<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 September 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
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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
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization
3330 West Market Street, Akron, Ohio 44333
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (330) 664-3700
---------------------------
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 September 30, 1996, there were 16,099,952 outstanding shares of the
registrant's Common Stock, $.01 par value per share ("Common Stock").
<PAGE> 2
TELXON CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1: Consolidated Financial Statements
Balance Sheet...........................................3
Statement of Operations.................................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.................11-20
PART II. OTHER INFORMATION:
Item 1: Legal Proceedings...........................................21
Item 4: Submission of Matters to a Vote of Security Holders.........21
Item 6: Exhibits and Reports on Form 8-K.........................21-29
</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>
September 30, March 31,
1996 1996
------------- ---------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash (including cash equivalents of $9,368 and
$23,411) ...................................................................... $ 16,128 $ 34,828
Trading securities ................................................................ -- 902
Accounts receivable, net of allowance for doubtful accounts of $1,917 and $1,731 .. 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 liabilities ........................................................ 194,211 228,019
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, 16,100 and 16,096
shares outstanding ............................................................ 162 161
Additional paid-in capital ........................................................ 86,444 85,750
Retained earnings ................................................................. 68,548 78,096
Equity adjustment for foreign currency translation ................................ (1,848) (2,064)
Unearned compensation relating to restricted stock awards ......................... (470) (753)
Treasury stock, 58 shares at cost ................................................. (612) --
--------- ---------
Total stockholders' equity ............................................... 152,224 161,190
Commitments and contingencies .......................................................... -- --
========= =========
Total .................................................................... $ 346,435 $ 389,209
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<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:
Product ................................... 62,445 52,063 128,270 103,474
Customer service .......................... 11,534 9,437 22,582 18,440
--------- --------- --------- ---------
Total 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
--------- --------- --------- ---------
Total operating expenses ......... 41,681 39,882 85,135 78,271
--------- --------- --------- ---------
(Loss) income 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 (expense) income ........... (32) 355 73 355
--------- --------- --------- ---------
(Loss) income before income taxes (9,404) 4,608 (18,998) 8,323
(Benefit)provision for income taxes ............ (4,702) 1,797 (9,499) 3,283
--------- --------- --------- ---------
Net (loss) income ................ $ (4,702) $ 2,811 $ (9,499) $ 5,040
========= ========= ========= =========
Earnings per common and common equivalent share:
Net (loss) income per share ...... $ (.29) $ .17 $ (.58) $ .31
========= ========= ========= =========
Average number of common and common
equivalent shares outstanding ............ 16,182 16,248 16,265 16,066
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income .................................... $ (9,499) $ 5,040
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation and amortization ............... 13,673 10,683
Non-cash compensation related to
restricted stock awards ................ 253 468
Provision for doubtful accounts ............. 180 1,139
Provision for inventory obsolescence ........ 5,972 2,770
Deferred income taxes ....................... (1,025) (606)
Loss on disposal of assets .................. 295 227
Trading securities .......................... -- (5,026)
Non-cash gain on trading securities ........ -- (100)
Proceeds from sale of trading securities .... 961 1,474
Gain on sale of trading securities .......... (59) (138)
Gain on sale of subsidiary stock ............ -- (355)
Changes in assets and liabilities:
Accounts and notes receivable .......... 18,038 (22,055)
Refundable income taxes ................ -- (898)
Inventories ............................ (1,732) (30,362)
Prepaid expenses and other ............. 55 (236)
Intangible and other assets ............ (1,865) (1,169)
Accounts payable and accrued liabilities (46,431) 12,666
Other long-term liabilities ............ 37 249
-------- --------
Total adjustments ........... (11,648) (31,269)
-------- --------
Net cash used in operating activities ................ (21,147) (26,229)
Cash flows from investing activities:
Additions to property and equipment .................. (8,269) (9,294)
Proceeds from the sale of assets ..................... 150 --
Payments for acquisitions, net of cash acquired ...... -- (2,401)
Software investments ................................. (3,477) (792)
-------- --------
Net cash used in investing activities ................ (11,596) (12,487)
Cash flows from financing activities:
Notes payable, net ................................... 17,269 23,796
Purchase of treasury stock ........................... (1,051) --
Principal payments on capital leases ................. (502) (424)
Principal payments on long-term borrowing ............ (2,103) (125)
Debt issue costs paid ................................ (239) --
Proceeds from exercise of stock options
(includes tax benefit) .......................... 652 3,315
-------- --------
Net cash provided by financing activities ............ 14,026 26,562
Effect of exchange rate changes on cash .............. 17 (226)
-------- --------
Net decrease in cash and cash equivalents ............ (18,700) (12,380)
Cash and cash equivalents at beginning of period ..... 34,828 31,364
-------- --------
Cash and cash equivalents at end of period ........... $ 16,128 $ 18,984
======== ========
</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 except share and per share amounts)
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>
September 30, 1996 March 31,
(Unaudited) 1996
------------------ --------------
<S> <C> <C>
Purchased components............. $ 44,388 $ 50,022
Work-in-process.................. 33,001 35,379
Finished goods................... 29,481 25,731
-------------- --------------
$ 106,870 $ 111,132
============== ==============
</TABLE>
4. Accrued Liabilities
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
September 30,
1996 March 31,
(Unaudited) 1996
-------------- -----------
<S> <C> <C>
Deferred customer service revenues...................... $ 16,482 $ 15,063
Accrued payroll and other employee compensation......... 7,916 10,586
Other accrued liabilities............................... 5,177 26,532
----------- -----------
$ 29,575 $ 52,181
=========== ===========
</TABLE>
6
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TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except share and per share amounts)
5. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Six Months Ended
September 30, September 30,
1996 1995
---------------------- ----------------------
(Unaudited)
<S> <C> <C>
Cash paid during the period for
Interest............................ $ 4,419 $ 2,445
Income taxes........................ 6,127 3,749
</TABLE>
Capital lease additions are non-cash transactions and, accordingly,
$509 has been excluded from property and equipment additions in the
fiscal 1996 Consolidated Statement of Cash Flows.
Secured promissory notes aggregating $6,200 which were received in
connection with the Company's divestiture of certain retail application
software operations have been excluded from the fiscal 1997
Consolidated Statement of Cash Flows as a non-cash transaction. See
Note 9 - Divestiture for further details of such transaction.
The Company's re-issuance of $439 treasury stock to satisfy purchases
made by employees through the Telxon Corporation 1995 Employee Stock
Purchase Plan has been excluded from the fiscal 1997 Consolidated
Statement of Cash Flows as a non-cash transaction. See Note 10 - Other
Transactions and Events for further details of the re-issuance.
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,
7
<PAGE> 8
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except share and per share amounts)
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 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 appeal was heard on October 24, 1996, and
the parties are awaiting the decision from the Court of Appeals. 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 continuing; no deadline for the completion of
discovery has yet been set by the Court. 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.
8
<PAGE> 9
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except share and per share amounts)
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 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 Financing
The Company had no borrowings outstanding under its $100,000 credit
agreement at September 30, 1996, and was in compliance with all
restrictive covenants contained in the agreement at September 30, 1996.
The Company had $17,335 outstanding under its $20,000 business purpose
revolving promissory note at September 30, 1996. At September 30, 1996,
the note was bearing interest at an annual rate of 6.87%.
Effective August 16, 1996, the Company's $100,000 credit agreement was
amended, among other things, to conditionally grant to the lenders a
security interest in certain assets of the Company which will only
become effective if the Company were to become in default under the
credit agreement and then only if the requisite lenders were to direct
that the security documents be filed. Thereafter, the Company entered
into an amendment conditionally granting a similar security
interest to the lender under the $20,000 business purpose revolving
promissory note.
8. Income Taxes
The Company's consolidated effective income tax rate reflects income
before taxes plus non-deductible goodwill amortization, which sum is
multiplied by the United States statutory rate and increased by foreign
rate differentials.
The increases in the Company's second quarter and first half of fiscal
1997
9
<PAGE> 10
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except share and per share amounts)
consolidated effective income tax rates from those experienced during
the same periods in fiscal 1996 are primarily due to an increase in
foreign income taxed at higher foreign tax rates and the decrease in
U.S. taxable income without decreases in non-deductible reconciling
items such as goodwill amortization.
9. 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 is also 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 as of
September 30, 1996, as a result of this transaction, the Company will
recognize gain from the sale as cash proceeds are received.
10. Other Transactions and Events
On July 16, 1996, the Company re-issued 41,754 shares of its treasury
stock, with a weighted average price per share of $10.43, to satisfy
purchases made by employees through the Telxon Corporation 1995
Employee Stock Purchase Plan at a price of $11.75 per share. The
remaining 58,246 shares of treasury stock have been accounted for at
cost plus brokerage fees under the caption of treasury stock in the
fiscal 1997 Consolidated Balance Sheet.
Effective August 23, 1996, the Company repurchased 432,558 shares of
the voting common stock of its Metanetics Corporation subsidiary from a
former employee. The shares were repurchased by the Company at a price
of $1.04 per share and resulted in a $449 non-operating loss. Effective
September 30, 1996, the Company re-sold the repurchased shares to a
corporation owned by Mr. Meyerson and his wife at the same $1.04 price
per share, resulting in an offsetting non-operating gain of $449.
11. Reclassifications
Certain items in the fiscal 1996 consolidated financial statements and
notes thereto have been reclassified to conform to the fiscal 1997
presentation.
10
<PAGE> 11
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's first half of fiscal 1997 results were in line with
earlier expectations as the Company recorded revenue growth of
approximately 5% over the same period in the prior year and a loss of
$.58 per share. The Company anticipates a return to profitability in
the second half of fiscal 1997, as the result of the initiatives it is
taking to streamline operations. Those initiatives include narrowing
the Company's product line, improving its manufacturing efficiencies,
and workforce reductions to reduce employee headcount by 300, or
approximately 15 percent. The Company will continue to review all
aspects of its business and may take further actions to achieve more
effective and efficient operations, some of which may result in
certain nonrecurring charges in addition to those incurred in 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 or that they will be successfully
implemented. 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.
11
<PAGE> 12
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 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 expectations regarding future cost reductions and
profitability resulting from the streamlining of operations and the
achievement of greater manufacturing efficiencies are dependent upon
the successful identification and implementation of appropriate cost
saving and operational efficiency initiatives. To the extent that these
measures are not fully and successfully implemented or that their
implementation is delayed, the Company's ability to realize such cost
reductions and profitability may be materially adversely affected.
Historically, 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 also 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
12
<PAGE> 13
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 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 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
13
<PAGE> 14
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 ability to market its products and hence, on its business,
results of operations and financial condition.
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. Additionally, as
certain of its products, components and sub-assemblies are purchased
from outside the United States, the Company is subject to similar risks
in those procurement activities.
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 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, making current products obsolete 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,
14
<PAGE> 15
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 success 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 Part I - Item 1 above.
RESULTS OF OPERATIONS
Revenues
--------
Total consolidated revenues for the second quarter and first half of
fiscal 1997 increased $1.3 million or 1% and $10.1 million or 5%,
respectively, as compared to the same periods in fiscal 1996.
Second quarter fiscal 1997 consolidated product revenues decreased $.8
million or 1% from results recorded during the same period in the prior
year, while first half fiscal 1997 consolidated product revenues
increased $5.3 million or 3% over fiscal 1996's first half results.
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 decrease in second quarter product revenues was
primarily due to a decrease in PTC unit volume that was only partially
offset by an increase in the average selling price per PTC unit as the
Company initiated certain efforts to increase its backlog. The increase
in product revenues for the first half of fiscal 1997 was primarily due
to increases in average selling price per PTC unit partially offset by
decreases in PTC unit volume as the sales mix continued to trend
towards more comprehensive products and systems. The Company's
technical subsidiary Itronix Corporation, a designer, developer and
manufacturer of rugged, wireless, portable microcomputers, recorded
total product revenues of $20.3 million and $40.8 million during the
second quarter and first half of fiscal 1997, respectively, and was a
significant contributor to the increase in average selling price per
PTC. Itronix had total product revenues of $6.0 million and $10.0
million in the second quarter and first half of fiscal 1996,
respectively.
Customer service revenues for the second quarter and first half of
fiscal 1997 increased $2.1 million or 12% and $4.8 million or 15%,
respectively, as
15
<PAGE> 16
compared to the same periods in fiscal 1996. These revenue increases
were 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)
for the second quarter and first half of fiscal 1997 increased $3.0
million or 11% and $6.2 million or 11%, respectively, as compared to
the same periods in fiscal 1996. Changes in currency exchange rates and
intercompany hedging activities did not materially affect the results
of the Company's international operations.
The Company anticipates increased consolidated revenues for the third
and fourth quarters of fiscal 1997 as compared to the first two
quarters of fiscal 1997.
Costs of Revenues
-----------------
Consolidated cost of product revenues as a percentage of product
revenues increased to 70% for the second quarter and first half of
fiscal 1997 as compared to 58% for the same periods in fiscal 1996. The
decreases in product gross margins from those recorded during the
second quarter and first half of fiscal 1996 were primarily due to the
mix of large-volume/low margin business, higher costs on early stage
rollouts of new products and manufacturing inefficiencies. Included in
the large-volume/low margin business experienced in the first half of
fiscal 1997 was one single, large customer contract that negatively
impacted the second quarter's and first half's cost percentages by 2%
and 1%, respectively. Additionally, the second quarter and first half
of fiscal 1997 cost percentages were negatively impacted by 4% and 2%,
respectively, as a result of increased inventory valuation provisions
and by 2% and 1%, respectively, for increased customer allowances.
Included in the fiscal 1996 results were adjustments to estimated
amounts accrued for warranty costs and revenues related to the sale of
non-exclusive software licenses and manufacturing rights to a
third-party business partner. These adjustments combined to reduce the
second quarter fiscal 1996 cost percentage by approximately 1%.
The Company anticipates the consolidated cost of product revenues
percentage to decrease from second quarter fiscal 1997 levels during
the next two quarters as it continues to implement its cost reduction
and efficiency initiatives.
Consolidated cost of customer service revenues as a percentage of
customer service revenues increased to 61% during the second quarter of
fiscal 1997 from 56% during the same period in the previous fiscal
year. Consolidated cost of customer service revenues as a percentage of
customer service revenues also increased to 61% for the first half of
fiscal 1997 as compared to 57% for the same period in the previous
fiscal year. The increases in the cost of customer service revenues
percentage during the second quarter and first half of fiscal 1997 were
primarily due to increased direct material and labor costs required to
repair the Company's more sophisticated and complex products.
Inventory valuation accounts for the second quarter of fiscal 1997 were
increased to cover the risk of obsolescence due to new product
introductions and continuing technological change. As of September 30,
1996, inventory valuation accounts increased to $15.1 million or 12% of
gross inventory as
16
<PAGE> 17
compared to $10.1 million or 8% of gross inventory as of March 31,
1996. The Company anticipates continuing to provide for obsolescence as
revenue volumes from new product offerings replace revenue from older
products.
Operating Expenses
------------------
Selling expenses for the second quarter and first half of fiscal 1997
increased $2.3 million or 12% and $3.8 million or 10%, respectively, as
compared to the same periods in fiscal 1996. As a percentage of
revenues, second quarter and first half of fiscal 1997 selling expenses
increased 1% as compared to the same periods in fiscal 1996 and
primarily reflect the Company's increased marketing activities.
Additionally, the Company recorded severance charges of approximately
$.5 million related to sales and marketing operations during the second
quarter of fiscal 1997.
Product development and engineering expenses for the second quarter and
first half of fiscal 1997 decreased $1.9 million or 16% and $.4 million
or 2%, respectively, as compared to the same periods in fiscal 1996.
These decreases are primarily attributable to the deferral of certain
research and development activities during the second quarter of fiscal
1997 as well as the Company's implementation of certain cost reduction
initiatives. Partially offsetting these decreases were severance
charges of approximately $.4 million related to product development and
engineering operations recorded during the second quarter of fiscal
1997. The Company anticipates research and development activity, which
includes new and continued product development of 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, to increase during the next
two quarters from second quarter fiscal 1997 levels.
The Company capitalized internal software development costs in
accordance with the requirements of SFAS No. 86 aggregating $1.3
million and $2.6 million during the second quarter and first half of
fiscal 1997, respectively.
General and administrative expenses for the second quarter and first
half of fiscal 1997 increased $1.4 million or 16% and $3.5 million or
19%, respectively, as compared to the same periods in fiscal 1996. As a
percentage of revenues, general and administrative expenses increased
approximately 1% as compared to the same periods in fiscal 1996 and
reflects the increase in corporate resources necessary to support the
Company's operations.
Income Taxes
------------
The Company's consolidated effective income tax rate for the second
quarter and first half of fiscal 1997 was 50% as compared to 39% for
the same periods in fiscal 1996. The consolidated effective income tax
rate reflects income before taxes plus non-deductible goodwill
amortization, which sum is multiplied by the United States statutory
rate and increased by foreign rate differentials. The increases in the
Company's consolidated effective income tax rate are primarily due to
an increase in foreign taxable income taxed at higher foreign tax rates
and the decrease in U.S. taxable income without decreases in
non-deductible reconciling items such as goodwill amortization.
17
<PAGE> 18
Other Non-Operating Transactions
--------------------------------
Effective August 23, 1996, the Company repurchased 432,558 shares of
the voting common stock of its Metanetics Corporation subsidiary from a
former employee. The shares were repurchased by the Company at a price
of $1.04 per share and resulted in a $449,000 non-operating loss. The
Company's percentage interest in the voting common stock of Metanetics
increased from 49% to 58% as a result of the repurchase. Effective
September 30, 1996, the Company re-sold the repurchased shares to a
corporation owned by Mr. Meyerson and his wife at the same $1.04 price
per share, resulting in an offsetting non-operating gain of $449,000
and the reduction of the Company's remaining percentage interest in
Metanetics voting common stock to 49%.
Liquidity
---------
At September 30, 1996, the Company had cash and cash equivalents of
$16.1 million, as compared to $34.8 million at March 31, 1996. The
Company's current ratio (current assets divided by current liabilities)
was 3.1:1 at September 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 $18.7 million, accounts receivable of
$21.6 million, inventories of $4.3 million, and notes payable of $17.3
million. These working capital decreases were partially offset by
increases resulting from changes in accounts payable of $25.9 million
and accrued liabilities of $22.6 million. Accounts receivable balances
decreased from amounts recorded at March 31, 1996, primarily due to the
collection of a large amount of outstanding receivables related to
fiscal 1996 year-end revenues. Days sales outstanding increased from 84
days at March 31, 1996, to 95 days at September 30, 1996, primarily due
to an increase in the number of complex and lengthy large customer
installations. Inventory levels, in total, decreased at September 30,
1996, as compared to those recorded at March 31, 1996, as the Company's
efforts to streamline its product line reduced the component
procurement requirements for second quarter fiscal 1997 production
levels. Notes payable increased as the Company increased bank
borrowings to fulfill operational cash flow requirements. Accounts
payable decreased primarily due to decreased manufacturing inventory
levels and increased payments to vendors. Accrued liabilities
decreased from amounts recorded at March 31, 1996, primarily due to
the reduction in the Company's income tax obligations resulting from
the consolidated net loss for the first half of fiscal 1997.
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.
18
<PAGE> 19
Cash Flows from Operating Activities
------------------------------------
Net cash used in operating activities was $21.1 million for the six
months ended September 30, 1996, as compared to net cash used in
operating activities of $26.2 million for the same period in fiscal
1996. Cash flows for the first half of fiscal 1997, as compared to the
same period in fiscal 1996, were positively impacted by the change in
cash flow impacts of accounts and notes receivable of $40.1 million,
inventories of $28.6 million, non-cash charges of $4.8 million, trading
securities of $5.0 million and other positive cash flow items
aggregating $1.6 million. These positive impacts were offset by
negative cash flow impacts in accounts payable and accrued liabilities
of $59.1 million, the $14.5 million reduction in net earnings and other
items aggregating $1.4 million.
Investing Activities
--------------------
Net cash used in investing activities during the six months ended
September 30, 1996, decreased $.9 million from net cash used during the
same period in fiscal 1996. The Company invested $8.3 million in
capital equipment during the first half of fiscal 1997, a decrease of
$1.0 million as compared to the same period of fiscal 1996. Software
investments in the first half of fiscal 1997 increased $2.7 million
over the same period in the prior year while payments related to
acquisitions decreased $2.4 million from amounts recorded in the first
half of fiscal 1996.
Financing Activities
--------------------
Cash flows from financing activities decreased $12.5 million during the
first half of fiscal 1997 as compared with the same period in fiscal
1996. The decrease was primarily due to the reduction in borrowings on
notes payable of $6.5 million, decreased proceeds from the exercise of
stock options of $2.7 million, a $2.0 million increase in principal
payments on long-term borrowings as certain long-term obligations were
fully repaid prior to maturity, and the purchase of $1.1 million of
treasury stock.
Effective August 16, 1996, the Company's $100.0 million credit
agreement was amended, among other things, to conditionally grant to
the lenders a security interest in certain assets of the Company which
will only become effective if the Company were to become in default
under the credit agreement and then only if the requisite lenders were
to direct that the security documents be filed. Thereafter, the Company
entered into an amendment conditionally granting a similar security
interest to the lender under the Company's $20.0 million business
purpose revolving promissory note.
Non-Cash Transactions
---------------------
Effective April 1, 1996, the Company sold certain retail application
software operations, with net assets of approximately $5.0 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 receivable 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 as of
September 30, 1996, as a result of this transaction, the Company will
recognize gain from the sale as cash proceeds are received.
19
<PAGE> 20
Effective July 16, 1996, the Company re-issued 41,754 shares of
treasury stock, with a weighted average price per share of $10.43, to
satisfy purchases made by employees through the Telxon Corporation 1995
Employee Stock Purchase Plan for a price of $11.75 per share. The sale
of these treasury shares, which were purchased by Plan participants
through payroll deductions, has been excluded from the fiscal 1997
Consolidated Statement of Cash Flows as a non-cash financing
transaction.
20
<PAGE> 21
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
(a) The Company held its Annual Meeting of Stockholders on
September 18, 1996 (the "Annual Meeting").
(b) The sole matter voted upon by the Company's stockholders at
the Annual Meeting was the election of the two directors of
the class to hold office until the 1999 annual meeting of
stockholders. Proxies for the Annual Meeting were solicited
pursuant to Regulation 14 under the Securities Exchange Act
of 1934, there was no solicitation in opposition to
management's nominees as listed in the proxy statement, and
all of such nominees were elected.
(c) The following votes were cast for each director nominee:
For the election of Robert F. Meyerson --
Votes for: 13,824,662
Votes withheld: 779,327
For the election of Norton W. Rose --
Votes for: 13,819,700
Votes withheld: 784,289
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits required by Item 601 of Regulation S-K:
3.1 Restated Certificate of Incorporation of Registrant,
incorporated herein by reference to Exhibit No. 3.1
to Registrant's Form 10-K 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
21
<PAGE> 22
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 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, as 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.
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.
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
22
<PAGE> 23
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 for the year ended
March 31, 1994.
10.1.1.a Amendment, dated January 1, 1994,
to the Plan included as Exhibit
10.1.1 above, incorporated herein
by reference to Exhibit 10.1.1.a to
Registrant's Form 10-K for the year
ended March 31, 1994.
10.1.1.b Amendment, dated April 1, 1994, to
the Plan included as Exhibit 10.1.1
above, incorporated herein by
reference to Exhibit 10.1.1.b to
Registrant's Form 10-K for the year
ended March 31, 1994.
10.1.1.c Amendment, dated January 1, 1994,
to the Plan included as Exhibit
10.1.1 above, incorporated herein
by reference to Exhibit 10.1.1.c to
Registrant's Form 10-Q for the
quarter ended December 31, 1994.
10.1.2 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 for the quarter ended
September 30, 1995.
10.1.3 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 for the
quarter ended September 30, 1995.
10.1.4 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 for the year ended March 31, 1994.
23
<PAGE> 24
10.1.4.a Description of amendment extending
the term of the Agreement
included as Exhibit 10.1.4 above,
incorporated herein by reference to
Exhibit 10.1.6.a to Registrant's
Form 10-Q for the quarter ended
September 30, 1994.
10.1.5 1992 Restricted Stock Plan of the
Registrant, incorporated herein by
reference to Exhibit 10.1.17 to the
Registrant's Form 10-Q for the quarter
ended December 31, 1993.
10.1.5.a Amendment, dated December 7, 1993,
to the Plan included as Exhibit
10.1.5 above, incorporated herein
by reference to Exhibit 10.1.17.a
to the Registrant's Form 10-Q for
the quarter ended December 31,
1993.
10.1.5.b Amendment, dated July 18, 1994,
to the Plan included as Exhibit
10.1.5 above, incorporated
herein by reference to Exhibit
10.1.17.b to Registrant's Form
10-Q for the quarter ended
September 30, 1994.
10.1.6 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 for the
quarter ended September 30, 1995.
10.1.7 Description of compensation arrangements
between the Registrant and Robert F.
Meyerson, Chairman of the Board of
Registrant, incorporated herein by
reference to 10.1.7 to Registrant's Form
10-Q for the quarter ended June 30, 1995.
10.1.8 Employment Agreement between Telxon
Products, Inc., a wholly owned
subsidiary of the Registrant, and Dan R.
Wipff, dated September 29, 1994,
incorporated herein by reference to Exhibit
10.1.8 to Registrant's Form 10-Q for the
quarter ended September 30, 1994.
10.1.9 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 for the quarter
ended December 31, 1992.
10.1.10 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 for the year ended
March 31, 1994.
10.1.11 Employment Agreement between the
Registrant and Frank Brick, effective as
of October 15, 1993, incorporated
24
<PAGE> 25
herein by reference to Exhibit 10.1.16 on
Registrant's Form 10-Q 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 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
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 & 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 an
Addendum thereto, incorporated herein by
reference to Exhibit 10.2.4 to Registrant's
Form 10-K for the year ended March 31, 1996.
10.2.4.a Second Addendum, dated as of
October 5, 1995, to the Lease
included as Exhibit 10.2.4 above,
incorporated herein by reference to
Exhibit 10.2.4.a to Registrant's
Form 10-K for the year ended March
31, 1996.
10.2.4.b Third Addendum, dated as of March
1, 1996, to the Lease included as
Exhibit 10.2.4 above, incorporated
herein by reference to Exhibit
10.2.4.b to Registrant's Form 10-K
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 revolving credit
facility established by the Agreement
included as Exhibit 10.3.2 below),
incorporated herein by reference to
25
<PAGE> 26
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 Agreement
included as Exhibit 10.3.1 above,
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
Agreement included as Exhibit
10.3.1 above, incorporated herein
by reference to Exhibit 10.3.1.b
to Registrant's Form 10-Q 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 revolving credit and
term loan facility established by the
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 for the year
ended March 31, 1996.
10.3.2.a Amendment No. 1, dated as of
August 6, 1996, to the Agreement
included as Exhibit 10.3.2 above,
incorporated herein by reference
to Exhibit 10.3.2.a to
Registrant's Current Report on
Form 8-K, dated August 16, 1996.
10.3.2.b Security Agreement, dated as of
August 6, 1996, by and among
the Registrant and The Bank of New
York, as Agent, incorporated
herein by reference to Exhibit
10.3.2.b to Registrant's Current
Report on Form 8-K, dated August
16, 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 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
26
<PAGE> 27
herein by reference to Exhibit 10.3.3 to
Registrant's Form 10-Q 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 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 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
for the year ended March 31, 1996.
10.3.8 Business Purpose Revolving Promissory Note
(Swing Line) made by the Registrant in
favor of Bank One, Akron, N.A., dated August
6, 1996 (in replacement of the Note
included as Exhibit 10.3.7 above),
incorporated herein by reference to Exhibit
10.3.8 to Registrant's Current Report on
Form 8-K, dated August 16, 1996.
10.3.8.a Bank One Security Agreement,
dated as of August 6, 1996, by
and among the Registrant and Bank
One, Akron, N.A., incorporated
herein by reference to Exhibit
10.3.8.a to Registrant's Current
Report on Form 8-K, dated August
16, 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.
10.5 Plan and Agreement of Merger, dated as of January
18, 1993, among the Registrant, WSACO, Inc. and
Teletransaction, Inc., incorporated herein by
reference to Exhibit 10.29 to the Registrant's Form
10-Q for the quarter ended December 31, 1992.
10.6 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,
27
<PAGE> 28
incorporated herein by reference to Exhibit 10.8 to
Registrant's Form 10-Q for the quarter ended June
30, 1995.
10.7 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 for the quarter ended
September 30, 1995.
10.8 Stock Purchase Agreement by and between Metanetics
Corporation, a subsidiary of the Registrant fka New
Meta Licensing Corporation, and Accipiter II, Inc.,
dated as of September 30, 1996, filed herewith.
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 Agreement included as
Exhibit 10.7 above, dated as of September 29, 1995,
incorporated herein by reference to Exhibit 10.9 to
Registrant's Form 10-Q for the quarter ended
September 30, 1995.
10.9.1 First Amendment, dated as of September 29,
1995, to the Agreement included as
Exhibit 10.9 above, incorporated herein by
reference to Exhibit 10.9.1 to Registrant's
Form 10-Q for the quarter ended December 31,
1995.
10.9.2 Second Amendment, dated as of January,
1996, to the Agreement included as Exhibit
10.9 above, incorporated herein by reference
to Exhibit 10.9.2 to Registrant's Form 10-Q
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 Agreement included as
Exhibit 10.9 above, as amended by the First
and Second Amendments thereto included as
Exhibits 10.9.1 and 10.9.2 above,
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 Agreement included as Exhibit
10.9.3 above, incorporated herein by
reference to Exhibit 10.9.4 to Registrant's
Form 10-K for the year ended March 31,
1996.
11. Computation of Common Shares outstanding and
earnings per share for the six months ended
September 30, 1996 and 1995, filed herewith.
28
<PAGE> 29
27. Financial Data Schedule as of September 30, 1996,
filed herewith.
(b) Reports on Form 8-K
During the fiscal quarter ended September 30, 1996
for which this Quarterly Report on Form 10-K
is filed, 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 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 Company's 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); (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); and (iv) Current Report dated August
16, 1996, reporting amendments to the Company's
primary credit facility with The Bank of New York,
as Agent for an eight-bank lending group, and its
supplemental credit facility with Bank One, Akron,
N.A. In addition, subsequent to the end of the
September 30, 1996 fiscal quarter, the Registrant
filed a Current Report on Form 8-K dated October 18,
1996, attaching the Registrant's press release of
that date which announced its financial results for
the second fiscal quarter and six months ended
September 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 September
30, 1996 (unaudited), and March 31, 1996, and
condensed consolidated statements of income for the
three-month and six-month periods (unaudited) ended
September 30, 1996 and 1995).
29
<PAGE> 30
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: November 14, 1996
TELXON CORPORATION
------------------
(Registrant)
/s/ Kenneth W. Haver
-------------------------
Kenneth W. Haver
Senior Vice President and
Chief Financial Officer
<PAGE> 31
TELXON CORPORATION
EXHIBITS TO
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
<PAGE> 32
INDEX TO EXHIBITS
-----------------
Where
Filed
* 3.1 Restated Certificate of Incorporation of Registrant,
incorporated by reference to Exhibit No. 3.1 to
Registrant's Form 10-K 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 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, as 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.
* 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
<PAGE> 33
Where
Filed
- -----
4.2 to Registrant's Registration Statement on Form
S-3, Registration No. 33-14348, filed May 18, 1987.
* 4.4.1 Form of the Registrant's 7-1/2% Convertible
Subordinated Debentures Due 2012 (set forth
in the Indenture included as Exhibit 4.4
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 for the year ended
March 31, 1994.
* 10.1.1.a Amendment, dated January 1, 1994,
to the Plan included as Exhibit
10.1.1 above, incorporated herein
by reference to Exhibit 10.1.1.a
to Registrant's Form 10-K
for the year ended March 31, 1994.
* 10.1.1.b Amendment, dated April 1, 1994, to
the Plan included as Exhibit
10.1.1 above, incorporated herein
by reference to Exhibit
10.1.1.b to Registrant's Form
10-K for the year ended March
31, 1994.
<PAGE> 34
* 10.1.1.c Amendment, dated January 1,
1994, to the Plan included as
Exhibit 10.1.1 above,
incorporated herein by
reference to Exhibit 10.1.1.c
to Registrant's Form 10-Q for
the quarter ended December 31,
1994.
* 10.1.2 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 for the quarter ended
September 30, 1995.
* 10.1.3 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 for the
quarter ended September 30, 1995.
* 10.1.4 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 for the year ended
March 31, 1994.
* 10.1.4.a Description of amendment
extending the term of the
Agreement included as Exhibit
10.1.4 above, incorporated
herein by reference to Exhibit
10.1.6.a to Registrant's Form
10-Q for the quarter ended
September 30, 1994.
* 10.1.5 1992 Restricted Stock Plan of the
Registrant, incorporated herein by reference
to Exhibit 10.1.17 to the Registrant's Form
10-Q for the quarter ended December 31,
1993.
* 10.1.5.a Amendment, dated December 7,
1993, to the Plan included as
Exhibit 10.1.5 above,
incorporated herein by
reference to Exhibit 10.1.17.a
to the Registrant's Form
10-Q for the quarter ended
December 31, 1993.
* 10.1.5.b Amendment, dated July 18,
1994, to the Plan included as
Exhibit 10.1.5 above,
incorporated herein by
reference to Exhibit 10.1.17.b
to Registrant's Form 10-Q for
the quarter ended September 30,
1994.
* 10.1.6 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 for the quarter ended
September 30, 1995.
<PAGE> 35
Where
Filed
- ------
* 10.1.7 Description of compensation arrangements
between the Registrant and Robert F.
Meyerson, Chairman of the Board of
Registrant, incorporated herein by reference
to Exhibit 10.1.7 to Registrant's Form 10-Q
for the quarter ended September 30, 1995.
* 10.1.8 Employment Agreement between Telxon
Products, Inc., a wholly owned subsidiary of
the Registrant, and Dan R. Wipff, dated
September 29, 1994, incorporated herein by
reference to Exhibit 10.1.8 to Registrant's
Form 10-Q for the quarter ended September
30, 1994.
* 10.1.9 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 for the quarter ended
December 31, 1992.
* 10.1.10 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
for the year ended March 31, 1994.
* 10.1.11 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
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 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
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 & 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.
<PAGE> 36
Where
Filed
- -----
* 10.2.4 Standard Office Lease (Modified Net Lease)
between Registrant and John D. Dellagnese
III, dated as of July 19, 1995, including an
Addendum thereto, incorporated herein by
reference to Exhibit 10.2.4 to Registrant's
Form 10-K for the year ended March 31, 1996.
* 10.2.4.a Second Addendum, dated as of
October 5, 1995, to the Lease
included as Exhibit 10.2.4 above,
incorporated herein by reference to
Exhibit 10.2.4.a to Registrant's
Form 10-K for the year ended March
31, 1996.
* 10.2.4.b Third Addendum, dated as of
March 1, 1996, to the Lease
included as Exhibit 10.2.4 above,
incorporated herein by reference to
Exhibit 10.2.4.b to Registrant's
Form 10-K 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 revolving credit
facility established by the 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 Agreement
included as Exhibit 10.3.1 above,
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 Agreement
included as Exhibit 10.3.1 above,
incorporated herein by reference to
Exhibit 10.3.1.b to Registrant's
Form 10-Q 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 revolving credit
and term loan facility established by the
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
<PAGE> 37
Where
Filed
- -----
10.3.2 to Registrant's Form 10-K for the
year ended March 31, 1996.
* 10.3.2.a Amendment No. 1, dated as of
August 6, 1996, to the Agreement
included as Exhibit 10.3.2 above,
incorporated herein by reference to
Exhibit 10.3.2.a to Registrant's
Current Report on Form 8-K, dated
August 16, 1996.
* 10.3.2.b Security Agreement, dated as of
August 6, 1996, by and among the
Registrant and The Bank of New
York, as Agent, incorporated herein
by reference to Exhibit 10.3.2.b to
Registrant's Current Report on Form
8-K, dated August 16, 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
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 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 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 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 for
the year ended March 31, 1996.
<PAGE> 38
Where
Filed
- -----
* 10.3.8 Business Purpose Revolving Promissory Note
(Swing Line) made by the Registrant in favor
of Bank One, Akron, N.A., dated August 6,
1996 (in replacement of the Note included
as Exhibit 10.3.7 above), incorporated
herein by reference to Exhibit 10.3.8 to
Registrant's Current Report on Form 8-K,
dated August 16, 1996.
* 10.3.8.a Bank One Security Agreement,
dated as of August 6, 1996, by
and among the Registrant and Bank
One, Akron, N.A., incorporated
herein by reference to Exhibit
10.3.8.a to Registrant's Current
Report on Form 8-K, dated August
16, 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.
* 10.5 Plan and Agreement of Merger, dated as of January
18, 1993, among the Registrant, WSACO, Inc. and
Teletransaction, Inc., incorporated herein by
reference to Exhibit 10.29 to the Registrant's Form
10-Q for the quarter ended December 31, 1992.
* 10.6 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 for the quarter ended June 30,
1995.
* 10.7 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 for the quarter ended
September 30, 1995.
** 10.8 Stock Purchase Agreement by and between Metanetics
Corporation, a subsidiary of the Registrant fka New
Meta Licensing Corporation, and Accipiter II, Inc.,
dated as of September 30, 1996, filed herewith.
* 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 Agreement
included as Exhibit 10.7 above, dated as of September
29, 1995, incorporated herein by reference to Exhibit
10.9 to Registrant's Form 10-Q for the quarter ended
September 30, 1995.
<PAGE> 39
Where
Filed
- -----
* 10.9.1 First Amendment, dated as of September 29,
1995, to the Agreement included as
Exhibit 10.9 above, incorporated herein by
reference to Exhibit 10.9.1 to Registrant's
Form 10-Q for the quarter ended December 31,
1995.
* 10.9.2 Second Amendment, dated as of January,
1996, to the Agreement included as Exhibit
10.9 above, incorporated herein by
reference to Exhibit 10.9.2 to Registrant's
Form 10-Q 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 Agreement included as
Exhibit 10.9 above, as amended by the First
and Second Amendments thereto included as
Exhibits 10.9.1 and 10.9.2 above,
incorporated herein by reference to Exhibit
10.9.3 to Registrant's Form 10-K for the
year ended March 31, 1996.
* 10.9.4 First Amendment, dated as of March 30, 1996,
to the Agreement included as Exhibit
10.9.3 above, incorporated herein by
reference to Exhibit 10.9.4 to Registrant's
Form 10-K for the year ended March 31, 1996.
** 11. Computation of Common Shares outstanding and
earnings per share for the six months ended
September 30, 1996 and 1995, filed herewith.
** 27. Financial Data Schedule as of September 30, 1996,
filed herewith.
- ------------------
* Previously filed
** Filed herewith
<PAGE> 1
EXHIBIT 10.8
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 30th day of September, 1996, by and between METANETICS
CORPORATION, a Delaware corporation ("Metanetics"), and ACCIPITER II, INC., a
Florida corporation ("Purchaser").
WHEREAS, on September 22, 1995, the Certificate of Incorporation of
Metanetics (then known as New Meta Licensing Corporation) was filed by the
Secretary of State for the State of Delaware (the "Certificate");
WHEREAS, pursuant to the Certificate the authorized capital stock of
Metanetics consists solely of Ten Million (10,000,000) shares of Voting Common
Stock $.01 par value (the "Voting Common"), Three Million (3,000,000) shares of
Non-Voting Common Stock $.01 par value and Three Million (3,000,000) shares of
Preferred Stock $.01 par value;
WHEREAS, Metanetics' Board of Directors determined that it would be in
the best interest of Metanetics and its stockholders if Metanetics
deconsolidated from the Telxon Corporation ("Telxon") consolidated group;
WHEREAS, in satisfaction of one of the preconditions for
deconsolidation, Telxon's ownership of Metanetics capital stock was reduced
below 50%;
WHEREAS, on June 17, 1996, in connection with the termination of a
Metanetics' employee/shareholder, the Board of Directors of Metanetics approved
the repurchase and a subsequent resale of all shares of Metanetics' capital
stock owned by the former employee;
WHEREAS, on August 23, 1996, in a negotiated settlement of the stock
repurchase rights under the Amended and Restated Shareholder Agreement between
Metanetics and all of its shareholders and related severance matters, Metanetics
agreed to repurchase the former employee's Metanetics Voting Common Stock
(432,558 shares) (the "Repurchased Shares") for $1.0386 per share;
WHEREAS, in the absence of a resale of the Repurchased Shares, Telxon's
ownership of Metanetics would have exceeded 50%,which would by itself preclude
Metanetics' deconsolidation efforts and would also cause Metanetics to suffer
other adverse financial consequences; and
WHEREAS, to avoid these adverse consequences of the repurchase of the
Repurchased Shares, Metanetics desires to sell the Repurchased Shares to
Purchaser, and to assist Metanetics in avoiding such adverse consequences,
Purchaser desires to buy the Repurchased Shares from Metanetics.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, covenants and agreements hereinafter set
forth, the parties, intending to be legally and equitably bound, hereby agree as
follows:
1. SALE AND PURCHASE OF SHARES. Subject to the terms and conditions
hereof, Metanetics shall sell, transfer and assign to Purchaser at Purchaser's
Florida address, and Purchaser shall purchase and acquire from Metanetics,
432,558 Shares of Voting Common (the "Purchased Shares"), for a purchase price
of $1.0386 per share for an aggregate purchase price of $449,254.73 (the
"Purchase Price"). The Purchase Price shall be payable by Purchaser through its
delivery to Metanetics of a Promissory Note in the form attached hereto.
2. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) Metanetics hereby represents and warrants to Purchaser (with
respect to and only with respect to the shares of Voting Common hereby) being
sold hereby that:
(i) The execution, delivery and performance of this Agreement
does not and will not violate, conflict with or result in the breach of
any provision of (a) any material contract, agreement or instrument to
which it is a party or by or to which it or its assets or properties
may be bound or subject; or (b) any order, judgment, injunction, award,
decree, statute, law, rule or regulation of any jurisdiction applicable
to it. Such execution, delivery and performance will not result in the
creation of any lien or encumbrance on the Purchased Shares.
(ii) There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or
regulatory body against it. There are no actions, suits or claims or
legal, administrative or arbitral proceedings or investigations
(whether or not the defense thereof or liabilities in respect thereof
are covered by insurance) pending or, to its knowledge, threatened,
against or involving it which could adversely effect its ability to
consummate the transactions contemplated hereby.
(iii) Upon its execution and delivery, this Agreement will be
the valid and binding obligation of Metanetics, enforceable in
accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, organization, moratorium or other laws of
general application affecting enforcement of creditors' rights; and (b)
general principles of equity that restrict the availability of
equitable remedies.
(iv) It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with all
requisite corporate power and lawful authority to own, lease and
operate its assets and properties and to carry on its business in the
manner presently conducted or contemplated by it.
(v) The execution, delivery and performance of this Agreement
does not and will not violate, conflict with or result in the breach of
any provision of its Certificate of Incorporation or By-laws, as either
may be amended.
2
<PAGE> 3
(vi) No consent, action, approval, order or authorization, or
declaration of or registration or filing with, any federal, state,
local or governmental agency or authority is required to be obtained or
made by Metanetics in connection with (a) the execution, delivery or
performance by Metanetics of this Agreement and of the other
instruments, agreements and documents required or contemplated
hereunder; and (b) the consummation of the transactions contemplated
hereby and thereby.
(vii) Metanetics is authorized to issue Ten Million
(10,000,000) shares of Voting Common Stock $.01 par value, Three
Million (3,000,000) shares of Non-Voting Common Stock $.01 par value
and Three Million (3,000,000) shares of Preferred Stock $.01 par value,
of which Four Million Three Hundred Eighty One Thousand Three Hundred
Ninety Five (4,381,395) shares of Voting Common Stock are issued and
outstanding as of the date hereof, immediately prior to the
consummation of the transactions hereunder. There is no other class of
capital stock authorized, issued or outstanding. The Purchased Shares
will, when issued and paid for, be validly issued, fully paid, and
nonassessable, and all such shares have been issued in compliance with
all applicable federal and state securities laws.
(b) Purchaser hereby represents and warrants to Metanetics as
follows:
(i) Purchaser has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement and
to carry out Purchaser's obligations hereunder. All actions by
Purchaser required for the lawful execution and delivery of this
Agreement have been effectively taken prior to the Closing. Upon its
execution and delivery, this Agreement will be the valid and binding
obligation of Purchaser, enforceable in accordance with its terms,
except (a) as limited by applicable bankruptcy, insolvency,
organization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and (b) general principles of equity
that restrict the availability of equitable remedies.
(ii) All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings
with any governmental or banking authority on the part of Purchaser
required in connection with the consummation of the transactions
contemplated in this Agreement have been obtained prior to and shall be
effective as of the Closing.
(iii) Purchaser understands that the Purchased Shares
purchased by it hereunder have not been registered under the Securities
Act of 1993, as amended (the "Securities Act"). Purchaser also
understands that the shares are being offered and sold pursuant to
exemptions from registration contained in the Securities Act and
applicable state securities laws based in part upon Purchaser's
representations contained in this Agreement.
(iv) Purchaser understands and agrees that it bears the
economic risk of this investment indefinitely unless and until the
shares acquired hereunder are registered pursuant to the Securities
Act, or an exemption from registration is available. Purchaser
understands that Metanetics has no present intention of registering the
shares being sold
3
<PAGE> 4
hereunder or any shares of its capital stock. Purchaser also
understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even
if available, such exemption may not allow Purchaser to transfer all or
any portion of such shares.
(v) Purchaser is acquiring the Purchased Shares for
Purchaser's own account for investment only, and not with a view toward
their distribution.
(vi) Purchaser represents that by reason of its business or
financial experience, Purchaser has the capacity to protect its own
interests in connection with the transactions contemplated in this
Agreement and can bear the risk of such investment without materially
impairing its financial condition. Further, Purchaser is aware of no
publication of any advertisement in connection with the transactions
contemplated in this Agreement.
(vii) A principal stockholder of Purchaser is an officer and
director of Telxon, Metanetics' parent corporation, and as such is
fully aware of all material information relating to Metanetics,
including its business and financial affairs, and has had full and free
access to all such information. Purchaser has had an opportunity to
discuss Metanetics' business, management and financial affairs with
directors, officers and management of Metanetics and has had the
opportunity to review Metanetics' operations and facilities. Purchaser
also has had the opportunity to ask questions of and receive answers
from Metanetics and its management regarding the transactions
contemplated hereby.
(viii) Purchaser is an "accredited investor" as that term is
defined in Regulation D under the Securities Act. Specifically,
Purchaser (and/or its stockholders) meets one or more of the following
definitions of an "accredited investor":
(A) A natural person whose net worth, either
individually or jointly with such person's spouse, at the same
time of the Closing (defined below), exceeds $1,000,000;
(B) A natural person who had an individual income in
excess of $200,000 or joint income with that person's spouse
in excess of $300,000 in 1994 and 1995, and reasonably expects
to have individual income reaching the same level in 1996;
(C) A corporation, not formed for the specific
purpose of acquiring shares the Purchased Shares, with assets
in excess of $5,000,000.
For purposes of the above definitions of "accredited investor," the
term "net worth" means the excess of total assets over total
liabilities. In calculating net worth, Purchaser may include the
estimated fair market value of the Purchaser's stockholders' principal
residence as an asset. In determining individual "income," Purchaser
should add to Purchaser's stockholders' individual adjusted gross
income (exclusive of any spousal income) any amounts attributable to
tax exempt income received, losses claimed as a
4
<PAGE> 5
limited partner in any limited partnership, deductions claimed for
depletion, contributions to an IRA or Keogh retirement plan, alimony
payments, and any amount by which income from long-term capital gains
has been reduced in arriving at adjusted gross income, and should
subtract any unrealized capital gain.
3. CLOSING. The closing of the transactions contemplated hereunder (the
"Closing") shall be held at such times and places as the parties may agree.
4. INDEMNIFICATION. Notwithstanding anything to the contrary in this
Agreement, Purchaser and Metanetics shall indemnify and hold harmless the other
against and from any and all losses, fees, costs, expenses, damages,
obligations, liabilities and claims (including, without limitation, any and all
fees, costs and expenses whatsoever reasonably incurred by it or its counsel in
investigating, preparing for, defending against, or providing evidence,
producing documents or taking any other action in respect of, any threatened or
asserted claim) arising directly or indirectly out of: (a) any failure of any
representation or warranty of such party to be correct and complete when made,
or (b) any failure by such party to perform and observe fully all obligations
and conditions to be performed or observed by that party under this Agreement.
Notwithstanding the foregoing or anything herein to the contrary, no claim for
indemnification may be asserted after September 30, 1997.
5. CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligation of Purchaser
to purchase the Purchased Shares are subject to the satisfaction, at or prior to
the Closing, of the following conditions, any one or more of which may be waived
by such Purchaser:
(a) The representations and warranties made by Metanetics in
Section 2(a) hereof shall be true and correct in all material respects
at the Closing with the same force and effect as if they had been made
as of the date of the Closing, and Metanetics shall have performed all
obligations and conditions herein required to be performed or observed
by it on or prior to Closing.
(b) At the time of Closing, the sale of the Purchased Shares
shall be legally permitted by all laws and regulations to which
Purchaser and Metanetics are subject.
(c) Metanetics shall have obtained any and all consents,
permits, and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement (except for such as
properly may be obtained subsequent to the Closing).
(d) Purchaser or its counsel has had the opportunity to review
copies of all corporate documents of Metanetics as the Purchaser
reasonably may have requested.
(e) The Telxon Board of Directors shall have approved of
Purchaser's purchase of the Purchased Shares.
6. CONDITIONS TO METANETICS' OBLIGATIONS. Metanetics' obligation to
sell the Purchased Shares at Closing is subject to the satisfaction, on or prior
to Closing, of the following conditions, any one or more of which may be waived
by it:
5
<PAGE> 6
(a) The representations and warranties made by Purchaser in
Section 2(b) hereof shall be true and correct in all material respects
at the date of the Closing, with the same force and effect as if they
had been made on and as of said date, and Purchaser shall have
performed all obligations and conditions herein required to be
performed or observed by it on or prior to Closing.
(b) At the time of Closing, the sale of the Purchased Shares
shall be legally permitted by all laws and regulations to which
Purchaser and Metanetics are subject.
(c) Purchaser shall have obtained any and all consents,
permits, and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement (except for such as
properly may be obtained subsequent to the Closing).
(d) Purchaser shall have performed and complied with all
agreements and conditions herein required to be performed or complied
with by Purchaser on or before the Closing.
(e) The Telxon Board of Directors shall have approved of
Purchaser's purchase of the Purchased Shares.
8. ENTIRE AGREEMENT. This Agreement and any other writing specifically
identified herein or specifically contemplated hereby, taken together, contain
the entire agreement among the parties hereto with respect to Metanetics' sale
and Purchaser's acquisition of shares hereunder and supersedes all previous
written or oral negotiations, commitments and writings with respect thereto.
9. HEADINGS. The paragraph headings used herein are for convenience of
reference only and do not form a part hereof and do not in any way modify,
interpret or set forth the intentions of the parties.
10. SURVIVAL. All agreements, obligations, warranties, and
representations under this Agreement shall survive the Closing and any
investigations made by the parties until September 30, 1997.
11. GENDER AND NUMBER. When permitted by the context, each pronoun used
in this Agreement includes the same pronoun in other genders or numbers, and
each noun used in this Agreement, including each capitalized term defined
herein, includes the same noun in other numbers.
12. SUCCESSORS. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by and against the respective heirs, personal
representatives, successors, and assigns of each party to this Agreement.
13. NO THIRD-PARTY BENEFIT. This Agreement is intended for the
exclusive benefit of the parties to this Agreement and their respective
successors and assigns, and nothing contained in this Agreement shall be
construed as creating any rights or benefits in or to any third party.
6
<PAGE> 7
14. GOVERNING LAW. All questions concerning the validity or meaning of
this Agreement or relating to the rights and obligations of the parties with
respect to performance under this Agreement shall be construed and resolved
under the laws of the State of Ohio, without regard to conflict of laws
principles.
15. SEVERABILITY. The intention of the parties to this Agreement is to
comply fully with all laws and public policies, and this Agreement shall be
construed consistently with all laws and public policies to the extent possible.
If any court of competent jurisdiction determines it is impossible to construe
any provision of this Agreement consistently with any law or public policy and
consequently holds that provision to be invalid, such holding shall in no way
effect the validity of the other provisions of this Agreement, which shall
remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
METANETICS CORPORATION
By: /s/ Kenneth W. Haver
------------------------------------
Its: Senior Vice President
------------------------------------
ACCIPITER II, INC.
By: /s/ Robert F. Meyerson
------------------------------------
Its: Executive Vice President
------------------------------------
7
<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 Six Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net (loss) income applicable to common
shares ............................. $ (4,702) $ 2,811 $ (9,499) $ 5,040
======== ======= ======== =======
Weighted average common shares outstanding for
the period ......................... 16,182 16,248 16,265 16,066
======== ======= ======== =======
(Loss) earnings per common share:
On the weighted average common
shares outstanding for the year ** $ (.29) $ .17 $ (.58) $ .31
<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
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 16,128
<SECURITIES> 0
<RECEIVABLES> 113,932
<ALLOWANCES> 1,917
<INVENTORY> 106,870
<CURRENT-ASSETS> 254,484
<PP&E> 133,126
<DEPRECIATION> 79,552
<TOTAL-ASSETS> 346,435
<CURRENT-LIABILITIES> 81,822
<BONDS> 108,790
<COMMON> 162
0
0
<OTHER-SE> 152,062
<TOTAL-LIABILITY-AND-EQUITY> 346,435
<SALES> 183,464
<TOTAL-REVENUES> 220,697
<CGS> 128,270
<TOTAL-COSTS> 150,852
<OTHER-EXPENSES> 85,135
<LOSS-PROVISION> 180
<INTEREST-EXPENSE> 3,781
<INCOME-PRETAX> (18,998)
<INCOME-TAX> (9,499)
<INCOME-CONTINUING> (9,499)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,499)
<EPS-PRIMARY> (.58)
<EPS-DILUTED> (.58)
</TABLE>
