<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Amendment No. 1)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from __________to __________
Commission file number 0-11402
TELXON CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 74-1666060
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
3330 West Market Street, Akron, Ohio 44333
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(330) 664-1000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ]. No [ ].
At December 31, 1997, there were 15,902,312 outstanding shares of the
registrant's Common Stock.
<PAGE> 2
This Amendment No. 1 on Form 10-Q/A (this "Amendment") amends and restates in
full the disclosures made by the registrant, Telxon Corporation, in response to
"ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS" in its Form 10-Q as originally filed
with the Securities and Exchange Commission (the "Commission") via EDGAR
transmission on February 17, 1998 (the "Original Filing"). The disclosures
responsive to all of the other Items in the Original Filing are not affected by
this Amendment, but continue as set forth in the Original Filing without change.
Notwithstanding the foregoing, the disclosures in the Original Filing, as
amended by this Amendment, are subject to updating and supplementation by the
disclosures contained in the filings made by the registrant with the Commission
for any period or as of any date subsequent to the quarter ended
December 31, 1997, covered by the Original Filing.
The purpose of this Amendment No. 1 is to make the following correction:
- --In "ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS":
To remove the typographical error duplicating the two line items entitled
"Income (loss) before income taxes" and "Provision (benefit) for income taxes"
in the CONSOLIDATED STATEMENT OF OPERATIONS on page 4 of the Original Filing
(notwithstanding the duplication of the provision for income taxes, the
provision was subtracted only once so that no correction is necessary to the
amount for any subsequent line item from that set forth in the Original Filing).
Except for the typographical correction made in Item 1 as restated herein, the
disclosures set forth herein do not differ from those in Item 1 of the
Original Filing.
<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>
December 31, March 31,
1997 1997
--------- ---------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash (including cash equivalents of $5,900 and
$38,100) ................................................................... $ 12,783 $ 45,386
Accounts receivable, net of allowance for
doubtful accounts of $1,756 and $1,596 ..................................... 122,862 111,959
Notes and other accounts receivable .......................................... 15,527 16,312
Inventories .................................................................. 101,547 84,499
Prepaid expenses and other ................................................... 13,049 11,956
--------- ---------
Total current assets ...................................................... 265,768 270,112
Property and equipment, net .................................................... 52,458 45,578
Intangible and other assets, net ............................................... 47,832 46,094
--------- ---------
Total ..................................................................... $ 366,058 $ 361,784
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ................................................................ $ 2,999 $ 50
Current portion of long-term debt ............................................ 383 383
Capital lease obligations due within one year ................................ 997 627
Accounts payable ............................................................. 50,240 47,917
Income taxes payable ......................................................... 2,523 3,077
Accrued liabilities .......................................................... 39,349 49,000
--------- ---------
Total current liabilities ................................................. 96,491 101,054
Capital lease obligations ...................................................... 1,926 968
Convertible subordinated notes and debentures .................................. 107,224 107,224
Other long-term liabilities .................................................... 5,910 5,837
--------- ---------
Total liabilities ......................................................... 211,551 215,083
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, 16,203 and 16,186 shares issued ......................... 162 162
Additional paid-in capital ................................................... 86,121 87,105
Retained earnings ............................................................ 77,316 70,821
Equity adjustment for foreign currency translation ........................... (4,529) (2,643)
Unearned compensation relating to restricted stock awards .................... (290) (210)
Treasury stock; 300 and 557 shares of common stock at cost ................... (4,273) (8,534)
--------- ---------
Total stockholders' equity ................................................ 154,507 146,701
--------- ---------
Commitments and contingencies .................................................. -- --
--------- ---------
Total ..................................................................... $ 366,058 $ 361,784
========= =========
</TABLE>
See accompanying notes to
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 Nine Months
Ended December 31, Ended December 31,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product, net .......................................... $ 97,472 $ 105,030 $ 275,302 $ 288,494
Customer service, net ................................. 19,835 18,545 57,239 55,778
--------- --------- --------- ---------
Total net revenues ........................... 117,307 123,575 332,541 344,272
Cost of revenues:
Product ............................................... 56,482 76,646 163,319 204,915
Customer service ...................................... 12,249 12,966 35,711 35,548
--------- --------- --------- ---------
Total cost of revenues ....................... 68,731 89,612 199,030 240,463
--------- --------- --------- ---------
Gross profit .......................................... 48,576 33,963 133,511 103,809
Operating expenses:
Selling expenses ...................................... 19,821 27,453 56,598 69,674
Product development and engineering
expenses ......................................... 9,876 13,839 28,526 35,043
General and administrative expenses ................... 9,662 16,206 29,210 37,914
--------- --------- --------- ---------
Total operating expenses ..................... 39,359 57,498 114,334 142,631
--------- --------- --------- ---------
Income (loss) from operations ................ 9,217 (23,535) 19,177 (38,822)
Interest income ............................................ 340 161 1,257 511
Interest expense ........................................... (1,752) (2,130) (5,354) (6,262)
Other non-operating (expense) income ....................... (160) 35,176 (325) 35,249
--------- --------- --------- ---------
Income (loss) before income taxes ............ 7,645 9,672 14,755 (9,324)
Provision (benefit) for income taxes ....................... 3,288 7,537 6,416 (1,961)
--------- --------- --------- ---------
Net income (loss) before cumulative
effect of accounting change................... 4,357 2,135 8,339 (7,363)
Cumulative effect of accounting change, net of taxes........ 1,240 -- 1,240 --
--------- --------- --------- ---------
Net income (loss)............................. $ 3,117 $ 2,135 $ 7,099 $ (7,363)
========= ========= ========= =========
Net income (loss) per common share before accounting
change:
Basic......................................... $ .28 $ .13 $ .53 $ (.45)
Diluted....................................... $ .27 $ .13 $ .52 $ (.45)
========= ========= ========= =========
Cumulative effect of accounting change:
Basic......................................... $ .08 $ -- $ .08 $ --
Diluted....................................... $ .08 $ -- $ .08 $ --
========= ========= ========= =========
Net income (loss) per common share:
Basic......................................... $ .20 $ .13 $ .45 $ (.45)
Diluted....................................... $ .19 $ .13 $ .44 $ (.45)
========= ========= ========= =========
Average number of common shares outstanding:
Basic......................................... 15,685 16,103 15,742 16,207
Diluted....................................... 16,262 16,150 16,189 16,207
========= ========= ========= =========
</TABLE>
See accompanying notes to
consolidated financial statements
4
<PAGE> 5
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended December 31,
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................... $ 7,099 $ (7,363)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Cumulative effect of accounting change.................. 2,176 --
Depreciation and amortization .......................... 18,560 21,948
Amortization of restricted stock
awards, net ........................................ 148 474
Provision for doubtful accounts ........................ 451 947
Provision for inventory obsolescence ................... 5,398 11,502
Deferred income taxes .................................. (4) (1,026)
Gain on sale of assets ................................. -- (35,176)
Loss on disposal of fixed assets ....................... 825 402
Trading securities, net ................................ -- 902
Changes in assets and liabilities:
Accounts and notes receivable ..................... (11,714) 15,645
Inventories ....................................... (22,399) (1,101)
Prepaid expenses and other ........................ (1,135) (472)
Intangible and other assets ....................... (1,985) (3,047)
Accounts payable and accrued liabilities .......... (8,527) (25,499)
Other long-term liabilities ....................... 73 (1,223)
------------- -------------
Total adjustments ....................... (18,133) (15,724)
------------- -------------
Net cash used in operating activities ........................... (11,034) (23,087)
Cash flows from investing activities:
Additions to property and equipment ............................. (18,791) (10,926)
Software investments ............................................ (3,172) (5,120)
Proceeds from the sale of fixed assets .......................... 866 65,655
Proceeds from the sale of non-marketable investments ............ 1,033 --
Purchase of non-marketable investments .......................... (5,500) (400)
Additions to long-term notes receivable ......................... (140) (1,850)
------------- -------------
Net cash (used in) provided by investing activities ............. (25,704) 47,359
Cash flows from financing activities:
Notes payable, net .............................................. 2,949 1,999
Principal payments on capital leases ............................ (479) (702)
Principal payments on long-term borrowing ....................... -- (2,103)
Purchase of treasury stock ...................................... (4,928) (1,051)
Debt issue costs paid ........................................... (25) (303)
Proceeds from exercise of stock options
(includes tax benefit) ...................................... 6,958 710
------------- -------------
Net cash provided by (used by) financing activities ............. 4,475 (1,450)
Effect of exchange rate changes on cash ......................... (340) 56
------------- -------------
Net (decrease) increase in cash and cash equivalents ............ (32,603) 22,878
Cash and cash equivalents at beginning of period ................ 45,386 34,828
------------- -------------
Cash and cash equivalents at end of period ...................... $ 12,783 $ 57,706
============= =============
</TABLE>
See accompanying notes to
consolidated financial statements
5
<PAGE> 6
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
1. Management Representation
The consolidated financial statements of Telxon Corporation ("Telxon")
and its subsidiaries (collectively with Telxon, 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, including the March 31, 1997, condensed balance sheet data
derived from audited financial statements, do not include all of the
information and notes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the audited consolidated financial statements as
contained in Telxon's Annual Report on Form 10-K, as amended by
Amendment No. 1 on Form 10-K/A, for the fiscal year ended March 31,
1997.
2. Earnings Per Share
Computations of basic and diluted earnings per share of common stock
have been made in accordance with the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("SFAS No. 128"). The Company was required to adopt the
provisions of SFAS No. 128 beginning with the quarter ended December
31, 1997. All prior and interim period earnings per common share
amounts have been restated accordingly. All securities having an
anti-dilutive effect on earnings per common share have been excluded
from such computations. Common stock purchase rights outstanding under
Telxon'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.
<TABLE>
<CAPTION>
RECONCILIATION OF NUMERATORS AND DENOMINATORS OF THE BASIC
AND DILUTED EPS COMPUTATIONS
(DOLLARS IN THOUSAND EXCEPT PER SHARE AMOUNTS)
For the Quarter ended December 31, 1997 For the Quarter ended December 31, 1996
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 3,117 $ 2,135
BASIC EPS
Income Available to
common stockholders 3,117 15,685 $ 0.20 2,135 16,103 $ 0.13
============ ============
EFFECT OF DILUTIVE SECURITIES
Options 577 47
DILUTED EPS
Income available to stockholders
of common shares and
common stock equivalents $ 3,117 16,262 $ 0.19 $ 2,135 16,150 $ 0.13
============ ============ ============ ============ ============ ============
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
For the Nine Months ended December 31, 1997 For the Nine Months ended December 31, 1996
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income (Loss) $ 7,099 $ (7,363)
BASIC EPS
Income Available to
common stockholders 7,099 15,742 $ 0.45 (7,363) 16,207 $ (0.45)
============ ============
EFFECT OF DILUTIVE SECURITIES
Options 447
DILUTED EPS
Income (Loss) available to
stockholders of common shares
and common share equivalents $ 7,099 16,189 $ 0.44 $ (7,363) 16,207 $ (0.45)
============ ============ ============ ============ ============ ============
</TABLE>
Options to purchase 457,500 shares of common stock at $21.25 - $24.00 per share
were outstanding during the first nine months of fiscal 1998, but were not
included in the computation of diluted EPS because the options' exercise price
was greater than the average market price of the common shares for the first
nine months of fiscal 1998. The shares issuable upon conversion of Telxon's
5-3/4% Convertible Subordinated Notes and 7-1/2% Convertible Subordinated
Debentures were omitted from the diluted EPS calculation because the
conditions for their conversion were not satisfied as of December 31, 1997.
As more fully described in note 10, subsequent to December 31, 1997, Telxon
reissued 20,972 shares of treasury stock to satisfy purchases made by employees
through its 1995 Employee Stock Purchase Plan and 25,770 shares of treasury
stock to satisfy stock options exercised under its stock option plans.
Additionally, subsequent to December 31, 1997, Telxon repurchased 6,500 shares
of its common stock pursuant to its open market repurchase program.
3. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31,
1997 March 31,
(Unaudited) 1997
----------- ----
<S> <C> <C>
Purchased components $ 58,011 $ 29,983
Work-in-process 22,642 31,579
Finished goods 20,894 22,937
-------- --------
$101,547 $ 84,499
======== ========
</TABLE>
4. Accrued Liabilities
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
December 31,
1997 March 31,
(Unaudited) 1997
----------- ----
<S> <C> <C>
Deferred customer service revenues $10,358 $14,329
Accrued payroll and other employee compensation 12,588 19,309
Other accrued liabilities 16,403 15,362
------- -------
$39,349 $49,000
======= =======
</TABLE>
7
<PAGE> 8
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
5. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Nine Months
Ended December 31,
------------------
1997 1996
---- ----
(Unaudited)
Cash paid during the period for:
<S> <C> <C>
Interest $4,694 $5,846
Income taxes 5,502 7,368
</TABLE>
Capital lease additions of $1,819 (principally for new manufacturing
equipment) and $48 in fiscal 1998 and fiscal 1997, respectively, have
been excluded from the accompanying consolidated statement of cash
flows as non-cash transactions.
Effective April 1, 1996, the Company sold the assets of certain retail
application software operations, with net assets of approximately
$5,000 to a third-party in exchange for $150 in cash and $7,000 in
secured promissory notes, including interest. The $7,000 of secured
promissory notes received in connection with the sale have been
excluded from the accompanying consolidated statement of cash flows as
a non-cash transaction.
Telxon's re-issuances of treasury stock during the second quarter
of each fiscal 1998 and 1997 to satisfy purchases made by employees
through its 1995 Employee Stock Purchase Plan have been excluded
from the accompanying consolidated statement of cash flows as
non-cash transactions.
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
Telxon stockholders on behalf of themselves and purported classes
consisting of Telxon stockholders, other than defendants and
their affiliates, who purchased Telxon common stock between May
20, 1992 and January 19, 1993. The named defendants are Telxon,
former President and Chief Executive Officer Raymond D. Meyo, and then
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 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 Telxon, 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 Telxon, filed their
briefs in opposition to Class Certification on October 13, 1993. On
December 17, 1993, the District Court certified the class, consisting
of Telxon stockholders, other than defendants and their affiliates, who
purchased Telxon common stock between May 20, 1992 and December 14,
1992.
Following the completion of discovery (other than of experts), each
defendant filed a Motion for Summary Judgment on May 19, 1995, all of
which were opposed by the plaintiffs. On September 14, 1995, the trial
court granted each defendant summary judgment on all counts, which the
plaintiffs appealed to the United States Sixth Circuit Court of
Appeals. On November 12, 1997, the Court of Appeals affirmed the
summary judgment as to all defendants. The plaintiffs had 90 days from
the entry of the judgement to seek further appeal or other relief, and
it is believed that such time has expired. Accordingly, the Company
does not expect that the trial court's disposition of the case, as
affirmed by the Court of Appeals, will be overturned, and, no provision
has been made in the accompanying consolidated financial statements for
any liability that could result to the Company with respect to the
Consolidated Class Action.
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 Telxon; Robert F. Meyerson, former Chairman
of the Board, Chief Executive Officer and director; Dan R. Wipff, then
President, Chief Operating Officer and Chief Financial Officer and
director; Robert A. Goodman, Corporate Secretary and
8
<PAGE> 9
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
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 Telxon is nominally a defendant
in this derivative action, no monetary relief is sought by the
plaintiff from Telxon. 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 but allowed the claims
relating to breach of fiduciary duty to continue.
On October 31, 1996, plaintiff's counsel filed a Motion to Intervene in
the derivative action on behalf of a new plaintiff stockholder. As part
of the Motion to Intervene, the intervening plaintiff asked that the
Court designate as operative for the action the intervening plaintiff's
proposed Complaint, which alleges that a series of transactions in
which the Company acquired certain technology from a corporation
affiliated with Mr. Meyerson was wrongful in that Telxon already owned
the technology by means of a pre-existing consulting agreement with
another affiliate of Mr. Meyerson; the intervenor's complaint also
names Raymond D. Meyo, President, Chief Executive Officer and director
at the time of the first acquisition transaction, as a new defendant.
The defendants opposed the Motion on grounds that the new claim alleged
in the proposed Complaint and the addition of Mr. Meyo were time-barred
by the statute of limitations and the intervening plaintiff did not
satisfy the standards for intervention. After taking legal briefs, the
Court ruled on June 13, 1997, to permit the intervention. Discovery is
continuing, and no deadline for its completion has yet been set by the
Court. The defendants believe that the post-intervention claims lack
merit, and they intend to continue vigorously defending 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 and accordingly has not
made provisions for any loss or related insurance recovery in the
accompanying consolidated financial statements.
In the normal course of its operations, the Company is subject to
performance under contracts and assertions that technologies it
utilizes may infringe third party intellectual properties, 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 soil
contamination at the facility and may be responsible for possible
diminution in the economic value of the premises allegedly resulting
from the contamination. The Company, with professional assistance, is
continuing to investigate the scope, nature and cause of the
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 the information currently
available to it, continues to believe 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 held responsible
for the alleged contamination, the associated loss 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. Income Taxes
The Company's consolidated effective income tax rate reflects income
before taxes increased by non-deductible goodwill amortization and the
tax effect of subsidiaries' net operating loss benefits not currently
utilized, which sum is multiplied by the United States statutory rate
and increased by foreign tax rate differentials. The effective income
tax rate was decreased by the favorable tax treatment of the Company's
foreign sales corporation.
8. Other Transactions
During the third quarter of fiscal 1998, Telxon re-issued 128,813
shares of treasury stock to satisfy stock options exercised under its
stock option plans. Additionally, during the third quarter of fiscal
1998, Telxon repurchased 72,000 shares of its common stock, at a
weighted average price of $23.22 per share, pursuant to its open market
repurchase program.
9
<PAGE> 10
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
9. Change in Accounting Principle
On November 20, 1997, the Financial Accounting Standards Board's
Emerging Issues Task Force issued a new consensus ruling, "Accounting
for Costs Incurred in Connection with a Consulting Contract or an
Internal Project That Combines Business Process Reengineering and
Information Technology Transformation" ("EITF 97-13"). EITF 97-13
requires business process reengineering costs associated with
information system development to be expensed as incurred. The Company
has been involved in a corporate-wide information systems
implementation project that is affected by this pronouncement. In
accordance with this ruling, during the quarter ended December 31,
1997, the Company recorded a one-time, after-tax, non-cash charge of
$1.2 million to expense previously capitalized costs associated with
this project. Such costs had primarily been incurred during the second
quarter of fiscal 1998.
10. Subsequent Events
Subsequent to December 31, 1997, Telxon reissued 20,972 shares of
treasury stock to satisfy purchases made by employees through its 1995
Employee Stock Purchase Plan. Additionally, Telxon reissued 25,770
shares of treasury stock in January 1998 to satisfy stock options
exercised under its stock option plans.
Subsequent to December 31, 1997, Telxon repurchased 6,500 shares of its
common stock at a price of $21.88 per share, pursuant to its open
market repurchase program.
11. Newly Issued Accounting Pronouncements
In October 1997, the American Institute of Certified Public
Accountants issued Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2"). The Company is required to adopt the
provisions of SOP 97-2 for the fiscal year ending March 31, 1999.
Management believes that the adoption of this pronouncement will not
have a material effect on the Company's consolidated financial
position, results of operations or cash flows.
12. Reclassifications
Certain items in the fiscal 1997 consolidated financial statements and
notes thereto have been reclassified to conform to the fiscal 1998
presentation.
10
<PAGE> 11
TELXON CORPORATION
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: March 13, 1998
TELXON CORPORATION
(Registrant)
/s/ KENNETH W. HAVER
--------------------
Kenneth W. Haver, Senior
Vice President and Chief
Financial Officer
