31,
1995 (replaced by the unsecured
revolving credit facility
established by the Credit Agreement
included as Exhibit 10.3.2 below),
incorporated herein by reference to
Exhibit 10.3 to Registrant's Form
10-K for the year ended March 31,
1995.
10.3.1.a Amendment No. 1,
dated as of June
16, 1995, to the
Amended and
Restated Revolving
Credit, Term Loan
and Security
Agreement between
the Registrant and
the Bank of New
York Commercial
Corporation,
incorporated
herein by
reference to
Exhibit 10.3.1 to
Registrant's Form
10-K for the year
ended March 31,
1995.
10.3.1.b Amendment No. 2,
dated as of
December 1, 1995,
to the Amended and
Restated Revolving
Credit, Term Loan
and Security
Agreement between
the Registrant and
the Bank of New
York Commercial
Corporation,
incorporated
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<PAGE> 23
herein by
reference to
Exhibit 10.3.1.b
to Registrant's
Form 10-Q filed
for the quarter
ended December 31,
1995.
10.3.2 Credit Agreement by and among the
Registrant, the lenders party
thereto from time to time and The
Bank of New York, as letter of
credit issuer, swing line lender and
agent for the lenders, dated as of
March 8, 1996 (replaced the secured
revolving and term loan facility
established by the Amended and
Restated Revolving Credit, Term Loan
and Security Agreement included as
Exhibit 10.3.1 above, as amended by
Amendments No. 1 and 2 thereto
included as Exhibits 10.3.1.a and
10.3.1.b above), incorporated herein
by reference to Exhibit 10.3.2 to
Registrant's Form 10-K filed for the
year ended March 31, 1996.
10.3.3 Business Purpose Revolving
Promissory Note made by the
Registrant in favor of Bank One,
Akron, N.A., dated September 8,
1995, and related Letter Agreement
between them of even date,
incorporated herein by reference to
Exhibit 10.3.2 to Registrant's Form
10-Q filed for the quarter ended
September 30, 1995.
10.3.4 Business Purpose Revolving
Promissory Note made by the
Registrant in favor of Bank One,
Akron, N.A., dated November 24,
1995, and related Letter Agreement
between them dated November 22,
1995, incorporated herein by
reference to Exhibit 10.3.3 to
Registrant's Form 10-Q filed for the
quarter ended December 31, 1995.
10.3.5 Business Purpose Revolving
Promissory Note made by the
Registrant in favor of Bank One,
Akron, N.A., dated January 31, 1996,
and related Letter Agreement between
them dated of even date,
incorporated herein by reference to
Exhibit 10.3.4 to Registrant's Form
10-Q filed for the quarter ended
December 31, 1995.
10.3.6 Business Purpose Revolving
Promissory Note made by the
Registrant in favor of Bank One,
Akron, N.A., dated February 29,
1996, and related Letter Agreement
between them dated of even date,
incorporated herein by reference to
Exhibit 10.3.6 to Registrant's Form
10-K filed for the year ended March
31, 1996.
10.3.7 Business Purpose Revolving
Promissory Note (Swing Line) made by
the Registrant in favor of Bank One,
Akron, N.A., dated March 20, 1996,
incorporated herein by reference to
Exhibit 10.3.7 to Registrant's Form
10-K filed for the year ended March
31, 1996.
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<PAGE> 24
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 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.
10.5.1 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.
10.6 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.
10.7 Agreement of Purchase and Sale of Assets by and
among Vision Newco, Inc., a wholly owned subsidiary
of the Registrant, Virtual Vision, Inc., as debtor
and debtor in possession, and the Official
Unsecured Creditors' Committee, on behalf of the
bankruptcy estate of Virtual Vision, dated as of
July 13, 1995, incorporated herein by reference to
Exhibit 10.8 to Registrant's Form 10-Q filed for
the quarter ended June 30, 1995.
10.8 Subscription Agreement by and among New Meta
Licensing Corporation, a subsidiary of the
Registrant, and certain officers of the Registrant
as Purchasers, dated as of September 19, 1995,
incorporated herein by reference to Exhibit 10.8 to
Registrant's Form 10-Q, filed for the quarter ended
September 30, 1995.
10.9 Shareholder Agreement by and among New Meta
Licensing Corporation, a subsidiary of the
Registrant, and its Shareholders, including the
officers of the Registrant party to the
Subscription Agreement included as Exhibit 10.8
above, dated as of September 29, 1995, incorporated
herein by reference to Exhibit 10.9 to Registrant's
Form 10-Q, filed for the quarter ended September
30, 1995.
10.9.1 First Amendment, dated as of
September 29, 1995, to the
Shareholder Agreement included as
Exhibit 10.9 above, incorporated
herein by reference to Exhibit
10.9.1 to Registrant's Form 10-Q
filed for the quarter ended December
31, 1995.
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<PAGE> 25
10.9.2 Second Amendment, dated as of
January, 1996, to the Shareholder
Agreement included As Exhibit 10.9
above, incorporated herein by
reference to Exhibit 10.9.2 to
Registrant's Form 10-Q filed for the
quarter ended December 31, 1995.
10.9.3 Amended and Restated Shareholder
Agreement by and among Metanetics
Corporation (fka New Meta Licensing
Corporation) and its Shareholders,
dated as of March 28, 1996,
superseding the Shareholder
Agreement included as Exhibit 10.9
above, as amended, incorporated
herein by reference to Exhibit
10.9.3 to Registrant's Form 10-K
filed for the year ended March 31,
1996.
10.9.4 First Amendment, dated as of March
30, 1996, to the Amended and
Restated Shareholder Agreement
included as Exhibit 10.9.3 above,
incorporated herein by reference to
Exhibit 10.9.4 to Registrant's Form
10-K filed for the year ended March
31, 1996.
11. Computation of Common Shares outstanding and
earnings per share for the three months ended
June 30, 1996 and 1995, filed herewith.
27. Financial Data Schedule as of June 30, 1996, filed
herewith.
(b) Reports on Form 8-K
During the fiscal quarter ended June 30, 1996 for which this Quarterly
Report on Form 10-Q is filed, the Registrant filed the following
Current Reports on Form 8-K: (i) Current Report dated May 21, 1996,
attaching the Registrant's press release of that date which announced
its financial results for the fourth fiscal quarter and fiscal year
ended March 31, 1996 as well as discussing the effects of its financial
condition at that date under the subordination provisions of its
$82,500,000 in principal amount of 5-3/4% Convertible Subordinated
Notes due 2003 issued in December 1995 (the press release as
incorporated into the Form 8-K included consolidated balance sheets for
the Registrant as of March 31, 1996 and 1995 and condensed consolidated
statements of income for the three-month periods (unaudited) and fiscal
years ended March 31, 1996 and 1995); and (ii) Current Report dated
June 19, 1996 attaching the Registrant's press release of that date
which announced changes in the Registrant's senior management, expected
financial results for the fiscal year ending March 31, 1997, including
an anticipated loss of approximately $8,400,000, or $.50 per share, for
the first half of fiscal 1997, and the recommendation of management to
Registrant's Board of Directors that the Registrant repurchase common
stock and convertible bonds (neither the Form 8-K nor the Press Release
included any financial statements). In addition, subsequent to the end
of the June 30, 1996 fiscal quarter, the Registrant filed the following
Current Reports on Form 8-K: (i) Current Report dated July 8, 1996,
attaching the Registrant's press release of that date reporting the
authorization by the Company's Board of Directors of the repurchase by
the
25
<PAGE> 26
Company of up to three million of its outstanding Shares and the
initial repurchases made under the repurchase program (neither the
Form 8-K nor the press release included any financial statements);
(ii) Current Report dated July 17, 1996, attaching the Registrant's
press release of that date which announced its financial results for
the first fiscal quarter ended June 30, 1996 as well as discussing the
effects of its financial condition at that date under the
subordination provisions of the 5-3/4% Convertible Subordinated Notes
(the press release as incorporated into the Form 8-K included
consolidated balance sheets for the Registrant as of June 30, 1996
(unaudited) and March 31, 1996 and condensed consolidated statements
of income for the three-month periods (unaudited) ended June 30, 1996
and 1995); and (iii) Current Report dated August 5, 1996, reporting
the amendment and restatement of the Company's stockholder rights plan
(the Form 8-K did not include any financial statements).
26
<PAGE> 27
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: August 14, 1996
TELXON CORPORATION
------------------
(Registrant)
/s/ Kenneth W. Haver
--------------------
Kenneth W. Haver
Senior Vice President,
Chief Financial Officer
and Treasurer
<PAGE> 28
TELXON CORPORATION
EXHIBITS TO
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
<PAGE> 29
INDEX TO EXHIBITS
-----------------
Page
----
* 3.1 Restated Certificate of Incorporation of Registrant, incorporated
by reference to Exhibit No. 3.1 to Registrant's Form 10-K filed
for the year ended March 31, 1993.
* 3.2 Amended and Restated By-Laws of Registrant, as amended,
incorporated by reference to Exhibit No. 2(b) to Registrant's
Registration Statement on Form 8-A with respect to its Common
Stock filed pursuant to Section 12(g) of the Securities Exchange
Act, as amended by Amendment No. 1 thereto filed under cover of a
Form 8 and Amendment No. 2 thereto filed on Form 8-A/A.
* 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 Text of form of Certificate for the Registrant's Common Stock,
par value $.01 per share, and description of graphic and image
material appearing thereon, incorporated herein by reference to
Exhibit 4.2 to Registrant's Form 10-Q filed for the quarter ended
June 30, 1995.
* 4.3 Rights Agreement between Registrant and KeyBank National
Association, as Rights Agent, dated as of August 25, 1987,
Amended and Restated as of July 31, 1996, incorporated herein by
reference to Registrant's Current Report on Form 8-K, dated
August 5, 1996 and filed August 6, 1996.
* 4.3.1 Form of Rights Certificate (included as Exhibit A
to the Rights Agreement included as Exhibit 4.3
above). 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
text of which and description thereof is included
as Exhibit 4.2 above, 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.
<PAGE> 30
Page
----
* 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 above).
* 4.5 Indenture by and between the Registrant and Bank One Trust
Company, N.A., as Trustee, dated as of December 1, 1995,
regarding Registrant's 5-3/4% Convertible Subordinated Notes
due 2003, incorporated herein by reference to Exhibit 4.1 to
Registrant's Registration Statement on Form S-3,
Registration No. 333-1189, filed February 23, 1996.
* 4.5.1 Form of Registrant's 5-3/4% Convertible
Subordinated Notes due 2003 issued under the
Indenture included as Exhibit 4.5 above,
incorporated herein by reference to Exhibit 4.2 to
Registrant's Registration Statement on Form S-3,
Registration No. 333-1189, filed February 23,
1996.
* 4.5.2 Registration Rights Agreement by and among the
Registrant and Hambrecht & Quist LLC and
Prudential Securities Incorporated, as the Initial
Purchasers of Registrant's 5-3/4% Convertible
Subordinated Notes due 2003, with respect to the
registration of said Notes under applicable
securities laws, incorporated herein by reference
to Exhibit 4.3 to Registrant's Registration
Statement on Form S-3, Registration No. 333-1189,
filed February 23, 1996.
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,
incorporated herein by reference to
Exhibit 10.1.1.c to Registrant's Form
10-Q field for the quarter ended
December 31, 1994.
<PAGE> 31
Page
----
* 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 for employees 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,
1995.
* 10.1.4 1990 Stock Option Plan for Non-Employee Directors
of the Registrant, as amended, incorporated herein
by reference to Exhibit 10.1.4 to Registrant's
Form 10-Q filed for the quarter ended September
30, 1995.
* 10.1.5 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.
* 10.1.5.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.
* 10.1.6 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.
* 10.1.6.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.
* 10.1.6.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.
* 10.1.7 1995 Employee Stock Purchase Plan of the
Registrant, as amended, incorporated herein by
reference to Exhibit 10.1.7 to Registrant's Form
10-Q filed for the quarter ended September 30,
1995.
<PAGE> 32
Page
----
* 10.1.8 Description of compensation arrangements between
the Registrant and Robert F. Meyerson, Chairman of
the Board of Registrant, incorporated herein by
reference to Exhibit 10.1.7 to Registrant's Form
10-Q filed for the quarter ended September 30,
1995.
* 10.1.9 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.
* 10.1.10 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 Employment Agreement between the Registrant and
Frank Brick, effective as of October 15, 1993,
incorporated herein by reference to Exhibit
10.1.16 on Registrant's Form 10-Q filed for the
quarter ended September 30, 1994.
* 10.1.13 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.
* 10.2.3 Commercial Lease and Condominium Lease Agreement
between Itronix Corporation, a wholly owned
subsidiary of the Registrant, and Metropolitan
Mortgage &
<PAGE> 33
Page
- ----
Securities Company, Inc., dated May 26, 1994,
incorporated herein by reference to Exhibit 10.2.3
to Registrant's Form 10-K for the year ended March
31, 1995.
* 10.2.4 Standard Office Lease (Modified Net Lease) between
Registrant and John D. Dellagnese III, dated as of
July 19, 1995, including Addendum thereto,
incorporated herein by reference to Exhibit 10.2.4
to Registrant's Form 10-K filed for the year ended
March 31, 1996.
* 10.2.4.a Second Addendum to Lease included as
Exhibit 10.2.4 above, dated as of
October 5, 1995, incorporated herein by
reference to Exhibit 10.2.4.a to
Registrant's Form 10-K filed for the
year ended March 31, 1996.
* 10.2.4.b Third Addendum to Lease included as
Exhibit 10.2.4 above, dated as of March
1, 1996, incorporated herein by
reference to Exhibit 10.2.4.b to
Registrant's Form 10-K filed for the
year ended March 31, 1996.
* 10.3.1 Amended and Restated Revolving Credit, Term Loan
and Security Agreement between the Registrant and
the Bank of New York Commercial Corporation, dated
as of March 31, 1995 (replaced by the unsecured
revolving credit facility established by the
Credit Agreement included as Exhibit 10.3.2
below), incorporated herein by reference to
Exhibit 10.3 to Registrant's Form 10-K for the
year ended March 31, 1995.
* 10.3.1.a Amendment No. 1, dated as of June 16,
1995, to the Amended and Restated
Revolving Credit, Term Loan and Security
Agreement between the Registrant and the
Bank of New York Commercial Corporation,
incorporated herein by reference to
Exhibit 10.3.1 to Registrant's Form 10-K
for the year ended March 31, 1995.
* 10.3.1.b Amendment No. 2, dated as of December 1,
1995, to the Amended and Restated
Revolving Credit, Term Loan and Security
Agreement between the Registrant and the
Bank of New York Commercial Corporation,
incorporated herein by reference to
Exhibit 10.3.1.b to Registrant's Form
10-Q filed for the quarter ended
December 31, 1995.
<PAGE> 34
Page
- ----
* 10.3.2 Credit Agreement by and among the Registrant, the
lenders party thereto from time to time and The
Bank of New York, as letter of credit issuer,
swing line lender and agent for the lenders, dated
as of March 8, 1996 (replaced the secured
revolving and term loan facility established by
the Amended and Restated Revolving Credit, Term
Loan and Security Agreement included as Exhibit
10.3.1 above, as amended by Amendments No. 1 and 2
thereto included as Exhibits 10.3.1.a and 10.3.1.b
above), incorporated herein by reference to
Exhibit 10.3.2 to Registrant's Form 10-K filed for
the year ended March 31, 1996.
* 10.3.3 Business Purpose Revolving Promissory Note made by
the Registrant in favor of Bank One, Akron, N.A.,
dated September 8, 1995, and related Letter
Agreement between them of even date, incorporated
herein by reference to Exhibit 10.3.2 to
Registrant's Form 10-Q filed for the quarter ended
September 30, 1995.
* 10.3.4 Business Purpose Revolving Promissory Note made by
the Registrant in favor of Bank One, Akron, N.A.,
dated November 24, 1995, and related Letter
Agreement between them dated November 22, 1995,
incorporated herein by reference to Exhibit 10.3.3
to Registrant's Form 10-Q filed for the quarter
ended December 31, 1995.
* 10.3.5 Business Purpose Revolving Promissory Note made by
the Registrant in favor of Bank One, Akron, N.A.,
dated January 31, 1996, and related Letter
Agreement between them dated of even date,
incorporated herein by reference to Exhibit 10.3.4
to Registrant's Form 10-Q filed for the quarter
ended December 31, 1995.
* 10.3.6 Business Purpose Revolving Promissory Note made by
the Registrant in favor of Bank One, Akron, N.A.,
dated February 29, 1996, and related Letter
Agreement between them dated of even date,
incorporated herein by reference to Exhibit 10.3.6
to Registrant's Form 10-K filed for the year ended
March 31, 1996.
* 10.3.7 Business Purpose Revolving Promissory Note (Swing
Line) made by the Registrant in favor of Bank One,
Akron, N.A., dated March 20, 1996, incorporated
herein by reference to Exhibit 10.3.7 to
Registrant's Form 10-K filed for the year ended
March 31, 1996.
* 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.
<PAGE> 35
Page
- ----
* 10.5 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.
* 10.5.1 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.
* 10.6 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.
* 10.7 Agreement of Purchase and Sale of Assets by and among Vision
Newco, Inc., a wholly owned subsidiary of the Registrant,
Virtual Vision, Inc., as debtor and debtor in possession,
and the Official Unsecured Creditors' Committee, on behalf
of the bankruptcy estate of Virtual Vision, dated as of July
13, 1995, incorporated herein by reference to Exhibit 10.8
to Registrant's Form 10-Q filed for the quarter ended June
30, 1995.
* 10.8 Subscription Agreement by and among New Meta Licensing
Corporation, a subsidiary of the Registrant, and certain
officers of the Registrant as Purchasers, dated as of
September 19, 1995, incorporated herein by reference to
Exhibit 10.8 to Registrant's Form 10-Q, filed for the
quarter ended September 30, 1995.
* 10.9 Shareholder Agreement by and among New Meta Licensing
Corporation, a subsidiary of the Registrant, and its
Shareholders, including the officers of the Registrant party
to the Subscription Agreement included as Exhibit 10.8
above, dated as of September 29, 1995, incorporated herein
by reference to Exhibit 10.9 to Registrant's Form 10-Q,
filed for the quarter ended September 30, 1995.
* 10.9.1 First Amendment, dated as of September 29, 1995,
to the Shareholder Agreement included as Exhibit
10.9 above, incorporated herein by reference to
Exhibit 10.9.1 to Registrant's Form 10-Q filed for
the quarter ended December 31, 1995.
* 10.9.2 Second Amendment, dated as of January, 1996, to
the Shareholder Agreement included As Exhibit 10.9
above, incorporated herein by reference to Exhibit
10.9.2 to
<PAGE> 36
Page
- ----
Registrant's Form 10-Q filed for the quarter ended
December 31, 1995.
* 10.9.3 Amended and Restated Shareholder Agreement by and
among Metanetics Corporation (fka New Meta
Licensing Corporation) and its Shareholders, dated
as of March 28, 1996, superseding the Shareholder
Agreement included as Exhibit 10.9 above, as
amended, incorporated herein by reference to
Exhibit 10.9.3 to Registrant's Form 10-K filed for
the year ended March 31, 1996.
* 10.9.4 First Amendment, dated as of March 30, 1996, to
the Amended and Restated Shareholder Agreement
included as Exhibit 10.9.3 above, incorporated
herein by reference to Exhibit 10.9.4 to
Registrant's Form 10-K filed for the year ended
March 31, 1996.
** 11. Computation of Common Shares outstanding and earnings per
share for the three months ended June 30, 1996 and 1995,
filed herewith.
** 27. Financial Data Schedule as of June 30, 1996, filed herewith.
- ------------------------------------
* Previously filed
** Filed herewith
<PAGE> 1
EXHIBIT 11
----------
EXHIBIT (11)* TO REPORT ON FORM 10-Q
TELXON CORPORATION AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------
1996 1995
----------------------- -------------------------
<S> <C> <C>
Net (loss) income applicable to common shares $(4,797) $2,229
======================= ======================
Weighted average common shares outstanding
for the period 16,544 16,102
======================= ======================
(Loss) earnings per common share:
On the weighted average common
shares outstanding for the year ** $(.29) $.08
<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 5-3/4% Convertible Subordinated Notes and 7-1/2% Convertible
Subordinated Debentures were omitted from the fully diluted calculation
due to their antidilutive effect.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 17,805
<SECURITIES> 876
<RECEIVABLES> 120,872
<ALLOWANCES> 1,821
<INVENTORY> 107,581
<CURRENT-ASSETS> 264,508
<PP&E> 131,797
<DEPRECIATION> 77,087
<TOTAL-ASSETS> 356,816
<CURRENT-LIABILITIES> 86,790
<BONDS> 110,276
<COMMON> 161
0
0
<OTHER-SE> 155,675
<TOTAL-LIABILITY-AND-EQUITY> 356,816
<SALES> 94,025
<TOTAL-REVENUES> 112,383
<CGS> 65,825
<TOTAL-COSTS> 76,873
<OTHER-EXPENSES> 43,454
<LOSS-PROVISION> 124
<INTEREST-EXPENSE> 1,755
<INCOME-PRETAX> (9,594)
<INCOME-TAX> (4,797)
<INCOME-CONTINUING> (4,797)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,797)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
