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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): October 20, 1998
TELXON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 0-11402 74-1666060
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
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3330 WEST MARKET STREET, AKRON, OHIO 44333
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (330) 664-1000
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ITEM 5. OTHER EVENTS.
On October 20, 1998, Telxon Corporation ("Telxon" or the Company")
issued a press release announcing its financial results for the second quarter
and first six months, ended September 30, 1998, of its 1999 fiscal year. A
copy of the press release is included as Exhibit 99 to this Current Report on
Form 8-K and incorporated herein by reference.
The amounts owed from time to time by the Company and its subsidiaries
to other creditors, which, as of September 30, 1998, are reflected in the
consolidated balance sheet included as part of the press release, determine the
extent to which the Company's $82,500,000 aggregate outstanding principal amount
of 5 3/4% Convertible Subordinated Notes due 2003 (the "Notes") is subordinated.
Under the terms of the Indenture (the "Indenture"), dated December 1, 1995,
between the Company and Bank One Trust Company, N.A., as trustee, pursuant to
which the Notes were issued in December 1995, the indebtedness evidenced by the
Notes is subordinated, to the extent provided in the Indenture, to the prior
payment in full of all Senior Indebtedness (as defined in the Indenture). The
Notes are also effectively subordinated to the amounts of indebtedness and other
liabilities of the Company's subsidiaries. For a discussion summarizing such
subordination of the Notes, reference should be made to the Company's Current
Report on Form 8-K dated May 21, 1996 (the "Prior Report"), as filed with the
Securities and Exchange Commission on June 3, 1996 and incorporated herein by
reference. The "Designated Senior Indebtedness" discussed in the Prior Report
currently consists of (i) the Company's five-year $100 million credit facility
with The Bank of New York, as agent for a syndicate of participating lenders,
and (ii) a supplemental 364-day $20 million guidance facility, dated August 4,
1998, with Bank One, NA (fka Bank One, Akron, N.A.), which is also one of the
participants in the Bank of New York facility. The amounts of other indebtedness
to which the Notes were so subordinated as of September 30, 1998 are discussed
below. The statements in the Prior Report regarding the provisions of the
Indenture are further qualified in their entirety by reference to the copy of
the Indenture included as an exhibit to the registration statement relating to
the Notes which has been filed by the Company under the Securities Act of 1933
as well as to the Company's Current, Quarterly and Annual Reports on Forms 8-K,
10-Q and 10-K which have been filed by the Company under the Securities Exchange
Act of 1934 subsequent to the filing of the Prior Report.
The amounts of Senior Indebtedness, and the amounts of indebtedness and
other liabilities of the Company's subsidiaries, as of Setember 30, 1998 were as
follows (such amounts varying from time to time depending upon the operating and
capital needs and operating results of Telxon and its subsidiaries):
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Senior Indebtedness $26.7 million
Indebtedness and Other Liabilities of Subsidiaries* 27.2 million
--------------------
* Excludes intercompany liabilities and approximately $0.7 million at
September 30, 1998 in subsidiaries' obligations guaranteed by Telxon
which are included in the amount of Senior Indebtedness above.
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1
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
--- -----
(c) Exhibits.
99 Press Release issued by the registrant on October 20, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TELXON CORPORATION
Date: October 22, 1998 By: /s/ Kenneth W. Haver
--------------------
Kenneth W. Haver
Senior Vice President and
Chief Financial Officer
2
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EXHIBIT 99
----------
[TELXON LOGO]
NEWS RELEASE
TELXON REPORTS SECOND QUARTER FY1999 RESULTS
AKRON, OHIO, October 20, 1998 - - Telxon Corporation (Nasdaq-NNM: TLXN)
today reported fiscal 1999 second quarter earnings of $.22 per share (diluted),
before non-recurring items, up 47%, as compared to earnings of $.15 per share
(diluted) in the same quarter a year ago.
For the quarter ended September 30, 1998, the company reported revenues
of $124.4 million, up 13% from revenues of $110.3 million last year. Earnings
for the quarter were $3.6 million, excluding non-recurring items of $1.1 million
after-tax ($.07 per share), up 51%, as compared to earnings of $2.4 million last
year. The non-recurring items were related to the proxy contest and settlement
with Guy Wyser-Pratte.
For the first six months of fiscal 1999, Telxon recorded revenues of
$239.4 million and earnings of $5.8 million, or $.35 per share (diluted), before
non-recurring items of $3.1 million after-tax ($.19 per share). This compares to
revenues of $215.2 million and earnings of $4.0 million, or $.25 per share
(diluted), for the same period last year.
Frank E. Brick, Telxon's president and chief executive officer, said,
"We are pleased with our Q2 operating earnings and the progress of our inventory
and DSO reduction initiatives. As we continue to drive our `growth through
leverage' initiatives, we remain confident in the company's ability to achieve
our operating and financial objectives for the second half of fiscal 1999."
"Strong growth in our U.S. and European operations during the quarter,
and the surge in demand for our new Pen-Client mobile computers, whose shipments
are
Telxon Corporation/3330 West Market Street/P.O. Box 5582/Akron, Ohio 44334-0582
800.800.8001/Fax 330.664.2058/www.telxon.com
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expected to double in the second-half of fiscal 1999, continue our optimism for
the balance of this fiscal year, and throughout fiscal 2000," Brick continued.
Telxon Corporation is a leading global designer and manufacturer of
wireless and mobile information systems for vertical markets. The company
integrates advanced mobile computing and wireless data communication technology
with a wide array of peripherals, application-specific software and global
customer services for its customers in more than 60 countries. Telxon's web site
address is: http://www.telxon.com.
Other than the historical financial information reported above, this
news release constitutes forward-looking statements that are inherently subject
to risks and uncertainties which could cause Telxon's actual results to differ
materially from the forward-looking statements. The important factors affecting
the realization of those results include, without limitation, the company's
ability to gain and maintain market acceptance of its products, and implement
appropriate cost reduction, efficiency and other operating improvement
strategies, as well as general and industry-specific economic conditions,
competitive pressures and rapid technological change. Reference should be made
to the discussion of these and other factors affecting Telxon's business and
results as included from time to time in the company's filings with the
Securities and Exchange Commission.
# # #
For corporate information:
Alex Csiszar
Vice President, Investor Relations
Telxon Corporation
(330) 664-2961
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Telxon Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
- --------------------------
(In thousands, except per share data)
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SEPTEMBER 30, MARCH 31,
1998 1998
--------------- ---------------
(UNAUDITED)
ASSETS
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Current assets:
Cash and short-term investments $ 37,586 $ 27,500
Accounts receivable, net 114,140 125,739
Notes and other accounts receivable 18,970 22,949
Inventories 104,336 108,178
Prepaid expenses and other 14,337 11,307
--------------- ---------------
Total current assets 289,369 295,673
Property and equipment, net 62,936 52,108
Intangible and other assets, net 47,563 42,758
--------------- ---------------
Total $ 399,868 $ 390,539
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 17,580 $ 3,000
Capital lease obligations due within one year 855 968
Accounts payable 50,726 58,634
Income taxes payable 2,623 3,390
Accrued liabilities 39,720 41,034
--------------- ---------------
Total current liabilities 111,504 107,026
Capital lease obligations 1,923 1,876
Convertible subordinated debentures 106,913 107,224
Other long-term liabilities 6,942 6,897
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Total 227,282 223,023
Minority interest 2,811 2,791
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, 16,234
and 16,219 shares issued 162 162
Additional paid-in capital 88,369 87,994
Retained earnings 87,712 85,053
Equity adjustment for foreign currency translation (4,294) (4,929)
Unearned restricted stock awards (344) (493)
Treasury stock; 110 and 162 shares of common stock
at cost (1,830) (3,062)
--------------- ---------------
Total stockholders' equity 169,775 164,725
--------------- ---------------
Total $ 399,868 $ 390,539
=============== ===============
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Telxon Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
- ------------------------------------
(In thousands, except per share data)
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THREE MONTHS SIX MONTHS
--------------------------------- ---------------------------------
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------------------------- ---------------------------------
(UNAUDITED) (UNAUDITED)
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Revenues:
Product $ 103,133 $ 91,138 $ 197,210 $ 177,829
Customer service 21,236 19,182 42,206 37,404
------------- ------------- ------------- -------------
Total revenues 124,369 110,320 239,416 215,233
Cost of revenues:
Product 62,411 54,276 119,722 106,836
Customer service 13,502 12,336 26,327 23,462
------------- ------------- ------------- -------------
Total cost of revenues 75,913 66,612 146,049 130,298
Gross profit:
Product 40,722 36,862 77,488 70,993
Customer service 7,734 6,846 15,879 13,942
------------- ------------- ------------- -------------
Total gross profit 48,456 43,708 93,367 84,935
Operating expenses:
Selling expenses 20,317 18,677 41,678 36,776
Product development and engineering
expenses 9,261 9,525 18,191 18,651
General and administrative expenses 10,425 9,843 19,862 19,547
------------- ------------- ------------- -------------
Total operating expenses 40,003 38,045 79,731 74,974
Other operating items:
Take-over defense costs 1,830 -- 3,579 --
Charge related to transactions with
business partner -- -- 1,950 --
------------- ------------- ------------- -------------
Total other operating items 1,830 -- 5,529 --
Income from operations 6,623 5,663 8,107 9,961
Interest income 164 420 343 917
Interest expense (2,617) (1,811) (4,329) (3,602)
------------- ------------- ------------- -------------
Income before other non-operating
(expense) income and income taxes 4,170 4,272 4,121 7,276
Other non-operating (expense) income -- (7) 460 (165)
------------- ------------- ------------- -------------
Income before income taxes 4,170 4,265 4,581 7,111
Provision for income taxes 1,672 1,877 1,837 3,129
------------- ------------- ------------- -------------
Net income $ 2,498 $ 2,388 $ 2,744 $ 3,982
============= ============= ============= =============
Net Income per common share:
Basic $ 0.16 $ 0.15 $ 0.17 $ 0.25
============= ============= ============= =============
Diluted $ 0.15 $ 0.15 $ 0.16 $ 0.25
============= ============= ============= =============
Average number of common shares outstanding:
Basic 16,065 15,772 16,095 15,646
Diluted 16,559 16,278 16,764 16,048
Note: The company has reclassified a $2.0 million pretax charge related to transactions with a business partner which occurred
in the first quarter of fiscal 1999 from the Statement of Operations caption of "Other non-operating (expense) income" to
"Other operating items." Therefore, the year-to-date results reported in this press release reflect an adjustment to the
previously reported first quarter results for that reclassification.
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