<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 19, 1999
TELXON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-11402 74-1666060
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
3330 WEST MARKET STREET, AKRON, OHIO 44333
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (330) 664-1000
Not applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 4. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On July 19, 1999, Telxon Corporation (the Company") entered into a
letter agreement engaging Arthur Andersen LLP ("Andersen") to audit the
Company's consolidated financial statements for the fiscal year ending March 31,
2000. Andersen replaces PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as
the principal accountant to audit the Company's consolidated financial
statements. PricewaterhouseCoopers will accordingly be dismissed upon the
completion of the audit of the Company's consolidated financial statements for
the fiscal year ended March 31, 1999 and the issuance of their report thereon
for filing in the Company's Annual Report on Form 10-K for the fiscal year then
ended. Having reviewed with PricewaterhouseCoopers the Company's fiscal annual
1999 consolidated financial results prior to the release thereof in the
Company's press release of July 14, 1999 (a copy of which was filed under cover
of a Form 8-K of that date), the Company does not expect that the final audited
statements will include any change from those reported results. The change in
accountants was recommended and authorized by the Audit Committee of the
Company's Board of Directors (the "Audit Committee").
PricewaterhouseCoopers' reports on the Company's consolidated financial
statements for each of the fiscal years ended March 31, 1997 and March 31, 1998
(as the two most recently completed fiscal years on which PricewaterhouseCoopers
has reported as of the date hereof, they are referred to herein as the "Prior
Report Periods") did not contain an adverse opinion, nor was either such report
qualified or modified as to uncertainty, audit scope or accounting principles.
It should be noted, however, that the consolidated financial statements for the
Prior Report Periods have subsequently been restated as discussed in the
Company's February 23, 1999 press release (a copy of which was filed under cover
of a Form 8-K of that date), and that PricewaterhouseCoopers' report to be
included in the fiscal 1999 Annual Report on Form 10-K will cover those restated
consolidated financial statements. The Company expects that
PricewaterhouseCoopers' report on the fiscal 1999 consolidated financial
statements will include a separate paragraph regarding an accounting change for
business process re-engineering affecting the 1998 statement of operations
included as a part thereof.
In reporting its financial results for the first quarter of fiscal
1999, the Company recorded a May, 1998 repurchase of shares in its Metanetics
Corporation subsidiary in a manner with which PricewaterhouseCoopers disagreed.
Based upon the completion in February, 1999 of an appraisal of Metanetics
Corporation, the Company resolved the disagreement by adjusting its financial
statements to record the consideration given as goodwill.
In connection with the fiscal 1999 audit and other work performed by
PricewaterhouseCoopers during the year, several material non-standard
transactions were identified which had credit enhancements, lease features,
rights of return or software revenue recognition elements requiring deferred
timing of revenue recognition compared to the timing of revenue recognition
originally recorded by the Company. The identified transactions have been
addressed through the restatements of the Company's consolidated financial
statements discussed in the Company's February 23, 1999 press release referenced
above and in its press releases of
<PAGE> 3
December 11, 1998, January 27, 1999 and June 16, 1999 (copies of which were also
filed under covers of Form 8-K of the same respective dates).
PricewaterhouseCoopers has advised and discussed with the Company's Board of
Directors and management the Company's need to improve its internal controls to
require that the Company's chief accounting officer be consulted with the
relevant complete documentation for any non-standard, significant transactions
to ensure that the accounting treatment is considered before entering into such
transactions. The Company has already made changes in the personnel responsible
for such matters and continues to monitor the implementation of strengthened
policies and procedures in this regard.
The Company continues to work toward obtaining financing to replace
its current bank facilities, which presently remain outstanding under waivers
effective through August 30, 1999. The obtaining of that financing is an open
item with respect to the finalization of the fiscal 1999 audited consolidated
financial statements.
Each of the above matters has been reviewed and discussed by
PricewaterhouseCoopers with the Audit Committee. The Company has authorized
PricewaterhouseCoopers to respond fully to any inquiries Andersen may make of
PricewaterhouseCoopers regarding these matters.
Except as discussed above, the Company does not believe that, during
the Prior Report Periods and the interim periods preceding the change in
accountants (collectively, the "Pre-Change Period") (i) there were any
disagreements with PricewaterhouseCoopers on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedures,
which disagreements, if not resolved to PricewaterhouseCoopers' satisfaction,
would have caused it to make reference to the subject matters of the
disagreements in connection with its reports on the Company's consolidated
financial statements, or (ii) any "reportable events" (as defined in Item
304(a)(1)(v) of Regulation S-K) occurred.
During the Pre-Change Period, the Company did not consult with
Andersen regarding (1) the application of accounting principles to any completed
or proposed transaction or the type of audit opinion that might be rendered on
the Company's consolidated financial statements or (2) any matter that was the
subject of a disagreement or a reportable event.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
16 Letter provided by PricewaterhouseCoopers LLP as
Former Accountant pursuant to Item 304(a)(3) of
Regulation S-K.
2
<PAGE> 4
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: July 26, 1999 By: /s/ Woody M. McGee
------------------------------
Woody M. McGee
Vice President,
Chief Financial Officer
3
<PAGE> 1
EXHIBIT 16
[PRICEWATERHOUSECOOPERS LOGO]
PRICEWATERHOUSECOOPERS LLP
1500 One Cleveland Center
1375 East Ninth Street
Cleveland, OH 44114-1700
Telephone (216) 241 4380
Facsimile (216) 575 0170
July 26, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We have read the statements made by Telxon Corporation (copy attached), which we
understand are being filed with the Commission today, pursuant to Item 4 of Form
8-K, as part of the Company's Form 8-K report dated July 19, 1999. We agree with
the statements concerning our Firm in such Form 8-K.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
<PAGE> 2
[The following is the attachment to the PricewaterhouseCoopers letter, which
attachment conforms with the Form 8-K to which the letter is included as
Exhibit 16.]
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): July 19, 1999
TELXON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-11402 74-1666060
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
3330 WEST MARKET STREET, AKRON, OHIO 44333
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (330) 664-1000
Not applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 3
ITEM 4. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On July 19, 1999, Telxon Corporation (the Company") entered into a
letter agreement engaging Arthur Andersen LLP ("Andersen") to audit the
Company's consolidated financial statements for the fiscal year ending March 31,
2000. Andersen replaces PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as
the principal accountant to audit the Company's consolidated financial
statements. PricewaterhouseCoopers will accordingly be dismissed upon the
completion of the audit of the Company's consolidated financial statements for
the fiscal year ended March 31, 1999 and the issuance of their report thereon
for filing in the Company's Annual Report on Form 10-K for the fiscal year then
ended. Having reviewed with PricewaterhouseCoopers the Company's fiscal annual
1999 consolidated financial results prior to the release thereof in the
Company's press release of July 14, 1999 (a copy of which was filed under cover
of a Form 8-K of that date), the Company does not expect that the final audited
statements will include any change from those reported results. The change in
accountants was recommended and authorized by the Audit Committee of the
Company's Board of Directors (the "Audit Committee").
PricewaterhouseCoopers' reports on the Company's consolidated financial
statements for each of the fiscal years ended March 31, 1997 and March 31, 1998
(as the two most recently completed fiscal years on which PricewaterhouseCoopers
has reported as of the date hereof, they are referred to herein as the "Prior
Report Periods") did not contain an adverse opinion, nor was either such report
qualified or modified as to uncertainty, audit scope or accounting principles.
It should be noted, however, that the consolidated financial statements for the
Prior Report Periods have subsequently been restated as discussed in the
Company's February 23, 1999 press release (a copy of which was filed under cover
of a Form 8-K of that date), and that PricewaterhouseCoopers' report to be
included in the fiscal 1999 Annual Report on Form 10-K will cover those restated
consolidated financial statements. The Company expects that
PricewaterhouseCoopers' report on the fiscal 1999 consolidated financial
statements will include a separate paragraph regarding an accounting change for
business process re-engineering affecting the 1998 statement of operations
included as a part thereof.
In reporting its financial results for the first quarter of fiscal
1999, the Company recorded a May, 1998 repurchase of shares in its Metanetics
Corporation subsidiary in a manner with which PricewaterhouseCoopers disagreed.
Based upon the completion in February, 1999 of an appraisal of Metanetics
Corporation, the Company resolved the disagreement by adjusting its financial
statements to record the consideration given as goodwill.
In connection with the fiscal 1999 audit and other work performed by
PricewaterhouseCoopers during the year, several material non-standard
transactions were identified which had credit enhancements, lease features,
rights of return or software revenue recognition elements requiring deferred
timing of revenue recognition compared to the timing of revenue recognition
originally recorded by the Company. The identified transactions have been
addressed through the restatements of the Company's consolidated financial
statements discussed in the Company's February 23, 1999 press release referenced
above and in its press releases of
<PAGE> 4
December 11, 1998, January 27, 1999 and June 16, 1999 (copies of which were also
filed under covers of Form 8-K of the same respective dates).
PricewaterhouseCoopers has advised and discussed with the Company's Board of
Directors and management the Company's need to improve its internal controls to
require that the Company's chief accounting officer be consulted with the
relevant complete documentation for any non-standard, significant transactions
to ensure that the accounting treatment is considered before entering into such
transactions. The Company has already made changes in the personnel responsible
for such matters and continues to monitor the implementation of strengthened
policies and procedures in this regard.
The Company continues to work toward obtaining financing to replace
its current bank facilities, which presently remain outstanding under waivers
effective through August 30, 1999. The obtaining of that financing is an open
item with respect to the finalization of the fiscal 1999 audited consolidated
financial statements.
Each of the above matters has been reviewed and discussed by
PricewaterhouseCoopers with the Audit Committee. The Company has authorized
PricewaterhouseCoopers to respond fully to any inquiries Andersen may make of
PricewaterhouseCoopers regarding these matters.
Except as discussed above, the Company does not believe that, during
the Prior Report Periods and the interim periods preceding the change in
accountants (collectively, the "Pre-Change Period") (i) there were any
disagreements with PricewaterhouseCoopers on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedures,
which disagreements, if not resolved to PricewaterhouseCoopers' satisfaction,
would have caused it to make reference to the subject matters of the
disagreements in connection with its reports on the Company's consolidated
financial statements, or (ii) any "reportable events" (as defined in Item
304(a)(1)(v) of Regulation S-K) occurred.
During the Pre-Change Period, the Company did not consult with
Andersen regarding (1) the application of accounting principles to any completed
or proposed transaction or the type of audit opinion that might be rendered on
the Company's consolidated financial statements or (2) any matter that was the
subject of a disagreement or a reportable event.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
16 Letter provided by PricewaterhouseCoopers LLP as
Former Accountant pursuant to Item 304(a)(3) of
Regulation S-K.
2
<PAGE> 5
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: July 26, 1999 By:
------------------------------
Woody M. McGee
Vice President,
Chief Financial Officer
3
