<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934 For the quarterly period ended
October 30, 1993, Or
[ ] Transition Report Pursuant To Section 13 or 15(d) Of The Securies
Exchange Act Of 1934 For the transition period from ________
to ________
Commission file number 1-7636
DATAPOINT CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 74-1605174
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
5-7 rue Montalivet 75008, Paris, France
8400 Datapoint Drive
San Antonio, Texas 78229-8500
(Address of principal executive offices and zip code)
(33-1) 40 07 37 37
(210) 593-7000
(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 / /
As of December 3, 1993, 14,428,775 shares of Datapoint Corporation Common
Stock were outstanding, exclusive of 6,562,442 shares held in Treasury.
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<TABLE>
DATAPOINT CORPORATION AND SUBSIDIARIES
INDEX
<CAPTION>
Page
Number
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
October 30, 1993 and July 31, 1993 3
Consolidated Statements of Operations -
Three Months Ended October 30, 1993 and
October 31, 1992 4
Consolidated Statements of Cash Flows -
Three Months Ended October 30, 1993 and
October 31, 1992 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 8
Part II. Other Information
Item 1. Legal Proceedings 10
Signature 11
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
Datapoint Corporation and Subsidiaries
<CAPTION>
(In thousands, except share data)
(Unaudited)
October 30, July 31,
1992 1993
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $14,558 $22,452
Restricted cash and cash equivalents 4,779 4,459
Marketable securities at market 953 789
Accounts receivable, net of allowance for
doubtful accounts of $2,621 and $2,466,
respectively 41,772 45,090
Inventories 17,466 17,536
Prepaid expenses and other current assets 3,717 3,843
Total current assets 83,245 94,169
Fixed assets, net of accumulated depreciation of
$116,643 and $116,086, respectively 27,659 27,950
Excess of cost of investment over net assets acquired,
net of accumulated amortization of $51,301 and
$50,797, respectively 57,078 58,216
Other assets, net 23,590 21,940
$191,572 $202,275
Liabilities and Stockholders' Equity
Current liabilities:
Payables to banks $16,864 $14,129
Current maturities of long-term debt 3,599 4,246
Accounts payable 12,574 15,914
Accrued expenses 26,437 26,683
Deferred revenue 12,132 12,579
Income taxes payable 454 1,208
Total current liabilities 72,060 74,759
Long-term debt, exclusive of current maturities 71,433 71,551
Other liabilities 9,078 8,944
Commitments and contingencies
Stockholders' Equity:
Preferred stock of $1.00 par value. Shares
authorized 10,000,000; shares issued and
outstanding 1,784,456 (aggregate liquidation
preference $35,689). 1,784 1,784
Common stock of $.25 par value. Shares
authorized 40,000,000; shares issued of
20,991,217 in fiscal 1994 and 20,991,217 in
fiscal 1993, including treasury shares
of 6,571,688 and 6,637,065, respectively. 5,248 5,248
Other capital 212,599 212,599
Foreign currency translation adjustment 6,492 7,707
Retained deficit (132,927) (125,581)
Treasury stock, at cost (54,195) (54,736)
Total stockholders' equity 39,001 47,021
$191,572 $202,275
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Datapoint Corporation and Subsidiaries
(Unaudited)
<CAPTION>
(In thousands, except share data)
Three Months Ended
October 30, October 31,
1993 1992
<S> <C> <C>
Revenue:
Sales $19,329 $29,856
Service and other 22,319 30,687
Total revenue 41,648 60,543
Operating costs and expenses:
Cost of sales 10,841 14,825
Cost of service and other 13,693 19,982
Research and development 1,716 1,962
Selling, general and administrative 15,689 20,746
Restructuring costs 0 189
Total operating costs and expenses 41,939 57,704
Operating income (loss) (291) 2,839
Non-operating income (expense):
Interest expense (2,271) (2,129)
Other, net 285 (521)
Income (loss) before income taxes (2,277) 189
Income taxes 49 567
Loss before extraordinary item and
effect of change in accounting principle (2,326) (378)
Extraordinary item:
Utilization of tax loss carryforward 0 473
Net income (loss) before effect of change
in accounting principle (2,326) 95
Effect of change in accounting principle (Note 3) 1,340 0
Net income (loss) $(986) $95
Net income (loss), less preferred
stock dividend $(1,432) $(351)
Net income (loss) per common share:
Before extraordinary item and effect
of change in accounting principle $(.19) $(.06)
Extraordinary item .00 .03
Effect of change in accounting principle .09 .00
Net loss $(.10) $(.03)
Average common shares 14,380,672 13,891,766
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Datapoint Corporation and Subsidiaries
(Unaudited)
<CAPTION>
(In Thousands)
Three Months Ended
October 30, October 31,
1993 1992
<S> <C> <C>
Cash flows from operating activities:
Net income $(986) $95
Adjustments to reconcile net income to net
cash used in operating activities:
Losses incurred in lag month eliminated (5,470) 0
Effect of change in accounting principle (1,340) 0
Provision for unrealized losses (recoveries)
on marketable securities (164) 48
Depreciation and amortization 2,768 3,962
Provision for (gains) losses
on accounts receivable 143 (211)
Changes in assets and liabilities:
Decrease in receivables 2,293 4,603
(Increase) decrease in inventor 58 (1,068)
Decrease in accounts payable (3,049) (4,150)
Increase (decrease) in accrued expenses 225 (6,701)
Decrease in other liabilities
and deferred credits (948) (2,519)
Other, net 599 (198)
Net cash used in operating activities (5,871) (6,139)
Cash flows from investing activities:
Proceeds from marketable securities 0 24
Payments for fixed assets (2,518) (3,321)
Proceeds from dispositions of fixed assets 416 1,334
Other, net (630) 40
Net cash used in investing activities (2,732) (1,923)
Cash flows from financing activities:
Proceeds from borrowings 12,558 17,498
Payments on borrowings (11,010) (14,896)
Payment of dividend on preferred stock (446) (446)
Restricted cash for letters of credit (320) (42)
Other, net 97 14
Net cash provided from financing activities 879 2,128
Effect of foreign currency translation on cash (170) 1,840
Net decrease in cash and cash equivalents (7,894) (4,094)
Cash and cash equivalents at beginning of year 22,452 20,021
Cash and cash equivalents at end of period $14,558 $15,927
Cash payments (refunds) for:
Interest $355 $734
Income taxes, net 583 (97)
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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DATAPOINT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands)
(Unaudited)
1. Preparation of Financial Statements
The consolidated financial statements included herein have been prepared
by Datapoint Corporation (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission and in
accordance with generally accepted accounting principles. In the
opinion of management, the information furnished reflects all
adjustments which are necessary for a fair statement of the results of
the interim periods presented. All adjustments made in the interim
statements are of a normal recurring nature.
It is recommended that these statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report and Form 10-K for the year ended July 31, 1993.
The results of operations for the three months ended October 30, 1993,
are not necessarily indicative of the results to be expected for the
full year.
Prior to 1994, the Company's foreign subsidiaries reported their
results to the parent on a one-month lag which allowed more time to
compile results but produced comparability problems in management
accounting. Due to improved internal operations, the one-month lag
became unnecessary and therefore was eliminated subsequent to 1993 and
prior to 1994. As a result, the July 1993 results of operations for
the Company's foreign subsidiaries was recorded to the retained
deficit. This action resulted in a charge of $5,470 being recorded
against the retained deficit. The loss incurred in July 1993 resulted
primarily from a low revenue level, which is usual for the first month
following the end of a fiscal year.
2. Extraordinary Item
The utilization of post-acquisition net operating loss carryforwards
of certain foreign subsidiaries resulted in an extraordinary credit
during the first quarter of fiscal 1993 of $473.
3. Change in Accounting Principle
Effective August 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." SFAS 109 requires that liabilities and receivables for future
taxes be calculated using a balance sheet approach rather than the
income statement approach. As a result, the Company recorded
additional deferred income tax assets of $2,075, after a valuation
allowance of $66,720, and increased deferred income tax liabilities
by $735 which, in total, resulted in a $1,340 credit ($.09 per share)
for the cumulative effect of the accounting change. Management believes
that future taxable income of the Company will more likely than not result
in utilization of the net deferred tax asset at August 1, 1993. Such future
income levels are not assured due to the nature of the Company's business
which is generally characterized by rapidly changing technology and
intense competition.
After adoption of SFAS 109, the primary components of the Company's
deferred tax assets and liabilities as of August 1, 1993 were as
follows:
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<S> <C>
Deferred tax assets:
Property, plant and equipment $3,445
Loss and credit carryforwards 58,731
Other 8,385
70,561
Less: Valuation allowance (66,720)
3,841
Deferred tax liabilities:
Accrued retirement costs 1,979
Other 1,065
3,044
Net deferred tax assets $797
</TABLE>
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DATAPOINT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands)
(Unaudited)
4. Inventories
Inventories consist of:
<TABLE>
<CAPTION>
October 30, July 31,
1993 1993
<S> <C> <C>
Raw materials $5,344 $9,876
Work in process 2,245 2,041
Finished goods 9,877 5,619
$17,466 $17,536
</TABLE>
5. Fire at Belgium Subsidiary Warehouse
On November 19, 1993, the Company incurred a fire loss, covered by
insurance, at a leased facility in Brussels, Belgium. The policies
between the Company and its insurers generally provide for losses to
be covered at replacement cost or sale value. An agreement has been
partially negotiated and the Company expects to receive proceeds from
its insurers during the second quarter of fiscal 1994.
6. Commitments and Contingencies
The Company is a defendant in various other lawsuits generally incidental
to its business. The amounts sought by the plaintiffs in such cases are
substantial and, if all such cases were decided adversely to the Company,
the Company's aggregate liability might be material. However, the Company
does not expect such an aggregate result based upon the limited number of
such actions and an assessment that most such actions will be successfully
defended. No provision has been made in the accompanying financial
statements for any possible liability with respect to such lawsuits.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Years Referred to are Fiscal Years)
Results of Operations
The Company had an operating loss of $0.3 million and a net loss of
$1.0 million for the first quarter of 1994. This compares with an
operating income of $2.8 million and a net income of $0.1 million, for
the first quarter of 1993. The following is a summary of the Company's
sources of revenue:
<TABLE>
<CAPTION>
Three Months Ended
(In thousands) 10/30/93 10/31/92
<S> <C> <C>
Sales:
Foreign $17,008 $28,387
U.S. 2,321 1,469
19,329 29,856
Service and other:
Foreign 21,987 30,260
U.S. 332 427
22,319 30,687
Total revenue $41,648 $60,543
</TABLE>
Revenue during the first quarter of 1994 declined $18.9 million, or
31.2%, compared with the same period of the prior year. This decline
was partly due to a stronger U.S. dollar during the first quarter of
1994, as compared to the local currencies of the Company's
subsidiaries. The strengthening of the U.S. dollar negatively
impacted sales revenue $3.8 million and service and other revenue
$5.1 million. In addition, revenue for the first quarter of 1993
included $0.8 million of sales revenue and $1.2 million of service and
other revenue for the former Australian subsidiary which was
subsequently sold at the end of the second quarter of 1993. Excluding
these items, revenue declined $8.0 million; the Company attributes
this to competitive pressure in its data processing business and the
weak economic environment in many of the European countries in which
the Company does a preponderance of its business.
The gross profit margin for the first three months of 1994 was 41.1%
compared with 42.5% for the same period a year ago. The slight
change was due primarily to a change in product mix.
Operating expenses during the first quarter of 1994 declined $5.5
million from the same period a year ago, or $3.2 million if the effect
of the stronger U.S. dollar is excluded, because the Company has
significantly reduced the cost of its internal operations over the past
year.
The non-operating income of $0.3 million during the first quarter of
1994 consisted primarily of interest income. The non-operating expense
of $0.5 million during the first quarter of 1993 resulted from the
unfavorable impact of changes in foreign currency exchange rates on
certain of the Company's intercompany receivables and payables, which
more than offset interest income earned during the period.
In the first quarter of 1994, the Company adopted Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for
Income Taxes." SFAS 109 requires that liabilities and receivables for
future taxes be calculated using a balance sheet approach rather than
the income statement approach. As a result, the Company recorded
additional deferred income tax assets of $2.1 million, after a valuation
allowance of $66.7 million, and increased deferred income tax liabilities
by $0.7 million which, in total, resulted in a $1.3 million credit
($.09 per share) for the cumulative effect of the accounting change.
The valuation allowance reflects the Company's assessment regarding
the realizability of certain U.S. and non-U.S. deferred income tax
assets. Management believes that future taxable income of the Company
will more likely than not result in utilization of the net deferred tax
asset at August 1, 1993. Such future income levels are not assured due to
the nature of the Company's business which is generally characterized by
rapidly changing technology and intense competition. The Company
evaluates realizability of the deferred income tax assets on a quarterly
basis.
<PAGE> 9
Prior to 1994, the Company's foreign subsidiaries reported their results
to the parent on a one-month lag which allowed more time to compile
results but produced comparability problems in management accounting.
Due to improved internal operations, the one-month lag became unnecessary
and therefore was eliminated subsequent to 1993 and prior to 1994. As a
result, the July 1993 results of operations for the Company's foreign
subsidiaries was recorded to the retained deficit. This action resulted
in a charge of $5.5 million being recorded against the retained deficit.
The loss incurred in July 1993 resulted primarily from a low revenue level,
which is usual for the first month of the new fiscal year.
Financial Condition
During the first three months of 1994, the Company's cash and cash
equivalents decreased $7.9 million due primarily to the usage of cash
in operations. The decrease in cash was chiefly a result of the revenue
decline and a reduction in accounts payable, partially offset by continued
strong collections of accounts receivables and additional bank borrowings.
As of October 30, 1993, the Company had restricted cash and cash
equivalents of $4.8 million which was restricted primarily to cover various
lines of credits, reflected as payables to banks, and for $1.6 million of
guaranteed dividends on the $1.00 Preferred Stock.
The Company has a secured credit facility ("Credit Facility") with The
CIT Group, which consists of a term loan and a revolving loan. The
borrowings outstanding under the Credit Facility, as of October 30, 1993,
were $3.8 million. The Credit Facility expires March 7, 1994, at which
time the outstanding borrowings must be repaid in full. The Company
intends to refinance this loan through The CIT Group, or another lender,
or will use internal sources of liquidity to retire the Credit Facility.
The Company has an internal source of liquidity in an investment
portfolio with a market value of $5.0 million. As of October 30, 1993,
the portfolio consisted of $4.0 million of cash and $1.0 million of
marketable securities.
On November 19, 1993, the Company incurred a fire loss, covered by
insurance, at a leased facility in Brussels, Belgium. The policies
between the Company and its insurers generally provide for losses to
be covered at replacement cost or sale value. An agreement has been
partially negotiated and the Company expects to receive proceeds from
its insurers during the second quarter of fiscal 1994. The business
interruption resulting from the fire is not expected to have a major
negative impact upon the Belgium subsidiary's ability to operate.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3 of Registrant's Report on Form 10-K for the fiscal year
ended July 31, 1993, for a description of certain legal proceedings
heretofore reported. See also note 6 to the Consolidated Financial
Statements included as Item 1 of Part I of this Report.
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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.
DATAPOINT CORPORATION
(Registrant)
/s/ David G. Hargraves
DATE: December 14, 1993 __________________________
David G. Hargraves
Chief Financial Officer
(Chief Accounting Officer)
