<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): February 23, 1999
TELXON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
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
Not applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On February 23, 1999, Telxon Corporation (the Company") issued a press
release (the "February Release") announcing operating results for the third
quarter, ended December 31, 1998, of its 1999 fiscal year, and that, having
completed the review of certain judgmental accounting matters with the Company's
outside auditors previously reported in the Company's January 27, 1999 press
release and filed under cover of a Form 8-K of that same date, will be restating
its audited financial statements for fiscal years 1996, 1997 and 1998 and its
unaudited interim financial statements for the first and second quarters of
fiscal 1999. The February Release includes statements of operations comparing
the Company's originally reported and restated results for the affected periods.
The restated results for the fiscal year 1999 second quarter also include the
effects of the item required to be restated for that quarter as previously
announced in the Company's December 11, 1998 press release and filed under cover
of a Form 8-K of that same date.
As noted in the February Release, the Company plans to file
appropriate amended Forms 10-K and 10-Q for the periods covered by the
restatement, as well as a complete Form 10-Q for the fiscal 1999 third quarter,
as expeditiously as practicable over the coming weeks.
A copy of the February Release discussing the above and certain
related matters is included as Exhibit 99 to this Current Report on Form 8-K and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
--- -----
(c) Exhibits.
99 Press Release issued by the registrant on February 23,
1999.
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: February 23, 1999 By: /s/ Kenneth W. Haver
--------------------
Kenneth W. Haver
Senior Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 99
----------
[TELXON LOGO]
NEWS RELEASE
TELXON REPORTS RESULTS FOR FY99 THIRD QUARTER;
ANNOUNCES RESTATEMENT OF PRIOR FINANCIAL RESULTS
AKRON, OHIO, February 23, 1999 - - Telxon Corporation (Nasdaq-NNM:
TLXN) today reported results for its fiscal 1999 third quarter ended December
31, 1998 and announced that the Audit Committee of its Board of Directors, the
company's management, and the company's outside auditors, PricewaterhouseCoopers
LLP ("PwC"], have completed a previously announced review of certain judgmental
accounting matters.
Based on that review, with the concurrence of PwC, Telxon will restate
its audited financial statements for fiscal years 1996, 1997 and 1998, and its
unaudited interim financial statements for the first and second quarters of
fiscal 1999. The restatement of the prior audited periods results from the
re-evaluation of the accounting treatment of certain discrete transactions, not
from the discovery of any irregularities or wrongdoing of the company. The
majority of the aggregate restatement is attributable to asset impairments and
valuation allowances, with the balance mostly attributable to adjustments of
revenue previously recognized for certain transactions.
In the aggregate, the restatement of the company's results reduces net
income for fiscal years 1996, 1997 and 1998 by $9.8 million, or $.59 per share
(diluted), and reduces first and second quarter 1999 net income by $6.9 million,
or $.42 per share (diluted), including the second quarter restatement item
announced on December 11, 1998 by the company.
The restatement adjustments (as described above) and tax charge for the
third quarter of fiscal 1999 (as described below), are primarily non-cash and
non-core business related items, which have no significant impact on the
company's operations.
Telxon Corporation/3330 West Market Street/P.O. Box 5582/Akron, Ohio 44334-0582
800.800.8001/Fax 330.664.2058/www.telxon.com
<PAGE> 2
For the quarter ended December 31, 1998, the company reported revenues
of $96.4 million, and a net loss of $16.1 million, or $1.00 per share (diluted),
excluding non-recurring items of $2.9 million, or $.18 per share (diluted), for
activities related to unconsummated business combinations, and $26.9 million, or
$1.68 per share (diluted), for a charge related to income tax valuation
reserves. This tax valuation charge includes $9.4 million related to prior
fiscal years.
Revenues for the quarter were negatively affected by the unanticipated
cancellation of a $13 million order to a large logistics company in early
December 1998, by unanticipated delays in the roll-out of two large retail
projects totaling $18 million due to integration issues related to third-party
hardware and software, and by lower than expected demand.
As anticipated in the company's announcement on January 27, 1999, gross
profit margins for the third quarter of 25.8%, were below targeted levels.
Gross margins were negatively affected by manufacturing volume inefficiencies
related to lower than anticipated revenues and by increases in inventory
reserves.
During the next 30 to 60 days, Telxon's Board of Directors and
management will finalize the company's fiscal year 2000 plan, which will focus
on demand generation, market share growth and cash generation designed to return
the company to profitability.
A summary of the effects of the restatement for the relevant periods is
attached. As expeditiously as practicable over the coming weeks, the company
plans to file with the Securities and Exchange Commission the appropriate
amended Forms 10-K and 10-Q for the periods covered by the restatement and a
complete Form 10-Q for the quarter ended December 31, 1998, which will include
comparative financial statements for the periods affected by the restatement.
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
<PAGE> 3
its customers in more than 60 countries. Telxon's website 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 that could cause Telxon's actual or restated results
to differ materially from the forward-looking statements. The important factors
affecting the realization of those results include, without limitation, the
levels of customer acceptance of and demand for the company's products and of
customers' commitments of resources to information technology investments, the
company's ability to identify and implement appropriate cost reduction,
efficiency and other operating improvement strategies, the continued adequacy of
the company's internal and external sources of working capital, and finalization
of the financial statements being restated, as well as general and
industry-specific economic conditions, competitive pressures and rapid
technological change. Reference should be made to the discussion of various
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 L. Csiszar
Vice President, Investor Relations
Telxon Corporation
(330) 664-2961
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Telxon Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
THREE MONTHS NINE MONTHS
---------------------- ----------------------
ENDED DECEMBER 31, ENDED DECEMBER 31,
---------------------- ----------------------
1998 1997 1998 1997
---------------------- ----------------------
(UNAUDITED) (UNAUDITED)
AS AS AS
RESTATED RESTATED RESTATED
<S> <C> <C> <C> <C>
Revenues:
Product ........................................ $ 76,393 $ 97,581 $ 255,975 $ 274,528
Customer service ............................... 20,016 19,835 62,222 57,239
--------- --------- --------- ---------
Total revenues ......................... 96,409 117,416 318,197 331,767
Cost of revenues:
Product ........................................ 57,446 57,066 169,388 163,684
Customer service ............................... 14,047 12,249 40,375 35,711
--------- --------- --------- ---------
Total cost of revenues ................. 71,493 69,315 209,763 199,395
Gross profit:
Product ........................................ 18,947 40,515 86,587 110,844
Customer service ............................... 5,969 7,586 21,847 21,528
--------- --------- --------- ---------
Total gross profit ..................... 24,916 48,101 108,434 132,372
Operating expenses:
Selling expenses ............................... 22,828 20,791 67,699 59,727
Product development and engineering
expenses .................................... 10,670 9,876 29,107 28,527
General and administrative expenses ............ 13,610 9,662 33,541 29,030
--------- --------- --------- ---------
Total operating expenses ................ 47,108 40,329 130,347 117,284
Other operating items:
Unconsummated business combination costs ....... 4,491 -- 8,070 --
Impairment charge .............................. -- 1,434 -- 1,434
--------- --------- --------- ---------
Total other operating items ............ 4,491 1,434 8,070 1,434
Income from operations ................. (26,683) 6,338 (29,983) 13,654
Interest income .................................. 226 340 569 1,258
Interest expense ................................. (2,499) (1,752) (6,829) (5,355)
--------- --------- --------- ---------
Income (loss) before other non-operating
(expense) income and income taxes .. (28,956) 4,926 (36,243) 9,557
Other non-operating (expense) income ............. (238) (160) 1,025 (324)
--------- --------- --------- ---------
Income (loss) before income taxes ...... (29,194) 4,766 (35,218) 9,233
Provision for income taxes ....................... 16,659 2,280 14,784 4,484
--------- --------- --------- ---------
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<S> <C> <C> <C> <C>
Income (loss) before cumulative effect
of accounting change ................ (45,853) 2,486 (50,002) 4,749
Cumulative effect of an accounting change,
net of taxes ........................... -- 1,240 -- 1,240
--------- --------- --------- ---------
Net income (loss) ................................ $ (45,853) $ 1,246 $ (50,002) $ 3,509
========= ========= ========= =========
Net Income (loss) per common share before
accounting change:
Basic ............................. $ (2.86) $ 0.16 $ (3.11) $ 0.30
========= ========= ========= =========
Diluted ........................... $ (2.86) $ 0.15 $ (3.11) $ 0.29
========= ========= ========= =========
Cumulative effect of an accounting change:
Basic ............................. $ -- $ 0.08 $ -- $ 0.08
========= ========= ========= =========
Diluted ........................... $ -- $ 0.07 $ -- $ 0.07
========= ========= ========= =========
Net Income (loss) per common share:
Basic ............................. $ (2.86) $ 0.08 $ (3.11) $ 0.22
========= ========= ========= =========
Diluted ........................... $ (2.86) $ 0.08 $ (3.11) $ 0.22
========= ========= ========= =========
Average number of common shares outstanding:
Basic ............................. 16,048 15,685 16,101 15,809
Diluted ........................... 16,048 16,305 16,101 16,247
</TABLE>
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<TABLE>
<CAPTION>
Telxon Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
THREE MONTHS THREE MONTHS SIX MONTHS
---------------------- ------------------------ ------------------------
ENDED JUNE 30, 1998 ENDED SEPTEMBER 30, 1998 ENDED SEPTEMBER 30, 1998
---------------------- ------------------------ ------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
AS AS AS
PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product ..................................... $ 94,077 $ 90,192 $ 103,133 $ 89,390 $ 197,210 $ 179,582
Customer service ............................ 20,970 20,970 21,236 21,236 42,206 42,206
--------- --------- --------- --------- --------- ---------
Total revenues ...................... 115,047 111,162 124,369 110,626 239,416 221,788
Cost of revenues:
Product ..................................... 57,310 54,473 62,411 57,469 119,721 111,942
Customer service ............................ 12,826 12,826 13,502 13,502 26,328 26,328
--------- --------- --------- --------- --------- ---------
Total cost of revenues .............. 70,136 67,299 75,913 70,971 146,049 138,270
Gross profit:
Product ..................................... 36,767 35,719 40,722 31,921 77,489 67,640
Customer service ............................ 8,144 8,144 7,734 7,734 15,878 15,878
--------- --------- --------- --------- --------- ---------
Total gross profit .................. 44,911 43,863 48,456 39,655 93,367 83,518
Operating expenses:
Selling expenses ............................ 21,361 23,542 20,317 21,329 41,678 44,871
Product development and engineering
expenses ................................. 8,930 9,014 9,261 9,423 18,191 18,437
General and administrative expenses ......... 9,436 9,506 10,425 10,425 19,861 19,931
--------- --------- --------- --------- --------- ---------
Total operating expenses ............. 39,727 42,062 40,003 41,177 79,730 83,239
Other operating items:
Unconsummated business combination costs .... 1,749 1,749 1,830 1,830 3,579 3,579
Charge related to transactions with
business partner ......................... 1,950 -- -- -- 1,950 --
--------- --------- --------- --------- --------- ---------
Total other operating items ......... 3,699 1,749 1,830 1,830 5,529 3,579
Income from operations .............. 1,485 52 6,623 (3,352) 8,108 (3,300)
Interest income ............................... 179 179 164 164 343 343
Interest expense .............................. (1,713) (1,713) (2,617) (2,617) (4,330) (4,330)
--------- --------- --------- --------- --------- ---------
Income before other non-operating
(expense) income and income taxes (49) (1,482) 4,170 (5,805) 4,121 (7,287)
Other non-operating (expense) income .......... 460 1,360 -- (97) 460 1,263
--------- --------- --------- --------- --------- ---------
Income before income taxes .......... 411 (122) 4,170 (5,902) 4,581 (6,024)
Provision (benefit) for income taxes .......... 165 (22) 1,672 (1,853) 1,837 (1,875)
--------- --------- --------- --------- --------- ---------
Net income .................................... $ 246 $ (100) $ 2,498 $ (4,049) $ 2,744 $ (4,149)
========= ========= ========= ========= ========= =========
Net Income per common share:
Basic .......................... $ 0.02 $ (0.01) $ 0.16 $ (0.25) $ 0.17 $ (0.26)
========= ========= ========= ========= ========= =========
Diluted ........................ $ 0.01 $ (0.01) $ 0.15 $ (0.25) $ 0.16 $ (0.26)
========= ========= ========= ========= ========= =========
Average number of common shares outstanding:
Basic .......................... 16,080 16,080 16,075 16,075 16,095 16,100
Diluted ........................ 16,938 16,080 16,578 16,075 16,764 16,100
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<TABLE>
<CAPTION>
Telxon Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
FISCAL YEARS ENDED MARCH 31,
---------------------------------------------------------------------------
1996 1997 1998
----------------------- ----------------------- ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
AS AS AS
PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED
Revenues:
<S> <C> <C> <C> <C> <C> <C>
Product ........................................ $ 417,725 $ 415,383 $ 391,406 $ 386,791 $ 389,124 $ 386,410
Customer service ............................... 68,744 68,744 74,606 74,606 76,746 76,746
--------- --------- --------- --------- --------- ---------
Total revenues ......................... 486,469 484,127 466,012 461,397 465,870 463,156
Cost of revenues:
Product ........................................ 249,120 249,610 266,624 262,862 228,318 227,850
Customer service ............................... 39,016 39,016 47,248 47,248 48,836 48,836
--------- --------- --------- --------- --------- ---------
Total cost of revenues ................. 288,136 288,626 313,872 310,110 277,154 276,686
Gross profit:
Product ........................................ 168,605 165,773 124,782 123,929 160,806 158,560
Customer service ............................... 29,728 29,728 27,358 27,358 27,910 27,910
--------- --------- --------- --------- --------- ---------
Total gross profit ..................... 198,333 195,501 152,140 151,287 188,716 186,470
Operating expenses:
Selling expenses ............................... 82,207 82,207 88,321 88,374 77,858 82,054
Product development and engineering
expenses .................................... 45,383 45,383 44,439 45,189 37,500 37,500
General and administrative expenses ............ 39,415 39,415 53,230 53,408 39,028 39,462
--------- --------- --------- --------- --------- ---------
Total operating expenses ................ 167,005 167,005 185,990 186,971 154,386 159,016
Other operating items:
Impairment charge .............................. -- -- -- -- -- 6,069
--------- --------- --------- --------- --------- ---------
Total other operating items ............ -- -- -- -- -- 6,069
Income (loss) from operations .......... 31,328 28,496 (33,850) (35,684) 34,330 21,385
Interest income .................................. 760 760 1,489 1,489 1,573 1,573
Interest expense ................................. (6,770) (6,770) (8,056) (8,056) (7,181) (7,181)
--------- --------- --------- --------- --------- ---------
Income (loss) before other non-operating
income and income taxes ............ 25,318 22,486 (40,417) (42,251) 28,722 15,777
Other non-operating income ....................... 1,517 1,517 34,726 34,726 133 625
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes ...... 26,835 24,003 (5,691) (7,525) 28,855 16,402
Provision for income taxes ....................... 10,314 9,028 1,368 726 12,408 7,227
--------- --------- --------- --------- --------- ---------
Income (loss) before cumulative effect
of accounting change ................ 16,521 14,975 (7,059) (8,251) 16,447 9,175
Cumulative effect of an accounting change,
net of taxes ........................... -- -- -- -- 1,240 1,016
--------- --------- --------- --------- --------- ---------
Net income (loss) ................................ $ 16,521 $ 14,975 $ (7,059) $ (8,251) $ 15,207 $ 8,159
========= ========= ========= ========= ========= =========
Net Income (loss) per common share before
accounting change:
Basic ............................. $ 1.04 $ 0.94 $ (0.44) $ (0.51) $ 1.04 $ 0.58
========= ========= ========= ========= ========= =========
Diluted ........................... $ 1.00 $ 0.91 $ (0.44) $ (0.51) $ 1.01 $ 0.56
========= ========= ========= ========= ========= =========
Cumulative effect of an accounting change:
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<S> <C> <C> <C> <C> <C> <C>
Basic ............................. $ -- $ -- $ -- $ -- $ 0.08 $ 0.06
========= ========= ========= ========= ========= =========
Diluted ........................... $ -- $ -- $ -- $ -- $ 0.08 $ 0.06
========= ========= ========= ========= ========= =========
Net Income (loss) per common share:
Basic ............................. $ 1.04 $ 0.94 $ (0.44) $ (0.51) $ 0.96 $ 0.52
========= ========= ========= ========= ========= =========
Diluted ........................... $ 1.00 $ 0.91 $ (0.44) $ (0.51) $ 0.93 $ 0.50
========= ========= ========= ========= ========= =========
Average number of common shares outstanding:
Basic ............................. 15,910 15,910 16,062 16,062 15,809 15,809
Diluted ........................... 16,479 16,479 16,062 16,062 16,289 16,246
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