<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): May 21, 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 May 21, 1996, Telxon Corporation ("Telxon" or the "Company") issued
a press release announcing its financial results for the fourth fiscal quarter
and fiscal year ended March 31, 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 press release references, among other matters, the Company's entry
during the fourth fiscal quarter into new unsecured credit facilities totaling
$120,000,000. These new facilities consist of (i) a five year $100 million
credit facility, dated March 8, 1996, with The Bank of New York, as agent for a
syndicate of participating lenders, and (ii) a supplemental 364 day, $20 million
guidance facility, dated March 20, 1996, with Bank One, Akron, NA, which is also
one of the participants in the Bank of New York facility. These facilities
replaced pre-existing credit facilities with The Bank of New York Commercial
Corporation and Bank One, Akron, NA. Each of these replacement credit facilities
provides by its terms that the Indebtedness (as defined in the Indenture (the
"Indenture"), dated December 1, 1995, between the Company and Bank One Trust
Company, N.A., as trustee (the "Trustee"), under which the Company's $82,500,000
aggregate principal amount of 5 3/4% Convertible Subordinated Notes due 2003
(the "Notes") were issued in December 1995 (the "Debt Offering")) thereunder
shall be "Designated Senior Indebtedness" within the meaning of the Indenture.
Under the Indenture, the holders of Designated Senior Indebtedness are
accorded special rights and priorities relative to the indebtedness evidenced
by the Notes, as discussed in more detail below.
The amounts of Senior Indebtedness (as defined in the Indenture)
to which the Notes are subordinated, and the amounts of indebtedness and other
liabilities of the Company's subsidiaries to which the Notes are effectively
subordinated, as of March 31, 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 $ 5.7 million
Indebtedness and Other Liabilities 42.8 million
of Subsidiaries*
-------------------
<FN>
* Excludes intercompany liabilities and approximately $3.1
million at March 31, 1996 in subsidiaries' notes and letters of
credit guaranteed by Telxon which are included in the amount of
Senior Indebtedness above.
</TABLE>
<PAGE> 3
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. Upon any distribution of assets of the Company resulting from
any dissolution, winding up, liquidation or reorganization, the payment of the
principal of, or premium, if any, and interest on the Notes is subordinated,
to the extent provided in the Indenture, in right of payment to the prior
payment in full in cash of all Senior Indebtedness. In the event of any
acceleration of the Notes because of an Event of Default (as defined), the
holders of any Senior Indebtedness then outstanding would be entitled to
payment in full in cash of all obligations in respect of such Senior
Indebtedness before the holders of the Notes are entitled to receive any
payment or distribution in respect thereof. The Indenture requires that the
Company promptly notify holders of Senior Indebtedness if payment of the Notes
is accelerated because of an Event of Default.
The Company also may not make any payment upon or in respect of the
Notes if (i) a default in the payment of the principal of, premium, if any,
interest, rent or other obligations in respect of Senior Indebtedness occurs and
is continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness (as
defined) that permits holders of the Designated Senior Indebtedness as to which
such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or other
person permitted to give such notice under the Indenture. Payments on the Notes
may and shall be resumed (a) in case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received. No new period of payment blockage may be commenced pursuant to a
Payment Blockage Notice unless and until (i) 365 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the Notes that
have become due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
By reason of the subordination provisions described above, holders of
Senior Indebtedness may, in the event of the Company's bankruptcy, dissolution
or reorganization, receive more, ratably, and holders of the Notes may receive
less, ratably, than the other creditors of the Company. Such subordination will
not prevent the occurrence of any Event of Default under the Indenture.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness of the Company, whether outstanding
on the date of the Indenture or thereafter created, incurred, assumed,
guaranteed or in effect guaranteed by the Company (including all deferrals,
renewals, extensions or refundings of, or amendments, modifications or
supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such indebtedness shall not be senior
in right of payment to the Notes or expressly provides that such Indebtedness is
"pari passu" or "junior" to the Notes. Notwithstanding the foregoing, Senior
Indebtedness shall not include (i) any Indebtedness of the Company to any
<PAGE> 4
subsidiary of the Company, a majority of the voting stock of which is owned,
directly or indirectly, by the Company or (ii) the Company's 7 1/2% Convertible
Subordinated Debentures Due 2012. The term "Indebtedness" means, with respect to
any Person, and without duplication, (a) all indebtedness, obligations and other
liabilities (contingent or otherwise) of such Person for borrowed money
(including obligations of the Company in respect of overdrafts, foreign exchange
contracts, currency exchange agreements, interest rate protection agreements,
and any loans or advances from banks, whether or not evidenced by notes or
similar instruments) or evidenced by bonds, debentures, notes or similar
instruments (whether or not the recourse of the lender is to the whole of the
assets of such Person or to only a portion thereof) (other than any account
payable or other accrued current liability or obligation incurred in the
ordinary course of business in connection with the obtaining of materials or
services), (b) all reimbursement obligations and other liabilities (contingent
or otherwise) of such Person with respect to letters of credit, bank guarantees
or bankers' acceptances, (c) all obligations and liabilities (contingent or
otherwise) in respect of leases of such Person as lessee required, in conformity
with generally accepted accounting principles, to be accounted for as
capitalized lease obligations on the balance sheet of such Person, and all
obligations and other liabilities (contingent or otherwise) under any lease or
related document (including a purchase agreement) in connection with any lease
of real property which provides that such Person is contractually obligated to
purchase or cause a third party to purchase the leased property and thereby
guarantee a minimum residual value of the leased property to the lessor and the
obligations of such Person under such lease or related document to purchase or
to cause a third party to purchase such leased property, (d) all obligations of
such Person (contingent or otherwise) with respect to an interest rate or other
swap, cap or collar agreement or other similar instrument or agreement or
foreign currency hedge, exchange, purchase or similar instrument or agreement,
(e) all direct or indirect guaranties or similar agreements by such Person in
respect of, and obligations or liabilities (contingent or otherwise) of such
Person to purchase or otherwise acquire or otherwise assure a creditor against
loss in respect of, indebtedness, obligations or liabilities of another Person
of the kind described in clauses (a) through (d), (f) any indebtedness or other
obligations described in clauses (a) through (d) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
such Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person and, (g) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (f).
"Designated Senior Indebtedness" is defined in the Indenture to include
two specified credit facilities maintained by the Company at the time of the
Debt Offering as well as any other Senior Indebtedness if the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such Indebtedness shall be "Designated Senior Indebtedness" for
purposes of the Indenture (provided that such instrument, agreement or other
document may place limitations and conditions on the right of such Senior
Indebtedness to exercise the rights of Designated Senior Indebtedness). Since
the time of the Debt Offering, the Company has replaced the two specified credit
facilities with the following revolving credit facilities, each of which
replacement facilities provides by its terms that the Indebtedness thereunder
shall be "Designated Senior Indebtedness" within the
<PAGE> 5
meaning of the Indenture: (i) a five year unsecured $100 million credit
facility, dated March 8, 1996, with The Bank of New York, as agent for a
syndicate of participating lenders, and (ii) a supplemental 364 day unsecured
$20 million guidance facility, dated March 20, 1996, with Bank One, Akron, NA,
which is also one of the participants in the Bank of New York facility.
The Notes are obligations exclusively of the Company. Since the
operations of the Company are partially conducted through its subsidiaries, the
cash flow and the consequent ability to service debt, including the Notes, of
the Company are partially dependent upon the earnings of any such subsidiaries
(some of which are less than wholly owned) and the distribution of those
earnings, or upon loans or other payments of funds, by those subsidiaries to the
Company. The subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Notes or to make any funds available therefor, whether by dividends,
distributions, loans or other payments. In addition, the payment of dividends or
distributions and the making of loans and other payments to the Company by any
such subsidiaries could be subject to statutory or contractual restrictions,
could be contingent upon the earnings of those subsidiaries, and are subject to
various business considerations.
Any right of the Company to receive any assets of any of its
subsidiaries upon their liquidation or reorganization (and the consequent right
of the holders of the Notes to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interest in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.
The Indenture contains no limitations on either (i) the amount of
additional indebtedness, including Senior Indebtedness, which the Company can
create, incur, assume or guarantee, or (ii) the amount of indebtedness and
other liabilities which any subsidiary can create, incur, assume or guarantee.
In the event that, notwithstanding the foregoing, the Trustee or any
holder of Notes receives any payment or distribution of assets of the Company of
any kind in contravention of any of the subordination provisions of the
Indenture, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Notes before all
Senior Indebtedness is paid in full, then such payment or distribution will be
held by the recipient in trust for the benefit of holders of Senior Indebtedness
or their representative or representatives to the extent necessary to make
payment in full of all Senior Indebtedness remaining unpaid, after giving effect
to any
<PAGE> 6
concurrent payment or distribution, or provision therefor, to or for the holders
of Senior Indebtedness.
The Company is obligated to pay reasonable compensation to the Trustee
and to indemnify the Trustee against any losses, liabilities or expenses
incurred by it in connection with its duties relating to the Notes. The
Trustee's claims for such payments will be senior to claims of holders of the
Notes in respect of all funds collected or held by the Trustee.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99 Press Release issued by registrant on May 21, 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: June 3, 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 EARNINGS UP 99%, TELXON SALES UP 42%
FOR THE FOURTH QUARTER ENDED MARCH 31, 1996
AKRON, OHIO, May 21, 1996 - - Telxon Corporation (TLXN - Nasdaq - NNM)
today reported results for its fourth quarter and fiscal year ended March 31,
1996.
For the quarter ended March 31, 1996, the company reported net income
of $7.3 million, or $.45 per share, up 99% from net income of $3.7 million, or
$.23 per share in the same quarter a year ago. Revenues for the quarter were
$144.9 million, up 42% from revenues of $102.0 million recorded in the same
quarter of the prior year.
For the fiscal year ended March 31, 1996, Telxon reported net income of
$16.5 million, or $1.00 per share, on revenues of $486.5 million. This compares
to net income of $9.0 million, or $.57 per share, on revenues of $379.5 million
for fiscal 1995.
Gross profit margins for Q4 FY96 were 39.5%, as compared to 41.8% in
the same quarter a year ago. Gross profit margins for fiscal 1996 were 40.8%,
compared to 41.5% for fiscal 1995.
Operating expenses, as a percentage of revenues, were 30.4% during Q4
FY96, compared to 34.5% in the same quarter a year ago. Operating expenses, as
percentage of revenues, were 34.3% for fiscal 1996, down from 36.0% in fiscal
1995. R&D expenses were $45.4 million, or 9.3% of revenues, for fiscal 1996,
compared to $33.7 million, or 8.9% of revenues in fiscal 1995.
William J. Murphy, President and Chief Operating Officer, said, "The
increase in revenues for the year was aided by high levels of new account and
non-retail vertical market activity. For the first time in its corporate
history, half of Telxon's top 20 accounts were in industries other than our
traditional retail market. Telxon wireless and mobile solutions are being
implemented in new vertical markets by industry leaders such as
(more)
Telxon Corporation/Corporate Communications Department
3330 West Market Street/P.O. Box 5582/Akron, Ohio 44334-0582
800-800-8001/Fax (216) 873-2058
<PAGE> 2
Caterpillar, Ford, Merck, American Airlines, ADP Claims Solution Group, Union
Pacific Railroad, New York State Electric and Gas and others."
Robert F. Meyerson, Chairman and Chief Executive Officer, said, "When
we began redesigning Telxon three years ago, we said that all of our strategies
and tactics would be aimed at producing sustainable long-term profitable growth
for our shareholders. We have been consistent in that pursuit, sacrificing
near-term gain for longer-term, sustainable gains which produce more lasting
value. We have made significant investments in new technologies, market
development, and in service and support infrastructure, which have placed Telxon
in a leading position in the growing market for wireless and mobile transaction
solutions. The 42% increase in fourth quarter revenues and the 28% increase in
revenues for fiscal 1996 reflect the early results of these efforts. Telxon's
leading position in the wireless LAN marketplace, and sizable systems,
networking and project management organization are making a positive impact in
Telxon's global vertical markets."
The surge in fourth quarter revenues was accompanied by an increase in
operating expenses and costs associated with the fulfillment of customer
delivery commitments for volume shipments of new products which required costly,
rapid redesign and rework in the period. These higher expenses and costs were
offset by software capitalization and a reduction in inventory reserves. The
software capitalization, as prescribed by SFAS 86, reflects the transition of
development projects to commercial readiness. Capitalization of software costs
and other non-recurring adjustments in the fourth quarter had a net positive
impact of $1.7 million, or $.11 per share. Manufacturing and customer service
inventory reserves were reduced producing a net positive impact of $1.8 million,
or $.11 per share.
Kenneth W. Haver, Senior Vice President and Chief Financial Officer,
said, "Telxon's financial position improved in the quarter. Fourth quarter
operations generated $24 million of positive cash flow. We ended the year with
$36 million of cash, up $10 million during Q4. Accounts receivable DSO improved
eight days during the quarter to 83 days while inventory turns were 3.5 times,
up from 3.3 turns in Q3. During the quarter, Telxon
(More)
<PAGE> 3
completed arrangements for new unsecured credit facilities totaling $120 million
with a group of eight banks. At fiscal year-end, we had no borrowings
outstanding under these lines."
Meyerson concluded, "Telxon's flow of new products and developing
technologies has never been stronger. Increasingly our sales growth is being
fueled by products developed within the last three years. These newer
technologies and products stem from our heavy investments in Telxon's technical
subsidiaries and strategic alliances. We believe that the book value of these
technology investments understates their value to the company's ongoing market
and capital gain opportunities. We are planning to increase our operating
margins in the second half of fiscal 1997 by deconsolidating certain development
operations that carry sizable expense run-rates and from additional operating
efficiencies including streamlining product lines and other expense reduction
initiatives."
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, 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 while controlling manufacturing and
other costs. Reference 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
(More)
<PAGE> 4
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
[email protected]
<PAGE> 5
Telxon Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
- --------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
--------- ---------
ASSETS
Current assets:
<S> <C> <C>
Cash and short-term investments ............. $ 35,730 $ 31,364
Accounts receivable, net .................... 133,592 84,468
Notes and other accounts receivable ......... 9,522 6,256
Refundable income taxes ..................... -- 935
Inventories ................................. 111,132 72,078
Prepaid expenses and other .................. 9,939 10,192
--------- ---------
Total current assets ............... 299,915 205,293
Property and equipment, net ................. 54,673 45,887
Intangible and other assets, net ............ 34,621 24,947
--------- ---------
Total .............................. $ 389,209 $ 276,127
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ............................... $ 66 $ 25,395
Current portion of long-term debt ........... 1,156 1,343
Accounts payable ............................ 59,620 33,466
Capital lease obligations due within one year 897 769
Income taxes payable ........................ 7,029 8,315
Accrued liabilities ......................... 45,152 34,388
--------- ---------
Total current liabilities .......... 113,920 103,676
Capital lease obligations ............................ 1,982 1,729
Convertible subordinated debentures .................. 107,224 24,734
Long-term debt ....................................... 1,331 5,246
Other long-term liabilities .......................... 3,562 2,164
--------- ---------
Total .............................. 228,019 137,549
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, 16,096,193
and 15,623,242 shares outstanding ...... 161 156
Additional paid-in capital .................. 86,483 78,548
Retained earnings ........................... 77,363 62,954
Equity adjustment for foreign currency
translation ............................ (2,064) (1,525)
Unearned restricted stock awards ............ (753) (1,555)
--------- ---------
Total stockholders' equity ......... 161,190 138,578
--------- ---------
Total .............................. $ 389,209 $ 276,127
========= =========
</TABLE>
<PAGE> 6
Telxon Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
----------------- -------------------
1996 1995 1996 1995
------ ------- ------- -------
(Unaudited)
Revenues:
<S> <C> <C> <C> <C>
Product ................................. $ 126,343 $ 86,200 $ 417,725 $ 323,916
Customer service ........................ 18,539 15,804 68,744 55,603
--------- --------- --------- ---------
Total revenues ................... 144,882 102,004 486,469 379,519
Cost of revenues ........................ 87,683 59,400 288,136 222,023
--------- --------- --------- ---------
Gross profit ............................ 57,199 42,604 198,333 157,496
Operating expenses:
Selling expenses ........................ 22,534 18,720 82,207 68,279
Product development and engineering
expenses ............................ 11,065 7,946 45,383 33,728
General and administrative expenses ..... 10,424 8,550 39,415 34,583
--------- --------- --------- ---------
44,023 35,216 167,005 136,590
Income from operations ........... 13,176 7,388 31,328 20,906
Interest income ................................ 309 260 760 658
Interest expense ............................... (2,124) (869) (6,770) (4,354)
Other non-operating income ..................... 375 -- 1,517 --
--------- --------- --------- ---------
Income before income taxes ....... 11,736 6,779 26,835 17,210
Provision for income taxes ..................... 4,460 3,117 10,314 8,192
--------- --------- --------- ---------
Net income ....................... $ 7,276 $ 3,662 $ 16,521 $ 9,018
========= ========= ========= =========
Earnings per common and common equivalent share:
Net income per share ............. $ .45 $ .23 $ 1.00 $ .57
========= ========= ========= =========
Average number of common and common
equivalent shares outstanding ............. 16,098 15,702 16,490 15,909
========= ========= ========= =========
</TABLE>
