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 29, 1994
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 1-7636
DATAPOINT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1605174
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 2, 1994, 12,901,605 shares of Datapoint Corporation
Common Stock were outstanding, exclusive of 8,089,612 shares held in
Treasury.
<PAGE>
DATAPOINT CORPORATION AND SUBSIDIARIES
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
October 29, 1994 and July 30, 1994
Consolidated Statements of Operations -
Three Months Ended October 29, 1994 and October 30, 1993
Consolidated Statements of Cash Flows -
Three Months Ended October 29, 1994 and October 30, 1993
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Signature
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
Datapoint Corporation and Subsidiaries
(In thousands, except share data)
(Unaudited)
October 29, July 30,
1994 1994
Assets
Current assets:
Cash and cash equivalents $6,767 $6,241
Restricted cash and cash equivalents 4,804 4,312
Marketable securities at market 188 334
Accounts receivable, net of allowance for
doubtful accounts of $1,158 and $2,568,
respectively 36,244 44,379
Inventories 17,728 17,674
Prepaid expenses and other current assets 6,716 6,975
Total current assets 72,447 79,915
Fixed assets, net of accumulated
depreciation of $111,191 and $105,988,
respectively 28,436 29,088
Other assets, net 18,693 18,431
$119,576 $127,434
Liabilities and Stockholders' Deficit
Current liabilities:
Payables to banks $19,037 $17,963
Current maturities of long-term debt 3,399 2,370
Accounts payable 19,327 25,649
Accrued expenses 37,440 37,732
Deferred revenue 12,373 13,728
Income taxes payable 961 760
Total current liabilities 92,537 98,202
Long-term debt, exclusive of current
maturities 70,505 70,561
Other liabilities 9,894 9,432
Commitments and contingencies - -
Stockholders' Deficit:
Preferred stock of $1.00 par value. Shares
authorized 10,000,000; shares issued and
outstanding 1,784,456 (aggregate liquidation
preference $36,135). 1,784 1,784
Common stock of $.25 par value. Shares
authorized 40,000,000; shares issued of
20,991,217 in fiscal 1995 and 20,991,217
in fiscal 1994 including treasury shares of
8,089,612 and 6,546,825, respectively. 5,248 5,248
Other capital 212,599 212,599
Foreign currency translation adjustment 12,392 10,552
Retained deficit (233,419) (226,977)
Treasury stock, at cost (51,964) (53,967)
Total stockholders' deficit (53,360) (50,761)
$119,576 $127,434
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Datapoint Corporation and Subsidiaries
(Unaudited)
(In thousands, except share data)
Three Months Ended
October 29, October 30,
1994 1993
Revenue:
Sales $14,342 $19,329
Service and other 22,765 22,319
Total revenue 37,107 41,648
Operating costs and expenses:
Cost of sales 9,737 10,841
Cost of service and other 12,745 13,693
Research and development 1,180 1,716
Selling, general and administrative 16,751 15,689
Total operating costs and expenses 40,413 41,939
Operating loss (3,306) (291)
Non-operating income (expense):
Interest expense (2,225) (2,271)
Other, net (449) 285
Loss before income taxes (5,980) (2,277)
Income taxes 462 49
Loss before effect of change in accounting
principle (6,442) (2,326)
Effect of change in accounting principle (Note 2) - 1,340
Net loss $(6,442) $(986)
Net loss, less preferred stock dividend
paid or accumulated $(6,888) $(1,432)
Net loss per common share:
Before effect of change in accounting principle $(.50) $(.19)
Effect of change in accounting principle - .09
Net loss $(.50) $(.10)
Average common shares 13,997,288 14,380,672
See accompanying Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Datapoint Corporation and Subsidiaries
(Unaudited)
(In Thousands)
Three Months Ended
October 29, October 30,
1994 1993
Cash flows from operating activities:
Net loss $(6,442) $(986)
Adjustments to reconcile net loss to net
cash used in operating activities:
Losses incurred in lag month eliminated - (5,470)
Effect of change in accounting principle - (1,340)
Provision for unrealized losses (recoveries)
on marketable securities 146 (164)
Depreciation and amortization 2,455 2,768
Provision for losses on accounts receivable 54 143
Changes in assets and liabilities:
Decrease in receivables 10,509 2,293
Decrease in inventory 382 58
Decrease in accounts payable (7,233) (3,049)
Increase (decrease) in accrued expenses (1,143) 225
Decrease in other liabilities and
deferred credits (1,827) (948)
Other, net 458 599
Net cash used in operating activities (2,641) (5,871)
Cash flows from investing activities:
Payments for fixed assets (1,020) (2,518)
Proceeds from dispositions of fixed assets 293 416
Other, net 347 (630)
Net cash used in investing activities (380) (2,732)
Cash flows from financing activities:
Proceeds from borrowings 8,323 12,558
Payments on borrowings (6,826) (11,010)
Proceeds from sale of common stock 2,003 -
Payment of dividend on preferred stock - (446)
Restricted cash for letters of credit (492) (320)
Other, net - 97
Net cash provided from financing activities 3,008 879
Effect of foreign currency translation on cash 539 (170)
Net increase (decrease) in cash and
cash equivalents 526 (7,894)
Cash and cash equivalents at beginning of year 6,241 22,452
Cash and cash equivalents at end of period $6,767 $14,558
Cash payments (refunds) for:
Interest $647 $355
Income taxes, net (2) 583
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
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 30, 1994.
The results of operations for the three months ended October 29, 1994, 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. 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. 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.
3. Inventories
Inventories consist of:
October 29, July 30,
1994 1994
Finished products $9,997 $10,416
Work in process 2,340 1,601
Raw materials 5,391 5,657
$17,728 $17,674
<PAGE>
DATAPOINT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
4. Commitments and Contingencies
The Company is a defendant in various 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.
5. Common Stock
In August 1994 the Company sold 700,000 shares of its common stock held in
treasury for $1,750 in a transaction outside the United States pursuant to
Regulation S of the Securities and Exchange Commission. The Company utilized
the proceeds for working capital needs. In addition, in September 1994,
the Company reached an agreement with Intelogic Trace, Inc. ("Intelogic"), in
conjunction with Intelogic's court approved reorganization, to cancel its
option to repurchase at $.75 per share, its common stock held by Intelogic
in exchange for all of the Company's holding of Intelogic Preferred Stock,
which had no carrying value. As a result of the exchange, the Company
received from Intelogic 2,400,000 shares of Datapoint common stock.
6. Income Taxes
Income taxes for the first quarter of 1995 were $462 on a pre-tax loss of
$5,980. The income taxes were the result of profitable operations at
certain European subsidiaries which could not be offset against the
overall consolidated loss.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Years Referred to are Fiscal Years)
Overview
During the first quarter of 1995, the Company continued to experience
operating losses due to a significant decline in revenues and to
a lesser extent gross profit margins. The adverse effects of a decline in
revenue produced an operating loss of $3.3 million and negative cash flows
from operations of $2.6 million for the quarter ended October 29, 1994.
The operating loss during the first quarter of 1995 was narrowed due to the
reorganization recorded during the fourth quarter of 1994 which resulted in
savings of $2.9 million. The reorganization of one of the Company's European
subsidiaries resulted in reduced first quarter 1995 operating costs and
expenses of $2.4 million. The write-off of goodwill in the fourth quarter of
1994 resulted in reduced amortization expense of $.5 million. In conjunction
with the Company's efforts to stabilize revenues, the Company will continue
to take cost cutting measures throughout 1995 to preserve and improve the
Company's cash liquidity position.
However, during the first quarter of 1995 the Company had one-time cash
infusions from the sale of 700,000 shares of common stock ($1.8 million),
settlement proceeds received from a defendant in patent infringement
litigation ($.5 million) and the final insurance payment related to the fire
in the Belgian subsidiary ($1.5 million included in accounts receivables
collections). Patent infringement suits against other defendants are pending.
In addition to these one-time cash infusions, subsequent to the first quarter
the Company achieved a significant one-time cash infusion from the sale of a
non-essential asset. Portions of these cash proceeds were utilized to pay
the December 1, 1994 interest obligation of $2.9 million on its 8-7/8%
convertible subordinated debentures and to pay down by $0.9 million a secured
credit facility with The CIT Group/Credit Finance. The Company will continue
to pursue additional one-time cash infusions as a means of augmenting cash
during 1995. Although there are a number of these available, no
assurances can be given that the efforts to pursue such cash infusions
will be successful in any case.
Results of Operations
The Company had an operating loss of $3.3 million and a net loss of $6.4
million for the first quarter of 1995. This compares with an operating loss
of $.3 million and a net loss of $1.0 million, for the first quarter of 1994.
The following is a summary of the Company's sources of revenue:
Three Months Ended
(In thousands) 10/29/94 10/30/93
Sales:
Foreign $12,607 $17,008
U.S. 1,735 2,321
14,342 19,329
Service and other:
Foreign 22,447 21,987
U.S. 318 332
22,765 22,319
Total revenue $37,107 $41,648
Revenue during the first quarter of 1995 declined $4.5 million, or 10.9%,
compared with the same period of the prior year. Foreign revenues declined
significantly as sale revenue performance in certain European subsidiaries
deteriorated substantially as the Company experienced a slowdown in new
orders. These negative impacts were partially offset by the weakening of
the U.S. dollar which favorably impacted foreign sales revenue by $.4 million
and service and other revenue by $2.1 million.
<PAGE>
The gross profit margin for the first three months of 1995 was 39.4% compared
with 41.1% for the same period a year ago. The decline was due primarily to
a change in product mix. Operating expenses (research and development plus
selling, general & administrative) during the first quarter of 1995 increased
$.5 million from the same period a year ago. The increase in operating
expenses was largely due to increased worldwide marketing and selling
expenses as the Company seeks to rebuild its sale revenues. Reorganization
actions recorded during the fourth quarter of 1994 generated $2.9 million of
cost savings during the first quarter of 1995. These savings were
essentially offset by the weakened U.S. dollar which resulted in an increase
in operating costs and expenses of $2.5 million.
Non-operating expenses included the unfavorable impact of changes in foreign
currency exchange rates on certain on the Company's intercompany receivables
and payables as the weakening of the U.S. dollar resulted in a charge of
$.6 million. The Company also earned less in interest income during the first
quarter of 1995 as compared to the same period of the prior year due to
the lower cash balance.
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 $.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.
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. 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 were 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 fiscal year 1994.
Financial Condition
During the first three months of 1995, the Company's cash and cash equivalents
increased $.5 million. The increase in cash was chiefly a result of continued
strong collections of accounts receivables, sale of common stock, and
additional bank borrowings. These cash infusions were substantially offset
by reductions of accounts payable and the loss incurred during the first
quarter of 1995.
As of October 29, 1994, the Company had restricted cash and cash equivalents
of $4.8 million which was restricted primarily to cover various lines of
credits.
Accounts payable decreased to $19.3 million for the first quarter of 1995 from
$25.6 million as of the end of the prior fiscal year as strong collections of
receivables and one-time cash infusions enabled the Company to significantly
reduce its accounts payable.
As of October 29, 1994, the Company has included in payables to banks an
amount of $6.5 million payable to International Factors "De Factorij" B.V., a
subsidiary of ABN-AMRO Bank of the Netherlands. The loan is secured by the
receivables of the Company's U.K., Dutch and German subsidiaries. The Company
paid down the loan by $1.0 million during the first quarter and is in
discussion with other various potential sources of financing to reduce the
borrowings by a further $1.5 million. Upon conclusion of such financing
the borrowings with International Factors B.V. will be secured by the U.K.
and Dutch receivables.
As an additional means of preserving cash flow for operations, the Company's
Board of Directors elected to defer the October 15, 1994 preferred dividend
payment to shareholders. If dividends are six quarters in arrears, the
preferred stock shareholders have the right to vote as a separate class and
elect two board members at the next annual meeting of shareholders and each
preferred share is exchangeable into two shares of common stock at the option
of the holder.
<PAGE>
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 30, 1994, for a description of certain legal proceedings heretofore
reported. See also note 4 to the Consolidated Financial Statements included
as Item 1 of Part I of this Report.
<PAGE>
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)
DATE: December 16, 1994 /s/ Paul D. Sheetz
Paul D. Sheetz
Assistant Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Datapoint
Corporation's Consolidated Statements of Operations and Consolidated Balance
Sheets and the related notes and schedules for its Quarter ended October 29,
1994 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000205239
<NAME> DATAPOINT CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-END> OCT-29-1994
<CASH> 11,571
<SECURITIES> 188
<RECEIVABLES> 37,402
<ALLOWANCES> (1,158)
<INVENTORY> 17,728
<CURRENT-ASSETS> 72,447
<PP&E> 139,627
<DEPRECIATION> (111,191)
<TOTAL-ASSETS> 119,576
<CURRENT-LIABILITIES> 92,537
<BONDS> 64,394
<COMMON> 5,248
0
1,784
<OTHER-SE> (60,392)
<TOTAL-LIABILITY-AND-EQUITY> 119,576
<SALES> 14,342
<TOTAL-REVENUES> 37,107
<CGS> 9,737
<TOTAL-COSTS> 40,413
<OTHER-EXPENSES> 449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,225
<INCOME-PRETAX> (5,980)
<INCOME-TAX> 462
<INCOME-CONTINUING> (6,442)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,442)
<EPS-PRIMARY> (.5)
<EPS-DILUTED> (.5)
</TABLE>
