<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): October 18, 1996
TELXON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-11402 74-1666060
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
3330 WEST MARKET STREET, AKRON, OHIO 44333
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (330) 867-3700
<PAGE> 2
ITEM 5. OTHER EVENTS.
On October 18, 1996, Telxon Corporation ("Telxon" or the "Company")
issued a press release announcing its financial results for its fiscal quarter
ended September 30, 1996. A copy of the press release is included as Exhibit
99 to this Current Report on Form 8-K and is incorporated herein by
reference.
The amounts owed from time to time by the Company and its subsidiaries
to other creditors, which, as of September 30, 1996, are reflected in the
consolidated balance sheet included as part of the press release, determine the
extent to which the Company's $82,500,000 aggregate outstanding principal amount
of 5 3/4% Convertible Subordinated Notes due 2003 (the "Notes") is
subordinated. Under the terms of the Indenture (the "Indenture"), dated December
1, 1995, between the Company and Bank One Trust Company, N.A., as trustee,
pursuant to which the Notes were issued in December 1995, the indebtedness
evidenced by the Notes is subordinated, to the extent provided in the Indenture,
to the prior payment in full of all Senior Indebtedness (as defined in the
Indenture). The Notes are also effectively subordinated to the amounts of
indebtedness and other liabilities of the Company's subsidiaries. For a
discussion summarizing such subordination of the Notes, reference should be made
to the Company's Current Report on Form 8-K dated May 21, 1996, as filed with
the Securities and Exchange Commission on June 3, 1996 (the "Prior Report")
and incorporated herein by reference. The statements in that discussion
regarding the provisions of the Indenture are qualified in their entirety by
reference to the copy of the Indenture included as an exhibit to the
registration statement relating to the Notes which has been filed by the
Company under the Securities Act of 1933 as well as to the Company's Current,
Quarterly and Annual Reports on Forms 8-K, 10-Q and 10-K which have been filed
by the Company under the Securities Exchange Act of 1934 subsequent to the
filing of the Prior Report.
The amounts of Senior Indebtedness, and the amounts of indebtedness and
other liabilities of the Company's subsidiaries, as of September 30, 1996 were
as follows (such amounts varying from time to time depending upon the operating
and capital needs and operating results of Telxon and its subsidiaries):
<TABLE>
<CAPTION>
<S> <C> <C>
Senior Indebtedness $ 32.0 million
Indebtedness and Other Liabilities 33.4 million
of Subsidiaries*
-------------------
<FN>
* Excludes intercompany liabilities and approximately $1.0
million at September 30, 1996 in subsidiaries' notes and
letters of credit guaranteed by Telxon which are included
in the amount of Senior Indebtedness above.
</TABLE>
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99 Press Release issued by registrant on October 18, 1996.
SIGNATURES
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 hereunto duly authorized.
TELXON CORPORATION
DATE: October 23, 1996 By: /s/ Glenn S. Hansen
-------------------
Glenn S. Hansen
Vice President, Legal Administration
and Corporate Counsel
<PAGE> 1
Exhibit 99
[TELXON LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
TELXON REPORTS SECOND QUARTER FY 1997 RESULTS
AKRON, OHIO, October 18, 1996 - - Telxon Corporation (TLXN - Nasdaq -
NNM) today reported results for its fiscal 1997 second quarter ended
September 30, 1996.
For the quarter ended September 30, 1996, the company reported results
in line with earlier management guidance, recording revenues of $108.3 million
and a net loss of $4.7 million, or $.29 per share. This includes $.04 per
share, or $1.4 million the company booked for non-recurring costs involved with
a workforce reduction that occurred in July. The company reported revenues of
$107.0 million and net income of $2.8 million, or $.17 per share, in the year
earlier quarter.
For the first six months of fiscal 1997, Telxon recorded revenues of
$220.7 million and a net loss $9.5 million, or $.58 per share. This compares to
net income of $5.0 million, or $.31 per share, on revenues of $210.5 million,
for the same period last year.
Robert F. Meyerson, Chairman and Chief Executive Officer, stated,
"During the second quarter of fiscal 1997, we continued to address changes in
market conditions and have begun implementing the cost reduction and efficiency
improvement strategies we identified earlier. Since electing Frank E. Brick
President and Chief Operating Officer in June, we are pleased with the
leadership role he has taken in
Telxon Corporation/Corporate Communications Department
3330 West Market Street/P.O. Box 5582/Akron, Ohio 44334-0582
800-800-8001/Fax (330) 873-2058
<PAGE> 2
implementing significant cost reductions and consolidations so the company can
return to its five year plan of consistent and profitable growth as soon as
possible."
Frank Brick, President and Chief Operating Officer, said, "The
implementation of our new business model consists of three phases. Phase One
focuses on reducing product costs and improving gross margins, Phase Two
centers upon improving operating efficiencies and lowering the overall cost of
serving our world-wide markets, and Phase Three redesigns our infrastructure
and logistics systems to address changing market conditions more efficiently."
Brick continued, "Specific actions have either been initiated or are
under review related to each of these phases. As part of Phase One, we have
implemented a number of engineering programs aimed at reducing the cost of our
products through new design procedures, improved sourcing and proposed model
consolidations. As part of Phase Two, we have made key management changes in
sales, product marketing, product development, customer service and operations
that will drive greater efficiencies throughout our core business processes. As
part of Phase Three, all operations are under review for further consolidation.
In addition, we continue to consider strategies in which the passive value of
investments in our technical subsidiaries can be better reflected in the
company's value."
Kenneth W. Haver, Senior Vice President and Chief Financial Officer,
added, "The early benefits of these initiatives have been only partially
reflected in our fiscal 1997 Q2 results. Benefits from these phased initiatives
are expected to be fully realized over the next three to four quarters. We
expect the total impact of these initiatives under all
<PAGE> 3
phases, once fully implemented, to generate overall annual cost reductions in
excess of $40 million below historical run-rates."
Haver continued, "During the quarter, we experienced a strong
book-to-bill rate, as our ending backlog increased by over $10 million. Our
gross profit margins, as a percentage of sales, are expected to increase over
the next 2-3 quarters, as cost reductions are implemented and planned
efficiency improvements are more fully realized. Q2 gross profit margins were
affected by a portion of the non-recurring charges mentioned previously, and
the impact of a single large volume, low margin, customer roll-out. These two
items combined to decrease margins by 2-3%."
"Although our DSO improved slightly during the quarter, the improvement
was 5-7 days less than expected, due to a delayed installation of a single,
large customer roll-out. This collection is expected to be substantially
completed within the third quarter."
Other than the historical financial information reported above, this
news release constitutes forward-looking statements that are inherently subject
to risks and uncertainties which could cause Telxon's actual results to differ
materially from the forward-looking statements. The important factors affecting
the realization of those results include, without limitation, the company's
success in identifying and implementing appropriate cost reduction and
efficiency improvement strategies as outlined above, as well as general and
industry-specific economic conditions, the company's ability to timely develop,
introduce and gain market acceptance of new and enhanced products, competitive
pressures and rapid technological change, and its ability to identify, acquire
and manage new businesses and technologies. Reference
<PAGE> 4
should be made to the discussion of these and other factors affecting Telxon's
business and results as included from time to time in the company's filings with
the Securities and Exchange Commission.
Telxon Corporation is a leading global designer and manufacturer of
wireless and mobile transaction solution systems for vertical markets. The
company integrates advanced mobile computing and wireless data communication
technology with a wide array of peripherals, application-specific software and
global technical services for its customers in more than 50 countries around the
world. Telxon's executive, engineering, marketing and sales offices are
headquartered in Akron, Ohio; its world manufacturing and domestic customer
service facilities are located in Houston, Texas. Telxon International Division
is headquartered in Brussels, Belgium. Telxon's World Wide Web site address
is: http://www.telxon.com.
# # #
For more information:
Alex L. Csiszar
Senior Director, Investor Relations
Telxon Corporation
(330) 873-2961
<PAGE> 5
Telxon Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
- --------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1996 1996
------------- ---------
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and short-term investments ............. $ 16,128 $ 35,730
Accounts receivable, net .................... 112,015 133,592
Notes and other accounts receivable ......... 9,931 9,522
Inventories............ ..................... 106,870 111,132
Prepaid expenses and other .................. 9,540 9,939
--------- ---------
Total current assets ............... 254,484 299,915
Property and equipment, net ................. 53,574 54,673
Intangible and other assets, net ............ 38,377 34,621
--------- ---------
Total .............................. $ 346,435 $ 389,209
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ............................... $ 17,335 $ 66
Current portion of long-term debt ........... 384 1,156
Accounts payable ............................ 33,717 59,620
Capital lease obligations due within one year 811 897
Accrued liabilities ......................... 29,575 52,181
--------- ---------
Total current liabilities .......... 81,822 113,920
Capital lease obligations ............................ 1,566 1,982
Convertible subordinated debentures .................. 107,224 107,224
Long-term debt ....................................... -- 1,331
Other long-term liabilities .......................... 3,599 3,562
--------- ---------
Total .............................. 194,211 228,019
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, 16,099,952
and 16,096,193 shares outstanding ...... 162 161
Additional paid-in capital .................. 86,395 85,750
Retained earnings ........................... 68,597 78,096
Equity adjustment for foreign currency
translation ............................ (1,848) (2,064)
Unearned restricted stock awards ............ (470) (753)
Treasury stock, 58,246 shares at cost ....... (612) --
--------- ---------
Total stockholders' equity ......... 152,224 161,190
--------- ---------
Total .............................. $ 346,435 $ 389,209
========= =========
</TABLE>
<PAGE> 6
Telxon Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
- --------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Product ........................................ $ 89,439 $ 90,191 $ 183,464 $ 178,135
Customer service ............................... 18,875 16,825 37,233 32,422
--------- --------- --------- ---------
Total revenues ......................... 108,314 107,016 220,697 210,557
Cost of revenues ............................... 73,979 61,500 150,852 121,914
--------- --------- --------- ---------
Gross profit ................................... 34,335 45,516 69,845 88,643
Operating expenses:
Selling expenses ............................... 21,037 18,748 42,220 38,416
Product development and engineering
expenses ..................................... 10,096 12,029 21,204 21,614
General and administrative expenses ............ 10,548 9,105 21,711 18,241
--------- --------- --------- ---------
41,681 39,882 85,135 78,271
Income (loss) from operations .......... (7,346) 5,634 (15,290) 10,372
Interest income .................................... 136 151 351 294
Interest expense ................................... (2,162) (1,532) (4,132) (2,698)
Other non-operating income (expense) ... (32) 355 73 355
--------- --------- --------- ---------
Income (loss) before income taxes ...... (9,404) 4,608 (18,998) 8,323
Provision (benefit) for income taxes ............... (4,702) 1,797 (9,499) 3,283
--------- --------- --------- ---------
Net income (loss) ..................... $ (4,702) $ 2,811 $ (9,499) $ 5,040
======== ======== ========= =========
Earnings per common and common equivalent share:
Net income (loss) per share ............ $ (.29) $ .17 $ (.58) $ .31
======== ======== ========= =========
Average number of common and common
equivalent shares outstanding .................... 16,182 16,248 16,265 16,066
======== ======== ========= =========
</TABLE>
