<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
DATAPOINT CORPORATION
----------------------
(NAME OF ISSUER)
DATAPOINT CORPORATION
----------------------
(Name of Persons Filing Statement)
$1.00 EXCHANGEABLE PREFERRED STOCK, $20.00 LIQUIDATION PREFERENCE PER SHARE
---------------------------------------------------------------------------
(Title of Class of Securities)
2381-00309
-------------------------------------
(CUSIP Number of Class of Securities)
Gerald N. Agranoff
Vice President and General Counsel
Datapoint Corporation
8410 Datapoint Drive
San Antonio, Texas 78229-4500
(210) 593-7000
---------------------------------------------------------------------
(Name, address, including ZIP Code, and telephone number, including
area code, of agent for service)
Selig D. Sacks, Esq.
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
(212) 421-4100
----------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
<PAGE>
This statement is filed in connection with (check the appropriate box):
(a) [X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c)
under the Securities Exchange Act of 1934.
(b) [X] The filing of a registration statement under the Securities Act of
1933
(c) [ ] A tender offer
(d) [ ] None of the above
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. [X]
Calculation of Filing Fee
________________________________________________________________________________
Transaction Valuation Amount of Filing Fee
$7,121,963.50 $1,425.00 *
________________________________________________________________________________
*The filing fee has been calculated pursuant to Rule 0-11 (b) as follows: one-
fiftieth of one percent of the value of the $1.00 Exchangeable Preferred Stock,
$20.00 liquidation preference per share, to be received by the filing person in
the Exchange Offer (as defined herein), assuming that all outstanding shares of
$1.00 Preferred Stock are tendered in the Exchange Offer. Pursuant to Rule 0-
11(a)(4), the market value of the $1.00 Preferred Stock was based upon the
average of the high and low prices reported in the consolidated system as of
July 31, 1996.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.
Amount previously paid: $1,425.00
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Form or registration no.:REGISTRATION STATEMENT ON FORM S-4 UNDER THE SECURITIES
------------------------------------------------------
ACT OF 1933, AS AMENDED.
- ------------------------
Filing Party: DATAPOINT CORPORATION
---------------------
Date Filed: August 6, 1996
-----------------------
2
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CROSS REFERENCE SHEET PURSUANT
TO INSTRUCTION F ON SCHEDULE 13E-3
-----------------------------------
The following is a cross-reference sheet pursuant to General Instruction
F to Schedule 13E-3 showing the location of the information required by
Schedule 13E-3 in the preliminary Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") of Datapoint Corporation ("Datapoint") filed as part
of the Registration Statement on Form S-4 filed with the Securities and
Exchange Commission on August 6, 1996, Registration No. 333-9627. The
cross-reference sheet indicates the caption in the Proxy Statement/Prospectus
in which the response to each item of this Schedule 13E-3 may be found, and
such responses are incorporated herein by reference. If any such item is
inapplicable or the answer thereto is negative and is omitted from the Proxy
Statement/Prospectus, it is so indicated in the cross-reference sheet. Unless
otherwise indicated herein, the terms used herein have the meanings ascribed
to them in the Proxy Statement/Prospectus.
3
<PAGE>
Item 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
--------------------------------------------------------
(a) INTRODUCTION; SUMMARY -- The Company, -- Purposes and Effects
of the Exchange Offer; BUSINESS OF THE COMPANY -- General; ANNEX
A-DESCRIPTION OF PREFERRED STOCK.
(b) INTRODUCTION; SUMMARY; BACKGROUND; PURPOSES AND EFFECTS OF
THE EXCHANGE OFFER -- Background; Purposes and Effects of the
Exchange Offer and the Preferred Stock Reclassification;
DESCRIPTION OF COMMON STOCK; MARKET PRICES FOR PREFERRED AND
COMMON STOCK.
(c) INTRODUCTION; SUMMARY; MARKET PRICES FOR PREFERRED STOCK AND
COMMON STOCK -- Preferred Stock; RISK FACTORS -- RISKS ASSOCIATED
WITH RETENTION OF THE PREFERRED STOCK -- NYSE Listing; ANNEX A-
DESCRIPTION OF PREFERRED STOCK.
(d) SUMMARY -- The Exchange Offer; MARKET PRICES FOR PREFERRED
STOCK AND COMMON STOCK -- Preferred Stock; ANNEX A-DESCRIPTION OF
PREFERRED STOCK -- Dividends; THE EXCHANGE OFFER AND STOCK
SOLICITATION -- The Exchange Offer and Stock Solicitation --
General; RISK FACTORS -- RISKS ASSOCIATED WITH RETENTION OF THE
PREFERRED STOCK.
(e) Not Applicable.
(f) Not Applicable.
Item 2. IDENTITY AND BACKGROUND.
------------------------
(a) - (d) This statement is being filed by Datapoint Corporation,
the issuer of the equity securities which are the subject of this
Rule 13E-3 transaction; INTRODUCTION; SUMMARY.
(e) During the last 5 years, neither Datapoint nor any executive
officer or director of Datapoint has been convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors).
(f) During the last 5 years, neither Datapoint nor any executive
officer or director of Datapoint was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is a
subject to a judgment, decree or final order enjoining further
violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such laws.
Item 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
--------------------------------------------
(a) Not Applicable.
(b) Not Applicable.
Item 4. TERMS OF THE TRANSACTION
------------------------
(a) INTRODUCTION; SUMMARY -- Purpose and Effects of the Exchange
Offer, -- The Exchange Offer, -- The Annual Meeting, -- The
Preferred Stock Amendment; BACKGROUND; PURPOSES AND EFFECTS OF
THE EXCHANGE OFFER -- The Annual Meeting; RISK FACTORS; PURPOSES
AND EFFECTS OF THE EXCHANGE OFFER; THE EXCHANGE OFFER AND STOCK
SOLICITATION; THE PREFERRED STOCK AMENDMENT.
4
<PAGE>
(b) Not Applicable.
Item 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE
---------------------------------------------
(a) Not Applicable.
(b) INTRODUCTION; RISK FACTORS -- RISKS ASSOCIATED WITH THE
COMPANY IN GENERAL -- Financial Condition of the Company;
BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER --
Background; MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS; BUSINESS OF THE COMPANY.
(c) INTRODUCTION; SUMMARY -- The Exchange Offer, -- The Annual
Meeting; THE EXCHANGE OFFER AND STOCK SOLICITATION; THE PREFERRED
STOCK AMENDMENT; ELECTION OF DIRECTORS.
(d) SUMMARY -- Purposes and Effects of the Exchange Offer, -- The
Exchange Offer, SUMMARY -- The Preferred Stock Amendment; SUMMARY
-- Unaudited Pro Forma Financial Statements; BACKGROUND; PURPOSES
AND EFFECTS OF THE EXCHANGE OFFER -- Background; Purpose and
Effects of the Exchange Offer and the Preferred Stock
Reclassification; THE EXCHANGE OFFER AND STOCK SOLICITATION; THE
PREFERRED STOCK AMENDMENT; CONSOLIDATED FINANCIAL STATEMENTS AND
OTHER FINANCIAL INFORMATION; DESCRIPTION OF COMMON STOCK; ANNEX
A-DESCRIPTION OF PREFERRED STOCK.
(e) Not Applicable.
(f) SUMMARY -- Market and Trading Information for Preferred Stock
and Common Stock; MARKET PRICES FOR PREFERRED STOCK AND COMMON
STOCK; THE EXCHANGE OFFER AND STOCK SOLICITATION -- Certain
Effects of the Exchange Offer on the Market for the Preferred
Stock; Exchange Act Registration.
(g) SUMMARY -- Market and Trading Information for Preferred Stock
and Common Stock; MARKET PRICES FOR PREFERRED STOCK AND COMMON
STOCK; THE EXCHANGE OFFER AND STOCK SOLICITATION -- Certain
Effect of the Exchange Offer on the Market for the Preferred
Stock; Exchange Act Registration.
Item 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
-------------------------------------------------
(a) INTRODUCTION; SUMMARY -- Purpose and Effect of the Exchange
Offer; -- The Exchange Offer, -- The Preferred Stock Amendment;
BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER; THE
EXCHANGE OFFER AND STOCK SOLICITATION; THE PREFERRED STOCK
AMENDMENT.
(b) BACKGROUND; PURPOSE AND EFFECT OF THE EXCHANGE OFFER --
Fairness Opinions; THE EXCHANGE OFFER AND STOCK SOLICITATION --
Fees and Expenses.
(c) Not Applicable.
(d) Not Applicable.
Item 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS
---------------------------------------------
(a) INTRODUCTION; SUMMARY -- Purposes and Effects of the Exchange
Offer; The Exchange Offer, -- The Preferred Stock Amendment; RISK
FACTORS -- RISKS ASSOCIATED
5
<PAGE>
WITH THE COMPANY IN GENERAL -- Financial Condition of the
Company; BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER;
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS; THE EXCHANGE OFFER AND STOCK SOLICITATION;
THE PREFERRED STOCK AMENDMENT; CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION; PRO FORMA UNAUDITED FINANCIAL
STATEMENTS.
(b) INTRODUCTION; SUMMARY -- Purposes and Effects of the Exchange
Offer; BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER --
Background, -- Determinations of the Board of Directors, --
Fairness Opinions; THE EXCHANGE OFFER AND STOCK SOLICITATION.
(c) INTRODUCTION; SUMMARY -- Purposes and Effects of the Exchange
Offer, -- The Exchange Offer; -- The Preferred Stock Amendment;
RISK FACTORS -- RISKS ASSOCIATED WITH THE COMPANY IN GENERAL --
Financial Condition of the Company; BACKGROUND; PURPOSES AND
EFFECTS OF THE EXCHANGE OFFER -- Determinations of the Board of
Directors; MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS; THE EXCHANGE OFFER AND STOCK
SOLICITATION; THE PREFERRED STOCK AMENDMENT; CONSOLIDATED
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION; PRO FORMA
UNAUDITED FINANCIAL STATEMENTS.
(d) INTRODUCTION; SUMMARY -- Purposes and Effects of the Exchange
Offer, -- The Exchange Offer, -- The Preferred Stock Amendment,
-- General -- Federal Income Tax Consequences; RISK FACTORS;
BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER --
Purposes and Effects of the Exchange Offer and the Preferred
Stock Reclassification, -- Determinations of the Board of
Directors, -- Fairness Opinions, -- Certain Consequences of
Holders of Preferred Stock that is Not Exchanged, -- Dilution;
THE EXCHANGE OFFER AND STOCK SOLICITATION -- The Exchange Offer
and Stock Solicitation, -- Certain Effects of the Exchange Offer
on the Market for the Preferred Stock; Exchange Act Registration;
THE PREFERRED STOCK AMENDMENT; CERTAIN FEDERAL INCOME TAX
CONSEQUENCES.
Item 8. FAIRNESS OF THE TRANSACTION
---------------------------
(a) INTRODUCTION; SUMMARY -- Purposes and effects of the Exchange
Offer; BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER --
Determinations of the Board of Directors, -- Fairness Opinions;
THE EXCHANGE OFFER AND STOCK SOLICITATION; THE PREFERRED STOCK
AMENDMENT.
(b) SUMMARY -- Purposes and Effects of the Exchange Offer;
BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER --
Background, -- Determinations of the Board of Directors, --
Fairness Opinions; MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS; THE EXCHANGE OFFER
AND STOCK SOLICITATION -- The Exchange Offer and Stock
Solicitation; THE PREFERRED STOCK AMENDMENT.
(c) SUMMARY -- The Preferred Stock Amendment -- Vote Required to
Adopt the Proposed Amendment; THE PREFERRED STOCK AMENDMENT.
(d) SUMMARY -- Purposes and Effects of the Exchange Offer;
BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER --
Determinations of the Board of Directors, -- Fairness Opinions;
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
6
<PAGE>
(e) BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER --
Determinations of the Board of Directors; DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY -- INDEPENDENT COMMITTEE.
(f) Not Applicable.
Item 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
------------------------------------------------------
(a) BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER --
Determinations of the Board of Directors, -- Fairness Opinions.
(b) BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER --
Determinations of the Board of Directors, -- Fairness Opinions;
BUSINESS OF THE COMPANY; ANNEX B - Fairness Opinion of Corporate
Capital Consultants, Inc.; ANNEX C - Fairness Opinion of Patricof
& Co. Capital Corp.
(c) AVAILABLE INFORMATION; BACKGROUND; PURPOSES AND EFFECTS OF
THE EXCHANGE OFFER -- Fairness Opinions.
Item 10. INTEREST IN SECURITIES OF THE ISSUER
------------------------------------
(a) SUMMARY -- The Exchange Offer -- Vote Required; SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT;
COMPENSATION OF DIRECTORS; COMPENSATION OF EXECUTIVE OFFICERS;
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(b) Not Applicable.
Item 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
-------------------------------------------------------------
ISSUER'S SECURITIES.
--------------------
SUMMARY -- The Exchange Offer -- Vote Required; COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
Item 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
-------------------------------------------------------------------
TO THE TRANSACTION.
-------------------
(a) SUMMARY -- The Exchange Offer -- Vote Required; BACKGROUND;
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER -- Determinations of
the Board of Directors; THE EXCHANGE OFFER AND STOCK SOLICITATION
-- The Exchange Offer and Stock Solicitation.
(b) SUMMARY -- The Exchange Offer -- Vote Required; BACKGROUND;
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER -- Determinations of
the Board of Directors; THE PREFERRED STOCK AMENDMENT.
Item 13. OTHER PROVISIONS OF THE TRANSACTION
-----------------------------------
(a) SUMMARY -- The Preferred Stock Amendment -- Dissenters'
Rights; THE EXCHANGE OFFER AND STOCK SOLICITATION -- General.
(b) Not Applicable.
(c) Not Applicable.
7
<PAGE>
Item 14. FINANCIAL INFORMATION
---------------------
(a) DATAPOINT CORPORATION AND SUBSIDIARIES FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION (See Index to Financial
Statements).
(b) SUMMARY -- HISTORICAL AND PRO FORMA UNAUDITED CAPITALIZATION,
-- SELECTED CONSOLIDATED FINANCIAL DATA, -- UNAUDITED PRO
FORMA FINANCIAL STATEMENTS.
Item 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
-------------------------------------------------
(a) Not Applicable.
(b) INTRODUCTION; SUMMARY -- General -- Solicitation Agent;
BACKGROUND; PURPOSES AND EFFECTS OF THE EXCHANGE OFFER AND STOCK
SOLICITATION -- Solicitation Agent.
Item 16. ADDITIONAL INFORMATION
----------------------
Not Applicable.
Item 17. MATERIAL TO BE FILED AS EXHIBITS
--------------------------------
(a) Not Applicable.
(b)- (1) Opinion Letter of Corporate Capital Consultants, Inc.
dated July 24, 1996 (Annex B to the Proxy
Statement/Prospectus filed as part of Registration
Statement on Form S-4 filed on August 6, 1996,
Registration No. 333-9627, and incorporated herein by
reference).
(2) Opinion Letter of Patricof & Co. Capital Corp. dated
July 24, 1996 (Annex C to the Proxy Statement/Prospectus
filed as part of Registration Statement on Form S-4
filed on August 6, 1996, Registration No. 333-9627, and
incorporated herein by reference).
*(3) Analysis of Corporate Capital Consultants, Inc.
contained in a presentation to the Independent
Committee of Datapoint Corporation dated July 24, 1996.
*(4) Analysis of Patricof & Co. Capital Corp. contained in a
presentation to the Board of Directors of Datapoint
Corporation dated July 24, 1996.
(c) Not Applicable.
(d) Proxy Statement/Prospectus filed as part of Registration
Statement on Form S-4 filed on August 6, 1996, Registration
No. 333-9627, and incorporated herein by reference.
(e) Not Applicable.
(f) Proxy Statement/Prospectus filed as part of Registration
Statement on Form S-4 filed on August 6, 1996, Registration
No. 333-9627, and incorporated herein by reference.
- ------------------------------
* Confidential treatment requested pursuant to Rule 24b-2.
8
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
August 7, 1996 /s/ Gerald N. Agranoff
------------------------------------------------------
(SIGNATURE)
Vice President, General Counsel and Corporate Secretary
-------------------------------------------------------
(NAME AND TITLE)
<PAGE>
Exhibit 17(b)(3)
[CORPORATE CAPITAL CONSULTANTS, INC. LOGO]
----------------------------------
<PAGE>
Presentation to the
Independent Committee of the
Board of Directors of
DATAPOINT CORPORATION
Prepared by
Corporate Capital Consultants, Inc.
<PAGE>
DATAPOINT CORPORATION
PRESENTATION TO THE INDEPENDENT COMMITTEE
OF THE BOARD OF DIRECTORS BY
CORPORATE CAPITAL CONSULTANTS, INC.
INDEX
o Draft Opinion Letter
o Charts and Schedules:
I. Stock Price History
II. Comparable Company Study
III. Forecasts and Discounted Cash Flow
IV. Pro Forma Balance Sheets
V. Projected Book Value
VI. Liquidation Value
VII. Comparable Transactions Analysis
VIII. Ability to Pay Arrears and Resume
Preferred Dividend Payments
IX. Litigation
X. Summary and Conclusions
<PAGE>
DRAFT
-----
[CORPORATE CAPITAL LOGO]
CORPORATE CAPITAL
CONSULTANTS INC.
1185 AVENUE OF THE AMERICAS
18TH FLOOR
NEW YORK, NEW YORK 10036-2601
TEL: (212) 843-0352
FAX: (212) 843-0574
JULY 24, 1996
Independent Committee
Board of Directors
Datapoint Corporation
8400 Datapoint Drive
San Antonio, Texas 78229-4500
Gentlemen:
You have asked Corporate Capital Consultants, Inc. ("CCC") to provide a
written opinion as to the fairness, from a financial point of view, to the
exchanging preferred shareholders ("the Exchanging Preferred Shareholders"),
other than Asher B. Edelman, of Datapoint Corporation ("Datapoint" or "the
Company") of the consideration to be received by them in an offer by the
Company, whereby each share of Datapoint's $1.00 Exchangeable Preferred Stock
("the Preferred Stock") tendered by the Exchanging Preferred Shareholders would
be exchanged for shares of the common stock of the Company ("the
---------
Exchange Offer") upon the terms and conditions set forth in the draft of the
joint Proxy Statement and Prospectus ("the Prospectus") dated July 24, 1996.
CCC is a specialist investment banking firm which, since its inception in
1974, performs services in the areas of financial consulting, corporate
valuation and fairness opinions, and mergers and acquisitions. In the valuation
area, CCC has provided corporate valuations, often in conjunction with pending
purchase offers, plans to sell or recapitalizations, for both public and
privately-held companies in a broad range of industries. In the case of public
companies, CCC has furnished fairness opinions in conjunction with a number of
tender offers, going-private transactions, and the purchase of minority
interests.
In connection with rendering this opinion, CCC has reviewed and analyzed,
among other things: a) drafts of the Registration Statement for the Company
on Form S-4 up to and including the draft dated July 16, 1996 ("the
Registration Statement"); b) the Forms 10-K filed by Datapoint for the fiscal
years 1991 through 1995; c) the Forms 10-Q for the Company for the three fiscal
quarters ended April 27, 1996; d) drafts of the Prospectus; e) the indenture
pertaining to the Company's 8-7/8% Convertible Subordinated Debentures due
2006; f) various corporate documents, including by-laws, minutes, loan
agreements, litigation documents, employment agreements, product literature,
proxies, and so forth; g) certain internal financial documents, memoranda and
other information furnished by the Company; h) historical market prices for the
two classes of stock; i) certain financial, operational, and stock market data
of companies engaged in businesses comparable to the Company; and additional
information provided from time to time by Datapoint or by other sources we
deemed relevant.
<PAGE>
-2-
Independent Committee, Board of Directors
Datapoint Corporation
In addition, we: a) met with the Company's principal officers and visited
its San Antonio facility; b) discussed the financial and operating performance
with such officers; c) reviewed with such officers the current and future
prospects of Datapoint; and d) considered such other information, financial
studies, analyses and investigations and financial economic and market criteria
as we deemed relevant.
In rendering this opinion, we have not made any independent appraisal of
any of the physical or intangible assets or liabilities of the Company, and we
have assumed, without independent verification, the accuracy and completeness of
the financial and other information and representations contained in the
materials which have been provided to us by the Company, or which are publicly
available. We have also relied on the representations made by various
representatives of the Company and their agents and advisors, and on other
relevant factors.
CCC, in reviewing the fairness of the Exchange Offer, took into account
the financial and operating performance of Datapoint, in relation to a group of
similar public companies and their market values. We considered various
multiples of earnings, cash flow, and book value of these companies in rendering
our opinion. We also prepared a discounted cash flow analysis based on our own
scenarios for the Company over the next five years. Other approaches to
fairness included an analysis of market history for both the Preferred Stock and
common stock, projected book value giving effect to the recent sale of the
Company's automotive business and the possible sale of selected assets and
operations of the Company, estimated liquidation value of both types of shares,
comparable transactions, and other factors.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the consideration to be received by the holders of the
Preferred Stock other than Asher B. Edelman upon the terms and conditions set
forth in the Prospectus is fair, from a financial point of view, to such
holders.
Very truly yours,
CORPORATE CAPITAL CONSULTANTS, INC.
Carl A. Goldman
CAG:evk President
<PAGE>
DATAPOINT CORPORATION
STOCK PRICE HISTORY
-------------------
CCC reviewed markets for both classes of stock back to April 30, 1992,
the inception of trading of the Preferred. We charted trading activity of both
classes of stock from the period commencing August 5, 1994, a point prior to the
announcement of the first deferral regarding the preferred dividend payment,
through July 16, 1996. However, particular attention was paid to the twenty
trading days prior to the announcement of the Exchange Offer in order to judge
prices accorded by a free market prior to this important change in the exchange
ratio.
The average closing price of a share of Common was $1.44 for that
twenty-day period, and $3.10 for a share of the Preferred. This is a ratio of
2.15:1, indicating that the Preferred was selling at just over its 2:1
conversion value in effect prior to the Exchange Offer, or at a premium of
approximately 7.6%. At 2.75:1, the Preferred was worth approximately $3.96 per
share, a 37.5% premium over the pre-Exchange Offer conversion value, and the
extra 0.75 shares of Common were worth $1.08 per share. The cumulative Preferred
arrearage averaged $1.58 over that period, $0.50 above the extra 0.75-share
exchange value per the Exchange Offer. In other words, the incremental exchange
value constituted a 32% discount off the cumulative arrearage on the Preferred.
On July 16, 1996, the most recent date we reviewed, the Common closed at
$1.13 and the Preferred at $3.25, a ratio of 2.88:1. Thus, the Preferred sold at
a slightly higher (approximately $0.16) price than the 2.75 conversion value per
the Exchange Offer. According to these closing prices, the 0.75-share
incremental conversion value thus was worth approximately $0.85 per share vs.
$1.75 in current cumulative Preferred arrearages (which are soon to total
$2.00), a discount of approximately 52%.
To reach the cumulative arrearage for the average twenty-day period
preceding the Exchange Offer announcement would require $0.50 more of Common
stock value per Preferred share. At an average closing price of $1.44 per share
for the Common for this twenty-day period, the exchange ratio would have to be
raised by 0.35 shares. As of the most recent date we examined, given the $1.13
closing price of Datapoint's Common, the additional value required to reach the
cumulative Preferred arrearage is approximately $0.90 per share, which would
require raising the exchange ratio by approximately 0.8 shares. As a practical
matter, some premium over recent exchange ratios between the two classes may be
needed to get Preferred stockholders to vote for the Exchange Offer, even though
to revert to the current 2:1 conversion value in effect would presumably cause a
drop in the market price of the Preferred from $3.25 to $2.26, based on July 16
closing prices, a 30% decline.
There should be a discount from the arrearage to reflect the high risk
of actually receiving them. But the Preferred price will tend to increase
relative to Common as more arrearages accumulate, absent other factors. In this
portion of our study, we would have to recommend an increase in the exchange
ratio, possibly to 3:1.
<PAGE>
DATAPOINT CORPORATION: PRICE BEHAVIOR OF $1.00 EXCHANGEABLE PREFERRED
AND COMMON STOCK FROM INCEPTION OF PREFERRED TRADING TO ANNOUNCEMENT
OF EXCHANGE OFFER
[Graph illustrating narrative
under "Stock Price History]
[GRAPH]
---Common
---Preferred
Page 1
<PAGE>
DATAPOINT CORPORATION: COMPARATIVE CLOSING PRICES OF PREFERRED AND COMMON
STOCK AND DEBENTURES 8/5/94 THROUGH 7/16/96
[Graph illustrating narrative
under "Stock Price History]
[GRAPH]
---Common
---Preferred
---Debentures
<PAGE>
DATAPOINT CORPORATION: COMPARATIVE CLOSING PRICES AND DAILY
VOLUMES OF PREFERRED AND COMMON STOCK -
8/5/94 THROUGH 7/16/96
[Graph illustrating narrative
under "Stock Price History]
[GRAPH]
<PAGE>
DATAPOINT CORPORATION: INCREMENTAL VALUE OF EXCHANGE OFFER
vs. CUMULATIVE ARREARAGE ON PREFERRED
VALUE
[Graph illustrating narrative
under "Stock Price History]
<PAGE>
DATAPOINT CORPORATION: COMPARISON OF INCREMENTAL CONVERSION VALUE,
CUMULATIVE ARREARAGE AND MOVING AVERAGE
[Graph illustrating narrative
under "Stock Price History]
[GRAPH]
---Cumulative Arrearage
---Incremental Value of Exchange Offer
---20-Day Moving Average Incremental Value
<PAGE>
DATAPOINT CORPORATION
COMPARABLE COMPANY STUDY
------------------------
Through a search using SIC Codes and after consultations with various
analysts who follow this sector of the computer services industry, CCC studied
ten companies that could be considered somewhat comparable to the Company's main
business of network information technology. The size of such comparables was
limited to the smallest at $31.4 million revenues (Alpha Microsystems) to the
largest at $235 million (Fore Systems). It should be noted that none are really
direct competitors since they are mostly U.S.-based operations while Datapoint
is almost entirely European-based. Its European competitors tend to be very
large companies with diversified businesses which we do not consider comparable
for study purposes.
CCC used two sets of numbers for Datapoint - before the possible sale of
the telephony business (but after giving effect to the recent sale of the
automotive dealership business to Kalamazoo) and after such a sale. Pro Forma
estimated revenues for fiscal 1996 were $158,200,000 to $113,700,000,
respectively. Datapoint's Profit & Loss Statement was further adjusted to remove
certain non-recurring items and the impact of employee reductions. This "Base
Case" was provided, for the most part, by the Company. CCC adjusted interest
costs and other expenses from the application of net proceeds from the
automotive sale and the estimated net proceeds of the possible sale of telephony
for * applying that to the redemption of convertible debentures at *.
Qualitatively, the Company's EBDAIT, EBIT, and EBDAIT to total assets
margins are in the same general area of the comparables. But with the Company's
deficit net worth and deficit working capital, the Company is in a much riskier
financial condition than the comparables.
CCC concentrated on market cap and market value to EBDAIT and EBIT.
Taxes are a minor consideration, except for foreign taxes, due to the NOL
carryforward. CCC cannot use market to book with a negative book value. CCC also
examined market value of comparables to earnings per share, but estimated
taxation is questionable as noted above, so this aspect is less important.
The median market cap is 10.8X EBDAIT, 11.9X EBIT.
The median market value is 7.9X EBDAIT, 9.0X EBIT, 21.4X latest twelve
months E/P/S.
Use of such medians should be considered the UPPER LIMIT of values due
to the financial condition of the Company and its history of losses.
Note: EBDAIT is Earnings before depreciation, amortization, interest
and taxes and is operating income PLUS other income, plus depreciation and
amortization.
EBIT is Earnings before interest, PLUS other income, before
taxes.
Earnings Per Share is net income after preferred dividend.
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
- 2 -
<TABLE>
<CAPTION>
Estimated Pro Forma 1996 Estimated Pro Forma 1996
After Sale of Automotive Net of Telephony Sale
------------------------ ------------------------
<S> <C> <C>
EBDAIT $18,319,000 $16,784,000
EBIT $11,619,000 $10,384,000
E/P/S ($0.16) $0.04
Market Cap
- ----------
EBDAIT
------
Median Market Cap (10.8X) $197,845,000 $181,267,000
Less: Total Debt at par 81,000,000 38,100,000
Less: Preferred at Stated Value 1,896,000 1,896,000
-------------- -------------
Total 114,949,000 141,271,000
Plus: Cash 16,700,000 21,500,000
-------------- -------------
Imputed value common $131,649,000 $162,771,000
On 13,670,930 shares $9.63 per Share $11.90 per Share
Removing Preferred and adding
new common @ 2.75:1 is
18,808,066 shares $ 7.10 per Share $ 8.75 per Share
EBIT
----
Median Market Cap (11.9X) $138,266,000 $123,570,000
Less: Total Debt at par 81,000,000 38,100,000
Less: Preferred at Stated Value 1,896,000 1,896,000
-------------- -------------
Total 55,370,000 83,574,000
Plus: Cash 16,700,000 21,500,000
-------------- -------------
Imputed value common $ 72,070,000 $105,074,000
On 13,670,930 shares $5.27 per Share $7.69 per Share
On 18,808,066 shares $3.93 per Share $5.69 per Share
Market Value
- ------------
EBDAIT
------
Median Market Value (7.9X) $144,720,000 $132,594,000
Less: Accumulated Arrears @ $2 3,736,000 3,736,000
-------------- ---------------
Net Value $140,984,000 $128,858,000
Imputed value $10.31 per Share $9.42 per Share
Imputed value after conversion $ 7.69 per Share $7.05 per Share
EBIT
----
Median Market Value (9.0X) $104,571,000 $ 93,456,000
Less: Accumulated Arrears @ $2 3,736,000 3,736,000
-------------- ----------------
Net Value $100,835,000 $ 89,720,000
Imputed value $7.38 per Share $6.56 per Share
Imputed Value after conversion $5.56 per Share $4.97 per Share
E/P/S ($0.16) $0.04
-----
21.4X n.a. $0.86 per Share
</TABLE>
<PAGE>
- 3 -
In this study, at a 2.75:1 ratio, Common stock values range from $5.27
to $11.90 per share before dilution vs. the closing price of the Preferred at
$3.10 per share just prior to the offer, and $3.25 recently.
After dilution, assuming conversion of all Preferred, the Common
is valued at $3.93 to $8.75 per share. 2.75 shares would be valued at $10.81
to $24.06.
The incremental .75 shares involves an incremental 1,401,053 shares of
dilution. Using, as an example, the lowest value for the Common stock as a
result of applying an EBIT multiple, $3.93 per share, the original 2:1 exchange
ratio yielded a value of $4.14 per share after dilution. Thus, the incremental
.75 decreases the value by $4.14 - $3.93, or $0.21 per share, but the ADDITIONAL
.75 SHARES are valued at .75 times $3.93, or $2.77. In short, in this study, the
incremental value provided in the Exchange Offer is worth as little as $2.77 -
$0.31, or $2.46 more per share of Preferred.
The pro forma earnings are risky at best, and, therefore, this study is
speculative. But no more speculative than the potential receipt of what would be
$2.00 a share at the end of this fiscal year. Thus, the exchange looks
attractive from this point of view.
<PAGE>
<TABLE><CAPTION>
COMPARATIVE FINANCIAL DATA FOR PUBLICLY-HELD COMPANIES
AND DATAPOINT CORPORATION
Company ALPHA ALPHANET BTG, FORE MICROS-TO- NETWORK NORTH STAR
MICROSYSTEMS SOLUTIONS INC. SYSTEMS, INC. MAINFRAMES, INC. PERIPHERALS, INC. UNIVERSAL, INC.
------------ --------- ---- ------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales
TTM $31.4 $75.0 $213.6 $235.2 $47.3 $44.0 $57.7
CY 1995 32.8 74.0 213.6 235.2 47.3 47.1 54.9
CY 1994 38.8 70.5 156.0 106.2 43.0 33.5 47.2
CY 1993 39.3 47.0 103.6 39.3 29.0 10.7 46.8
3-Yr, CAGR -8.6% 25.5% 43.6% 144.6% 27.7% 109.8% 8.3%
Net Income/Margin
TTM ($4.0) def. $2.5 3.3% $3.0 1.4% $9.7 4.1%(4) $1.0 2.1%(5)($8.7) def.(6) $2.4 4.2%
CY 1995 (3.6) def. 2.4 3.2%(2) 3.0 1.4% 9.7 4.1% 1.0 2.1%(5) 6.7 14.2% (2.4) def.(7)
CY 1994 (6.2) def. 1.8 2.6% 3.1 2.0% 12.9 12.1% 0.9 2.1% 5.7 17.0% (3.3) def.
CY 1993 0.3 0.8% 0.3 0.6% 1.8 1.7% 3.7 9.4% 0.5 1.7% 0.4 3.7% (4.6) def.
3-Yr, CAGR NM 182.8% 29.1% 61.9% 41.4% 309.3% NM
Gross Profit/Margin
TTM $9.0 28.7% $10.2 13.6% $49.9 23.4% $136.5 58.0% $6.9 14.6% $20.3 46.1% $15.8 27.4%
CY 1995 9.8 29.9% 10.1 13.6% 49.9 23.4% 136.5 58.0% 6.9 14.6% 22.5 47.8% 15.4 28.1%
CY 1994 11.4 29.4% 9.2 13.0% 37.4 24.0% 61.0 57.4% 5.5 12.8% 16.0 47.8% 12.9 27.3%
CY 1993 15.5 39.4% 5.6 11.9% 26.0 25.1% 24.2 61.6% 4.1 14.1% 5.1 47.7% 14.2 30.3%
3-Yr, CAGR -20.5% 34.3% 38.5% 137.5% 29.7% 110.0% 4.1%
Operating Income/Margin
TTM ($4.7) def. $4.2 5.6% $7.5 3.5% $10.6 4.5% $1.7 3.6%(5)($8.7) def.(6) $0.4 0.7%
CY 1995 (4.2) def. 4.2 5.7% 7.5 3.5% 10.6 4.5% 1.7 3.6% 8.1 17.2% 0.5 0.9%
CY 1994 (6.4) def. 3.2 4.5% 6.9 4.4% 16.1 15.2% 1.5 3.5% 6.5 19.4% (0.8) def.
CY 1993 0.4 1.0% 0.7 1.5% 4.2 4.1% 4.7 12.0% 0.9 3.1% 0.4 3.7% (2.1) def.(8)
3-Yr, CAGR NM 144.9% 33.6% 50.2% 37.4% 350.0% NM
EBT/Margin
TTM ($4.0) def. $4.1 5.5% $5.2 2.4% $20.6 8.8% $1.7 3.6%(5) ($6.4) def.(6) $5.4 9.4%(9)
CY 1995 (3.6) def. 4.1 5.5% 5.2 2.4% 20.6 8.8% 1.7 3.6% 10.3 21.9% (2.4) def.
CY 1994 (6.3) def. 3.1 4.4% 5.5 3.5% 18.9 17.8% 1.5 3.5% 7.1 21.2% (3.3) def.
CY 1993 0.2 0.5% 0.6 1.3% 3.4 3.3% 5.0 12.7% 8.0 27.6% 0.4 3.7% (4.6) def.
3-Yr, CAGR NM 161.4% 23.7% 103.0% -53.9% 407.4% NM
Interest
TTM $0.02 0.1% $0.1 0.1% $3.1 1.5% $0.0 0.0% $0.0 0.0% $0.0 0.0% $4.1 7.1%
CY 1995 0.0 0.0% 0.1 0.1% 3.1 1.5% 0.0 0.0% 0.0 0.0% 0.0 0.0% 4.3 7.8%
CY 1994 0.0 0.0% 0.2 0.3% 1.4 0.9% 0.0 0.0% 0.0 0.1% 0.0 0.0% 4.4 9.3%
CY 1993 0.1 0.2% 0.2 0.4% 0.8 0.8% 0.0 0.0% 0.1 0.3% 0.0 0.0% 4.4 9.4%
3-Yr, CAGR -78.9% -29.3% 96.9% 0.0% -68.4% 0.0% -1.1%
EBIT/Margin
TTM ($3.9) def. $4.2 5.6% $8.3 3.9% $20.6 8.8% $1.7 3.6% ($6.4) def.(6) $9.5 16.5%
CY 1995 (3.6) def. 4.2 5.7% 8.3 3.9% 20.6 8.8% $1.7 3.6% 10.3 21.9% $1.9 3.5%
CY 1994 (6.3) def. 3.3 4.7% 6.9 4.4% 18.9 17.8% 1.5 3.6% 7.1 21.2% 1.1 2.3%
CY 1993 0.3 0.7% 0.8 1.7% 4.2 4.1% 5.0 12.7% 8.1 27.9% 0.4 3.7% (0.2) def.
3-Yr, CAGR NM 129.1% 40.6% 103.0% NM 407.4% NM
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPARATIVE FINANCIAL DATA FOR PUBLICLY-HELD COMPANIES
AND DATAPOINT CORPORATION
Company ALPHA ALPHANET BTG, FORE MICROS-TO- NETWORK NORTH STAR
MICROSYSTEMS SOLUTIONS INC. SYSTEMS, INC. MAINFRAMES, INC. PERIPHERALS, INC. UNIVERSAL, INC.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Depcn & Amort.
TTM $2.4 7.6% $0.2 0.3% $2.2 1.0% $8.5 3.6% $0.1 0.2% $1.3 3.0% $0.8 1.4%(9)
CY 1995 2.3 7.0% 0.2 0.3% 2.2 1.0% 8.5 3.6% 0.1 0.2% 1.3 2.8% 0.8 1.5%
CY 1994 3.4 8.8% 0.1 0.1% 1.0 0.6% 3.5 3.3% 0.1 0.2% 0.7 2.1% 1.7 3.6%
CY 1993 2.3 5.9% 0.1 0.2% 1.1 1.1% 0.9 2.3% 0.1 0.3% 0.4 3.7% 1.6 3.4%
3-Yr, CAGR 0.0 41.4% 41.4% 207.3% 2.9% 80.3% -29.3%
EBDAIT/Margin
TTM ($1.5) def. $4.5 5.9% $10.5 4.9% $29.1 12.4% $1.8 3.8% ($5.1) def.(6) $10.3 17.9%
CY 1995 (1.3) def. 4.4 5.9% 10.5 4.9% 29.1 12.4% 1.8 3.8% 11.6 24.6% 2.7 4.9%
CY 1994 (2.9) def. 3.4 4.8% 7.9 5.1% 22.4 21.1% 1.6 3.8% 7.8 23.3% 2.8 5.9%
CY 1993 2.6 6.6% 0.9 1.9% 5.3 5.1% 5.9 15.0% 8.2 28.2% 0.8 7.5% 1.4 3.0%
3-Yr, CAGR NM 121.1% 40.8% 122.1% NM 280.8% 38.9%
E.P.S.
TTM ($0.60) $0.61 $0.47 $0.11 $0.31(3) ($0.78) $0.23 (7)(9)
CY 1995 (0.54) 0.61 0.47 0.11 0.31(3) 0.57 (0.25)(7)
CY 1994 (0.95) NA 0.60 0.18 0.40 0.62 (0.35)(7)
CY 1993 0.08 NA 0.38 0.06 0.30 0.05 (0.49)(7)
3-Yr, CAGR NM NA 11.2% 35.4% NM 237.6% NM
Sales
CY 1995 $32.8 $74.0 $213.6 $235.2 $47.3 $47.1 $54.9
CY 1994 38.8 70.5 156.0 106.2 43.0 33.5 47.2
CY 1993 39.3 47.0 103.6 39.3 29.0 10.7 46.8
CY 1992 45.0 35.4 56.5 12.5 15.3 7.2 42.8
CY 1991 49.3 29.6 28.8 2.0 18.6 1.8 37.0
5- Yr. CAGR -9.7% 25.7% 65.0% 229.3% 26.3% 126.2% 10.4%
Net Income/Margin
CY 1995 ($3.6) def. $2.4 3.2% $3.0 1.4% $9.7 4.1% ($3.6) def. $6.7 14.2% ($2.4) def.
CY 1994 (6.2) def. 1.8 2.6% 3.1 2.0% 12.9 12.1% 0.9 2.1% 5.7 17.0% (3.3) def.
CY 1993 0.3 0.8% 0.3 0.6% 1.8 1.7% 3.7 9.4% 0.5 1.7% 0.4 3.7% (4.6) def.
CY 1992 (3.7) def. 0.3 0.8% 1.2 2.1% (1.4) def. 0.4 2.6% (0.8) def. NA NA
CY 1991 0.2 0.4% 0.2 0.7% 0.1 0.3%(3) (2.7) def. 0.3 1.6% (2.0) def. NA NA
5- Yr. CAGR NM 86.1% 134.0% NM NM NM NM
E.P.S.
CY 1995 ($0.54) $0.61 $0.47 $0.11 $0.79 $0.57 ($0.25)
CY 1994 (0.95) NA 0.60 0.18 0.55 0.62 (0.35)
CY 1993 0.08 NA 0.38 0.06 0.23 0.05 (0.49)
CY 1992 (1.25) NA 0.25 0.00 (0.07) NA NA
CY 1991 0.05(1) NA 0.05(3) 0.00 (0.01) NA NA
5-Yr. Avge: (0.52) NA 0.35 0.07 0.30 0.41 NA
<PAGE>
<CAPTION>
COMPARATIVE FINANCIAL DATA FOR PUBLICLY-HELD COMPANIES
AND DATAPOINT CORPORATION
Company ALPHA ALPHANET BTG, FORE MICROS-TO- NETWORK NORTH STAR
MICROSYSTEMS SOLUTIONS INC. SYSTEMS, INC. MAINFRAMES, INC. PERIPHERALS, INC. UNIVERSAL, INC.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Assets
LFQ $13.0 $28.7 $109.5 $424.4 $16.2 $68.2 $116.3
CY 1995 13.1 18.5(2) 109.5 424.4 16.2 70.1 110.2
CY 1994 17.9 16.7 72.3 131.5 9.4 65.2 111.1
Total Debt
LFQ $0.8 $0.2 $45.0 $0.0 $0.0 $0.0 $41.1
CY 1995 0.9 0.8 45.0 0.0 0.0 0.0 43.4
CY 1994 0.5 1.7 24.5 0.0 0.0 0.0 45.7
Shareholders' Equity
LFQ $7.3 $15.1(2) $27.7 $336.0 $11.0 $57.8 $39.9
CY 1995 6.5 6.6(2) 27.7 336.0 11.0 65.7 34.5
CY 1994 10.0 3.9 23.0 97.7 4.9 57.8 34.2
Invested Capital
LFQ $8.1 $15.3 $72.7 $336.0 $11.0 $57.8 $81.0
CY 1995 $7.4 7.4 72.7 336.0 $11.0 65.7 77.9
CY 1994 $10.5 5.6 47.5 97.7 4.9 57.8 79.9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPPARATIVE FINANCIAL DATA FOR PUBLICLY-HELD COMPANIES AND DATAPOINT CORPORATION
Company OPTICAL DATA TECHFORCE WESTERN MICRO
SYSTEMS, INC CORPORATION TECHNOLOGY, INC. Minimum Mean Median
------------ ----------- ---------------- ------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
SALES
TTM $116.5 $57.1 $100.6 $ 31.4 $102.4 $ 75.0
CY 1995 111.5 49.2 106.5 32.8 102.5 74.0
CY 1994 86.6 30.7 119.3 33.5 77.9 70.5
CY 1993 55.9 8.9 96.8 10.7 52.0 46.8
3-Yr, CAGR 41.2% 135.1% 4.9% -8.6% 44.1% 27.7%
NET INCOME/MARGIN
TTM $14.2 12.2% $2.0 3.4% ($4.0) def. 1.4% 4.6% 3.7%
CY 1995 13.7 12.3% 1.0 2.0% (10) (5.1) def.(11) 1.4% 6.2% 3.7%
CY 1994 8.6 9.9% 0.8 2.5% (1.0) def. 2.0% 7.6% 6.2%
CY 1993 4.9 8.8% 1.0 11.2% (1.1) def. 0.6% 3.8% 1.7%
3-Yr, CAGR 67.2% 0.0% 115.3% 29.1% 115.3% 67.2%
GROSS PROFIT/MARGIN
TTM $57.9 49.7% $18.2 31.9% $12.7 12.6% 12.6% 30.5% 27.4%
CY 1995 56.0 50.2% 15.7 31.9% 13.1 12.3% 12.3% 30.9% 28.1%
CY 1994 39.8 46.0% 9.9 32.2% 16.6 13.9% 12.8% 30.2% 27.3%
CY 1993 26.1 46.7% 3.3 37.1% 17.0 17.6% 11.9% 32.7% 30.3%
3-Yr, CAGR 46.5% 118.1% -12.2% -20.5% 40.9% 34.3%
OPERATING INCOME/MARGIN
TTM $22.0 18.9% $4.0 7.0% $0.4 0.4% 0.4% 5.3% 3.6%
CY 1995 21.2 19.0% 2.8 5.7% (0.7) def. 0.9% 7.8% 4.5%
CY 1994 13.3 15.4% 2.2 7.2% (0.3) def. 3.5% 10.4% 9.8%
CY 1993 7.6 13.6% 2.0 22.5% 0.3 0.3% 0.3% 4.9% 3.4%
3-Yr, CAGR 67.0% 18.3% NM 33.6% 113.9% 58.6%
EBT/MARGIN
TTM $22.9 19.7% $3.2 5.6% (4.0) def. 2.4% 8.2% 7.1%
CY 1995 22.1 19.8% 1.7 3.5% (5.1) def. 2.4% 10.3% 7.1%
CY 1994 13.8 15.9% 1.4 4.6% (1.2) def. 3.5% 11.1% 10.2%
CY 1993 7.9 14.1% 1.7 19.1% (1.4) def. 0.5% 9.0% 3.7%
3-Yr, CAGR 67.3% 0.0 NM -53.9% 118.1% 85.1%
INTEREST
TTM $0.0 0.0% $0.8 1.4% $0.8 0.8% 0.0% 1.1% 0.1%
CY 1995 0.0 0.0% 1.1 2.2% 0.9 0.8% 0.0% 1.1% 0.0%
CY 1994 0.0 0.0% 0.8 2.6% 0.9 0.8% 0.0% 1.3% 0.1%
CY 1993 0.0 0.0% 0.0 0.0% 0.5 0.5% 0.0% 1.3% 0.3%
3-Yr, CAGR NM NM 30.4% -78.9% -6.3% -0.6%
EBIT/MARGIN
TTM $22.9 19.7% $4.0 7.0% ($3.1) def. 3.6% 9.7% 7.2%
CY 1995 22.1 19.8% 2.8 5.7% (4.3) def. 3.5% 9.6% 5.7%
CY 1994 13.8 15.9% 2.2 7.2% (0.3) def. 2.3% 10.0% 4.7%
CY 1993 7.9 14.1% 1.7 19.1% (0.9) def. 0.7% 9.3% 4.1%
3-Yr, CAGR 67.3% 28.3% NM 40.6% 149.5% 103.0%
<CAPTION>
Company DATAPOINT DATAPOINT
Maximum CORPORATION CORPORATION
------- ----------- -----------
(with Telephony)(12) (Without Telephony) (12)
<S> <C> <C> <C>
SALES
TTM $235.2 $158.2 $113.7
CY 1995 235.2 174.9 174.9
CY 1994 156.0 172.9 172.9
CY 1993 103.6 208.3 208.3
3-Yr, CAGR 144.6% -8.4% -8.4%
NET INCOME/MARGIN
TTM 12.2% $1.6 (13) $4.4 3.9% (13)
CY 1995 14.2% (28.3) (28.3) def.
CY 1994 17.0% (94.8) (94.8) def.
CY 1993 9.4% (11.9) (11.9) def.
3-Yr, CAGR 309.3% NM
GROSS PROFIT/MARGIN
TTM 58.0% $47.1 29.8% $33.3 29.3%
CY 1995 58.0% 57.5 32.9% 57.5 32.9%
CY 1994 57.4% 65.6 37.9% 65.6 37.9%
CY 1993 61.6% 86.6 41.6% 86.6 41.6%
3-Yr, CAGR 137.5% -18.5% -18.5%
OPERATING INCOME/MARGIN
TTM 18.9% $9.7 6.1% $8.4 7.4%
CY 1995 19.0% (18.2) def. (18.2) def.
CY 1994 19.4% (81.0) def.(14) (81.0) def.(13)
CY 1993 13.6% (1.3) def. (1.3) def.
3-Yr, CAGR 350.0% NM NM
EBT/MARGIN
TTM 19.7% $4.0 2.5% $6.5 5.7%
CY 1995 21.9% (28.1) def. (28.1) def.
CY 1994 21.2% (94.4) def. (94.4) def.
CY 1993 27.6% (10.9) def. (10.9) def.
3-Yr, CAGR 407.4% NM NM
INTEREST
TTM 7.1% $7.7 4.9% $3.9 3.4%
CY 1995 7.8% 9.3 5.3% 9.3 5.3%
CY 1994 9.3% 9.1 5.3% 9.1 5.3%
CY 1993 9.4% 9.3 4.5% 9.3 4.5%
3-Yr, CAGR 96.9% 0.0% 0.0%
EBIT/MARGIN
TTM 19.7% $11.7 7.4% $10.4 9.1%
CY 1995 21.9% (18.8) def. (18.8) def.
CY 1994 21.2% (85.3) def. (85.3) def.
CY 1993 27.9% (1.6) def. (1.6) def.
3-Yr, CAGR 407.4% 242.8% 242.8%
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
COMPARATIVE FINANCIAL DATA FOR PUBLICLY-HELD COMPANIES AND DATAPOINT CORPORATION
Company OPTICAL DATA TECHFORCE WESTERN MICRO
- ------- SYSTEMS, INC. CORPORATION TECHNOLOGY, INC. Minimum Mean Median
------------- ----------- ---------------- ------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Depcn & Amort.
TTM 2.2 1.9% 2.3 4.0% 0.6 0.6% 0.2% 2.2% 1.4%
CY 1995 2.1 1.9% 1.9 3.9% 0.5 0.5% 0.2% 2.1% 1.5%
CY 1994 1.8 2.1% 1.4 4.6% 0.6 0.5% 0.1% 2.4% 2.1%
CY 1993 1.4 2.5% 0.0 0.4% 0.9 0.9% 0.2% 2.3% 2.3%
3-Yr, CAGR 22.5% 589.2% -25.5% -29.3% 37.9% 22.5%
EBDAIT/Margin
TTM $25.1 21.5% $6.3 11.0% ($2.6) def. 3.8% 11.1% 9.2%
CY 1995 24.2 21.7% 4.7 9.6% (3.8) def. 3.8% 11.2% 5.9%
CY 1994 15.6 18.0% 3.6 11.7% 0.3 0.3% 0.3% 10.3% 5.5%
CY 1993 9.3 16.6% 1.7 19.6% 0.0 0.0% 0.0% 9.3% 6.6%
3-Yr, CAGR 61.3% 64.3% NM 38.9% 110.8% 91.2%
E.P.S.
TTM $0.84 $0.28 (4) ($1.07)
CY 1995 0.81 0.16 (1.36)
CY 1994 0.52 0.13 (0.27)
CY 1993 0.30 NA (0.31)
3-Yr, CAGR 64.3% NA NM 11.2% 87.1% 49.9%
Sales
CY 1995 $111.5 $49.2 $106.5
CY 1994 86.6 30.7 119.3
CY 1993 55.9 8.9 96.8
CY 1992 49.2 4.9 80.5
CY 1991 37.1 1.8 85.5
5-Yr, CAGR 31.4% 115.7% 5.6% -9.7% 56.7% 26.3%
Net Income/Margin
CY 1995 $13.7 12.3% $1.0 2.0% (10) ($5.1) def. (5)
CY 1994 8.6 9.9% 0.8 2.5% (10) ($1.0) def. (5)
CY 1993 4.9 8.8% 1.0 11.2% (10) (1.1) def. (5)
CY 1992 5.0 10.2% 0.7 14.3% (10) (0.4) def. (5)
CY 1991 1.8 4.9% 0.2 11.1% (10) (1.4) def. (5)
5-Yr, CAGR 66.1% 49.5% NM 66.1% 95.4% 86.1%
E.P.S.
CY 1995 $0.81 $0.16 (10) ($1.36)
CY 1994 0.52 0.13 (10) (0.27)
CY 1993 0.30 NA (0.31)
CY 1992 0.33 NA (0.12)
CY 1991 0.14 NA (0.45)
5-Yr. Avge: 0.42 NA (0.50)
<CAPTION>
Company DATAPOINT DATAPOINT
- ------- Maximum CORPORATION CORPORATION
------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Depcn & Amort.
TTM 7.6% $6.7 4.2% $6.4 5.6%
CY 1995 7.0% 9.8 5.6% 9.8 5.6%
CY 1994 8.8% 10.7 6.2% 10.7 6.2%
CY 1993 5.9% 11.1 5.3% 11.1 5.3%
3-Yr, CAGR 207.3% -6.0% -6.0%
EBDAIT/Margin
TTM 21.5% $18.4 11.6% $16.8 14.8%
CY 1995 24.6% (9.0) def. (9.0) def.
CY 1994 23.3% (74.6) def. (74.6) def.
CY 1993 28.2% 9.5 4.6% 9.5 4.6%
3-Yr, CAGR 280.8% NM NM
E.P.S.
TTM ($0.16) (12) $0.05 (14)
CY 1995 (2.29) (2.29)
CY 1994 (6.69) (6.69)
CY 1993 (0.97) (0.97)
3-Yr, CAGR 237.6% NM NM
Sales
CY 1995 $174.9 $174.9
CY 1994 172.9 172.9
CY 1993 208.3 208.3
CY 1992 255.2 255.2
CY 1991 265.5 265.5
5-Yr. CAGR 229.3% -9.9% -9.9%
Net Income/Margin
CY 1995 ($28.3) def. ($28.3) def.
CY 1994 (94.8) def. (94.8) def.
CY 1993 (11.9) def. (11.9) def.
CY 1992 (10.4) def. (10.4) def.
CY 1991 5.4 2.0% 5.4 2.0%
5-Yr. CAGR 134.0% #NUM! #NUM!
E.P.S.
CY 1995 ($2.29) ($2.29)
CY 1994 (6.69) (6.69)
CY 1993 (0.97) (0.97)
CY 1992 (1.62) (1.62)
CY 1991 0.30 0.30
5-Yr. Avge: (2.25) (2.25)
</TABLE>
Page 5
<PAGE>
<TABLE><CAPTION>
COMPARATIVE FINANCIAL DATA FOR PUBLICLY-HELD COMPANIES AND DATAPOINT CORPORATION
COMPANY OPTICAL DATA TECHFORCE WESTERN MICRO
- ------- SYSTEMS, INC. CORPORATION TECHNOLOGY, Inc. Minimum Mean
------------- ----------- ---------------- ------- ----
<S> <C> <C> <C> <C> <C>
SYMBOL
Total Assets
LFQ $78.1 $44.3 $40.2 $13.0 $99.4
CY 1995 71.7 38.3 35.9 13.1 96.6
CY 1994 52.6 25.0 37.9 9.4 57.2
Total Debt
LFQ $0.0 $6.6 $8.1 $0.0 $10.6
CY 1995 0.0 4.3 7.2 0.0 10.8
CY 1994 0.0 10.5 9.3 0.0 9.1
Shareholders' Equity
LFQ $62.4 $27.0 $12.3 $7.3 $63.3
CY 1995 58.7 25.1 11.0 6.5 62.0
CY 1994 43.4 (0.8) 14.4 3.9 32.1
Invested Capital
LFQ $62.4 $33.6 $20.4 $6.1 573.9
CY 1995 58.7 30.4 18.2 7.4 72.8
CY 1994 43.4 9.7 23.7 4.9 41.2
<CAPTION>
COMPANY DATAPOINT DATAPOINT
- ------- Median Maximum CORPORATION CORPORATION
------ ------- ----------- -----------
<S> <C> <C> <C> <C>
Total Assets
LFQ $68.2 $424.4 84.4 $77.6
CY 1995 70.1 424.4 101.8 101.8
CY 1994 52.6 131.5 127.4 127.4
Total Debt
LFQ $0.2 $45.0 $81.0 $38.1
CY 1995 0.8 45.0 90.9 90.9
CY 1994 0.5 45.7 90.9 90.9
Shareholders' Equity
LFQ $27.7 $336.0 ($54.4) ($11.5)
CY 1995 27.7 336.0 (74.1) (74.1)
CY 1994 23.0 97.7 (50.8) (50.8)
Invested Capital
LFQ $57.8 $336.0 $26.6 $26.6
CY 1995 58.7 336.0 16.8 16.8
CY 1994 43.4 97.7 40.1 40.1
</TABLE>
Page 6
<PAGE>
COMPARATIVE FINANCIAL DATA FOR PUBLICLY-HELD COMPANIES
AND DATAPOINT CORPORATION
Note: (1) Alpha Microsystems' CY 91 Income is before Extraordinary Item
($151 K or $.05 per shr.)
Note: (2) Prior to its initial public offering on March 20, 1996,
Alphanet Solutions, was an S corp. Accordingly, EPS, income taxes and
net income prior thereto are pro-forma.
Note: (3) BTG's income is from Continuing Oper'ns only for FY 1992.
Otherwise, co. would have expcd. a net loss of $478K, or $.20 per
shr.
Note: (4) During the latest fiscal year, Fore Systems has acquired four
companies and written off apx. $29.4 MM in Merger-Related expenses,
consisting of transaction costs such as fees to financial advisors,
legal and accounting fees. The acquisitions were all accounted for
on a pooling basis; hence, historic sales and earnings have been
adjusted to reflect them. However, the write-off of the merger-
related expenses lowered Operating Income considerably. Excluding
this write-off, operating income would have been appx. $40 MM, EBT
appx. $49.9 and Net Income appx. $23.7 MM, or $.27 per shr.
Note: (5) Micros-to-Mainframes included a non-recurring non-cash charge
of $4.655 MM for conversion of co.'s convertible preferred shares
based on cumulative sales target with the amount shown as pro forma,
based on expectation of s/h approval following the next annual mtg.
of co. I chose to treat this as a non-recurring item and have adjusted
EBT, Net, EPS etc. accordingly on pro-forma basis to exclude this
item.
Note: (6) Network Peripherals acquired NuCom Systems, Inc. 3/21/96, and,
pursuant to that acquisition, wrote off $13.3 MM in Research and
Development, In Process during its first quarter, which was the
"estimated current fair market value, using a risk-adjusted income
approach, of specifically identified technologies which had not
reached technical feasibility and had no future uses," according to
the company. Without this write-off, Network Peripherals would have
still had an unprofitable first quarter; however, on a TTM basis,
its net income, EBT and operating income would have all been
positive.
Note: (7) North Star Universal is a holding company, which has
experienced losses before equity in earnings of unconsolidated
subsidiaries and discontinued oper'ns for at least the past 3 yrs.
Since its unconsolidtd. subsidiaries are involved in far different
businesses from the operating subsidiaries, for the sake of
consistency, EPS have been recomputed on pro-forma basis to reflect
only opeating sub. results. Otherwise, EPS from Continuing Oper'ns
would have been $.31, $.15 and ($1.44) for FY 1995-1993, respectively.
The company is also in the process of undergoing reorganization,
whereby its equity in certain unconsolidated subsidiaries is largely
being spun off to shareholders.
Note: (8) North Star's FY 1993 Operating loss is after Restructuring
Charge of $1.95 MM; however, the company had an operating loss even
before the restructuring charge.
Note: (9) North Star's quarterly EBT and income before equity in
unconsolidated subsidiaries and discontinued operations reflect a
one-time $7.7 MM gain on sale of stock in one unconsolidate
subsidiary (CorVel). Otherwise, North Star would have experienced
pretax losses in its 1st Qtr. 1996 of $714K and, on a TTM Basis,
$3.5 MM. ($.07 and $.36, per share, respectively). Also, quarterly
D&A data are unavailable; hence, as a surrogate, the previous FY's
D&A total was used for TTM, assuming no dramatic change from quarter
to quarter.
Note: (10) Techforce was a partnership prior to its recapitalization in
3/94 and initial public offering on 12/14/95. Accordingly, EBT, net
income and EPS for pre-IPO period are pro-forma.
Note: (11) Western Micro Technology's EBT and Net are from Continuing
Oper'ns only, with discontinued operations account for $615K of
income, or $.10 per shr.
Note: (12) TTM and LFQ figures for Datapoint are pro forma, per projected
FYE results. Two sets of pro-forma numbers are provided. The first
assumes that sale of Datapoint's Telephony business is not achieved
by FYE 1996, and reflects only the sale of the the company's
automotive business to Kalamazoo plc. and application of proceeds
per projections provided by the company and modified by CCC
assumptions. The second set of pro-forma numbers assumes sales of
Datapoint's Telephony businesses and application of their proceeds
primarily to retire a substantial part of the company's 8 7/8%
Debentures at a discount from par. This set of pro-forma numbers
assumes the Flat Growth scenario generated by CCC, with sale of
Telephony at * net of liabilities.
Note: (13) Re Datapoint's FY 1994 Operating Loss, appx. $57.7 MM pertains
to a write-off of investment in foreign operations. Without this
write-off, the operating loss would have been appx. $23.4 MM, as
opposed to $81 MM. Since restructuring charges have been applied
in each of the past three fiscal years, they are not treated here as
non-recurring expenses, but have been included in operating
expenses; accordingly, for all other comparables, restructuring
expenses have not been segregated or brought below the operating
expense line.
Note: (14) Datapoint's TTM EPS are pro-forma, reflecting EPS to Common,
after deducing accrued or paid Preferred dividends to date (est.
$3.74 MM by FYE 1996, or 8 qtrs @ $.25/qtr. x 1,868,071 shrs. Pfd.
outstanding), from pro-forma net income and dividing by 13.67 MM
shrs. common stock outstanding (per 4/96 10-Q).
Page 7
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
COMPARATIVE MARKET AND FINANCIAL DATA FOR COMPARABLE
PUBLICLY-HELD COMPANIES AND DATAPOINT CORPORATION
<TABLE><CAPTION>
Company ALPHA MICROS-TO- NETWORK
- ------- MICRO- ALPHANET BTG, FORE MAINFRAMES, PERIPHERALS, NORTH STAR
SYSTEMS SOLUTIONS INC. SYSTEMS,INC. INC. INC. UNIVERSAL,INC.
------- --------- --- ------------ ----------- ------------ ---------------
SYMBOL ALMI ALPH BTGI FORE MTMC NPIX NSRU
<S> <C> <C> <C> <C> <C> <C> <C>
Latest Fiscal Year 2/25/96 12/31/95 3/31/96 3/31/96 3/31/96 12/31/95 12/31/95
Latest 12 Months 5/26/96 3/31/96 3/31/96 3/31/96 3/31/96 3/31/96 3/31/96
Current Stock Price - 7/12/96 $2.41 $7.00 $12.25
$33.75 $4.13 $14.88 $7.63
52-Wk. High $5.78 $12.00 $15.25 $44.75 $8.63 $20.75 $8.75
52-Wk. Low $0.50 $6.75 $8.38 $15.25 $3.75 $8.25 $5.50
Shares Outstanding (millions) 6.6 5.1 6.1 89.2 3.5 11.8 9.5
Market Value ($MM) $15.9 $35.7 $74.5 $3,008.8 $14.2 $175.5 $72.1
Market Capitalization ($MM)(1) $15.5 $24.5 $119.5 $2,712.7 $10.3 $168.0 $127.5
Market Cap. as Multiple of:
Latest 12 Months Sales 0.5 0.3 0.6 11.5 0.2 3.8 2.2
Latest 12 Months EBDAIT (2) def. 5.5 11.4 93.2 5.7 def. 12.4
Latest 12 Months EBIT (3) def. 5.8 14.4 131.7 6.0 def. 13.4
Market Value as Multiple of:
Latest 12 Months EBDAIT def. 8.0 7.1 103.4 7.9 def. 7.0
Latest 12 Months EBIT def. 8.5 9.0 146.1 8.3 def. 7.6
Latest 12 Months Inv. Capital 2.0 2.3 1.0 9.0 1.3 3.0 0.9
Common Stock Price as Multiple of:
Latest 12 Months E.P.S. def. 11.5 26.1 306.8 13.3 def. 33.2
Current Fiscal year E.P.S. NA 9.7 25.5 62.5 NA 82.6 NA
Next Fiscal Year E.P.S. NA 7.4 14.2 46.2 NA 39.1 NA
Average 5 Yrs. E.P.S. def. NA 35.0 482.1 13.8 36.0 NA
Book Value per Share 2.2 2.4 2.7 9.0 1.5 3.0 1.8
Net Tangible Bk. Val. per Shr. 2.2 2.4 9.9 9.0 1.5 3.0 2.1
Latest 12 Months Sales ($MM) $31.4 $75.0 $213.6 $235.2 $47.3 44.0 57.7
3-Yr. C.A.G.R. -8.6% 25.5% 43.6% 144.6% 27.7% 109.8% 8.3%
Latest 12 Months Gross Profit ($MM) $9.0 $10.2 $49.9 $136.5 $6.9 $20.3 $15.8
Gross Profit Margin 28.7% 13.6% 23.4% 58.0% 14.6% 46.1% 27.4%
3-Yr. C.A.G.R. -20.5% 34.3% 38.5% 137.5% 29.7% 110.0% 4.1%
Latest FY Gross Profit Margin 29.9% 13.6% 23.4% 58.0% 14.6% 47.8% 28.1%
Page 1
<PAGE>
COMPARATIVE MARKET AND FINANCIAL DATA FOR COMPARABLE
PUBLICLY-HELD COMPANIES AND DATAPOINT CORPORATION
<CAPTION>
Company ALPHA MICROS-TO- NETWORK
- ------- MICRO- ALPHANET BTG, FORE MAINFRAMES, PERIPHERALS, NORTH STAR
SYSTEMS SOLUTIONS INC. SYSTEMS,INC. INC. INC. UNIVERSAL,INC.
------- --------- --- ------------ ----------- ------------ ---------------
Latest 12 Months EBDAIT ($MM) ($1.5) $4.5 $10.5 $29.1 $1.8 ($5.1) $10.3
EBDAIT Margin def. 5.9% 4.9% 12.4% 3.8% def. 17.9%
3-Yr. C.A.G.R. NM 121.1% 40.8% 122.1% NM 280.8% 38.9%
Latest FY EBDAIT Margin def. 5.9% 4.9% 12.4% 3.8% 24.6% 4.9%
Latest 12 Months EBIT ($MM) ($3.9) $4.2 $8.3 $20.6 $1.7 ($6.4) $9.5
EBIT Margin def. 5.6% 3.9% 8.8% 3.6% def. 16.5%
3-Yr. C.A.G.R. NM 129.1% 40.6% 103.0% NM 407.4% NM
Latest FY EBIT Margin def. 5.7% 3.9% 8.8% 3.6% 21.9% 3.5%
Latest 12 Months EBIT ROIC def. 27.6% 11.4% 6.1% 15.5% def. 11.7%
Latest FY EBIT ROIC def. 56.8% 11.4% 6.1% 15.5% 15.7% 2.4%
Latest 12 Months EBDAIT/Total Assets def. 15.5% 9.6% 6.9% 11.1% def. 8.9%
Latest FY EBDAIT/Total Assets def. 23.8% 9.6% 6.9% 11.1% 16.5% 2.5%
Return on Equity def. 16.6% 10.8% 2.9% 10.4% def. 6.0%
Return on Net Tangible Book def. 16.6% 40.0% 2.9% 10.4% def. 6.9%
LFQ Total Debt as % Total Assets 6.2% 0.7% 41.1% 0.0% 0.0% 0.0% 35.3%
LFQ Total Debt as % Equity 11.0% 1.3% 162.5% 0.0% 0.0% 0.0% 103.0%
Dividend Nil Nil Nil Nil Nil Nil
Yield Nil Nil Nil Nil 0.0% Nil Nil
Earnings Per Share
Latest 12 Months E.P.S. ($0.60) $0.61 $0.47 $0.11 0.31 ($0.78) $0.23
Current Fiscal year E.P.S. (4) $0.72 $0.48 $0.54 NA $0.18 NA
Next Fiscal Year E.P.S. (4) NA $0.95 $0.86 $0.73 NA $0.38 NA
3-Yr. C.A.G.R. NM NA 11.2% 35.4% NM 237.6% NM
LFQ Total Assets $13.0 $28.7 $109.5 $424.4 $16.2 $68.2 $116.3
Book Value per Share $1.11 $2.96 $4.56 $3.77 $2.78 $4.90 $4.22
Net Tangible Bk. Val. per Share $1.08 $2.96 $1.23 $3.77 $2.78 $4.90 $3.70
Summary Capitalization ($MM): 5/26/96 % 3/31/96 % 3/31/96 % 3/31/96 % 3/31/96 % 3/31/96 % 3/31/96 %
--------- -- ------- -- -------- -- --------- -- ------ -- -------- -- --------- --
Cash & Investments $1.7 $11.4 $0.3 $296.1 $5.3 $7.5 $11.2
Goodwill $0.2 $0.0 $20.2 $0.0 $0.0 $0.0 $4.9
Total Debt $0.8 9 $0.2 1 $45.0 62 $0.0 0 $0.0 0 $0.0 0 $41.1 39
Deferred Taxes & Min. Interests 0.5 6 0.0 0 0.3 0 0.0 0 0.0 0 0.0 0 25.5 24
Preferred Equity 0.0 0 0.0 0 0.0 0 0.0 0 1.4 13 0.0 0 0.0 0
Common Shareholders' Equity 7.3 85 15.1 99 27.7 38 336.0 100 9.6 87 57.8 100 39.9 37
------ -- ----- -- ----- -- ------ -- ----- -- ------ -- ------ --
Total Capitalization $8.6 100 $15.3 100 $73.0 100 $336.0 100 $11.0 100 $57.8 100 $106.5 100
Page 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPARATIVE MARKET AND FINANCIAL DATA FOR COMPARABLE PUBLICLY-HELD COMPANIES AND DATAPOINT CORPORATION
Company OPTICAL WESTERN
- ------- DATA TECHFORCE MICRO
SYSTEMS, INC. CORPORATION TECHNOLOGY, INC. Minimum Mean
------------- ----------- ---------------- ------- ----
SYMBOL ODSI TFRC WSTM
<S> <C> <C> <C> <C> <C>
Latest Fiscal Year 12/31/95 12/31/95 12/31/95
Latest 12 Months 3/31/96 3/31/96 3/31/96
Current Stock Price - 7/12/96 $18.00 $5.75 $8.13
52-Wk. High $43.25 $13.25 $11.38
52-Wk. Low $16.75 $5.50 $2.88
Shares Outstanding (millions) 16.2 7.9 4.0
Market Value ($MM) $291.6 $45.5 $32.5 $14.2 $376.6
Market Capitalization ($MM)(1) $271.6 $43.7 $40.3 $10.3 $353.4
Market Cap. as Multiple of:
Latest 12 Months Sales 2.3 0.8 0.4 0.2 2.3
Latest 12 Months EBDAIT (2) 10.8 6.9 def. 5.5 20.9
Latest 12 Months EBIT (3) 11.9 10.9 def. 5.8 27.7
Market Value as Multiple of:
Latest 12 Months EBDAIT 11.6 7.2 def. 7.0 21.7
Latest 12 Months EBIT 12.7 11.4 def. 7.6 29.1
Latest 12 Months Inv. Capital 4.7 1.4 1.6 0.9 2.7
Common Stock Price as Multiple of:
Latest 12 Months E.P.S. 21.4 20.5 def. 11.5 61.8
Current Fiscal year E.P.S. 16.1 11.3 NA 9.7 34.6
Next Fiscal Year E.P.S. 11.7 7.5 NA NA NA
Average 5 Yrs. E.P.S. 42.9 NA def. 13.8 122.0
Book Value per Share 4.7 1.7 2.6 1.5 3.2
Net Tangible Bk. Val. per Shr. 4.7 1.7 3.7 1.5 4.0
Latest 12 Months Sales ($MM) $116.5 $57.1 $100.6 $31.4 $97.8
3-Yr. C.A.G.R. 41.2% 135.1% 4.9% -8.6% 53.2%
Latest 12 Months Gross Profit ($MM) $57.9 $18.2 $12.7
Gross Profit Margin 49.7% 31.9% 12.6% 12.6% 30.6%
3-Yr. C.A.G.R. 46.5% 118.1% -12.2% -20.5% 48.6%
Latest FY Gross Profit Margin 50.2% 31.9% 12.3% 12.3% 31.0%
<CAPTION>
Company DATAPOINT DATAPOINT
- ------- CORPORATION CORPORATION
----------- -----------
Median Maximum (with Telephony)(5) (without Telephony)(5)
------ -------
SYMBOL DPT DPT
<S> <C> <C> <C> <C>
Latest Fiscal Year 7/29/95 7/29/95
Latest 12 Months 7/29/96 7/29/96
Current Stock Price - 7/12/96 $1.25 $1.25
52-Wk. High $2.38 $2.38
52-Wk. Low $1.00 $1.00
Shares Outstanding (millions) 13.7 13.7
Market Value ($MM) $58.8 $3,008.8 $17.1 $17.1
Market Capitalization ($MM)(1) $81.6 $2,712.7 $83.3 $35.6
Market Cap. as Multiple of:
Latest 12 Months Sales 0.7 11.5 0.5 0.3
Latest 12 Months EBDAIT (2) 10.8 93.2 4.5 2.1
Latest 12 Months EBIT (3) 11.9 131.7 7.1 3.4
Market Value as Multiple of:
Latest 12 Months EBDAIT 7.9 103.4 0.9 1.0
Latest 12 Months EBIT 9.0 146.1 1.5 1.6
Latest 12 Months Inv. Capital 1.8 9.0 0.6 0.6
Common Stock Price as Multiple of:
Latest 12 Months E.P.S. 21.4 306.8 def. 25.0
Current Fiscal year E.P.S. 20.8 82.6 NA NA
Next Fiscal Year E.P.S. NA NA NA NA
Average 5 Yrs. E.P.S. 36.0 482.1 def. def.
Book Value per Share 2.5 9.0 Neg. Neg.
Net Tangible Bk. Val. per Shr. 2.7 9.9 Neg. Neg.
Latest 12 Months Sales ($MM) 66.4 $235.2 $158.2 $113.7
3-Yr. C.A.G.R. 34.5% 144.6% -8.4% -8.4%
Latest 12 Months Gross Profit ($MM) $47.1 $33.3
Gross Profit Margin 28.0% 58.0% 29.8% 29.3%
3-Yr. C.A.G.R. 36.4% 137.5% -18.5% -18.5%
Latest FY Gross Profit Margin 29.0% 58.0% 32.9% 32.9%
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
COMPARATIVE MARKET AND FINANCIAL DATA FOR COMPARABLE PUBLICLY-HELD COMPANIES AND DATAPOINT CORPORATION
Company OPTICAL WESTERN
- ------- DATA TECHFORCE MICRO
SYSTEMS, INC. CORPORATION TECHNOLOGY, INC. Minimum Mean
------------- ----------- ---------------- ------- ----
<S> <C> <C> <C> <C> <C>
Latest 12 Months EBDAIT ($MM) $25.1 $6.3 ($2.6)
EBDAIT Margin 21.5% 11.0% def. 3.8% 11.1%
3-Yr. C.A.G.R. 61.3% 64.3% NM 38.9% 104.2%
Latest FY EBDAIT Margin 21.7% 9.6% def. 3.8% 11.0%
Latest 12 Months EBIT ($MM) $22.9 $4.0 ($3.1)
EBIT Margin 19.7% 7.0% def. 3.6% 9.3%
3-Yr. C.A.G.R. 67.3% 28.3% NM 28.3% 129.3%
Latest FY EBIT Margin 19.8% 5.7% def. 3.5% 9.1%
Latest 12 Months EBIT ROIC 36.7% 11.9% def. 6.1% 17.3%
Latest FY EBIT ROIC 37.6% 9.2% def. 2.4% 19.4%
Latest 12 Months EBDAIT/Total Assets 32.1% 14.2% def. 6.9% 14.0%
Latest FY EBDAIT/Total Assets 33.8% 12.3% def. 2.5% 14.5%
Return on Equity 22.8% 7.3% def. 2.9% 11.0%
Return on Net Tangible Book 22.8% 7.3% def. 2.9% 15.2%
LFQ Total Debt as % Total Assets 0.0% 14.9% 20.1% 0.0% 11.8%
LFQ Total Debt as % Equity 0.0% 24.4% 65.9% 0.0% 36.8%
Dividend Nil Nil Nil
Yield Nil Nil Nil 0.0% 0.0%
Earnings Per Share
Latest 12 Months E.P.S. $0.84 $0.28 ($1.07)
Current Fiscal year E.P.S. (4) $1.12 $0.51 NA
Next Fiscal Year E.P.S. (4) $1.54 $0.77 NA
3-Yr. C.A.G.R. 64.3% NA NM 11.2% 87.1%
LFQ Total Assets $78.1 $44.3 $40.2 $13.0 $93.9
Book Value per Share $3.85 $3.41 $3.08
Net Tangible Bk. Val. per Share $3.85 $3.41 $2.20
Summary Capitalization ($MM) 3/31/96 % 3/31/96 % 3/31/96 %
------- - ------- - ------- -
Cash & Investments $20.5 $8.4 $0.3
Goodwill $0.0 $0.0 $3.5
Total Debt $0.0 0 $6.6 20 $8.1 40 0 17
Deferred Taxes & Min. Interests 0.5 1 0.0 0 0.0 0 0 3
Preferred Equity 0.0 0 0.0 0 0.0 0 0 1
Common Shareholders' Equity 62.4 99 27.0 80 12.3 60 37 78
--------- -- --------- --- ---- --
Total Capitalization $62.9 100 $33.6 100 $20.4 100
<CAPTION>
Company DATAPOINT DATAPOINT
- ------- CORPORATION CORPORATION
----------- -----------
Median Maximum (with Telephony)(5) (without Telephony)(5)
------ -------
<S> <C> <C> <C> <C>
Latest 12 Months EBDAIT ($MM) $18.4 $16.8
EBDAIT Margin 11.0% 21.5% 11.6% 14.8%
3-Yr. C.A.G.R. 64.3% 280.8% NM NM
Latest FY EBDAIT Margin 7.7% 24.6% def. def.
Latest 12 Months EBIT ($MM) $11.7 $10.4
EBIT Margin 7.0% 19.7% 7.4% 9.1%
3-Yr. C.A.G.R. 85.1% 407.4% 242.8% 242.8%
Latest FY EBIT Margin 5.7% 21.9% def. def.
Latest 12 Months EBIT ROIC 11.9% 36.7% 44.0% 39.1%
Latest FY EBIT ROIC 13.5% 56.8% def. def.
Latest 12 Months EBDAIT/Total Assets 11.1% 32.1% 21.8% 21.6%
Latest FY EBDAIT/Total Assets 11.7% 33.8% def. def.
Return on Equity 10.4% 22.8% def. def.
Return on Net Tangible Book 10.4% 40.0% def. def.
LFQ Total Debt as % Total Assets 3.4% 41.1% 96.0% 49.1%
LFQ Total Debt as % Equity 6.1% 162.5% -148.9% -331.3%
Dividend Nil Nil
Yield 0.0% 0.0% Nil Nil
Earnings Per Share
Latest 12 Months E.P.S. ($0.16) $0.05
Current Fiscal year E.P.S. (4) ($0.16) $0.05
Next Fiscal Year E.P.S. (4) NA NA
3-Yr. C.A.G.R. 49.9% 237.6% NM NM
LFQ Total Assets $56.3 $424.4 $84.4 $77.6
Book Value per Share ($4.12) ($0.98)
Net Tangible Bk. Val. per Share ($4.12) ($0.98)
Summary Capitalization ($MM) 7/29/96 % 7/29/96 %
------------ - ------------ -
Cash & Investments $16.7 $21.5
Goodwill $0.0 $0.0
Total Debt 1 62 $81.0 305 $38.1 143
Deferred Taxes & Min. Interests 0 24 0.0 0 0.0 0
Preferred Equity 0 13 1.9 7 1.9 7
Common Shareholders' Equity 87 100 (56.3) -212 (13.4) -50
------------ ---- ------------ ---
Total Capitalization $26.6 100 $26.6 100
</TABLE>
Page 4
<PAGE>
COMPARATIVE MARKET AND FINANCIAL DATA FOR COMPARABLE
PUBLICLY-HELD COMPANIES AND DATAPOINT CORPORATION
Note: (1) Market Capitalization = Market Value, plus Total Debt,
Preferred Equity, Deferred Taxes and Minority Interest, less Cash.
Note: (2) EBDAIT = Earnings Before Depreciation, Amortization, Interest
and Taxes.
Note: (3) EBIT = Earnings Before Interest and Taxes.
Note: (4) All Earnings Per Share estimates for current and next fiscal
years for comparable public companies have been obtained from either
Bloomberg Information Services or the Institutional Brokers Estimate
System as of July 12, 1996.
Note: (5) Earnings and balance sheet data for its FYE 7/30/96 are pro-
forma, with the first column assuming that company is unable to sell
its Telephony business by the end of the fiscal year and apply the
sale proceeds accordingly. The second column assumes that the
Telephony business is sold by FYE. For this latter column, this
analysis further applies the No Growth scenario assumptions, one of
three assumptions generated by CCC. In this scenario, it is
assumed that the Telephony business is sold for * net of liabilities,
with the proceeds applied to retire a substantial part of Datapoint's
8 7/8% Debentures through open market purchases at a *.
Page 5
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION
FORECASTS AND DISCOUNTED CASH FLOW
----------------------------------
CCC used two scenarios, once again, to project cash flows and discount them
to their present value appropriately. First, CCC used the post-automotive sale,
and second, a post-sale of the telephony business. Each had a no-growth,
negative growth and optimistic projection. The cash flow assumptions are
outlined in the notes to those exhibits.
CCC used what is termed a recurring EBDAIT for determining the terminal
value and a multiple of 7 times, the minimum generated in the comparable company
study.
The cash flow was "net free cash flow," that is, cash flow after capital
expenditures and required working capital. Furthermore, the net free cash flow
was unleveraged, eliminating the effect of debt, since the value of the debt as
of the end of fiscal year 1996 was deducted from the present value of the cash
flows. All figures were discounted at rates from 15.3% to 30% per the attached
memorandum. After deduction of debt, the balance available for common after the
par value of the Preferred plus accrued dividends was computed. CCC also
computed the value available for common after dilution at the ratio of 2.75:1.
The result was a value of $4.10 per share for the common before dilution,
and $3.28 after dilution using the 30% discount rate and utilizing the most
optimistic of the scenarios after the sale of telephony. The numbers are lower
if the telephone business is not sold due to the higher debt. Under this
scenario, the optimistic case indicates a value of $1.37 per common share and
$1.29 per share after dilution. However, in CCC's opinion, the scenarios should
be weighted to reflect no-growth and negative growth projections. Using a lower
22% for the discount rate in the optimistic scenario, and the lowest rate,
15.3%, for no growth and negative growth, with weightings of 50% for no growth
as the most likely event and 25% for each of the others, we arrive at a range of
$1.81 to $1.62 before and after dilution if the telephony business is sold. If
NOT SOLD, the weighted values are negative. In our opinion, the chance of sale
is at least 75%, which suggests the value of the common is $1.22 to $1.36.
CCC concluded that a range of $1.22 to $1.36 should be used for the
discounted cash flow approach.
<PAGE>
CORPORATE CAPITAL CONSULTANTS, INC.
MEMORANDUM
----------
TO: Peter L. Ratner
FROM: Carl A. Goldman
DATE: July 12, 1996
RE: DATAPOINT CORP. - DISCOUNT RATES TO BE USED FOR DCF
---------------------------------------------------
1) Take yield on debentures (can't do cost of capital because no
earnings and stock at $1+).
(Update debenture run thru 7/11/96).
But at 6/21/96 - 8-7/8 - 58 = 15.3%.
-----
2) Build up method; Assumptions 5 Year DCF:
a) 5-Year Treasury (risk-free rate) - 6-5/8, 6/1/2001 6.66%
b) Ibbotson (P. 157) Risk Premia
1. Intermediate - horizon 7.40%
2. Size Premia - micro cap. 4.00%
c) beta per Bloomberg 1.35%
3) Equity discount rate formula
Cost of equity = Risk Free Rate plus beta times risk premia
plus unsystematic risk.
6.66% + 1.35 (7.4% + 4.0%) + 0 = 22.05%
------
Unsystematic risk is zero, which assumes there is no additional
risk since size is already taken into account through the micro-cap premium
and volatility is in the beta. However, the history of losses creates a
problem in unsystematic risk, so this formula may understate the cost of
equity.
4) CCC cannot use a weighted cost of capital because there is a
deficit equity. Clearly the equity rate should be higher than the
debenture rate due to the higher risk.
5) For DCF, use low rate of 15.3%, base case at 22%, high case at 30%
(which would be a venture capital type rate.)
CAG:evk
<PAGE>
DATAPOINT CORP.: BASE CASE INDICATING EFFECT OF ASSET DISPOSITIONS
Fiscal Year Ended July 29, 1996
<TABLE><CAPTION>
Impact of Reductions for
Base Case Employee Reductions Sale of Automotive P&L, Net of Sale of
Entire Company & N/R Items Segment Automotive Segment
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $184,614 100.0% $184,614 100.0% $26,378 100.0% $158,236 100.0%
Cost of Sales 126,922 68.7% 124,660 67.5% 13,531 51.3% 111,129 70.2%
----------- ---------- --------- ---------
Gross Profit 57,692 31.3% 59,954 32.5% 12,847 48.7% 47,107 29.8%
Operating Expenses 33,822 18.3% 33,168 18.0% 7,040 26.7% 26,128 16.5%
Corporate G&A (1) 11,726 6.4% 9,343 5.1% 570 2.2% 8,773 5.5%
R&D 2,871 1.6% 2,548 1.4% 0 0.0% 2,548 1.6%
----------- ---------- --------- ---------
Operating Income 9,273 5.0% 14,895 8.1% 5,237 19.9% 9,658 6.1%
Interest (2) 8,791 8,791 1,139 7,652
----------- ---------- ---------
Run Rate Income/(Loss) 482 6,104 4,098 2,006
Other Income/(Expense):
Restructuring Expense (77) 77 0 0
Other Int'l Operating
Exp. (175) 380 0 205
Transaction Gain/(Loss) 1,756 0 0 1,756
----------- ---------- --------- ---------
Sub-total 1,504 457 0 1,961
Pretax Income/(Loss) 1,986 6,561 4,098 3,967
Taxes (4) (6,039) (2,767) (391) (2,376)
----------- ---------- --------- ---------
Net Income/(Loss) (4,053) 3,794 3,707 1,591
Depreciation & Amortizn. 6,900 6,900 200 6,700
Capital Expenditures 2,777 2,777 200 2,577
<CAPTION>
Reductions for P&L, Net of Sale of
Sale of Telephony Telephony and
Business Automotive Segments
------------------ -------------------
<S> <C> <C> <C> <C>
Revenues $44,506 100.0% $113,730 100.0%
Cost of Sales 30,666 68.9% 80,463 70.7%
---------- ----------
Gross Profit 13,840 31.1% 33,267 29.3%
Operating Expenses 11,079 24.9% 15,049 13.2%
Corporate G&A (1) 1,526 3.4% 7,247 6.4%
R&D 0 0.0% 2,548 2.2%
---------- ----------
Operating Income 1,235 2.8% 8,423 7.4%
Interest (2) 3,804 3,848
---------- ----------
Run Rate Income/(Loss) (2,569) 4,575
Other Income/(Expense):
Restructuring Expense 0 0
Other Int'l Operating
Exp 0 205
Transaction Gain/(Loss) 0 (3) 1,756 (3)
---------- ----------
Sub-total 0 1,961
Pretax Income/(Loss) (2,569) 6,536
Taxes (4) (264) (2,112)
---------- ----------
Net Income/(Loss) (2,833) 4,424
Depreciation & Amortizn. 300 6,400 5.6%
Capital Expenditures 300 2,277
</TABLE>
Page 1
<PAGE>
DATAPOINT CORP.: BASE CASE INDICATING EFFECT OF ASSET DISPOSITIONS
Fiscal Year Ended July 29, 1996
Note: (1) Corporate G&A is net of $994 K in non-recurring US HQ Expense,
per Datapoint's CFO.
Note: (2) Interest Reductions assume application of part or all of net
proceeds of each division's sale to retirement of certain debt, with
consequent interest reductions. See Pro-Forma Interest Computation
and Assumptions Worksheets for itemization of these reductions.
Note: (3) Even though Base Case and subsequent cases contemplate sale of
Telephony Division w/application of substantial part of proceeds to
retirement of Datapoint's Debentures at a gain, the gain has been
excluded here, as the purpose of this projection is to provide the
basis of non-recurring income and EBDAIT over the course of a five-
year period, and it is not expected that such a buy-back will occur
again during this time.
Note: (4) Although Datapoint has a tax loss carry-forward totaling appx.
$150 MM to date, per company officers, the taxes shown here pertain
to foreign operations, and are not affected by the carry-forward.
Page 2
<PAGE>
<TABLE><CAPTION>
Base Case Optimistic Scenario
--------- -------------------
<S> <C> <C>
Sales N/A +5% per annum
Cost of Sales 71% of Sls 70% of Sls
Operating Expenses 13% of Sls increase at half the rate of Sls
Corporate G&A N/A +1% per annum
R& D N/A +1.5% per annum
Deprec'n & Amortizn. $6.4 MM, net auto & tele business -10% per annum
$6.7 MM w/ tele business retention -10% per annum
Interest Expense:
- -----------------
With Retention of Telephony: Reflects retirement of Reflects retirement of
NTI, CIT debt and NTI, CIT debt and
partial retirement of partial retirement of
IFN debt pertaining to A/R IFN debt pertaining to A/R
from automotive segment. from automotive segment.
Assumes mortgage on Assumes mortgage on
Dutch building is replaced Dutch building is replaced
with debt on similar terms. with debt on similar terms.
With Sale of Telephony: Also reflects open market Also reflects open market
purchase of Debentures purchase of Debentures
at * at *
based on * net based on * net
proceeds from sale of proceeds from sale of
Telephony Business Telephony Business
(see separate pro-forma (see separate pro-forma
interest computation interest computation
spread-sheet) spread-sheet)
Income Taxes No U.S. income taxes owing to No U.S. income taxes owing to
$150 MM TLCF; assume flat $150 MM TLCF; assume flat
offshore taxes @ $2.4 MM per offshore taxes @ $2.1 MM per
annum w/ Telephony retention, annum w/ Telephony retention,
$2.1 MM w/ Telephony sale. $2.1 MM w/ Telephony sale.
Capital Expenditures Assume $2.6 MM w/retention of Assume $2.6 MM w/retention of
tele business, $2.3 MM with sale; tele business, $2.3 MM with sale;
remain flat each year. remain flat each year.
<CAPTION>
No Growth Scenario Negative Scenario
------------------ -----------------
<S> <C>
No change -5% per annum
71% of Sls 70% of Sls
13% of Sls decrease at half the rate of Sls
+0.5% per annum +1% per annum
+0.5% per annum No growth
-10% per annum -10% per annum
-10% per annum -10% per annum
Reflects retirement of Reflects retirement of
NTI, CIT debt and NTI, CIT debt and
partial retirement of partial retirement of
IFN debt pertaining to A/R IFN debt pertaining to A/R
from automotive segment. from automotive segment.
Assumes mortgage on Assumes mortgage on
Dutch building is replaced Dutch building is replaced
with debt on similar terms. with debt on similar terms.
Also reflects open market Also reflects open market
purchase of Debentures purchase of Debentures
at * at *
based on * net based on * net
proceeds from sale of proceeds from sale of
Telephony Business Telephony Business
(see separate pro-forma (see separate pro-forma
interest computation interest computation
spread-sheet) spread-sheet)
No U.S. income taxes owing to No U.S. income taxes owing to
$150 MM TLCF; assume flat $150 MM TLCF; assume flat
offshore taxes @ $2.1 MM per offshore taxes @ $2.1 MM per
annum w/ Telephony retention, annum w/ Telephony retention,
$2.1 MM w/ Telephony sale. $2.1 MM w/ Telephony sale.
Assume $2.6 MM w/retention of Assume $2.6 MM w/retention of
tele business, $2.3 MM with sale; tele business, $2.3 MM with sale;
remain flat each year. remain flat each year.
</TABLE>
Page 3
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
REFLECTING SAVINGS FROM SALES OF EITHER AUTOMOTIVE OR BOTH
AUTOMOTIVE AND TELEPHONY BUSINESSES
<TABLE><CAPTION>
Base Case Optimistic No Growth Negative Growth
<S> <C> <C> <C> <C>
Total Interest Expense $8,791 $8,791 $8,791 $8,791
Retirement of NTI Note (726) (726) (726) (726)
Retirement of CIT Facility (278) (278) (278) (278)
Partial paydown of IFN Mortgage
(Germany & UK) (135) (135) (135) (135)
--------- --------- -------- --------
Interest with Retention of Telephony Business: 7,652 7,652 7,652 7,652
Impact of Sale of Telephony Business:
- -------------------------------------
Reduction of Debenture interest
through open market purchases:
Scenario 1: Telephony sold for
*, net (Base, No Growth and Negative Scenarios) (3,804) (3,804) (3,804)
Scenario 2: Telephony sold for
*, net (Optimistic Scenario) (5,071)
--------- --------- -------- -------
$3,848 $2,581 $3,848 $3,848
Scenario 1 Telephony Sale - Net Proceeds: *
- -----------------------------------------
Face amount of Debentures purchased (at *) 42,857
Interest on Debentures purchased $3,804
Scenario 2 Telephony Sale - Net Proceeds: *
- -----------------------------------------
Face amount of Debentures purchased (at *) 57,143
Interest on Debentures purchased $5,071
Gains on Debenture purchases at discount:
- -----------------------------------------
Scenario 1: *
Scenario 2: *
</TABLE>
Page 4
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION:
FIVE-YEAR FORECAST OF INCOME & CASH FLOW
ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END
<PAGE>
DATAPOINT CORPORATION; FIVE-YEAR FORECAST OF INCOME & CASH FLOW
ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END
AND DEBENTURE BUY-BACK @ *
DOLLARS IN THOUSANDS
OPTIMISTIC SCENARIO
-------------------
<TABLE><CAPTION>
Fiscal Year Ended 1996 1997 1998
--------------------- ----------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ % $ % % Change $ % % Change
Revenues $ 113,730 100.0% $119,417 100.0% 5.0% $125,387 100.0% 5.0%
Cost of Sales 80,463 70.7% 82,475 69.1% 2.5% 84,536 67.4%
----------- ------------ ---------
Gross Profit 33,267 29.3% 36,942 30.9% 40,851 32.6%
Operating Expenses 15,049 13.2% 15,425 12.9% 2.5% 15,811 12.6% 2.5%
Corporate G&A 7,247 6.4% 7,319 6.1% 1.0% 7,393 5.9% 1.0%
R&D 2,548 2.2% 2,586 2.2% 1.5% 2,625 2.1% 1.5%
----------- ------------ ---------
Operating Income 8,423 7.4% 11,611 9.7% 15,022 12.0%
Interest 2,581 (1) 2,581 2,581
----------- ------------ ---------
Other Income/(Expense):
Restructuring Expense 0
Other Int'l Operating Exp. 205
Transaction Gain/(Loss) 1,756
-----------
Sub-total 1,961
Pretax Income/(Loss) 7,803 9,030 12,442
Taxes (2,112) (2,112) (2,112)
----------- ------------ ---------
Net Income/(Loss) 5,691 6,918 10,330
Interest 2,581 2,581 2,581
Depreciation & Amortizn. 6,400 5.6% 5,760 4.8% -10.0% 5,184 4.1% -10.0%
Capital Expenditures (2,277) (2,277) (2,277)
----------- ------------ ---------
Net Free Cash Flow before W.C.
(unleveraged) 12,395 12,982 15,817
Working Capital requirements (12,395) (12,982) (5,800)(2)
----------- ------------ ---------
Net Free Cash Flow (unlevrgd.) 0 0 10,017
Terminal Value 0 0 0
----------- ------------ ---------
Total Flows to be Discounted 0 0 10,017
Operating income 8,423 11,611 15,022
Depreciation & Amortizn. 6,400 5.6% 5,760 4.8% -10.0% 5,184 4.1% -10.0%
----------- ------------ ---------
Recurring EBDAIT (3) $14,823 $17,371 $20,206
less debt (4) Net Value less Pfd.(5) per C/S shr.
------------- --------- ------------ -----------
PV at: 15.3% $147,926 (23,900) $124,026 ($5,604) $118,422 $8.66
22.0% $114,142 (23,900) $ 90,242 ($5,604) $ 84,638 $6.19
30.0% $85,529 (23,900) $ 61,629 ($5,604) $ 56,025 $4.10
<CAPTION>
Fiscal Year Ended 1999 2000 2001
---------------------------- ---------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ % % Change $ % % Change $ % % Change
Revenues $131,657 100.0% 5.0% $138,240 100.0% 5.0% $145,152 100.0% 5.0%
Cost of Sales 86,650 65.8% 88,816 64.2% 91,036 62.7%
------------ ----------- --------
Gross Profit 45,007 34.2% 49,423 35.8% 54,115 37.3%
Operating Expenses 16,206 12.3% 2.5% 16,611 12.0% 2.5% 17,027 11.7% 2.5%
Corporate G&A 7,467 5.7% 1.0% 7,541 5.5% 1.0% 7,617 5.2% 1.0%
R&D 2,664 2.0% 1.5% 2,704 2.0% 1.5% 2,745 1.9% 1.5%
------------ ----------- ---------
Operating Income 18,670 14.2% 22,567 16.3% 26,727 18.4%
Interest 2,150 1,901 1,901
------------ ----------- ---------
Other Income/(Expense):
Restructuring Expense
Other Int'l Operating Exp.
Transaction Gain/(Loss)
Sub-total
Pretax Income/(Loss) 16,520 20,666 24,826
Taxes (2,112) (2,112) (2,112)
------------ ----------- ---------
Net Income/(Loss) 14,408 18,554 22,714
Interest 2,150 1,901 1,901
Depreciation & Amortizn. 4,666 3.5% -10.0% 4,199 3.0% -10.0% 3,779 2.6% -10.0%
Capital Expenditures (2,277) (2,277) (2,277)
------------ ----------- ---------
Net Free Cash Flow before W.C.
(unleveraged) 18,946 22,377 26,117
Working Capital requirements (1,254) (1,317) (1,382)
------------ ----------- ---------
Net Free Cash Flow (unlevrgd.) 17,692 21,060 24,735
Terminal Value 0 0 213,542 (7)
------------ ----------- ---------
Total Flows to be Discounted 17,692 21,060 238,277
Operating income 18,670 22,567 26,727
Depreciation & Amortizn. 4,666 3.5% -10.0% 4,199 3.0% -10.0% 3,779 2.6% -10.0%
------------ ----------- ---------
Recurring EBDAIT (3) $23,335 $26,766 $ 30,506
per diluted C/S shr. for exchange (6)
PV at: -------------------------------------
$6.59
$4.80
$3.28
</TABLE>
Page 1
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
Dollars in Thousands DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END AND DEBENTURE BUY-BACK @ *
Optimistic Scenario
-------------------
Fiscal Year Ended 1996 1997
--------------- ------------------------
$ % $ % % Change
- - - - --------
<S> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 0 0
less, Interest expense (2,581)
-------
Net Cash flow avail. after int. 0 (2,581)
Balance of remaining CSD's (* buy-back) 7,657
FCF to repurchase remaining CSD's: 0
Pcpal. value for remaining repurchase (par) 0
Interest on repurchased CSD's 8.875% 0
Total Debentures bought back post-1996: 7,657
Net FCF available for Pfd. Dividend payment 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 3,736 5,604
Initial Wkg. Cap. deficit (6,100)
Cum. Wkg. Cap. requirement
(20% sls) $23,883
less, cum net FCF to W.C. 12,395 (19,277)
------
Net FCF to Wkg. Cap. 6,295
Net wkg. cap. requirement 4,606
<CAPTION>
Dollars in Thousands
Optimistic Scenario
-------------------
Fiscal Year Ended 1998 1999
------------------------- ------------------------
$ % % Change $ % % Change
- - -------- - - --------
<S> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 10,017 17,692
less, Interest expense (5,161) (2,150)
------- --------
Net Cash flow avail. after int. 4,856 15,543
Balance of remaining CSD's (* buy-back) 7,657 2,801
FCF to repurchase remaining CSD's: 4,856 2,801
Pcpal. value for remaining repurchase (par) 4,856 2,801
Interest on repurchased CSD's 8.875% 431 249
Total Debentures bought back post-1996:
Net FCF available for Pfd. Dividend payment 0 12,741
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 7,472 9,340
Initial Wkg. Cap. deficit
Cum. Wkg. Cap. requirement
(20% sls) $25,077 $26,331
less, cum net FCF to W.C. (25,077) (26,331)
Net FCF to Wkg. Cap.
Net wkg. cap. requirement
0 ($0)
<CAPTION>
Dollars in Thousands
Optimistic Scenario
-------------------
Fiscal Year Ended 2000 2001
----------------------- ------------------------
$ % % Change $ % % Change
- - -------- - - --------
<S> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 21,060 24,735
less, Interest expense (1,901) (1,901)
------- -----------
Net Cash flow avail. after int. 19,159 22,834
Balance of remaining CSD's (* buy-back) 0 0
FCF to repurchase remaining CSD's: 0 0
Pcpal. value for remaining repurchase (par) 0 0
Interest on repurchased CSD's 8.875% 0 0
Total Debentures bought back post-1996:
Net FCF available for Pfd. Dividend payment 19,159 22,834
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 11,208
Initial Wkg. Cap. deficit
Cum. Wkg. Cap. requirement
(20% sls) $27,648 $29,030
less, cum net FCF to W.C. (27,648) (29,030)
Net FCF to Wkg. Cap.
Net wkg. cap. requirement
($0) $0
</TABLE>
Page 2
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END
AND DEBENTURE BUY-BACK @ *
Dollars in Thousands
Optimistic Scenario
- --------------------
Note: (1) Interest expense reflects application of * net proceeds from sale
of Telephony division to retirement of 8 7/8% Convertible Subordinated
Debentures at average *; hence appx. $57.1 MM of debentures are retired,
with consequent decrease of interest of $5.1 MM. This scenario further
assumes retirement of the remaining $7.7 MM of debentures at par in
1998, with consequent reduction of approximately $680 K of interest in
subsequent years.
Note: (2) For purposes of this projection, it is assumed that the company
requires approximately one-fifth of revenues for working capital
requirements. This scenario posits a beginning working capital
deficit at year-end 1996 of approximately $6.1 MM, with free cash
flow devoted to meeting that goal in subsequent years. It is
further assumed that $7.7 MM of cash flow (after interest expense)
is utilized to retire the outstanding balance of Convertible
Subordinated Debentures by year-end 1999. For all subsequent years,
all cash flow above the amount necessary to meet the working capital
requirement is considered net free cash flow. For the purposes of
an unleveraged discounted cash flow, an unleveraged net free cash
flow is computed; for determining the ability and timing of the
company's retirement of its outstanding debentures, a free cash flow
after interest expense has been provided.
Note: (3) Recurring EBDAIT excludes the Other Income items that pertained
to fiscal year 1996, since those were generally considered non-
recurring items.
Note: (4) Debt as of the end of fiscal year 1996, assuming sale of the
Telephony division during the year and the application of the net
proceeds to the retirement of approximately $57.1 MM of debentures,
purchased at *. See pro-forma balance sheet and computation of
pro-forma total debt in accompanying spread-sheets for backup.
Note: (5) To determine the present value of future cash flow to the
common shareholders, the cumulative arrearage as of fiscal year-end
(8 quarters), plus the par value of the Preferred shares outstanding
(approximately 1,868,000 shares) have been deducted.
Note: (6) To determine the fully diluted value of the present value of
cash flow to common shareholders, it has been assumed that the
Preferred shares have all been exchanged, per the exchange ratio
proposed in the current offer by Datapoint.
Note: (7) To determine Terminal Value, we have applied the minimum
Price/EBDAIT multiple derived from our comparable company study
(7.0) to the final year's projected EBDAIT for this scenario.
Page 3
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
Dollars in Thousands DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
NO GROWTH SCENARIO ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END AND DEBENTURE BUY-BACK @ *
--------------------
<CAPTION>
Fiscal Year Ended 1996 1997 1998
----------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ % $ % % Change $ % % Change
- - - - -------- - - --------
Revenues $113,730 100.0% $113,730 100.0% 0.0% $113,730 100.0% 0.0%
Cost of Sales 80,463 70.7% 80,463 70.7% 80,463 70.7%
--------- --------- ---------
Gross Profit 33,267 29.3% 33,267 29.3% 33,267 29.3%
Operating Expenses 15,049 13.2% 15,049 13.2% 0.0% 15,049 13.2% 0.0%
Corporate G&A 7,247 6.4% 7,283 6.4% 0.5% 7,320 6.4% 0.5%
R&D 2,548 2.2% 2,561 2.3% 0.5% 2,574 2.3% 0.5%
--------- --------- ---------
Operating Income 8,423 7.4% 8,374 7.4% 8,325 7.3%
Interest 3,848 (1) 3,848 3,848
--------- --------- ---------
Other Income/(Expense):
Restructuring Expense 0
Other Int'l Operating Exp. 205
Transaction Gain/(Loss) 1,756
---------
Sub-total 1,961
Pretax Income/(Loss) 6,536 4,526 4,476
Taxes (2,112) (2,112) (2,112)
--------- --------- ---------
Net Income/(Loss) 4,424 2,414 2,364
Interest 3,848 3,848 3,848
Depreciation and Amortizn. 6,400 5.6% 5,760 5.1% -10.0% 5,184 4.6% -10.0%
Capital Expenditures (2,277) (2,277) (2,277)
--------- --------- ---------
Net Free Cash Fow before W.C.: 12,395 9,745 9,120
(unleveraged)
Working Capital requirements (2) (12,395) (9,745) (6,706)
--------- ---------
Net Free Cash Flow (unlevrgd.) 0 0 2,414
Terminal Value 0 0 0
--------- --------- ---------
Total Flows to be Discounted 0 0 2,414
Operating Income 8,423 8,374 8,325
Depreciation & Amortizn. 6,400 5.6% 5,760 5.1% -10.0% 5,184 4.6% -10.0%
--------- --------- ---------
Recurring EBDAIT (3) $14,823 $14,134 $13,509
PV at: less debt(4) Net Value less Pfd.(5) per C/S shr.
- ------ ------------ --------- ------------ ------------
15.3% $56,722 (38,100) $18,622 ($5,604) $13,018 $0.95
22.0% $43,721 (38,100) $5,621 ($5,604) $17 $0.00
30.0% $32,710 (38,100) ($5,390) ($5,604) ($10,994) ($0.80)
<CAPTION>
Dollars in Thousands
NO GROWTH SCENARIO
--------------------
Fiscal Year Ended 1999 2000 2001
---------------------------- ------------------------------ -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ % % Change $ % % Change $ % % Change
- - -------- - - -------- - - --------
Revenues $113,730 100.0% 0.0% $113,730 100.0% 0.0% $113,730 100.0% 0.0%
Cost of Sales 80,463 70.7% 80,463 70.7% 80,463 70.7%
--------- --------- ---------
Gross Profit 33,267 29.3% 33,267 29.3% 33,267 29.3%
Operating Expenses 15,049 13.2% 0.0% 15,049 13.2% 0.0% 15,049 13.2% 0.0%
Corporate G&A 7,356 6.5% 0.5% 7,393 6.5% 0.5% 7,430 6.5% 0.5%
R&D 2,586 2.3% 0.5% 2,599 2.3% 0.5% 2,612 2.3% 0.5%
--------- --------- ---------
Operating Income 8,275 7.3% 8,226 7.2% 8,176 7.2%
Interest 3,848 3,848 3,528
--------- --------- ---------
Other Income/(Expense):
Restructuring Expense
Other Int'l Operating Exp.
Transaction Gain/(Loss)
Sub-total
Pretax Income/(Loss) 4,427 4,377 4,647
Taxes (2,112) (2,112) (2,112)
--------- --------- ---------
Net Income/(Loss) 2,315 2,265 2,535
Interest 3,848 3,848 3,528
Depreciation and Amortizn. 4,666 4.1% -10.0% 4,199 3.7% -10.0% 3,779 3.3% -10.0%
Capital Expenditures (2,277) (2,277) (2,277)
--------- --------- ---------
Net Free Cash Fow before W.C.: 8,552 8,036 7,566
(unleveraged)
Working Capital requirements (2) 0 0 0
--------- --------- ---------
Net Free Cash Flow (unlevrgd.) 8,552 8,036 7,566
Terminal Value 0 0 83,684 (7)
--------- --------- ---------
Total Flows to be Discounted 8,552 8,036 91,249
Operating Income 8,275 8,226 8,176
Depreciation & Amortizn. 4,666 4.1% -10.0% 4,199 3.7% -10.0% 3,779 3.3% -10.0%
--------- --------- ---------
Recurring EBDAIT (3) $12,941 $12,425 $11,955
PV at: per diluted C/S shr. for exchange (6)
- ------ -------------------------------------
$0.99
$0.30
($0.29)
Page 1
</TABLE>
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
Dollars in Thousands DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
NO GROWTH SCENARIO ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END AND DEBENTURE BUY-BACK @ *
--------------------
Fiscal Year Ended 1996 1997 1998
---------------- ----------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ % $ % % Change $ % % Change
- - - - -------- - - --------
Net Free Cash Flow (unlevrgd.) 0 2,414
less, Interest expense (8) (3,848) (7,697)
------- -------
Net Cash flow avail. after int. (3,848) (5,283)
Balance of remaining CSD's (*) 21,943 21,943
FCF to repurchase remaining
CSD's: 0 0
Pcpal. value for remaining
purchase (par) 0 0
Interest on repurchased CSD's 8.875% 0 0
Total Debentures bought back
post-1996: 7,645
Net FCF available for Pfd.
Dividend payment 0 0
cumulative Pfd. arrearage @
yr.-end:
1,868.1 shrs. 3,736 5,604 7,472
Initial Wkg. Cap. deficit (6,100)
Cum. Wkg. Cap. requirement
(20% sls) $22,746 $22,746
less, cum net FCF to W.C. 12,395 (16,040) (22,746)
------
Net FCF to Wkg. Cap. 6,295
Net wkg. cap. requirement 6,706 (0)
<CAPTION>
Dollars in Thousands
NO GROWTH SCENARIO
--------------------
Fiscal Year Ended 1999 2000 2001
------------------------------ ----------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ % % Change $ % % Change $ % % Change
- - -------- - - -------- - - ------
Net Free Cash Flow (unlevrgd.) 8,552 8,036 7,566
less, Interest expense (8) (9,131) (4,428) (3,528)
-------- ------- -------
Net Cash flow avail. after
int. (580) 3,608 4,038
Balance of remaining CSD's
* 21,943 21,943 18,335
FCF to repurchase remaining
CSD's: 0 3,608 4,038
Pcpal. value for remaining
purchase (par) 0 3,608 4,038
Interest on repurchased CSD's 0 320 358
Total Debentures bought back
post-1996:
Net FCF available for Pfd.
Dividend payment 0 0 0
cumulative Pfd. arrearage @
yr.-end:
1,868.1 shrs. 9,340 11,208 13,076
Initial Wkg. Cap. deficit
Cum. Wkg. Cap. requirement
(20% sls) $22,746 $22,746 $22,746
less, cum net FCF to W.C. (22,746) (22,746) (22,746)
Net FCF to Wkg. Cap.
Net wkg. cap. requirement
($0) $0 $0
</TABLE>
Page 2
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END
AND DEBENTURE BUY-BACK @ *
Dollars in Thousands
No Growth Scenario
- --------------------
Note: (1) Interest expense reflects application of * net proceeds
from sale of Telephony division to retirement of 8 7/8% Convertible
Subordinated Debentures at average *; hence appx. $42.9 MM of debentures
are retired, with consequent decrease of interest of 3.8 MM. This
scenario further assumes that all free cash flow after working capital
requirements are applied towards reduction of the Debenture balance, and
that company is unable to repurchase Debentures at less than par.
Note: (2) For purposes of this projection, it is assumed that the company
requires approximately one-fifth of annual revenues for working
capital requirements. This scenario posits a beginning working
capital deficit at year-end 1996 of approximately $6.1 MM, with free
cash flow initially devoted to meeting that goal in subsequent
years. Once annual targets are met, all subsequent free cash flow
generated above the amount necessary to meet this requirement (after
interest expense) is applied towards reducing the company's
Convertible Subordinated Debenture balance. For all years subsequent
to the initial buy-back of 1996, it is assumed that the company is
only able to repurchase the Debentures at *. Once all of the
outstanding Debentures are retired, it is further assumed that the
remaining cash flow may be applied to paying the arrearages on the
Preferred stock. In this projection, Datapoint is unable to
generate sufficient free cash flow during the period covered by this
projection to reduce or eliminate the Preferred arrearage.
Note: (3) Recurring EBDAIT excludes the Other Income items that pertained
to fiscal year 1996, since those were generally considered non-
recurring items.
Note: (4) Debt as of the end of fiscal year 1996, assuming sale of the
Telephony division during the year and application of the net
proceeds to the retirement of approximately * of debentures,
purchased at *. See pro-forma balance sheet and computation of
pro-forma total debt in accompanying spread-sheets for backup.
Note: (5) To determine the present value of future cash flow to the
common shareholders, the cumulative arrearage as of fiscal year-end
(8 quarters), plus the par value of the Preferred shares outstanding
(approximately 1,868,000 shares) have been deducted.
Note: (6) To determine the fully diluted value of the present value of
cash flow to common shareholders, it has been assumed that the
Preferred shares have all been exchanged, per the exchange ratio
proposed in the current offer by Datapoint.
Note: (7) To determine Terminal Value, we have applied the minimum
Price/EBDAIT multiple derived from our comparable company study
(7.0) to the final year's projected EBDAIT for this scenario.
Note: (8) For purposes of determining the Company's ability either to
retire Debentures or cure its Preferred arrearage, a free cash flow
net of interest and working capital requirements has been computed.
In those situations in which this total is negative (i.e., where
interest for the year exceeds FCF net working capital requirements,
the spread-sheet employs the convention of carrying over unpaid
interest to the following year. However, in point of fact, it is
most likely that the company will utilize the funds allocated for
working capital requirements to pay out that year's interest rather
than risking default to any of its creditors.
Page 3
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE><CAPTION>
DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END AND DEBENTURE BUY-BACK @ *
DOLLARS IN THOUSANDS
NEGATIVE GROWTH SCENARIO
- ------------------------
Fiscal Year Ended 1996 1997 1998 1999
----------------- ------------------------- --------------------------- -----------------------
$ % $ % % Change $ % % Change $ % % Change
- - - - -------- - - -------- - - --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $113,730 100.0% $108,044 100.0% -5.0% $102,641 100.0% -5.0% $97,509 100.0% -5.0%
Cost of Sales 80,463 70.7% 75,630 70.0% 71,849 70.0% 68,258 70.0%
-------- -------- -------- --------
Gross Profit 33,267 29.3% 32,413 30.0% 30,792 30.0% 29,253 30.0%
Operating Expenses 15,049 13.2% 14,673 13.6% -2.5% 14,306 13.9% -2.5% 13,948 14.3% -2.5%
Corporate G&A 7,247 6.4% 7,319 6.8% 1.0% 7,393 7.2% 1.0% 7,467 7.7% 1.0%
R&D 2,548 2.2% 2,548 2.4% 0.0% 2,548 2.5% 0.0% 2,548 2.6% 0.0%
-------- -------- -------- -------
Operating Income 8,423 7.4% 7,873 7.3% 6,546 6.4% 5,290 5.4%
Interest 3,848 (1) 3,848 3,848 3,848
-------- -------- -------- -------
Other Income/(Expense):
Restructuring Expense 0
Other Int'l Operating Exp. 205
Transaction Gain/(Loss) 1,756
-------
Sub-total 1,961
Pretax Income/(Loss) 6,536 4,024 2,697 1,441
Taxes (2,112) (2,112) (2,112) (2,112)
-------- --------- ---------- ---------
Net Income/(Loss) 4,424 1,912 585 (671)
Interest 3,848 3,848 3,848 3,848
Depreciation & Amortizn. 6,400 5.6% 5,760 5.3% -10.0% 5,184 5.1% -10.0% 4,666 4.8% -10.0%
Capital Expenditures (2,277) (2,277) (2,277) (2,277)
-------- --------- --------- --------
Net Free Cash Flow before W.C.: 12,395 9,244 7,341 5,566
(unleveraged)
Working Capital requirements (2) (12,395) (9,244) (4,989) 0
-------- ------------ --------- ------------
Net Free Cash Flow (unlevrgd.) 0 0 2,352 5,566
Terminal Value 0 0 0 0
-------- ------------ --------- ------------
Total Flows to be Discounted 0 0 2,352 5,566
Operating Income 8,423 7,873 6,546 5,290
Depreciation & Amortizn. 6,400 5.6% 5,760 5.3% -10.0% 5,184 5.1% -10.0% 4,666 4.8% -10.0%
------- ---------- -------- ----------
Recurring EBDAIT (3) $14,823 $13,633 $11,730 $9,955
<CAPTION>
DOLLARS IN THOUSANDS
NEGATIVE GROWTH SCENARIO
- ------------------------
Fiscal Year Ended 2000 2001
------------------------------ ----------------------------
$ % % Change $ % % Change
- - -------- - - --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $92,634 100.0% -5.0% $88,002 100.0% -5.0%
Cost of Sales 64,844 70.0% 61,601 70.0%
-------- --------
Gross Profit 27,790 30.0% 26,401 30.0%
Operating Expenses 13,600 14.7% -2.5% 13,260 15.1% -2.5%
Corporate G&A 7,541 8.1% 1.0% 7,617 8.7% 1.0%
R&D 2,548 2.8% 0.0% 2,548 2.9% 0.0%
------- -------
Operating Income 4,101 4.4% 2,976 3.4%
Interest 3,848 3,848
------- -------
Other Income/(Expense):
Restructuring Expense
Other Int'l Operating Exp.
Transaction Gain/(Loss)
Sub-total
Pretax Income/(Loss) 253 (872)
Taxes (2,112) (2,112)
-------- --------
Net Income/(Loss) (1,859) (2,984)
Interest 3,848 3,848
Depreciation & Amortizn. 4,199 4.5% -10.0% 3,779 4.3% -10.0%
Capital Expenditures (2,277) (2,277)
-------- ----------
Net Free Cash Flow before W.C. 3,911 2,366
(unleveraged)
Working Capital requirements (2) 0 0
-------- ----------
Net Free Cash Flow (unlevrgd.) 3,911 2,366
Terminal Value 0 47,288 (7)
------- -------
Total Flows to be Discounted 3,911 49,655
Operating Income 4,101 2,976
Depreciation & Amortizn. 4,199 4.5% -10.0% 3,779 4.3% -10.0%
------- -------
Recurring EBDAIT (3) $ 8,300 $6,755
PV at: less debt (4) Net Value less Pfd.(5) per C/S shr. per diluted C/S shr. for exchange (6)
- ------ ------------- --------- ------------ ------------ -------------------------------------
15.3% $31,981 (38,100) ($6,119) ($5,604) ($11,723) ($O.86) ($0.33)
22.0% $24,783 (38,100) ($13,317) ($5,604) ($18,921) ($1.38) ($0.71)
30.0% $18,668 (38,100) ($19,432) ($5,604) ($25,036) ($1.83) ($1.03)
</TABLE>
Page 1
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END AND DEBENTURE BUY-BACK @ *
DOLLARS IN THOUSANDS
NEGATIVE GROWTH SCENARIO
- ------------------------
Fiscal Year Ended 1996 1997 1998
----------------- ------------------------- -------------------------
$ % $ % % Change $ % % Change
- - - - -------- - - --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 0 2,352
less, Interest expense (8) (3,848) (7,697)
------ --------
Net Cash flow avail. after int. (3,848) (5,345)
Balance of remaining CSD's
(*) 21,943 21,943
FCF to repurchase remaining CSD's: 0 0
Pcpal. value for remaining
repurchase (par) 0 0
Interest on repurchased CSD's 8.875% 0 0
Total Debentures bought back post-1996: 0
Net FCF available for Pfd. Dividend payment 0 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 3,736 5,604 7,472
Initial Wkg. Cap. deficit (6,100)
Cum. Wkg. Cap. requirement
(20% sls) $21,609 $20,528
less, cum net FCF to W.C. 12,395 (15,539) (20,528)
-------
Net FCF to Wkg. Cap. 6,295
Net wkg. cap. requiremt. 6,070 0
<CAPTION>
DOLLARS IN THOUSANDS
NEGATIVE GROWTH SCENARIO
- ------------------------
Fiscal Year Ended 1999 2000 2001
------------------------ -------------------------- ------------------------
$ % % Change $ % % Change $ % % Change
- - -------- - - -------- - - --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 5,566 3,911 2,366
less, Interest expense (8) (9,194) (7,475) (7,413)
------- --------- --------
Net Cash flow avail. after int. (3,627) 3,564 5,046
Balance of remaining CSD's
(*) 21,943 21,943 21,943
FCF to repurchase remaining CSD's: 0 0 0
Pcpal. value for remaining
repurchase (par) 0 0 0
Interest on repurchased CSD's 0 0 0
Total Debentures bought back post-1996:
Net FCF available for Pfd. Dividend paytment 0 0 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 9,340 11,208 13,076
Initial Wkg. Cap. deficit
Cum. Wkg. Cap. requirement
(20% sls) $19,502 $18,527 $17,600
less, cum net FCF to W.C. (20,528) (20,528) (20,528)
Net FCF to Wkg. Cap.
Net wkg. cap. requiremt. ($1,026) ($975) ($926)
</TABLE>
Page 2
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
ASSUMING SALE OF TELEPHONY BUSINESS PRIOR TO 1996 FISCAL YEAR END
AND DEBENTURE BUY-BACK @ *
Dollars in Thousands
Negative Growth Scenario
- ------------------------
Note: (1) Interest expense reflects application of * net proceeds
from sale of Telephony division to retirement of 8 7/8% Convertible
Subordinated Debentures at average *; hence appx. $42.9 MM of debentures
are retired, with consequent decrease of interest of $3.8 MM. This
scenario further assumes application of all cash flow generated by
company in excess of working capital requirements to retire remaining
outstanding Debentures at par.
Note: (2) For purposes of this projection, it is assumed that the company
requires approximately one-fifth of annual revenues for working
capital requirements. This scenario posits a beginning working
capital deficit at year-end 1996 of approximately $6.1 MM, with free
cash flow initially devoted to meeting that goal in subsequent
years. Once annual targets are met, all subsequent free cash flow
generated above the amount necessary to meet this requirement is
applied towards reducing the company's Convertible Subordinated
Debenture balance. For all years subsequent to the initial buy-back
of 1996, it is assumed that the company is only able to repurchase the
Debentures at*. Once all of the outstanding Debentures are retired,
it is further assumed that the remaining cash flow may be applied to
paying the arrearages on the Preferred stock. In this projection,
Datapoint is unable to generate sufficient free cash flow during the
period covered by this projection to reduce or eliminate the Preferred
arrearage.
Note: (3) Recurring EBDAIT excludes the Other Income items that pertained
to fiscal year 1996, since those were generally considered non-
recurring items.
Note: (4) Debt as of the end of fiscal year 1996, assuming sale of the
Telephony division during the year and application of the net
proceeds to the retirement of approximately $42.9 MM of debentures,
purchased at *. See pro-forma balance sheet and computation of
pro-forma total debt in accompanying spread-sheets for backup.
Note: (5) To determine the present value of future cash flow to the
common shareholders, the cumulative arrearage as of fiscal year-end 1996
(8 quarters), plus the par value of the Preferred shares outstanding
(approximately 1,868,000 shares) have been deducted.
Note: (6) To determine the fully diluted value of the present value of
cash flow to common shareholders, it has been assumed that the
Preferred shares have all been exchanged, per the exchange ratio
proposed in the current offer by Datapoint.
Note: (7) To determine Terminal Value, we have applied the minimum
Price/EBDAIT multiple derived from our comparable company study
(7.0) to the final year's projected EBDAIT for this scenario.
Note: (8) For purposes of determining the Company's ability either to
retire Debentures or cure its Preferred arrearage, a free cash flow
net of interest and working capital requirements has been computed.
In those situations in which this total is negative (i.e., where
interest for the year exceeds FCF net working capital requirements,
the spread-sheet employs the convention of carrying over unpaid
interest to the following year. However, in point of fact, it is
most likely that the company will utilize the funds allocated for
working capital requirements to pay out that year's interest rather
than risking default to any of its creditors.
Page 3
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION:
FIVE-YEAR FORECAST OF INCOME & CASH FLOW
ASSUMING RETENTION OF TELEPHONY BUSINESS
<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands) DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
Optimistic Scenario ASSUMING RETENTION OF TELEPHONY BUSINESS AND DEBENTURE BUY-BACK @ *
Fiscal Year Ended 1996 1997
-------------------------- ----------------------------------------
$ % $ % % Change
--- --- --- --- --------
<S> <C> <C> <C> <C> <C>
Revenues $158,236 100.0% $166,148 100.0% 5.0%
Cost of Sales 111,129 70.2% 113,907 68.6% 2.5%
- -------- -------- --------
Gross Profit 47,107 29.8% 52,241 31.4%
Operating Expenses 26,128 16.5% 26,781 16.1% 2.5%
Corporate G&A 8,773 5.5% 8,861 5.3% 1.0%
R&D 2,548 1.6% 2,586 1.6% 1.5%
-------- --------
Operating Income 9,658 6.1% 14,012 8.4%
Interest 7,652 (1) 7,652
-------- --------
Other Income/(Expense):
Restructuring Expense 0
Other Int'l Operating Exp. 205
Transactional Gain/(Loss) 1,756
--------
Sub-total 1,961
Pretax Income/(Loss) 3,967 6,360
Taxes (2,376) (2,376)
-------- --------
Net Income/(Loss) 1,591 3,984
Interest 7,652 7,652
Depreciation & Amortizn. 6,700 4.2% 6,030 3.6% -10.0%
Capital Expenditures (2,577) (2,277)
-------- --------
Net Free Cash Flow before W.C.
(unleveraged) 13,366 15,389
Working Capital requirements (13,366) (15,389)
-------- --------
Net Free Cash Flow (unlevrgd.) 0 0
Terminal Value 0 0
-------- --------
Total Flows to be Discounted 0 0
Operating Income 9,658 14,012
Depreciation & Amortizn. 6,700 4.2% 6,030 3.6% -10.0%
-------- --------
Recurring EBDAIT(3) $ 16,358 $ 20,042
PV at: less debt(4) Net Value
- ------ ------------ ---------
15.3% $183,616 (81,000) $102,616
22.0% $141,164 (81,000) $ 60,164
30.0% $105,279 (81,000) $ 24,279
<CAPTION>
Fiscal Year Ended 1998 1999
------------------------------------------ -------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $174,455 100.0% 5.0% $183,178 100.0% 5.0%
Cost of Sales 116,755 66.9% 119,674 65.3%
-------- --------
Gross Profit 57,700 33.1% 63,504 34.7%
Operating Expenses 27,451 15.7% 2.5% 28,137 15.4% 2.5%
Corporate G&A 8,949 5.1% 1.0% 9,039 4.9% 1.0%
R&D 2,625 1.5% 1.5% 2,664 1.5% 1.5%
-------- --------
Operating Income 18,675 10.7% 23,664 12.9%
Interest 7,652 7,652
-------- --------
Other Income/(Expense):
Restructuring Expense
Other Int'l Operating Exp.
Transactional Gain/(Loss)
Sub-total
Pretax Income/(Loss) 11,023 16,012
Taxes (2,376) (2,376)
-------- --------
Net Income/(Loss) 8,647 13,636
Interest 7,652 7,652
Depreciation & Amortizn. 5,427 3.1% -10.0% 4,884 2.7% -10.0%
Capital Expenditures (2,277) (2,277)
-------- --------
Net Free Cash Flow before W.C.
(unleveraged) 19,449 23,895
Working Capital requirements(2) (12,236) (2) (1,745)
-------- --------
Net Free Cash Flow (unlevrgd.) 7,213 22,150
Terminal Value 0 0
-------- --------
Total Flows to be Discounted 7,213 22,150
Operating Income 18,675 23,664
Depreciation & Amortizn. 5,427 3.1% -10.0% 4,884 2.7% -10.0%
-------- --------
Recurring EBDAIT(3) $ 24,102 $ 28,548
per diluted C/S shr.
PV at: less Pfd.(5) per C/S shr. for exchange(6)
- ------ ------------ ------------- -------------------
$ (5,604) $ 97,012 $ 7.10 $ 5.46
$ (5,604) $ 54,560 $ 3.99 $ 3.20
$ (5,604) $ 18,675 $ 1.37 $ 1.29
<CAPTION>
Fiscal Year Ended 2000 2001
------------------------------------------ ---------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $192,337 100.0% 5.0% $201,954 100.0% 5.0%
Cost of Sales 122,666 63.8% 125,732 62.3%
-------- --------
Gross Profit 69,671 36.2% 76,221 37.7%
Operating Expenses 28,840 15.0% 2.5% 296,561 14.6% 2.5%
Corporate G&A 9,129 4.7% 1.0% 9,221 4.6% 1.0%
R&D 2,704 1.4% 1.5% 2,745 1.4% 1.5%
-------- --------
Operating Income 26,997 15.1% 34,695 17.2%
Interest 6,840 4,295
-------- --------
Other Income/(Expense):
Restructuring Expense
Other Int'l Operating Exp.
Transactional Gain/(Loss)
Sub-total
Pretax Income/(Loss) 22,158 30,399
Taxes (2,376) (2,376)
-------- --------
Net Income/(Loss) 19,762 28,023
Interest 6,840 4,295
Depreciation & Amortizn. 4,396 2.3% -10.0% 3,956 2.0% -10.0%
Capital Expenditures (2,277) (2,277)
-------- --------
Net Free Cash Flow before W.C.
(unleveraged) 28,740 33,998
Working Capital requirements(2) (1,831) (1,924)
-------- --------
Net Free Cash Flow (unlevrgd.) 26,909 32,074
Terminal Value 0 270,556 (7)
-------- --------
Total Flows to be Discounted 26,909 302,630
Operating Income 28,997 34,695
Depreciation & Amortizn. 4,396 2.3% -10.0% 3,956 2.0% -10.0%
-------- --------
Recurring EBDAIT(3) $ 33,393 $ 38,651
PV at:
</TABLE>
Page 1
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands) DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
Optimistic Scenario ASSUMING RETENTION OF TELEPHONY BUSINESS AND DEBENTURE BUY-BACK @ *
Fiscal Year Ended 1996 1997
-------------------------- ----------------------------------------
$ % $ % % Change
--- --- --- --- --------
<S> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 0 0
less Interest expense(8) (7,652)
------
Net Cash flow avail. after int. (7,652)
Balance of remaining CSD's: 64,800
FCF to repurchase remaining CSD's: 0
Pcpal. value for remaining repurchase (*) 0
Interest on repurchased CSD's 8.875% 0
Total Debentures bought back post-1996: 64,800
Net FCF available for Pfd. Dividend payment 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 3,736 5,604
Initial Wkg. Cap. deficit (6,100)
Cum Wkg. Cap. requirement
20% sls) $ 33,230
less, cum net FCF to W.C. 13,366 (22,655)
-------
Net FCF to Wkg. Cap. 7,266
Net wkg. cap. requirement 10,574
<CAPTION>
Fiscal Year Ended 1998 1999
------------------------------------------ -------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 7,213 22,150
less Interest expense(8) (15,304) (15,743)
-------- --------
Net Cash flow avail. after int. (8,091) 6,407
Balance of remaining CSD's: 64,800 64,800
FCF to repurchase remaining CSD's: 0 6,407
Pcpal. value for remaining repurchase (*) 0 9,154
Interest on repurchased CSD's 8.875% 0 812
Total Debentures bought back post-1996: 64,800
Net FCF available for Pfd. Dividend payment 0 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 7,472 9,340
Initial Wkg. Cap. deficit
Cum Wkg. Cap. requirement
20% sls) $ 34,891 $ 36,636
less, cum net FCF to W.C. (34,891) (36,636)
Net FCF to Wkg. Cap.
Net wkg. cap. requiremt (0) $ (1)
<CAPTION>
Fiscal Year Ended 2000 2001
------------------------------------------ ---------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 26,909 32,074
less Interest expense(8) (6,840) (4,295)
-------- --------
Net Cash flow avail. after int. 20,069 27,779
Balance of remaining CSD's: 55,646 26,976
FCF to repurchase remaining CSD's: 20,069 18,883
Pcpal. value for remaining repurchase (* discount) 28,671 26,976
Interest on repurchased CSD's 8.875% 2,545 2,394
Total Debentures bought back post-1996: 64,800
Net FCF available for Pfd. Dividend payment 0 8,896
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 11,208 13,076
Initial Wkg. Cap. deficit
Cum Wkg. Cap. requirement
(20% sls) $ 36,467 $ 40,391
less, cum net FCF to W.C. (36,467) (40,391)
Net FCF to Wkg. Cap.
Net wkg. cap. requiremt $ 1 $ (1)
Page 2
</TABLE>
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
ASSUMING RETENTION OF TELEPHONY BUSINESS AND DEBENTURE BUY-BACK @ *
(Dollars in Thousands)
Optimistic Scenario
- ----------------------
Note: (1) Interest expense reflects retention of the Telephony business,
with no application of its sale proceeds to retire the company's
outstanding debentures. However, it is assumed that any cash flow
generated above working capital requirements are applied to retire
Debentures *. Per this scenario, the company is able to retire all of
its outstanding Debentures by year-end 2000, leaving it with approx.
$11 MM in free cash flow to apply towards curing of the cumulative
preferred arrearage at that time.
Note: (2) For purposes of this projection, it is assumed that the company
requires approximately one-fifth of revenues for working capital
requirements. This scenario posits a beginning working capital
deficit at year-end 1996 of approximately $6.1MM, with free cash
flow devoted to meeting that goal in subsequent years. For all
subsequent years, all cash flow above the amount necessary to meet
the working capital requirement is considered net free cash flow. In
this projection, all net free cash flow above working capital
requirements (after interest expense) is assumed to be applied by
Datapoint to reduce its Debentures at a *. This scenario projects
retirement of all Debentures by year-end 2001, and positive free cash
flow generated during that year and beyond.
Note: (3) Recurring EBDAIT excludes the Other Income items that pertained
to fiscal year 1996, since those were generally considered non-
recurring items.
Note: (4) Debt is as of the end of fiscal year 1996, assuming
retention of the Telephony division. See pro-forma balance sheet
and computation of pro-forma total debt in accompanying spread-
sheets for backup.
Note: (5) To determine the present value of future cash flow to the
common shareholders, the cumulative arrearage as of fiscal year-end
(8 quarters), plus the par value of the Preferred shares outstanding
(approximately 1,868,000 shares) have been deducted.
Note: (6) To determine the fully diluted value of the present value of
cash flow to common shareholders, it has been assumed that the
Preferred shares have all been exchanged, per the exchange ratio
proposed in the current offer by Datapoint.
Note: (7) To determine Terminal Value, we have applied the minimum
Price/EBDAIT multiple derived from our comparable company study
(7.0) to the final year's projected EBDAIT for this scenario.
Note: (8) For purposes of determining the Company's ability either to
retire Debentures or cure its Preferred arrearage, a free cash flow
net of interest and working capital requirements has been computed.
In those situations in which this total is negative (i.e., where
interest for the year exceeds FCF net working capital requirements,
the spread-sheet employs the convention of carrying over unpaid
interest to the following year. However, in point of fact, it is
most likely that the company will utilize the funds allocated for
working capital requirements to pay out that year's interest rather
than risking default to any of its creditors.
Page 3
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands) DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
No Growth Scenario ASSUMING RETENTION OF TELEPHONY BUSINESS AND DEBENTURE BUY-BACK @ *
Fiscal Year Ended 1996 1997
------------------------ ---------------------------------------
$ % $ % % Change
--- --- --- --- --------
<S> <C> <C> <C> <C> <C>
Revenues $ 158,236 100.0% $ 158,236 100.0% 0.0%
Cost of Sales 111,129 70.2% 111,129 70.2%
--------- ------------
Gross Profit 47,107 29.8% 47,107 29.8%
Operating Expenses 26,128 16.5% 26,128 16.5% 0.0%
Corporate G&A 8,773 5.5% 8,817 5.6% 0.5%
R&D 2,548 1.6% 2,561 1.6% 0.5%
--------- ------------
Operating Income 9,658 6.1% 9,601 6.1%
Interest 7,652 (1) 7,652
--------- ------------
Other Income/(Expense):
Restructuring Expense 0
Other Int'l Operating Exp. 205
Transactional Gain/(Loss) 1,756
---------
Sub-total 1,961
Pretax Income/(Loss) 3,967 1,949
Taxes (2,376) (2,376)
--------- ------------
Net Income/(Loss) 1,591 (427)
Interest 7,652 7,652
Depreciation & Amortizn. 6,700 4.2% 6,030 3.8% -10.0%
Capital Expenditures (2,577) (2,577)
--------- ------------
Net Free Cash Flow before W.C.
(unleveraged) 13,366 10,678
Working Capital requirements(2) (13,366) (10,678)
--------- ------------
Net Free Cash Flow (unlevrgd.) 0 0
Terminal Value 0 0
--------- ------------
Total Flows to be Discounted 0 0
Operating Income 9,658 9,601
Depreciation & Amortizn. 6,700 4.2% 6,030 3.8% -10.0%
--------- ------------
Recurring EBDAIT(3) $ 16,358 $ 15,631
PV at: less debt(4) Net Value
- ------ ------------ ---------
15.3% $58,658 (81,000) $(22,342)
22.0% $44,783 (81,000) $(36,217)
30.0% $33,101 (81,000) $(47,899)
<CAPTION>
Fiscal Year Ended 1998 1999
----------------------------------------- -------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 158,236 100.0% 0.0% $158,236 100.0% 0.0%
Cost of Sales 111,129 70.2% 111,129 70.2%
------------ --------
Gross Profit 47,107 29.8% 47,107 29.8%
Operating Expenses 26,128 16.5% 0.0% 26,128 16.5% 0.0%
Corporate G&A 8,861 5.6% 0.5% 8,905 5.6% 0.5%
R&D 2,574 1.6% 0.5% 2,586 1.6% 0.5%
------------ --------
Operating Income 9,545 6.0% 9,487 6.0%
Interest 7,652 7,652
------------ --------
Other Income/(Expense):
Restructuring Expense
Other Int'l Operating Exp.
Transactional Gain/(Loss)
Sub-total
Pretax Income/(Loss) 1,893 1,835
Taxes (2,376) (2,376)
------------ --------
Net Income/(Loss) (483) (541)
Interest 7,652 7,652
Depreciation & Amortizn. 5,427 3.4% -10.0% 4,884 3.1% -10.0%
Capital Expenditures (2,577) (2,577)
------------ --------
Net Free Cash Flow before W.C.:
(unleveraged) 10,019 9,419
Working Capital requirements(2) (10,019) (3,684)
------------ --------
Net Free Cash Flow (unlevrgd.) 0 5,735
Terminal Value 0 0
------------ --------
Total Flows to be Discounted 0 5,735
Operating Income 9,545 9,487
Depreciation & Amortizn. 5,427 3.4% -10.0% 4,884 3.1% -10.0%
------------ --------
Recurring EBDAIT(3) $ 14,972 $ 14,372
per diluted C/S shr.
PV at: less Pfd.(5) per C/S shr for exchange(6)
- ------ ------------ ----------- ---------------
$ (5,604) $(27,946) $(2.04) $ (1.19)
$ (5,604) $(41,821) $(3.06) $ (1.93)
$ (5,604) $(53,503) $(3.91) $ (2.55)
<CAPTION>
Fiscal Year Ended 2000 2001
-------------------------------- --------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $158,236 100.0% 0.0% $158,236 100.0% 0.0%
Cost of Sales 111,129 70.2% 111,129 70.2%
-------- --------
Gross Profit 47,107 29.8% 47,107 29.8%
Operating Expenses 26,128 16.5% 0.0% 26,128 16.5% 0.0%
Corporate G&A 8,950 5.7% 0.5% 8,995 5.7% 0.5%
R&D 2,599 1.6% 0.5% 2,612 1.7% 0.5%
-------- --------
Operating Income 9,430 6.0% 9,372 5.9%
Interest 7,652 7,652
-------- --------
Other Income/(Expense):
Restructuring Expense
Other Int'l Operating Exp.
Transactional Gain/(Loss)
Sub-total
Pretax Income/(Loss) 1,778 1,720
Taxes (2,376) (2,376)
-------- --------
Net Income/(Loss) (598) (656)
Interest 7,652 7,652
Depreciation & Amortizn. 4,396 2.8% -10.0% 3,956 2.5% -10.0%
Capital Expenditures (2,577) (2,577)
-------- --------
Net Free Cash Flow before W.C.
(unleveraged) 8,873 8,375
Working Capital requirements(2) 0 0
-------- --------
Net Free Cash Flow (unlevrgd.) 8,873 8,375
Terminal Value 0 93,299 (7)
-------- --------
Total Flows to be Discounted 8,873 101,674
Operating Income 9,430 9,372
Depreciation & Amortizn. 4,396 2.8% -10.0% 3,956 2.5% -10.0%
-------- --------
Recurring EBDAIT(3) $ 13,826 $ 13,328
PV at:
- ------
</TABLE>
Page 1
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands) DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
No Growth Scenario ASSUMING RETENTION OF TELEPHONY BUSINESS AND DEBENTURE BUY-BACK @ *
Fiscal Year Ended 1996 1997
------------------------ ---------------------------------------
$ % $ % % Change
--- --- --- --- --------
<S> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 0 0
Less Interest expense(8) (7,652)
Net Cash flow avail. after int. ------------
(7,652)
Balance of remaining CSD's: 64,800
FCF to repurchase remaining CSD's: 0
Pcpal. value for remaining repurchase (*) 0
Interest on repurchased CSD's 8.875% 0
Total Debentures bought back post-1996: 0
Net FCF available for Pfd. Dividend payment 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 3,736 5,604
Initial Wkg. Cap. deficit (6,100)
Cum Wkg. Cap. requirement
(20% sls) $ 31,647
less, cum net FCF to W.C. 13,366 (17,944)
---------
Net FCF to Wkg. Cap. 7,266
Net wkg. cap. requirement 13,703
<CAPTION>
Fiscal Year Ended 1998 1999
----------------------------------------- -------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 0 5,735
Less Interest expense(8) (15,304) (22,956)
Net Cash flow avail. after int. ------------ --------
(15,304) (17,221)
Balance of remaining CSD's: 64,800 64,800
FCF to repurchase remaining CSD's: 0 0
Pcpal. value for remaining repurchase (*) 0 0
Interest on repurchased CSD's 8.875% 0 0
Total Debentures bought back post-1996: 0
Net FCF available for Pfd. Dividend payment 0 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 7,472 9,340
Initial Wkg. Cap. deficit
Cum Wkg. Cap. requirement
(20% sls) $ 31,647 $ 31,647
less, cum net FCF to W.C. (27,963) (31,647)
Net FCF to Wkg. Cap.
Net wkg. cap. requiremt 3,684 $0
<CAPTION>
Fiscal Year Ended 2000 2001
-------------------------------- --------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 8,873 8,375
Less Interest expense(8) (24,873) (23,653)
-------- --------
Net Cash flow avail. after int. (16,001) (15,277)
Balance of remaining CSD's: 64,800 64,800
FCF to repurchase remaining CSD's: 0 0
Pcpal. value for remaining repurchase (*) 0 0
Interest on repurchased CSD's 8.875% 0 0
Total Debentures bought back post-1996: 0
Net FCF available for Pfd. Dividend payment 0 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 11,208 13,076
Initial Wkg. Cap. deficit
Cum Wkg. Cap. requirement
(20% sls) $ 31,647 $ 31,647
less, cum net FCF to W.C. (31,647) (31,647)
Net FCF to Wkg. Cap.
Net wkg. cap. requiremt $0 $0
</TABLE>
Page 2
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Dollars in Thousands DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME
No Growth Scenario AND CASH FLOW ASSUMING RETENTION OF TELEPHONY BUSINESS
------------------ AND DEBENTURE BUY-BACK @ *
NOTE: (1) Interest expense reflects retention of the Telephony business,
with no application of its sale proceeds to retire the company's
outstanding debentures. However, it is assumed that any cash flow
generated above working capital requirements are applied to retire
Debentures @ *.
NOTE: (2) For purposes of this projection, it is assumed that the company
requires approximately one-fifth of revenues for working capital
requirements. This scenario posits a beginning working capital
deficit at year-end 1996 of approximately $6.1 MM, with free cash flow
devoted to meeting that goal in subsequent years. For all subsequent
years, all cash flow above the amount necessary to meet the working
capital requirement is considered net free cash flow. In this
projection, all net free cash flow above working capital requirements
(after interest expense) is assumed to be applied by Datapoint to
reduce its Debentures at *. Accordingly, this projection indicates
that Datapoint will be unable to generate sufficient cash flow to
apply towards payment of the cumulative Preferred arrearage by 2001.
NOTE: (3) Recurring EBDAIT excludes the Other Income items that pertained
to fiscal year 1996, since those were generally considered non-
recurring items.
NOTE: (2) For purposes of this projection, it is assumed that the company
requires approximately one-fifth of revenues for working capital
requirements. This scenario posits a beginning working capital
deficit at year-end 1996 of approximately $6.1 MM, with free cash
flow devoted to meeting that goal in subsequent years. For all
subsequent years, all cash flow above the amount necessary to meet the
requirement is considered net free cash flow. In this projection,
Datapoint is able to generate free cash flow by 1999.
NOTE: (4) Debt as of the end of fiscal year 1996, assuming retention of the
Telephony division. See pro-forma balance sheet and computation of
pro-forma total debt in accompanying spread-sheets for backup.
NOTE: (5) To determine the present value of future cash flow to the common
shareholders, the cumulative arrearage as of fiscal year-end (8
quarters), plus the par value of the Preferred shares outstanding
(approximately 1,868,000 shares) have been deducted.
NOTE: (6) To determine the fully diluted value of the present value of cash
flow to common shareholders, it has been assumed that the Preferred
shares have all been exchanged, per the exchange ratio proposed in the
current offer by Datapoint.
NOTE: (7) To determine Terminal Value, we have applied the minimum
Price/EBDAIT multiple derived from our comparable company study (7.0)
to the final year's projected EBDAIT for this scenario.
NOTE: (8) For purposes of determining the company's ability either to
retire Debentures or cure its Preferred arrearage, a free cash flow
net of interest and working capital requirements has been computed.
In those situations in which this total is negative (i.e., where
interest for the year exceeds FCF net working capital requirements,
the spread-sheet employs the convention of carrying over unpaid
interest to the following year. However, in point of fact, it is most
likely that the company will utilize the funds allocated for working
capital requirements to pay out that year's interest rather than
risking default to any of its creditors.
Page 3
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands) DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
Negative Growth Scenario ASSUMING RETENTION OF TELEPHONY BUSINESS AND DEBENTURE BUY-BACK @ *
Fiscal Year Ended 1996 1997
----------------------- ----------------------------------
$ % $ % % Change
--- --- --- --- --------
<S> <C> <C> <C> <C> <C>
Revenues $158,236 100.0% $150,324 100.0% -5.0%
Cost of Sales 111,129 70.2% 105,227 70.0%
-------- --------
Gross Profit 47,107 29.8% 45,097 30.0%
Operating Expenses 26,128 16.5% 25,475 16.9% -2.5%
Corporate G&A 8,773 5.5% 8,861 5.9% 1.0%
R&D 2,548 1.6% 2,548 1.7% 0.0%
-------- --------
Operating Income 9,658 6.1% 8,214 5.5%
Interest 7,652 (1) 7,652
-------- --------
Other Income/(Expense):
Restructuring Expense 0
Other Int'l Operating Exp. 205
Transactional Gain/(Loss) 1,756
--------
Sub-total 1,961
Pretax Income/(Loss) 3,967 562
Taxes (2,376) (2,376)
-------- --------
Net Income/(Loss) 1,591 (1,894)
Interest 7,652 7,652
Depreciation & Amortizn. 6,700 4.2% 6,030 4.0% -10.0%
Capital Expenditures (2,577) (2,577)
-------- --------
Net Free Cash Flow before W.C.
(unleveraged) 13,366 9,291
Working Capital requirements(2) (13,366) (9,291)
-------- --------
Net Free Cash Flow (unlevrgd.) 0 0
Terminal Value 0 0
-------- --------
Total Flows to be Discounted 0 0
Operating Income 9,658 8,214
Depreciation & Amortizn. 6,700 4.2% 6,030 4.0% -10.0%
-------- --------
Recurring EBDAIT(3) $ 16,358 $ 14,244
PV at: less debt(4) Net Value
- ------ ------------ ---------
15.3% $23,125 (81,000) $(57,875)
22.0% $17,578 (81,000) $(63,422)
30.0% $12,923 (81,000) $(68,077)
<CAPTION>
Fiscal Year Ended 1998 1999
------------------------------------- --------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $142,808 100.0% -5.0% $135,668 100.0% -5.0%
Cost of Sales 99,966 70.0% 94,967 70.0%
-------- --------
Gross Profit 42,842 30.0% 40,700 30.0%
Operating Expenses 24,838 17.4% -2.5% 24,217 17.9% -2.5%
Corporate G&A 8,949 6.3% 1.0% 9,039 6.7% 1.0%
R&D 2,548 1.8% 0.0% 2,548 1.9% 0.0%
-------- --------
Operating Income 6,507 4.6% 4,896 3.6%
Interest 7,652 7,652
-------- --------
Other Income/(Expense):
Restructuring Expense
Other Int'l Operating Exp.
Transactional Gain/(Loss)
Sub-total
Pretax Income/(Loss) (1,145) (2,756)
Taxes (2,376) (2,376)
-------- --------
Net Income/(Loss) (3,521) (5,132)
Interest 7,652 7,652
Depreciation & Amortizn. 5,427 3.8% -10.0% 4,884 3.6% -10.0%
Capital Expenditures (2,577) (2,577)
-------- --------
Net Free Cash Flow before W.C.:
(unleveraged) 6,981 4,828
Working Capital requirements(2) (6,981) (3,596)
-------- --------
Net Free Cash Flow (unlevrgd.) 0 1,232
Terminal Value 0 0
-------- --------
Total Flows to be Discounted 0 1,232
Operating Income 6,507 4,896
Depreciation & Amortizn. 5,427 3.8% -10.0% 4,884 3.6% -10.0%
-------- --------
Recurring EBDAIT(3) $ 11,934 $ 9,781
per diluted C/S shr.
PV at: less Pfd.(5) per C/S shr for exchange(6)
- ------ ------------ ----------- ---------------
($5,604) ($63,479) ($4.64) ($3.08)
($5,604) ($69,026) ($5.05) ($3.37)
($5,604) ($73,681) ($5.39) ($3.62)
<CAPTION>
Fiscal Year Ended 2000 2001
-------------------------------- -------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $128,884 100.0% -5.0% $122,440 100.0% -5.0%
Cost of Sales 90,219 70.0% 85,708 70.0%
-------- --------
Gross Profit 38,665 30.0% 36,732 30.0%
Operating Expenses 23,612 18.3% -2.5% 23,021 18.8% -2.5%
Corporate G&A 9,129 7.1% 1.0% 9,221 7.5% 1.0%
R&D 2,548 2.0% 0.0% 2,548 2.1% 0.0%
-------- --------
Operating Income 3,376 2.6% 1,942 1.6%
Interest 7,652 7,652
-------- --------
Other Income/(Expense):
Restructuring Expense
Other Int'l Operating Exp.
Transactional Gain/(Loss)
Sub-total
Pretax Income/(Loss) (4,276) (5,710)
Taxes (2,376) (2,376)
-------- --------
Net Income/(Loss) (6,652) (8,086)
Interest 7,652 7,652
Depreciation & Amortizn. 4,396 3.4% -10.0% 3,956 3.2% -10.0%
Capital Expenditures (2,577) (2,577)
-------- --------
Net Free Cash Flow before W.C.
(unleveraged) 2,819 946
Working Capital requirements(2) 0 0
-------- --------
Net Free Cash Flow (unlevrgd.) 2,819 946
Terminal Value 0 41,290 (7)
-------- --------
Total Flows to be Discounted 2,819 42,235
Operating Income 3,376 1,942
Depreciation & Amortizn. 4,396 3.4% -10.0% 3,956 3.2% -10.0%
-------- --------
Recurring EBDAIT(3) $ 7,772 $ 5,899
PV at:
</TABLE>
Page 1
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands) DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME AND CASH FLOW
Negative Growth Scenario ASSUMING RETENTION OF TELEPHONY BUSINESS AND DEBENTURE BUY-BACK @ *
Fiscal Year Ended 1996 1997
----------------------- ----------------------------------
$ % $ % % Change
--- --- --- --- --------
<S> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 0 0
less Interest expense(8) (7,652)
-------
Net Cash flow avail. after int. (7,652)
Balance of remaining CSD's: 64,800
FCF to repurchase remaining CSD's: 0
Pcpal. value for remaining repurchase (*) 0
Interest on repurchased CSD's 8.875% 0
Total Debentures bought back post-1996: 0
Net FCF available for Pfd. Dividend payment 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 3,736 5,604
Initial Wkg. Cap. deficit (6,100)
Cum Wkg. Cap. requirement
(20% sls) $ 30,065
less, cum net FCF to W.C. 13,366 (16,557)
-------
Net FCF to Wkg. Cap. 7,266
Net wkg. cap. requiremt 13,508
<CAPTION>
Fiscal Year Ended 1998 1999
------------------------------------- --------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 0 1,232
Less Interest expense(8) (15,304) (22,956)
------- -------
Net Cash flow avail. after int. (15,304) (21,724)
Balance of remaining CSD's: 64,800 64,800
FCF to repurchase remaining CSD's: 0 0
Pcpal. value for remaining repurchase (*) 0 0
Interest on repurchased CSD's 8.875% 0 0
Total Debentures bought back post-1996: 0
Net FCF available for Pfd. Dividend payment 0 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 7,472 9,340
Initial Wkg. Cap. deficit
Cum Wkg. Cap. requirement
(20% sls) $ 28,562 $ 27,134
less, cum net FCF to W.C. (23,538) (24,134)
Net FCF to Wkg. Cap.
Net wkg. cap. requiremt 5,024 $0
<CAPTION>
Fiscal Year Ended 2000 2001
-------------------------------- -------------------------------
$ % % Change $ % % Change
--- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C>
Net Free Cash Flow (unlevrgd.) 2,819 946
Less Interest expense(8) (29,376) (34,209)
------- -------
Net Cash flow avail. after int. (26,557) (33,263)
Balance of remaining CSD's: 64,800 64,800
FCF to repurchase remaining CSD's: 0 0
Pcpal. value for remaining repurchase (*) 0 0
Interest on repurchased CSD's 8.875% 0 0
Total Debentures bought back post-1996: 0
Net FCF available for Pfd. Dividend payment 0 0
cumulative Pfd. arrearage @ yr.-end:
1,868.1 shrs. 11,208
Initial Wkg. Cap. deficit
Cum Wkg. Cap. requirement
(20% sls) $ 25,777 $ 24,488
less, cum net FCF to W.C. (27,134) (27,134)
Net FCF to Wkg. Cap.
Net wkg. cap. requiremt ($ 1,357) ($ 1,289)
</TABLE>
Page 2
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Dollars in Thousands DATAPOINT CORPORATION: FIVE-YEAR FORECAST OF INCOME
Negative Growth Scenario AND CASH FLOW ASSUMING RETENTION OF TELEPHONY BUSINESS
- ------------------------ AND DEBENTURE BUY-BACK @ *
NOTE: (1) Interest expense reflects retention of the Telephony business,
with no application of its sale proceeds to retire the company's
outstanding debentures. However, it is assumed that any cash flow
generated above working capital requirements are applied to retire
Debentures @ *.
NOTE: (2) For purposes of this projection, it is assumed that the company
requires approximately one-fifth of revenues for working capital
requirements. This scenario posits a beginning working capital
deficit at year-end 1996 of approximately $6.1 MM, with free cash flow
devoted to meeting that goal in subsequent years. For all subsequent
years, all cash flow above the amount necessary to meet the working
capital requirement is considered net free cash flow. In this
projection, all net free cash flow above working capital requirements
(after interest expense) is assumed to be applied by Datapoint to
reduce its Debentures at *. Accordingly, this projection indicates
that Datapoint will be unable to generate sufficient cash flow to
apply towards payment of the cumulative Preferred arrearage by 2001.
NOTE: (3) Recurring EBDAIT excludes the Other Income items that pertained
to fiscal year 1996, since those were generally considered non-
recurring items.
NOTE: (4) Debt as of the end of fiscal year 1996, assuming retention of the
Telephony division. See pro-forma balance sheet and computation of
pro-forma total debt in accompanying spread-sheets for backup.
NOTE: (5) To determine the present value of future cash flow to the common
shareholders, the cumulative arrearage of fiscal year-end (8
quarters), plus the par value of the Preferred shares outstanding
(approximately 1,868,000 shares) have been deducted.
NOTE: (6) To determine the fully diluted value of the present value of cash
flow to common shareholders, it has been assumed that the Preferred
shares have all been exchanged, per the exchange ratio proposed in the
current offer by Datapoint.
NOTE: (7) To determine Terminal Value, we have applied the minimum
Price/EBDAIT multiple derived from our comparable company study (7.0)
to the final year's projected EBDAIT for this scenario.
NOTE: (8) For purposes of determining the company's ability either to
retire Debentures or cure its Preferred arrearage, a free cash flow
net of interest and working capital requirements has been computed.
In those situations in which this total is negative (i.e., where
interest for the year exceeds FCF net working capital requirements,
the spread-sheet employs the convention of carrying over unpaid
interest to the following year. However, in point of fact, it is most
likely that the company will utilize the funds allocated for working
capital requirements to pay out that year's interest rather than
risking default to any of its creditors.
Page 3
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION
STATED BOOK VALUE (PRO FORMA)
-----------------------------
Starting with the Company's Pro Forma Balance Sheet for fiscal 1996
dated June 25, 1996, we further adjusted for other uses of proceeds from the
sale of automotive ("Darts"). It does not fully use ALL the cash - some is
still tied up in escrow. No funds are used to retire debentures.
After the sale to Kalamazoo, CCC's Pro Forma Balance Sheet shows a
negative working capital of $6,100,000. Shareholders' equity is a negative
$54,351,000, and long-term liabilities (primarily the 8-7/8% debentures) are
$73,320,000.
At this point, the Company is clearly in no position to pay a preferred
dividend and arrears. As for liquidation value of the preferred, that, too, is
underwater, technically. Thus, there is no book value per share of common and no
liquidation value for the preferred.
The "Telebus" or telephony business, is being offered for sale in the
mid * range. While there is a possibility that an acceptable transaction may be
completed in this calendar year, it must be considered speculative both as to
price and actual closing. But because Darts has finally been sold (after many
months of discussion and negotiation), CCC believes we should also calculate
the possible affect of a sale on the Profit & Loss Statement and Balance Sheet
using a * net sales price and a more optimistic * net sales price. The proceeds
is assumed to be used to retire the 8-7/8% debentures at an average price of
*. The debentures have sold in smaller quantities recently in the upper $50s.
It is thinly traded, with only $64 million face amount outstanding. The 1996
range has been a low of $39-3/4 to a high of $58-1/2. Volume has been as low as
3 bonds to a high of 192 bonds, when they trade. It is anyone's guess what it
will take to retire a majority of the bonds, particularly when, and if, the
telephony business is sold and it is known that the money is available for such
a buy-back.
CCC adjusted for the sale of telephony under two scenarios - * and *,
buying in $42,857,000 face amount of bonds up to $57,143,000 in the second
scenario. The latter is optimistic in two ways - a) the Company receives a net
of * and b) that almost 90% of the bonds can be retired at *.
In any event, the adjustments for the two scenarios result in a
still-negative working capital forecasted at $6,100,000, a negative book value
of $11,494,000 on a * sale, and a positive book value of $2,792,000 on a *
sale. The remaining long-term debt is * down to * on the higher price. Without
predicting further changes to bank or other debt, it is still a very small
possibility that, even under the optimistic scenario, the Company could pay a
dividend or pay off its arrears. The remaining positive equity under the
optimistic scenario still causes the preferred to have only $1.49 in book value.
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
DATAPOINT CORPORATION: PRO-FORMA BALANCE SHEETS FOR VARIOUS SCENARIOS
Adjustments for Adjustments for
Balance Sheet as of July 29, 1996: Telephony Sale (Flat Telephony Sale
Adjustments for Post Sale of & Negative Growth (Optimistic
Base Case Automotive Sale Automotive Scenarios) Scenario)
--------- --------------- ---------- ---------- ---------
Item $(000) $(000) $(000) $(000) $(000)
- ---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Equivalents 3,864 12,862 16,726 4,801 4,590
Accounts Receivable 39,802 (5,594) 34,208 (11,621) (11,621)
Inventory 5,951 (798) 5,153
Other 4,506 (1,277) 3,229
------- ------ ------- ------ ------
Total Current Assets 54,123 5,193 59,316 (6,820) (7,031)
Fixed Assets, net 13,796 (1,111) 12,685 0 0
Other Assets 14,981 (2,597) 12,384 0 0
Total Assets 82,900 1,485 84,385 (6,820) (7,031)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank Debt - O.D. 16,602 (1,978) 14,624
Current Portion of Long-term Debt 4,397 (2,675) 1,722
Trade Payables 18,168 (3,861) 14,307 (4,998) (4,998)
Accrued Expenses and Taxes Payable 32,139 (7,092) 25,047 (1,822) (2,033)
Other 13,545 (3,829) 9,716
------- ------ ------- ------ ------
Total Current Liabilities 84,851 (19,435) 65,416 (6,820) (7,031)
Long-term Liabilities 78,925 (5,605) 73,320 (42,857) (57,143)
Shareholders' Equity (80,876) 26,525 (54,351) 42,857 57,143
Total Liabilities and Shareholders' Equity 82,900 1,465 84,385 (6,820) (7,031)
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
DATAPOINT CORPORATION: PRO-FORMA BALANCE SHEETS FOR VARIOUS SCENARIOS
Balance Sheet as of July 29, 1996:
Pro-forma Post Sale of Pro-forma Post Sale of
Telephony (Flat & Neg. Growth) Telephony (Optimistic Scenario)
------------------------------ -------------------------------
Item $(000) $(000)
- ---- ------ ------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Equivalents 21,527 21,316
Accounts Receivable 22,587 22,587
Inventory 5,153 5,153
Other 3,229 3,229
------ ------
Total Current Assets 52,496 52,285
Fixed Assets, net 12,685 12,685
Other Assets 12,384 12,384
Total Assets 77,565 77,354
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank Debt - O.D. 14,624 14,624
Current Portion of Long-term Debt 1,722 1,722
Trade Payables 9,309 9,309
Accrued Expenses and Taxes Payable 23,225 23,014
Other 9,716 9,716
------ ------
Total Current Liabilities 58,596 58,385
Long-term Liabilities 30,463 16,177
Shareholders' Equity (11,494) 2,792
Total Liabilities and Shareholders' Equity 77,565 77,354
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
DATAPOINT CORPORATION: CALCULATION OF PRO-FORMA TOTAL DEBT
(in millions of dollars) Adjustments Debt, post- Adjustments
As of for Automotive Automotive for Telephony
4/27/96 (Base Case) Sale Sale Sale
------- --------- ---- ---- (Flat & No Growth)
------------------
<S> <C> <C> <C> <C> <C>
Current Liabilities:
Bank Debt - O.D. 17.1 16.6 (2.0) (1) 14.6 -
Current Portion of Long-term Debt 4.1 4.4 (2.7) (2) 1.7 -
----- ----- ----- ----- -----
Total Long-term Debt 21.2 21.0 (4.7) 16.3
Long-term Liabilities
Convertible Sub Debentures & NTI 69.1 69.1 (4.4) (3) 64.7 (49.2) (4)
Other LTL 9.8 9.8 (1.3) 8.6 -
----- ----- ----- ----- -----
78.9 78.9 (5.7) 73.3
Hence, Total Debt: 90.3 90.1 81.0
<CAPTION>
(in millions of dollars) Adjustments Debt, post- Debt, post-
for Telephony Telephony Telephony
Sale Sale Sale
(Optimistic Scenario) (Flat & No Growth) (Optimistic Scenario)
--------------------- ------------------ ---------------------
<S> <C> <C> <C>
Current Liabilities:
Bank Debt - O.D. - 14.6 14.6
Current Portion of Long-term Debt - 1.7 1.7
----- ----- -----
Total Long-term Debt 16.3 16.3
Long-term Liabilities
Convertible Sub Debentures & NTI 57.1 (5) 21.8 7.6
Other LTL 8.6 8.6
----- ----- -----
30.4 16.2
Hence, Total Debt: 38.1 23.9
</TABLE>
Notes:
(1) Includes $1 MM of IFN debt and $978 K for CIT paydown.
(2) Represents current portion of NTI debt paydown.
(3) Represents balance of NTI paydown.
(4) In Flat & No Growth scenarios, assumes * of telephony business sale
proceeds go to retire Debentures at *; hence $42.9 MM of Debentures
retired here.
(5) In Optimistic scenario, assumes * of telephony business sale proceeds
go to retire Debentures at *; hence $57.1 MM of Debentures are retired
here.
Page 1
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION
PROJECTED BOOK VALUE
--------------------
The Pro Forma Balance Sheets for the two principal scenarios project a
negative net worth of $80,870,000 at current fiscal year end, reduced to a
negative $54,351,000 after automotive, and a positive net worth of $2,792,000 in
our optimistic scenario where the telephony business is sold for a net of *
and debentures are retired at *.
Taking the most optimistic view, the $2,792,000 net worth is reduced by
the $1 par value Preferred of $1,868,071, leaving common stock book value at
$924,000, or nearly 7 (cent) per share, excluding arrears. The Preferred would
have a book value of only $1.49 per share.
Thus, book value technically is next to worthless, though should be
considered in a minor way.
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION
LIQUIDATION VALUE
-----------------
The remaining net assets after the sale of the telephony business can
be valued through the use of the comparable company and discounted cash flow
approaches, which we have already considered.
The comparable company approach suggests that the balance of assets
could be worth from $93 million to $180 million before various adjustments,
based on estimated pro forma EBDAIT and EBIT numbers. The pro forma balance
sheet requires the following adjustments:
Negative Working Capital $ 6,100,000
Long-term liabilities $ 16,177,000
------------
$ 22,277,000
This assumes that all inventory and receivables can be turned into cash
at 100% of their book value.
In a liquidation, we would assume that all other assets have no value,
although the San Antonio and Amsterdam properties can be sold at some number in
the $5 to $7 million range.
Costs of liquidating are high, including severance pay, legal,
accounting, fees and commissions, and other costs. The values, of course, depend
on what a third party thinks he can realistically achieve in earnings and cash
flow from a company that has lost money for several years, albeit with other
businesses included.
We would tend to discount these values by 50% given the risks involved.
Thus, $93 million to $180 million, less 50%, or $46.5 million to $90 million,
less $22 million shown above, less $10 million for liquidating costs, would
yield $14.5 million to $58 million.
On that basis, the Preferred would achieve its liquidating value of
$37,361,420 only if the higher numbers are met, and 38.8% of liquidating value,
or $7.76 per share, for the lower numbers.
On a discounted cash flow basis, our most optimistic scenario after
the sale of telephony suggests gross values of $81.7 million to $143.5
million, whereas the no-growth scenario suggests $32.7 million to $56.7
million. Using the same approach discussed above at 50%, less balance sheet
and closing costs, we arrive at a range of $8.5 million to as high as
$39.4 million. This higher figure permits the Preferred to attain its
liquidating value. On the retention of telephony, our calculation results in
NO available funds in a liquidation scenario.
<PAGE>
Datapoint Corportion: Liquidation Value Page 2
These calculations should not be accorded any weight, in CCC's opinion,
because there are no current plans to liquidate, the figures are based on highly
speculative forecasts of cash flow, and the Company has a poor record. Thus, it
is important to review this aspect, but it does not influence our conclusion.
<PAGE>
DATAPOINT CORPORATION
COMPARABLE TRANSACTIONS ANALYSIS
--------------------------------
CCC was able to find and review only two recent transactions involving
similar companies. Both transactions were for companies with revenues in excess
of $1 billion, and in one of the two cases, no price information was publicly
disclosed. The other transaction was the purchase of AmeriData Technologies,
Inc. ("Ameridata") by General Electric Capital Corporation at $16 a share
through a recent tender offer. CCC calculates that such a purchase for the
outstanding common stock was at approximately .235 times 1995 revenues, .1695
estimated 1996 revenues, 5.24 times 1995 EBDAIT, 3.15 times estimated 1996
EBDAIT, 20.25 times 1995 earnings per share before dilution and 11.9 times
estimated 1996 earnings, and finally, 2.2 times year-end 1995 stated book value.
On such figures, the implied value of the Company is in the range of $0.59 to
$3.69 per share, averaging $2.24 per share. The .75 incremental shares in the
new Exchange Offer adds $0.44 to $2.77 per share, average $1.61 per share.
However, CCC considers that this is not a very meaningful approach because of
the size and operating history of Ameridata compared to the Company.
GE to Ameridata:
<TABLE>
<CAPTION>
Datapoint After Datapoint After
Automotive Telephony
--------------- ---------
<S> <C> <C>
.235 times 1995 Revenues Not Available Not Available
.1695 times estimated 1996 Revenues $26,821,000 $19,277,235
Imputed Datapoint Value $1.96 per Share $1.41 per Share
3.15 times estimated 1996 EBDAIT $57,704,850 $52,869,660
Imputed Datapoint value $0.56 per Share $3.69 per Share
11.9 times estimated 1996 Earnings Negative $0.59 per Share
2.2 times 1999 book Not Applicable Not Applicable
Range is $0.59 to $3.69 per share - average $2.14 per Share.
At 2.75:1 = $1.62 to $10.15 per Share value, average $5.89 per Share.
.75 incremental shares is $0.44 to $2.77 per Share value, average $1.61 per
Share. This is against the loss of $2.00 per share arrears at year-end.
</TABLE>
<PAGE>
DATAPOINT CORPORATION
ABILITY TO PAY ARREARS AND RESUME
---------------------------------
PREFERRED DIVIDEND PAYMENTS
---------------------------
Current Arrears - $1.75 Per Share on 1,868,071 Shares is $3,269,124
Arrears Grow $467,018 Per Quarter, $1,868,071 Per Year
In CCC's opinion dividends should not be paid on the preferred until the
balance sheet shows a positive net worth, working capital is restored to a
normalized condition and the debentures are redeemed. Whether or not the
telephony business is sold for a net of * on a negative growth, or no-growth
sales scenario, the Company cannot resume dividends in the next five years
(beyond this we have not computed the possibility.) Under the optimistic
scenarios where the telephony business is sold for a net of * and the 8 7/8%
Debentures are repurchased at *, the arrears can be paid starting in the fiscal
year to end 7/31/99. At the end of fiscal 1999, arrears are $5.00 a share. If
Telephony is not sold, under the optimistic scenario, the $7.00 of arrears can
be paid starting in fiscal 2001. On a scenario where telephony is sold and
debentures are repurchased at *, only part of the arrears can be repaid in
fiscal 1999. But this does not materially change the values.
The present value of those payments brought back to the announcement
date, April 16, 1996 at the various rates used in the discounted cash flow
scenario range from $1.77 to as high as $3.32 per share. Keeping in mind that
this is from an optimistic scenario, the emphasis should be on the highest
discount rate (30%) which provides a range of $1.77 to $2.13, averaging $1.95.
Finally, what is the relative value of 2.75 shares of common compared to
giving up the future arrears and future price of the preferred, taken back to
the present value at announcement date.
CCC believes that once the preferred dividend is current, the preferred
will sell between $8 and $10 per share. If the arrears are able to be paid by
the end of fiscal 1999 in the optimistic scenario or 2001 if telephony is not
sold, the present value at a 30% discount rate is $2.02 to $4.26. The total
value including arrears is $3.79 to $6.39.
The common , on the other hand , at 2.75 times the $1.44 market is $3.96
per share of preferred. At 2.75 times the discounted present value it is $3.36
to $3.74.
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
DATAPOINT CORPORATION
LITIGATION
----------
CCC interviewed Dr. David Garrod and Peter Cobrin, partners in the law
firm of Cobrin, Gittes & Samuel, who are handling certain patent litigation. The
two sets of litigation involve video conferencing (as illustrated by the Minx
system) and Arcnet, the networking system.
The former involved NEC at first, which was settled, and other suits
against V-Tel and Video Server were settled. The Company has a current case
against PictureTel Corporation, Compression Labs and Telios and started a suit
against others such as Video-Lan.
If successful, substantial royalties could be paid to Datapoint by such
as PictureTel. Settlement discussions are on-going with Compression Labs and
Telios which could involve significant near-term sums and possible ongoing
royalties.
The Arcnet litigation involves a Local Area Network (LAN) and the
Ethernet. Currently there are two defendants, Standard Microsystems and Intel
Corporation. More defendants are possible if class action is certified. If not,
then more suits will be filed anyway against others such as 3 COM. A call to the
attorneys on July 17, 1996 revealed that the Judge did not certify the class.
There is really no way to put a reasonable figure on the value of these
suits from the point of view of adding to the value of the Company's Preferred
or Common stock. We have chosen to ignore them at this point, except to say that
they can only be a positive step for the Company's future.
<PAGE>
DATAPOINT CORPORATION
SUMMARY AND CONCLUSION
----------------------
CCC reviewed the stock price history, selected comparative companies,
discounted cash flow, comparative transactions, book value litigation and the
ability to pay the arrears.
Primary emphasis was placed on the stock price history as the only
factual comparison of preferred and common. Here we concluded that the exchange
ratio should be increased to 3:1.
Less emphasis was placed on a discounted cash flow approach. It has many
risks involving whether or not overhead savings can be made, the telephony
business sold and at what price the price debentures can be repurchased, and the
potential for growth in the face of competition. CCC performed several
iterations at different discount rates. CCC concluded that the value of the
common shares was within a range of $1.22 to $1.36 per share. At 2:1 exchange,
the preferred is valued at $2.44 to $2.72 per share. Another .75 shares of
common increases the value to $3.36 to $3.74 per share. With the preferred at an
average of $3.10 prior to announcement and $3.25 more recently, the exchange
gives little value to the intangible factors of the loss of arrears, liquidation
preference, and board representation.
No real emphasis was placed on the comparable company study. It is based
on the same speculative elements of the Company cited above. Furthermore, the
companies in the study are not closely parallel in business, geographical
location, capital structure and history of profits.
The comparative transaction, while academically interesting, is not
truly comparable and reflects a much larger company. Liquidation is not really
the goal here. The book value approach shows nominal values for the common.
Litigation is not quantifiable on any reasonable basis. These factors were given
little weight in the overall analysis.
Finally, CCC raises the question of the present value of an incremental
.75 shares in the exchange as against giving up hopes of receiving the arrears.
If the arrears are payable at various times starting in the year 1999, they are
valued in our opinion at between $1.77 and $2.13 share. This should be compared
to giving up the value of those arrears and intangibles to achieve an extra .75
common at $1.44 which is the average market price prior to announcement, or the
equivalent to of $1.08 per preferred share. On a discounted cash flow basis it
is equivalent to $0.92 to $1.02 per share. Compared to the present value of the
arrears, the exchange is not sufficiently attractive to the preferred. Another
.25 to .50 shares of common should provide a more fair exchange to the
preferred.
<PAGE>
In CCC's opinion the relative value of 2.75 shares of common compared to
the future arrears and future price of the preferred, discounted back to present
value, further confirms the opinion that the exchange value should be increased.
We conclude from the above that the preferred should receive no less
than an additional .25 shares of common.
<PAGE>
Exhibit 17(b)(4)
CONFIDENTIAL PRESENTATION
TO
BOARD OF DIRECTORS
OF
DATAPOINT CORPORATION
Patricof & Co. Capital Corp.
July 24, 1996
DATAPOINT CORPORATION CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
TABLE OF CONTENTS
TAB PAGE
- --------------------------------------------------------------
1. Transaction Overview.....................................1
2. Patricof Due Diligence...................................2
3. General Observations Concerning Datapoint................4
4. Summary Financial Information...........................17
5. Summary of Issues Respecting Fairness...................20
6. Valuation of Equity before Exchange Offer...............21
7. Comparative Company Approach............................23
8. Liquidation Value Approach..............................41
9. Discounted Cash Flow Valuation..........................42
10. Valuation of Preferred Stock...........................50
11. Conclusion.............................................57
Supplemental Materials
- ----------------------
A. Comparative Company Financial Data
B. Datapoint Preferred Stock and Convertible Debenture Summary Term Sheets
C. Datapoint Common Stock and Preferred Stock Price and Volume Data
D. Comparative Preferred Securities
E. Datapoint Historical Financials
F. Discounted Cash Flow - Base Case
G. Discounted Cash Flow - Downside Case
H. Discounted Cash Flow - Upside Case
<PAGE>
Patricof & Co. Capital Corp.
PREFACE
This report has been prepared by Patricof & Co. Capital Corp. ("Patricof") in
connection with Patricof's opinion to be rendered to the Board of Directors of
Datapoint Corporation ("Datapoint" or the "Company") as to the fairness from a
financial point of view of the Exchange Offer, described herein, to the
Company's Common Shareholders. The material in this report and all analyses
contained herein are confidential and are solely for the use of the Board of
Directors and its advisors. Any publication or use of this material or the
analyses contained herein without the express written consent of Patricof is
strictly prohibited.
In the course of our activities as financial advisor, Patricof received and
reviewed business and financial information on the Company developed by
Datapoint and held discussions with the management of Datapoint and with others
regarding this information. In connection with the analyses contained herein, we
have not independently verified the accuracy of any such information and have
relied on all such information as being complete and accurate in all material
respects. In addition, we have not obtained any independent appraisal of
Datapoint's properties or assets.
Patricof has employed several analytical methodologies herein and no one method
of analysis should be regarded as critical to the overall conclusion we have
reached. Each analytical technique has inherent strengths and limitations, and
the nature of the available information may further affect the value of
particular techniques. Our conclusion is based on all the analyses and factors
presented herein taken as a whole and also on application of our experience.
Such conclusion often involves significant elements of judgment and qualitative
as well as quantitative analysis. Hence, we express no opinion as to the
probative force standing alone, of any one or more parts of the material that
follows. Our only opinion is the formal written opinion that we have expressed
or will express as to the fairness from a financial point of view of the
consideration being paid in the transaction. The opinion, the analyses contained
herein and all conclusions drawn from such analyses are necessarily based upon
market, economic and other conditions that exist and can be evaluated as of the
date of this presentation, and on information available to us as of the date
hereof.
DATAPOINT CORPORATION ii CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
TRANSACTION OVERVIEW
- The Company has proposed to exchange 3.25 shares of $0.25 par value Common
Stock (the "Common Stock") for each share of its $1.00 Exchangeable
Preferred Stock (the "Preferred Stock") (the "Exchange Offer"). The
Preferred Stock has a $20 liquidation preference per share, is currently
convertible into 2.00 shares of Common Stock, and had a dividend arrearage
of $2.00 per share at July 15, 1996.
- Concurrently with the Exchange Offer, the Company will solicit votes to
amend the Preferred Stock such that each share of Preferred Stock
(inclusive of accumulated dividends) not otherwise exchanged in the
Exchange Offer would be immediately converted into 3.25 shares of Common
Stock (the "Preferred Stock Amendment").
- The votes of at least two-thirds of the outstanding shares of Preferred
Stock, voting separately as a class, and a majority of the outstanding
shares of Common Stock is required to approve the Preferred Stock
Amendment. If the Preferred Stock Amendment is approved, all shares of
Preferred Stock not tendered in the Exchange Offer will be subject to the
Preferred Stock Amendment and will be automatically reclassified and
changed into shares of Common Stock.
<TABLE>
PRO FORMA CAPITALIZATION
<CAPTION>
Shares Common Stock outstanding
outstanding at pro forma for conversion at
----------------------------------------------
4/27/96 2.00:1 3.25:1
------------------- ----------------------- ----------------------
<S> <C> <C> <C>
Common Stock 13,670,930 13,670,930 13,670,930
Preferred Stock 1,868,071 3,736,142 6,071,231
----------------------- ----------------------
Pro forma for conversion 17,407,072 19,742,161
======================= ======================
</TABLE>
DATAPOINT CORPORATION CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
PATRICOF DUE DILIGENCE
PERSONS INTERVIEWED
Datapoint Corporation
- ---------------------
<TABLE>
<S> <C>
Asher Edelman Chairman
Blake Thomas Chief Operating Officer
Gerald Agranoff, Esq. Chief Counsel
Philip Krumb Chief Financial Officer
John Perkins Director, Open Systems Product Development
David Berger Vice President - Sales & Distribution (Telebusiness)
Ken Witt Finance Department
Cobrin, Gittes & Samuel
- -----------------------
Peter T. Cobrin, Esq.
David J. Garrod, Ph.D.
DATAPOINT CORPORATION 2 CONFIDENTIAL
</TABLE>
<PAGE>
Patricof & Co. Capital Corp.
PATRICOF DUE DILIGENCE (CONTINUED)
DOCUMENTS REVIEWED
- Public Filings of Datapoint Corporation 10-Ks for the years ended July 31,
1995, 1994, 1993 10-Q for the quarter ended 4/27/96
- Public filings of companies used for comparative purposes
- Relevant Agreements and Contracts, including:
- March 17, 1992 Exchange Offer and Proxy
- 8 7/8% Convertible Subordinated Debenture prospectus and Indenture
- Acquisition agreements between Kalamazoo and Datapoint
- Draft S-4 describing the Exchange Offer
- Company Data
- Annual Operating Plan for fiscal year 1996
-Fiscal year 1996 forecast (as of May) pro forma for restructurings &
sale of Autobusiness and Telebusiness
- Other internal company financial statements (historic, current, and
prospective)
- Company product descriptions
- Minx business plan
- By laws, articles of incorporation, minutes and other corporate
items
- Trading history of Datapoint Common Stock, Preferred Stock and Convertible
Debentures
DATAPOINT CORPORATION 3 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT
- As of the date of the 4/27/96 10-Q, the Company consisted of three
divisions: the automotive dealer management system division
("Autobusiness"), the computer telephony integration systems integration
division ("Telebusiness"), and the systems integration and proprietary
hardware and software business (Open Systems Networking division, or "OSN")
which includes the Minx video conferencing business ("Minx").
- The Company estimates total revenue of $184.6 million, EBITDA of $15.3
million and loss before extraordinary items of $3.3 million for the fiscal
year ended July 31, 1996.
ESTIMATED RESULTS FOR FISCAL YEAR 1996
Revenue EBITDA
------------ -------------
Autobusiness (a) $26.4 $5.9
Telebusiness 44.5 1.2
OSN (b) 113.7 8.1
------------ -------------
Total $184.6 $15.3
============ =============
- -------------------------------------------
(a) Does not include service revenue which Datapoint will
continue to generate as a subcontractor to Kalamazoo.
(b) Includes Minx revenue and EBITDA. Minx sales revenue
is not material, and Minx operates at approximately breakeven
profitability.
SOURCE: DATAPOINT. (ALL COMPANY DATA THROUGHOUT THIS
PRESENTATION IS SOURCED FROM DATAPOINT).
DATAPOINT CORPORATION 4 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
SALE OF AUTOBUSINESS AND RESTRUCTURING
- On June 25, 1996 Datapoint announced the sale of Autobusiness to Kalamazoo
Computer Group plc for a price of $33 million.
- During 1996 Datapoint took actions to reduce operating expenses. Adjusting
estimated fiscal year 1996 results for the full year impact of cost
reductions and for non-recurring expenses results in an increase in EBITDA
of $3.1 million.
- The Company plans to undertake additional cost cutting programs in the
remainder of fiscal year 1996. Adjusting estimated fiscal year 1996 results
for these actions results in an increase in EBITDA of an additional $2.6
million.
- The table on the following page presents estimated 1996 fiscal year
operating results pro forma for the sale of Autobusiness and adjusted for
cost reduction and non-recurring expenses.
DATAPOINT CORPORATION 5 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
ADJUSTED ESTIMATED FY 1996 INCOME STATEMENT PRO FORMA FOR AUTOBUSINESS SALE
<TABLE>
<CAPTION>
A B C: A+B D E: C+D F G: E+F
Cost Reduction Adjusted
reductions Planned for sale of estimated
Estimated & non- cost Autobusiness PF 1996
FY 1996 recurring reductions & NTI note pro forma
------------ ------------- ------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue $184.6 $0.0 $184.6 $0.0 $184.6 ($26.4) $158.2
Cost of goods sold (a) 125.2 0.4 124.8 (1.9) 122.9 (13.4) 109.5
------------ ------------- --------- ------------- ------------ ------------- -----------------
Gross profit
59.4 0.4 59.9 1.9 61.7 (12.9) 48.8
Subsidiary operating exp. (b) 28.9 (0.6) 28.3 (0.0) 28.3 (6.4) 21.8
------------ ------------- --------- ------------- ------------ ------------- -----------------
Operating income before corp. 30.5 1.0 31.6 1.9 33.4 (6.5) 26.9
European HQ overhead
5.3 (0.4) 4.9 (0.4) 4.5 (0.6) 3.9
US HQ overhead (c)
7.1 (1.3) 5.8 (0.3) 5.5 - 5.5
R&D
2.9 (0.3) 2.6 (0.0) 2.5 - 2.5
------------ ------------- --------- ------------- ------------ ------------- -----------------
EBITDA 18.3 15.0
15.3 3.1 2.6 20.9 (5.9)
Depreciation
7.0 - 7.0 - 7.0 (0.7) 6.3
------------ ------------- --------- ------------- ------------ ------------- -----------------
Operating income (EBIT) 11.3
8.3 3.1 2.6 13.9 (5.2) 8.7
Interest expense, net
(8.8) - (8.8) - (8.8) 1.1 (7.7)
------------ ------------- --------- ------------- ------------ ------------- -----------------
Pretax
(0.5) 3.1 2.5 2.6 5.1 (4.1) 1.0
Taxes & other
(2.7) - (2.7) - (2.7) 0.4 (2.3)
------------ ------------- --------- ------------- ------------ ------------- -----------------
Income before extraordinary items
(3.3) 3.1 (0.2) 2.6 2.4 (3.7) (1.4)
Extraordinary (loss)/gain (d)
(1.8) 3.5 1.8 - 1.8 - 1.8
------------ ------------- --------- ------------- ------------ ------------- -----------------
Net income ($5.0) $6.6 $1.6 $2.6 $4.1 ($3.7) $0.4
============ ============= ========= ============= ============ ============= =================
</TABLE>
<TABLE>
<CAPTION>
Notes:
- -----
<S> <C>
(a) Excludes depreciation of $1.8 million, which has been reclassified in "Depreciation".
(b) Excludes depreciation of $4.9 million, which has been reclassified in "Depreciation".
(c) Excludes depreciation of $0.3 million, which has been reclassified in "Depreciation".
(d) Includes $3.3 million related to litigation settlement.
</TABLE>
DATAPOINT CORPORATION 6 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
<TABLE>
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
ADJUSTED ESTIMATED FY 1996 BALANCE SHEET PRO FORMA FOR AUTOBUSINESS SALE
<CAPTION>
A B C D E: C+D
PF for sale
PF for Payment of Autobus.
FYE Estimated sale of of NTI & pmt of
1995 FYE '96 Autobus. note NTI note
------------ ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Cash $11.0 $3.9 $21.8 ($5.0) $16.8
Trade receivables 39.8 34.2
43.1 - 34.2
Inventory
9.8 6.0 5.2 - 5.2
Other current assets
3.6 4.5 3.2 - 3.2
------------ ------------- ------------- ------------- -----------------
Total current assets 54.1 64.4
67.5 (5.0) 59.4
Net fixed assets 13.8 12.7
18.9 - 12.7
Other assets 15.0 12.4
15.4 - 12.4
------------ ------------- ------------- ------------- -----------------
Total assets $101.8 $82.9 $89.4 ($5.0) $84.4
============ ============= ============= ============= =================
Bank debt
$16.8 $16.6 $14.6 $0 $14.6
Current portion LTD
9.2 4.4 2.4 (0.7) 1.7
Trade payables 18.2 14.3
23.3 - 14.3
Accrued expenses 32.1 25.1
34.9 - 25.1
Other current liabilities 13.5
16.1 9.7 - 9.7
------------ ------------- ------------- ------------- -----------------
Total current liabilities 100.3 84.8 66.1
(0.7) 65.4
Long term debt 64.9 64.9
64.9 - 64.9
Other long term liabilities 14.0 12.8
10.7 (4.4) 8.4
------------ ------------- ------------- ------------- -----------------
Total liabilities 175.9 163.8 143.8 138.8
(5.0)
Equity (80.9) (54.4) (54.3)
(74.1) 0.0
------------ ------------- ------------- ------------- -----------------
Total liabilities & equity $101.8 $82.9 $89.4 ($5.0) $84.4
============ ============= ============= ============= =================
</TABLE>
DATAPOINT CORPORATION 7 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
SALES BY COUNTRY
- Over 90% of Datapoint's revenue is generated in Europe. The following is a
breakdown of Datapoint's estimated sales for fiscal year 1996, pro forma
for the sale of Autobusiness.
ESTIMATED FYE JULY 31, 1996 REVENUE
OSN Telebus. Total
------------ ------------- -------------
Sweden $41.3 $1.4 $42.7
U.K. 16.4 20.2 36.6
Belgium 15.0 3.7 18.7
France 11.2 4.9 16.1
Germany 6.1 0.3 6.4
Holland 4.7 0.8 5.5
Spain 2.6 3.5 6.1
Italy 1.2 7.4 8.6
Other Europe 6.1 2.3 8.4
------------ ------------- -------------
Total Europe 104.6 44.5 149.1
U.S., Pacific and other 9.1 0.0 9.1
------------ ------------- -------------
Total $113.7 $44.5 $158.2
============ ============= =============
DATAPOINT CORPORATION 8 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
TELEBUSINESS
- Telebusiness is principally engaged in the development, marketing,
distribution and servicing of computer and communications products, both
hardware and software, in the field of computer telephony integration
("CTI"). Telebusiness acts primarily as a systems integrator, providing
corporations with integrated solutions for CTI applications using hardware
and software supplied by third parties. Telebusiness typically services
these CTI systems after installation, providing it with a profitable
ongoing stream of revenue.
- Telebusiness competes with hardware suppliers such as IBM as well as with
consultancies and value added resellers. Management believes Telebusiness
is poised for growth due to its large market share in the CTI niche of the
European systems integration market, the knowledge and expertise of its
systems engineers and the quality of its customer base.
- Telebusiness revenue was concentrated in the U.K. (approximately 45% of
1996 estimated revenue) but the Company has invested considerable
resources in developing the market for CTI on the European continent.
This market has lagged the U.S. and U.K. market in adoption of CTI
technology, but is expected to provide a significant amount of growth in
the future.
- Telebusiness is projected to generate revenue of $67.7 million in fiscal
year 1997, up from $44.5 million estimated for fiscal year 1996. Assuming
the implementation of Telebusiness management's plans to enter new product
lines, EBIT is projected to increase to $8.2 million from $3.0 million
estimated for 1996 (on a stand-alone basis, excluding certain corporate
overhead allocations).
- Datapoint is currently exploring the sale of Telebusiness. The tables on
the following pages illustrate the effect of the sale of Telebusiness for *
in net proceeds and the use of these proceeds plus * of cash on hand to
repurchase debentures at *.
DATAPOINT CORPORATION 9 CONFIDENTIAL
* [ Confidential Material: Confidential portions have been omitted and filed
separately with the Securities and Exchange Commission pursuant to Rule
24b-2 under the Securities Exchange Act of 1934, as amended and denoted
herein by "*" ]
<PAGE>
Patricof & Co. Capital Corp.
<TABLE>
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
ADJUSTED ESTIMATED FY 1996 INCOME STATEMENT PRO FORMA FOR TELEBUSINESS SALE
<CAPTION>
A B C: A+B D E: C+D
Impact of
PF for Reduction PF for repurchase of PF for
sale of for sale of sale of debentures repurchase of
Autobus. Telebus. Telebus. & other debentures
------------- ------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Total revenue $158.2 ($44.5) $113.7 * *
Cost of goods sold 109.5 (30.7) 78.8 *
------------- ------------- ------------- ----------------- -----------------
Gross profit 48.8 (13.8) 34.9
* *
Subsidiary operating exp. 21.8 (11.1) 10.7 *
------------- ------------- ------------- ----------------- -----------------
Operating income before corp. 26.9 24.2
(2.8) * *
European HQ overhead
3.9 (1.5) 2.4 * *
US HQ overhead
5.5 - 5.5 * *
R&D
2.5 - 2.5 * *
------------- ------------- ------------- ----------------- -----------------
EBITDA 15.0 13.7
(1.2) * *
Depreciation
6.3 - 6.3 * *
------------- ------------- ------------- ----------------- -----------------
Operating income (EBIT)
8.7 (1.2) 7.4 * *
Interest expense, net
(7.7) - (7.7) * *
------------- ------------- ------------- ----------------- -----------------
Pretax
1.0 (1.2) (0.3) * *
Taxes & other
(2.3) 0.3 (2.1) * *
------------- ------------- ------------- ----------------- -----------------
Income before extraordinary items
(1.4) (1.0) (2.3) * *
Extraordinary (loss)/gain
1.8 - 1.8 * *
------------- ------------- ------------- ----------------- -----------------
Net income $0.4 ($1.0) ($0.6) * *
============= ============= ============= ================= =================
</TABLE>
DATAPOINT CORPORATION 10 CONFIDENTIAL
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
<TABLE>
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
ADJUSTED ESTIMATED FY 1996 BALANCE SHEET PRO FORMA FOR TELEBUSINESS SALE & DEB. REPURCHASE
<CAPTION>
A B C: A+B D E: C+D F G: E+F
PF for PF for Impact Pro forma PF for
sale of Removal removal of sale for sale repurch.
Autobus. & of of of of Repurch. of
pmt of NTI Telebus. Telebus. Telebus. Telebusiness debentures debent.
-------------------------- ------------- ------------- ----------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash $16.8 $5.4 $22.2 * * * *
Trade receivables 34.2 (11.6) 22.6 *
* * *
Inventory 5.2
- 5.2 * * * *
Other current assets 3.2
- 3.2 * * * *
--------- ------------- ------------- ------------- ----------------- --------------- -------------
Total current assets 53.2 * *
59.4 (6.2) * *
Net fixed assets 12.7 12.7 *
- * * *
Other assets 12.4 12.4 *
- * * *
--------- ------------- ------------- ------------- ----------------- --------------- -------------
Total assets $84.4 ($6.2) $78.2 * * * *
========= ============= ============= ============= ================= =============== =============
Bank debt $14.6 $0.0 14.6 *
* * *
Current portion LTD 1.7
- 1.7 * * * *
Trade payables 14.3
(5.0) 9.3 * * * *
Accrued expenses 25.1 23.9 *
(1.2) * * *
Other current liabilities 9.7
- 9.7 * * * *
--------- ------------- ------------- ------------- ----------------- --------------- -------------
Total current liabilities 59.3 *
65.4 (6.2) * * *
Long term debt 64.9 64.9 *
- * * *
Other long term liabilities 8.4
- 8.4 * * * *
--------- ------------- ------------- ------------- ----------------- --------------- -------------
Total liabilities 138.8 132.6 * *
(6.2) * *
Equity (54.3) (54.3) * * * *
--------- ------------- ------------- ------------- ----------------- --------------- -------------
-
Total liabilities & equity $84.4 ($6.2) $78.2 * * * *
========= ============= ============= ============= ================= =============== =============
DATAPOINT CORPORATION 11 CONFIDENTIAL
</TABLE>
* Confidential portions omitted and filed separately with the Commission
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
OSN
- OSN is engaged in the development, marketing, distribution and servicing
of hardware and software computer products. OSN markets a variety of
hardware and software, including Datapoint proprietary hardware and
software as part of integrated computing solutions to corporations.
Datapoint outsources the manufacture of proprietary hardware. Proprietary
hardware consists primarily of single and multiple processor computer
servers, and Arcnet cards which allow computers to transmit data within a
network (similar to Ethernet). Datapoint holds a patent on a dual-speed
operating protocol allowing upgrades to its Arcnet products, without
requiring the upgrade of the customer's entire system. (See "Patents").
- A substantial installed base of Datapoint proprietary hardware and
software exists. While a portion of this installed base is expected to
switch to other, non-proprietary systems in the future, Datapoint believes
that this will take place slowly over a period of years, and that the
Company will be chosen by many of these customers to assist in the switch
and continue to service the system. However, revenue generated through the
sale of proprietary hardware and software is substantially more profitable
than those from sale of third party hardware and software.
- In 1996, OSN revenue was concentrated in Sweden, the U.K., Belgium and
France.
- Approximately $20 million of OSN's $41 million in Swedish revenue was
generated through the sale of third-party personal computers to the Swedish
government at low (15%) gross margins. Datapoint management is confident
that its Swedish subsidiary will find additional sales opportunities,
either with the Swedish government or other customers, sufficient to
replace any non-recurring personal computer sales revenue.
- Approximately 50% of the $15 million of revenue in Belgium was generated
through sales to a single customer.
- In the U.K., OSN generated $10 million in revenue through third-party
maintenance contracts and $6 million through the sale of third-party
personal computers.
DATAPOINT CORPORATION 12 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
OSN (CONTINUED)
- Revenue from the French subsidiary totaled $11.2 million. The French
subsidiary owes approximately $7.2 million over time to the equivalent of a
bankruptcy trustee (the result of a restructuring and downsizing of this
subsidiary to return it to profitability). Datapoint has limited access to
the cash flow generated by the French subsidiary until this amount is paid.
Management expects to pay this amount over eight years.
- In 1996, OSN generated approximately $10 million in royalties on the
Datapoint proprietary operating system (the "RMS" operating system) at a
100% gross margin. The primary application of RMS is database management.
It is not expected that customers will replace RMS with other systems,
because the RMS operating system is compatible with industry standard
network software (e.g. Microsoft, Novell), and the changeover from RMS to
other database management systems is costly. Datapoint maintains
compatibility by developing upgrades for the RMS software when necessary.
- OSN competes with large hardware manufacturers, such as Unysis, and with
value added resellers and systems integration consultancies. Management
believes OSN has a competitive advantage due to the installed base of
Datapoint proprietary hardware and software, and due to its reputation as a
system integrator.
DATAPOINT CORPORATION 13 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
MINX
- Minx is a video conferencing system. Datapoint has reduced the resources
allocated to this business to approximately 15 employees. Minx operates at
approximately breakeven profitability, with about $5 million in sales of
replacement parts to an installed base of video conferencing equipment,
most at U.S. correctional facilities and other U.S. government facilities.
- Datapoint holds a number of video conferencing technology patents.
Datapoint has received one-time royalty payments related to the settlement
of certain patent-infringement lawsuits totaling approximately $1 million,
and is the plaintiff in a number of outstanding lawsuits related to these
patents. (See "Patents").
DATAPOINT CORPORATION 14 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
PATENTS
- Datapoint holds five patents related to (i) the technology developed for
use in the Minx video conferencing products and (ii) the OSN dual-speed
Local Area Network ("LAN") operating protocol developed to allow upgrades
to its Arcnet networking products.
- The Minx video conferencing technology patent is used for video
transmission over telephone lines, and includes the compression of data for
transmission from a LAN. It also covers the technology which creates the
"bridge" connecting the LAN to a telephone line, allowing this function to
be controlled by the LAN operator (the "chairman control" function). In
many competing systems, a user must contract with outside service providers
for connection to a telephone line, limiting the flexibility of use of the
video conferencing system.
- The OSN dual-speed operating protocol patent enables the LAN to be
upgraded to operate at a greater number of megabytes per second without
losing compatibility with existing equipment which operates at a lesser
number of megabytes per second. Without this dual-speed feature, all
equipment connected to the LAN would have to be upgraded to be compatible
with the faster speed.
- The Company has filed patent infringement lawsuits related to its Minx
patents against a number of parties including PictureTel, CLI and Telios.
The suit with the largest potential value is against PictureTel (NASDAQ -
PCTL), a leading video conferencing equipment manufacturer with $347
million in sales in 1995. While PictureTel's system does not operate
through a LAN, this suit is based upon, among other things, PictureTel's
use of compression technology covered by the Datapoint patent. A recent
PictureTel motion for summary judgment based on a point of law was denied.
During the course of the Company's action, a suit has been filed against
the Company by individuals claiming to be omitted inventors challenging
Datapoint's right to its video conferencing patents. The Company's
intellectual property counsel, Cobrin, Gittes & Samuel expect this
challenge to lead to another round of fact-finding by PictureTel.
DATAPOINT CORPORATION 15 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
GENERAL OBSERVATIONS CONCERNING DATAPOINT (CONTINUED)
PATENTS (CONTINUED)
- Datapoint has settled lawsuits against several manufacturers of video
conferencing equipment for patent licensing fees. These companies include
VTEL, NEC and Videoserver. In each case, Datapoint received * in up-front
licensing fees. The VTEL patent license is in perpetuity, but does not
allow sales of equipment utilizing the Datapoint patent to Datapoint's
major competitors (PictureTel, NEC and others) and does not include the
rights to the "chairman control" feature of the Datapoint patent. The NEC
licensing arrangement requires an additional payment of $1 million to
Datapoint if NEC's video conferencing sales reach $24 million by the year
2000.
- Additional lawsuits may be filed in the future under the video
conferencing patents against companies producing video transmission
equipment for use at the desktop PC by individuals, as part of a LAN.
- Datapoint has filed patent infringement lawsuits related to the OSN
patents against a large number of manufacturers of dual-speed networking
products. The Company has consolidated these suits in a class action. No
trial date has been set.
- While it is possible that a favorable outcome of these lawsuits could be
of substantial value to Datapoint, Datapoint's counsel believes that it is
impossible to predict the eventual outcome of the lawsuits at this time.
DATAPOINT CORPORATION 16 CONFIDENTIAL
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Estimated FY 1996, Adjusted(a)
-----------------------------------------
Pro forma Pro forma(b)
Fiscal year ended July 29, LTM as for sale of for sale of Auto.
----------------------------------------
1993 1994 1995 of 4/96 Autobusiness and Telebusiness
------------ ------------- ------------- ------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $208.3 $172.9 $174.9 $184.7 $158.2 *
Gross profit $86.6 $65.6 $57.5 $59.8 $48.8 *
Gross margin % 42% 38% 33% 32% 31% *
EBITDA $15.8 ($2.1) $0.2 $11.5 $15.0 *
EBITDA margin % 8% -1% 0% 6% 9% *
Income before extraordinary
items ($5.6) ($22.2) ($19.1) ($6.8) ($1.4) *
Total assets $202.3 $127.4 $101.8 $90.2 $84.4 *
Total debt $89.9 $90.9 $90.9 $90.3 $81.3 *
Total cash and equivalents $22.5 $6.2 $8.5 $5.0 $16.8 *
Book value of equity $47.0 ($50.7) ($74.1) ($81.0) ($54.3) *
</TABLE>
- -------------------------------------------
(a) Adjusted for impact of expense reductions and non-recurring items.
(b) Assumes sale price of * and use of proceeds, plus * of cash on hand, to
repurchase debentures at *.
DATAPOINT CORPORATION 17 CONFIDENTIAL
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
SUMMARY FINANCIAL INFORMATION (CONTINUED)
OBSERVATIONS
- Performance has suffered in recent years due to increasing competition and
the impact of an industry shift away from proprietary systems to open
standards.
- This led to a relatively high debt level and a negative net worth, as
illustrated by a net debt-to-EBITDA ratio of 7.4x and net shareholder
deficit of $81.0 million as of April 27, 1996. To improve the financial
condition of the Company management sold the Autobusiness in the fourth
quarter of 1996 and is exploring the sale of Telebusiness.
- The proceeds of the sale of Autobusiness were used to pay transaction
expenses, corporate payables and to retire debt. As a result, the Company's
net debt-to-EBITDA ratio and shareholder deficit are reduced to 4.3x and
$54.3 million, respectively, pro forma for the sale.
- Over the past several years, the Company has not devoted significant
resources to the development of new customers and revenue sources, due to
liquidity and leverage concerns. With the sale of Autobusiness, the Company
has significantly improved its capitalization and should be able to focus
on improving its operations.
- The sale of Telebusiness would further strengthen the Company's balance
sheet.
DATAPOINT CORPORATION 18 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
FINANCIAL INFORMATION (CONTINUED)
POTENTIAL AREAS FOR CONCERN
- Datapoint may be unable to maintain pro forma profitability and/or meet
the projections utilized in the discounted cash flow analysis due to a
combination of:
(i) competition from larger, better capitalized companies;
(ii) inability to effectively generate new customers and revenues to
replace customers expected to switch from Datapoint proprietary
products to third-party products;
(iii) greater than expected switching of OSN's customers from
Datapoint proprietary products to third-party products;
(iv) inability to sell Telebusiness, and as a result inability to
reduce leverage.
- Operating results may be impacted by issues beyond the Company's control
such as:
(i) a general recession;
(ii) unfavorable foreign exchange rates;
(iii) technological change.
DATAPOINT CORPORATION 19 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
SUMMARY OF ISSUES RESPECTING FAIRNESS
- To assess the fairness of the Exchange Offer from a financial point of
view, Patricof considered, among other things:
(i) Value of Datapoint equity before the Exchange Offer
(ii) Value of Datapoint Preferred Stock before the Exchange Offer
(iii) Value of Datapoint Common Stock before the Exchange Offer
(iv) Value of Datapoint Common Stock after the Exchange Offer
- Patricof considered the rights of holders of Preferred Stock with respect
to dividends, liquidation preference and the ability to influence corporate
actions in determining the value of the elimination of this security to the
holders of Common Stock.
- Patricof considered and employed several valuation approaches:
Comparative company analysis
Discounted cash flow analysis
Preferred Stock valuation based on discounted value of future dividends
- Patricof considered an approach based on the public market for the Common
Stock and the Preferred Stock. The recent trading history of these
securities has been impacted by the April 16, 1996 announcement of the
Exchange Offer. (See Supplementary Materials for trading data).
- No dividends may be paid on the Preferred Stock until Datapoint attains a
positive book equity. Thus, the prices at which (i) Telebusiness is sold
and (ii) Debentures are repurchased greatly impact the timing of potential
dividend payments on the Preferred Stock.
DATAPOINT CORPORATION 20 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
VALUATION OF EQUITY BEFORE EXCHANGE OFFER
- Patricof considered two approaches, the comparative company approach and
the discounted cash flow approach.
<TABLE>
<CAPTION>
RESULTS OF EQUITY VALUATION ANALYSIS
Equity Value
Range
--------------------------
Comparative Company Low High
- ------------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Pro forma for sale of Autobusiness & Telebusiness
- Telebusiness proceeds of * $55.0 $65.0
- Telebusiness proceeds of * $42.5 $52.5
- Telebusiness proceeds of * $67.5 $77.5
No sale of Telebusiness $25.0 $35.0
Discounted Cash Flow 15% cost of equity 20% cost of equity 25% cost of equity
- ---------------------
-------------------------- -------------------------- -----------------------
PF for sale of Autobusiness & Telebusiness Low High Low High Low High
------------ ------------- ------------ ------------- ------------ ---------
- Telebusiness proceeds of * $55.0 $62.0 $42.0 $49.0 $33.0 - $40.0
- Telebusiness proceeds of * $42.0 $49.0 $29.0 $36.0 $21.0 - $28.0
- Telebusiness proceeds of * $66.0 $73.0 $54.0 $61.0 $46.0 - $53.0
DATAPOINT CORPORATION 21 CONFIDENTIAL
</TABLE>
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
VALUE OF EQUITY BEFORE EXCHANGE OFFER (CONTINUED)
- We performed comparative company analysis under two scenarios: (i)
assuming the sale of Telebusiness for net proceeds of between *
and the repurchase of Debentures at * using the proceeds plus * of
cash on hand, and (ii) assuming no sale of Telebusiness. The comparative
company valuation is higher in (i) above, as the application of comparative
company multiples to the estimated 1996 revenue, EBITDA and assets of
Telebusiness generates less value than Datapoint expects to realize from
the sale of Telebusiness. The repurchase of debentures at a discount in (i)
above further increases equity value.
- The discounted cash flow analysis assumes the sale of Telebusiness and
repurchase of debentures as outlined above. If Telebusiness were not sold,
it is uncertain whether the higher debt level would be offset by higher
profits of Datapoint due to Telebusiness.
DATAPOINT CORPORATION 22 CONFIDENTIAL
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH
COMPARATIVE COMPANY SELECTION CRITERIA
- Listed in OneSource database with a primary SIC code of 7373:
"Establishments primarily engaged in developing or modifying computer
software and packaging or bundling the software with purchased computer
hardware to create and market an integrated system for specific
application. Establishments in this industry must provide the following
services:
(i) development or modification of computer software;
(ii) marketing of purchased computer hardware;
(iii) involvement in all phases of systems development from
design through installation."
- Revenues between $25 million and $500 million.
- Negative net income before extraordinary items (based on GAAP) for at
least three of the last five fiscal years.
- Traded on a major exchange or NASDAQ.
- Company not the subject of an ancillary transaction such as a takeover or
going private deal. (One potential comparative, New Image Industries, Inc.,
was eliminated from the group because it completed a significant
acquisition on May 31, 1996 and did not release pro forma operating
results.)
- U.S. company.
DATAPOINT CORPORATION 23 CONFIDENTIAL
<PAGE>
Patricof & Co. Capital Corp.
<TABLE>
COMPARATIVE COMPANY APPROACH (CONTINUED)
COMPARATIVE COMPANY DESCRIPTIONS
<CAPTION>
COMPANY LTM REV. BUSINESS DESCRIPTION
<S> <C> <C>
Consilium, Inc. $34.3 million Consilium is a leading supplier of manufacturing execution software, and offers related
software maintenance and consulting. Its software is designed to assist manufacturing
companies in controlling manufacturing processes. Consilium is the leader in this field.
Its WorkStream product line consists of 24 integrated software modules sharing a common
database and user interface. A WorkStream system monitors and controls manufacturing's five
key elements during the manufacturing process: materials, equipment, personnel,
specifications and facilities. Consilium's FlowStream product line was designed to
complement the WorkStream product line by extending the benefits of its plant floor
management software to process manufacturers. FlowStream supports best practices for
manufacturers in the pharmaceutical, medical device and chemical industries. Products are
marketed through a direct sales force and distributors in the U.S., Japan, South Korea,
Taiwan, Southeast Asia, Western Europe and Israel.
Control Data $403.0 Control Data Systems is a systems integrator that develops and implements open systems
Systems, Inc. million solutions for customers in technical, government and commercial markets worldwide. The
principal application of the company's systems is for corporation-wide management of data.
The company develops custom solutions based on hardware, software and peripherals available
from its growing group of open systems technology partners and suppliers. The company
integrates computer solutions to business-specific problems in manufacturing design,
network communications and database management. The company is not captive to a particular
product set or technology, and is thus allowed to work in a multi-vendor environment
without bias. Revenue contributions in 1995 from hardware products, software and services,
and maintenance and support were 45%, 38% and 17%, respectively. The company completed the
divestiture of seven international subsidiaries in October 1995, reducing revenue by nearly
$100 million. The divestiture was part of the company's strategy to move away from
proprietary systems and develop its systems integration business.
DATAPOINT CORPORATION 24 CONFIDENTIAL
</TABLE>
<PAGE>
Patricof & Co. Capital Corp.
<TABLE>
COMPARATIVE COMPANY APPROACH (CONTINUED)
COMPARATIVE COMPANY DESCRIPTIONS (CONTINUED)
<CAPTION>
COMPANY LTM REV. BUSINESS DESCRIPTION
<S> <C> <C>
IKOS Systems, $36.2 million IKOS Systems designs, develops, manufactures, markets and supports high-performance
Inc. hardware-assisted systems for simulation of integrated circuits (ICs) and IC-based
electronic systems. IKOS specializes in the Electronic Design Automation (EDA) market. Its
products are used by designers of electronic systems to determine whether a system design
functions properly prior to incurring the cost and time to build the actual system. The
company sells its products to a broad range of customers in the communications,
semiconductor, multimedia/graphics, computer, aerospace and consumer electronics
industries. Its direct sales force and distribution network cover North America, Europe and
Asia.
Rational $91.1 million Rational Software is a software development company. It develops, markets and supports a
Software comprehensive solution for developing and managing complex software systems. It provides an
Corporation integrated family of software tools that spans major phases of the software development
process, from initial graphical object modeling of business processes such as order
processing and system requirements for products such as telecommunication switching
systems, through detailed design, coding, compilation, delivery and maintenance. These
products are designed for use with industry-standard hardware platforms and operating
systems. In addition, the company provides a broad range of technical consulting, training
and support services.
DATAPOINT CORPORATION 25 CONFIDENTIAL
</TABLE>
<PAGE>
Patricof & Co. Capital Corp.
<TABLE>
COMPARATIVE COMPANY APPROACH (CONTINUED)
COMPARATIVE COMPANY DESCRIPTIONS (CONTINUED)
<CAPTION>
COMPANY LTM REV. BUSINESS DESCRIPTION
- ------- -------- --------------------
<S> <C> <C>
Structural Dynamics $240.8 SDRC is a leading international supplier of mechanical design automation software and
Research Corporation million engineering services used by automotive, aerospace and industrial manufacturers for the
design, analysis, testing and manufacturing of sophisticated mechanical products. The
company's software and services are intended to reduce product development time and costs
and to improve product quality by enabling customers to optimize product designs prior to
production. Software products are sold to end-users primarily through a direct sales force,
and also through original equipment manufacturers, distributors, value-added resellers and
hardware suppliers.
Sulcus Computer $45.9 Sulcus develops, manufactures, markets and installs microcomputer systems designed to
Corporation million automate the creation, handling, storage and retrieval of information and documents. The
company designs its systems primarily for the hospitality and real estate industries and to
a lesser extent, the legal profession. Sulcus' sales practices are currently systems
oriented (rather than individual sales of hardware or software) toward the vertical
marketing of its integrated products. The company's systems are offered together with full
services training, maintenance and support, and have been installed throughout North and
South America, Europe, Africa, Asia and Australia.
Source: Company reports and S&P tearsheets.
DATAPOINT CORPORATION 26 CONFIDENTIAL
</TABLE>
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
DATAPOINT'S PERFORMANCE RELATIVE TO THE COMPARATIVE GROUP
. Relative Performance of Datapoint to the universe of Comparatives:
Size: Slightly larger than the median of the group based on assets,
revenues, and EBITDA;
Growth: Lower than the median of the group based on revenue and EBITDA
growth;
Margins: Significantly lower gross margins than the median of the
Comparatives for all periods, EBITDA and operating margins
for the most recent period are near the median for the
Comparatives;
Liquidity: Significantly lower than the median of the Comparatives;
Leverage: Significantly higher than the Comparatives.
Datapoint Corporation 27 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
DATAPOINT'S PERFORMANCE RELATIVE TO THE COMPARATIVE GROUP
. Datapoint is substantially less profitable than the median of the
Comparatives on a gross margin and earnings basis. A number of the
Comparatives are software design companies, and have gross margins of 70%
or more and EBITDA margins of 10% to 20%.
. Two of the Comparatives are primarily involved in developing and marketing
integrated systems. These are Control Data Systems, Inc. ("Control
Data") and Sulcus Computer Corporation ("Sulcus").
. Among the Comparatives, Control Data is the most similar to Datapoint in
operations and in financial performance:
(i) Control Data is "transitioning from a developer and manufacturer
of proprietary mainframe computer systems to a software and services
provider focused on enterprise integration and product design and
information services".(a)
(ii) Control Data is primarily involved in integrating the information
processing systems of a corporation, and allowing corporate-wide access
to data. Control Data acts as a system integrator, providing the
expertise to put such a system in place using a variety of third-party
hardware and software platforms.
(iii) Control Data's customers are large corporations.
(iv) Control Data markets its systems internationally and in the U.S.
(v) Control Data's gross margin and EBITDA margin are similar to
those of Datapoint.
. Sulcus is focused on a very specific niche within the real estate and
hospitality industries, and does not sell primarily to large corporations.
It sells proprietary products, not designed to work with open systems.
(a) Control Data 10-Q dated March, 1996.
Datapoint Corporation 28 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
TOTAL ASSETS (A)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Datapoint Corporation PF
Datapoint Corporation
Median of Comparative
Group
Sulcus Computer
Corporation
Structural Dynamics
Research Corporation [GRAPH]
Rational Software
Corporation
IKOS Systems, Inc.
Control Data Systems, Inc.
Consilium, Inc.
$0.0 $50.0 $100.0 $150.0 $200.0 $250.0
</TABLE>
TOTAL ASSETS
Consilium, Inc. $28.9
Control Data Systems, Inc. 218.0
IKOS Systems, Inc. 32.8
Rational Software Corporation 85.7
Structural Dynamics Research Corporation 119.0
Sulcus Computer Corporation 45.6
Median of Comparative Group 65.6
Datapoint Corporation 90.2
Datapoint Corporation PF 84.4
(a) Based on total assets in most recent period ended.
Note: Datapoint Corporation PF reflects projected 1996 results of the
Autobusiness restructuring.
Source: Company reports.
Datapoint Corporation 29 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
LTM SALES
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Datapoint Corporation PF
Datapoint Corporation
Median of Comparative
Group
Sulcus Computer
Corporation
Structural Dynamics [GRAPH]
Research Corporation
Rational Software
Corporation
IKOS Systems, Inc.
Control Data Systems, Inc.
Consilium, Inc.
$0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0
</TABLE>
LTM SALES
Consilium, Inc. $34.3
Control Data Systems, Inc. 403.0
IKOS Systems, Inc. 36.2
Rational Software Corporation 91.1
Structural Dynamics Research Corporation 240.8
Sulcus Computer Corporation 45.9
Median of Comparative Group 68.5
Datapoint Corporation 184.7
Datapoint Corporation PF 158.2
Note: Datapoint PF figures are estimated 1996, adjusted for restructurings and
non-recurring expenses, pro forma for sale of Autobusiness.
Source: Company reports.
Datapoint Corporation 30 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
LTM EBITDA
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Datapoint Corporation PF
Datapoint Corporation
Median of Comparative
Group
Sulcus Computer [GRAPH]
Corporation
Structural Dynamics
Research Corporation
Rational Software
Corporation
IKOS Systems, Inc.
Control Data Systems, Inc.
Consilium, Inc.
$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0
</TABLE>
LTM EBITDA
Consilium, Inc. $1.3
Control Data Systems, Inc. 11.8
IKOS Systems, Inc. 7.2
Rational Software Corporation 8.7
Structural Dynamics Research Corporation NM
Sulcus Computer Corporation 5.7
Median of Comparative Group 7.2
Datapoint Corporation 11.5
Datapoint Corporation PF 15.0
Note: EBITDA refers to earnings before interest, taxes and depreciation and
amortization. In this analysis, EBITDA is defined as operating income before
depreciation and amortization.
Note: Structural Dynamics Research Corp. did not provide restated EBITDA
information after the acquisition of CAMAX Manufacturing Technologies in
June 1996.
Note: Datapoint Corporation PF reflects projected 1996 results of the
Autobusiness restructuring.
Source: Company reports.
Datapoint Corporation 31 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
RELATIVE REVENUE GROWTH
300
HIGH
250 LOW/CONTROL DATA
MEDIAN
200 Datapoint Corporation
150 [GRAPH]
100
50
0
1991 1992 1993 1994 1995 LTM 1996P/PF
<TABLE>
<CAPTION>
RELATIVE REVENUE GROWTH 1991 1992 1993 1994 1995 LTM 1996P/PF
---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consilium, Inc. 100 101 104 102 121 126
Control Data Systems, Inc. 100 90 79 91 79 70 59
IKOS Systems, Inc. 100 92 109 143 189 240
Rational Software Corporation 100 118 117 121 151 151
Structural Dynamics Research Corporation NA NA 100 112 135 145
Sulcus Computer Corporation 100 206 277 243 259 259
HIGH 100 206 277 243 259 259
LOW/CONTROL DATA 100 90 79 91 79 70 59
MEDIAN 100 101 107 116 143 148
Datapoint Corporation 100 96 78 65 66 70 60
</TABLE>
Note: 1996P/PF reflects 1996 results for Control Data Systems (based on
research report by Cowen & Co.) and pro forma results for Datapoint based
on the restructuring of its Autobusiness.
Source: Company reports.
Datapoint Corporation 32 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
GROSS MARGIN PERCENTAGE
80.0%
HIGH
70.0% LOW/CONTROL DATA
MEDIAN
60.0% Datapoint Corporation PF
50.0%
40.0%
30.0% [GRAPH]
20.0%
10.0%
0.0%
1991 1992 1993 1994 1995 LTM 1996PF
<TABLE>
<CAPTION>
GROSS MARGIN PERCENTAGE 1991 1992 1993 1994 1995 LTM 1996P/PF
---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consilium, Inc. 78.0% 74.6% 72.7% 74.0% 76.5% 75.6%
Control Data Systems, Inc. 41.1% 38.0% 36.8% 27.0% 27.4% 28.9%
IKOS Systems, Inc. 74.7% 71.1% 61.7% 72.6% 75.0% 76.9%
Rational Software Corporation 65.4% 69.6% 64.0% 65.6% 70.9% 70.9%
Structural Dynamics Research Corporation NM NM 70.5% 72.1% 71.0% 70.6%
Sulcus Computer Corporation 65.4% 57.9% 53.2% 52.3% 58.8% 59.0%
HIGH 78.0% 74.6% 72.7% 74.0% 76.5% 76.9%
LOW/CONTROL DATA 41.1% 38.0% 36.8% 27.0% 27.4% 28.9%
MEDIAN 65.4% 69.6% 62.8% 68.9% 70.9% 70.8%
Datapoint Corporation PF 41.1% 39.9% 41.5% 37.9% 32.9% 32.3% 30.8%
</TABLE>
Note: Datapoint Corporation PF reflects projected 1996 results of the
Autobusiness restructuring.
Source: Company reports.
Datapoint Corporation 33 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
EBITDA MARGIN
20.0%
Control Data Systems, Inc.
10.0% HIGH
LOW
0.0% MEDIAN
Datapoint Corporation
- -10.0%
- -20.0%
- -30.0%
- -40.0%
1991 1992 1993 1994 1995 LTM 1996P/PF
<TABLE>
<CAPTION>
EBITDA MARGIN 1991 1992 1993 1994 1995 LTM 1996P/PF
---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consilium, Inc. 1.1% -7.8% -8.0% -4.9% 11.1% 3.9%
Control Data Systems, Inc. 3.6% 4.9% 5.1% 3.0% 3.0% 2.9% 5.9%
IKOS Systems, Inc. -23.9% -10.5% -37.8% 13.1% 16.3% 20.0%
Rational Software Corporation 6.7% 13.0% 8.9% 11.7% 9.6% 9.6%
Structural Dynamics Research Corporation NA NA NA NA NA NA
Sulcus Computer Corporation 18.9% 15.4% 9.5% -2.4% 11.7% 12.3%
HIGH 18.9% 15.4% 9.5% 13.1% 16.3% 20.0%
LOW -23.9% -10.5% -37.8% -4.9% 3.0% 2.9%
MEDIAN 3.6% 4.9% 5.1% 3.0% 11.1% 9.6%
Datapoint Corporation 12.0% 7.7% 7.6% -1.2% 0.1% 6.2% 9.5%
</TABLE>
Note: Structural Dynamics Research Corp. did not provide restated EBITDA
information after the acquisition of CAMAX Manufacturing Technologies in
June 1996.
Note: 1996P/PF reflects projected 1996 results for Control Data Systems
(based on research report by Cowen & Co.) and pro forma results for Datapoint
based on the restructuring of its Autobusiness.
Source: Company reports.
Datapoint Corporation 34 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
DEBT-TO-CAPITAL RATIO
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Datapoint Corporation PF
Datapoint Corporation
Median of Comparative
Group
Sulcus Computer
Corporation
Structural Dynamics [GRAPH]
Research Corporation
Rational Software
Corporation
IKOS Systems, Inc.
Control Data Systems, Inc.
Consilium, Inc.
$-10.0% 10.0% 30.0% 50.0% 70.0% 90.0% 110.0% 130.0% 150.0%
</TABLE>
DEBT-TO-CAPITAL RATIO (a)
Consilium, Inc. 12.3%
Control Data Systems, Inc. 1.0%
IKOS Systems, Inc. 5.2%
Rational Software Corporation 1.3%
Structural Dynamics Research Corporation 1.6%
Suleus Computer Corporation 23.2%
Median of Comparative Group 3.4%
Datapoint Corporation 971.0%
Datapoint Corporation PF 301.9%
(a) Ratio based on most recent reporting period. Calculated as book value of
total debt divided by the sum of the book value of total debt and equity.
Note: X-axis scale does not extend to reflect high level of Datapoint and
Datapoint PF debt.
Note: Datapoint Corporation PF reflects projected 1996 results of the
Autobusiness restructuring.
Source: Company reports.
Datapoint Corporation 35 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
COMPARATIVE COMPANY VALUATION
Of the universe of Comparatives, Control Data most resembles Datapoint. We
therefore determined that the investor appraisal ratios exhibited by Control
Data should form the basis for the valuation of Datapoint. The following is the
calculation of the total enterprise value ("TEV") of Control Data:
CALCULATION OF CONTROL DATA TEV
($ in millions)
Control Data freely-traded minority interest equity value $270.6
Plus: Debt 0.9
Less: Cash (79.5)
=============
Control Data (TEV) $192.0
=============
. Projected 1996 earnings figures have been generated by research analysts
are publicly available. Investor appraisal ratios based on projected
figures, rather than historical figures, are more appropriate due to the
pro forma nature of the Datapoint results to which they will be applied.
. Investor appraisal ratios for Control Data based on projected figures are
as follows:
CALCULATION OF CONTROL DATA INVESTOR APPRAISAL RATIOS
($ in millions)
---------------------------------------
Revenue EBITDA Assets
------------ ------------- ------------
Control Data projected 1996 results $340.0 $20.0 $218.0
TEV/projected results 0.56x 9.6x 0.88x
Datapoint Corporation 36 Confidential
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
COMPARATIVE COMPANY VALUATION CONCLUSION
. A discount of 20% is applied to the multiples exhibited by Control Data
due to Datapoint's smaller size, higher leverage and negative equity value,
offset by the potential for significant profits related to its patents and
patent litigation, and by the potential benefits of its net operating loss
carryforwards (which, at $157 million as of 12/31/95, are somewhat larger
than those of Control Data, although due to the international nature of the
revenues of these two companies it is uncertain how much of these operating
loss carryforwards will be utilized).
. The following tables present the values obtained by applying the resulting
multiples to the estimated FY 1996 results, adjusted for cost reductions
and non-recurring items, pro forma for the sale of Autobusiness and
assuming the sale of Telebusiness for net proceeds of * and *, and the use
of these proceeds plus * of cash on hand to retire debentures at *
CALCULATION OF DATAPOINT EQUITY VALUE - TELEBUSINESS SOLD FOR
* ($ in millions)
TEV as a multiple of:
-------------------------------
Revenue EBITDA Assets
--------- -------- --------
Datapoint (a) $113.7 $13.7 $68.2
Control Data multiple 0.6x 9.6x 0.9x
Premium/(discount) -20% -20% -20%
--------- -------- --------
Multiple applied to Datapoint results 0.5x 7.7x 0.7x
--------- -------- --------
Freely-traded minority interest TEV 51.4 105.4 48.1
Less: Debt (31.3) (31.3) (31.3)
Plus: Cash 12.2 12.2 12.2
========= ======== ========
Freely-traded minority interest equity value $32.3 $86.4 $29.0
========= ======== ========
- -------------------------------
(a) Estimated FY 1996 adjusted for cost reductions and non-recurring expenses,
pro forma for the sale of Autobusiness and Telebusiness.
. The equity value range selected based on this analysis is $55 to $65
million.
Datapoint Corporation 37 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
CALCULATION OF DATAPOINT EQUITY VALUE - TELEBUSINESS SOLD FOR *
($ in millions)
TEV as a multiple of:
-----------------------------
Revenue EBITDA Assets
--------- -------- --------
Datapoint (a) $113.7 $13.7 $68.2
Control Data multiple 0.6x 9.6x 0.9x
Premium/(discount) -20% -20% -20%
--------- -------- --------
Multiple applied to Datapoint results 0.5x 7.7x 0.7x
--------- -------- --------
Freely-traded minority interest TEV 51.4 105.4 48.1
Less: Debt (43.8) (43.8) (43.8)
Plus: Cash 12.2 12.2 12.2
========= ======== ========
Freely-traded minority interest equity value $19.8 $73.9 $16.5
========= ======== ========
- -------------------------------
(a) Estimated FY 1996 adjusted for cost reductions and non-recurring expenses,
pro forma for the sale of Autobusiness and Telebusiness.
. The equity value range selected based on this analysis is $42.5 to $52.5
million.
Datapoint Corporation 38 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
CALCULATION OF DATAPOINT EQUITY VALUE - TELEBUSINESS SOLD FOR *
($ in millions)
TEV as a multiple of:
------------------------------
Revenue EBITDA Assets
--------- -------- --------
Datapoint (a) $113.7 $13.7 $68.2
Control Data multiple 0.6x 9.6x 0.9x
Premium/(discount) -20% -20% -20%
--------- -------- ---------
Multiple applied to Datapoint results 0.5x 7.7x 0.7x
--------- -------- ---------
Freely-traded minority interest TEV 51.4 105.4 48.1
Less: Debt (18.8) (18.8) (18.8)
Plus: Cash 12.2 12.2 12.2
========= ======== =========
Freely-traded minority interest equity value $44.8 $98.9 $41.5
========= ======== =========
- -------------------------------
(a) Estimated FY 1996 adjusted for cost reductions and non-recurring expenses,
pro forma for the sale of Autobusiness and Telebusiness.
. The equity value range selected based on this analysis is $67.5 to $77.5
million.
Datapoint Corporation 39 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
COMPARATIVE COMPANY APPROACH (CONTINUED)
CONCLUSION - NO SALE OF TELEBUSINESS
. The following table presents the values obtained by applying the resulting
multiples to the estimated FY 1996 results, adjusted for cost reductions
and non-recurring items and pro forma for the sale of Autobusiness. It is
possible that the sale of Telebusiness will generate more value than the
application of the multiples used in this analysis would imply.
CALCULATION OF DATAPOINT EQUITY VALUE - TELEBUSINESS NOT SOLD
($ in millions)
TEV as a multiple of:
-----------------------------
Revenue EBITDA Assets
--------- -------- --------
Datapoint (a) $158.2 $15.0 $84.4
Control Data multiple 0.56x 9.6x 0.9x
Premium/(discount) -20% -20% -20%
--------- -------- --------
Multiple applied to Datapoint results 0.5x 7.7x 0.7x
--------- -------- --------
Freely-traded minority interest TEV 71.5 114.9 59.5
Less: Debt (81.3) (81.3) (81.3)
Plus: Cash 16.8 16.8 16.8
========= ======== ========
Freely-traded minority interest equity value $7.0 $50.4 ($5.0)
========= ======== ========
- -------------------------------
(a) Estimated FY 1996 adjusted for cost reductions and non-recurring expenses,
pro forma for the sale of Autobusiness.
. The equity value range selected based on this analysis is $25 to $35
million.
Note: The difference in TEV between the "Telebusiness Sold" and "Telebusiness
Not Sold" cases results from the fact that in the "Telebusiness Not Sold" case,
Telebusiness revenue, EBITDA and assets, when multiplied by the comparative
company multiples, yield a smaller value than the * in sale proceeds assumed
in the "Telebusiness Sold" case. The difference in equity value is a
combination of the difference in TEV and the impact of (i) the repurchase of
debentures at *, and (ii) the cash which results from the removal of
Telebusiness from the balance sheet (and effective liquidation of a portion
of Telebusiness working capital).
Datapoint Corporation 40 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
LIQUIDATION VALUE APPROACH
. The Company does not plan a liquidation. In a liquidation, the Preferred
Stock has a preference value of $20 per share, or $37.4 million.
. Liquidation could imply two very different events:
(i) The sale of the fixed assets and working capital of the company to
realize the value of individual assets (ii) The sale of the assets of
the Company as a going concern, including the goodwill associated with
the Company's business.
. In the first instance the value of the assets after satisfying the
liabilities is likely to be negative.
. A sale of the Company as a going concern should result in a value similar
to that discussed in the "Comparative Company Valuation", above, as that
valuation considers the value attributable to the Company and to its most
significant non-income producing asset, the patent litigation.
Datapoint Corporation 41 Confidential
<PAGE>
Patricof & Co. Capital Corp.
DISCOUNTED CASH FLOW VALUATION
. We performed a discounted cash flow valuation of Datapoint based on a
discounted cash flow analysis that: - Discounts cumulative stream of
free cash flow to the present;
- Assumes a terminal value based on capitalized earnings or cash flow
in the future.
. Management's projections formed the basis of the analysis. We used three
scenarios:
(i) Management's base case of 0% sales growth, constant gross margins
(equal to 1996 pro forma gross margins); (ii) A downside case of 5%
annual sales growth, with constant gross margins; (iii) An upside case
of 10% annual sales decline, with constant gross margins.
. The sale of Telebusiness for net proceeds of * was assumed.
. In all scenarios it was assumed that the Company used the proceeds of the
sale of Telebusiness and * of cash on hand to repurchase debentures at an
average price of *.
. Key assumptions:
(i) Terminal year 2001;
(ii) Datapoint's calculated weighted average cost of capital ("WACC")
is 18.5%;
(iii) A range of cost of equity of 15%, 20% and 25% is used to
discount Datapoint's free cash flow and terminal value.
These costs of equity imply a WACC of 13.3%, 17.3% and 21.3%,
respectively.
(iii) Terminal multiple of 2001 EBITDA in a range of 6.0x, 7.0x and
8.0x;
(iv) Perpetuity terminal value calculated as 2001 free cash flow
divided by the discount rate; (v) Average of terminal multiple value
and perpetuity value used as terminal value; (vi) Utilization of
Datapoint's NOL results in taxes at 33% rather than the statutory rate
in the projected years.
Datapoint Corporation 42 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
DISCOUNTED CASH FLOW VALUATION
SUMMARY PROJECTED FINANCIAL INFORMATION - BASE CASE, TELEBUSINESS SOLD FOR
*
($ in millions)
<TABLE>
<CAPTION>
Projected
----------------------------------------------------------------
PF 1996 1997 1998 1999 2000 2001
------------ ------------- ------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $113.7 $113.7 $113.7 $113.7 $113.7 $113.7
Gross profit $34.9 $34.9 $34.9 $34.9 $34.9 $34.9
Gross margin % 31% 31% 31% 31% 31% 31%
EBITDA $13.7 $13.7 $13.7 $13.7 $13.7 $13.7
EBITDA margin % 12% 12% 12% 12% 12% 12%
Income before extraordinary items $2.8 $3.7 $4.2 $4.7 $5.1 $5.5
Total assets $68.2 $70.3 $73.6 $77.5 $81.8 $86.5
Total debt * $31.3 $31.3 $31.3 $31.3 $31.3
Total cash and equivalents $12.2 $16.9 $22.4 $27.8 $33.3 $38.7
Book value of equity * ($10.6) ($6.4) ($1.8) $3.3 $8.8
</TABLE>
. Datapoint achieves a positive net worth in fiscal year 2000.
- Assuming the sale of Telebusiness for * in net proceeds
and the use of these proceeds plus * of cash on hand to
repurchase debentures at *, positive net worth is attained
in 2003.
- Assuming the sale of Telebusiness for * in net proceeds
and the use of these proceeds plus * of cash on hand to
repurchase debentures at *, positive net worth is attained
in 1997.
Datapoint Corporation 43 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
DISCOUNTED CASH FLOW VALUATION
SUMMARY PROJECTED FINANCIAL INFORMATION -
DOWNSIDE CASE, TELEBUSINESS SOLD FOR *
($ in millions)
<TABLE>
<CAPTION>
Projected
----------------------------------------------------------------
PF 1996 1997 1998 1999 2000 2001
------------ ------------- ------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $113.7 $108.0 $102.6 $97.5 $92.6 $88.0
Gross profit $34.9 $33.2 $31.5 $29.9 $28.4 $27.0
Gross margin % 31% 31% 31% 31% 31% 31%
EBITDA $13.7 $12.5 $11.4 $10.3 $9.3 $8.3
EBITDA margin % 12% 12% 11% 11% 10% 9%
Income before extraordinary items $2.8 $2.9 $2.6 $2.3 $2.0 $1.7
Total assets $68.2 $68.2 $68.9 $69.3 $69.5 $69.4
Total debt * $31.3 $31.3 $31.3 $31.3 $31.3
Total cash and equivalents $12.2 $16.2 $20.3 $23.6 $26.1 $27.9
Book value of equity * ($11.4) ($8.8) ($6.5) ($4.5) ($2.8)
</TABLE>
. In the downside case Datapoint achieve a positive net worth in 2004.
- Assuming the sale of Telebusiness for * in net proceeds
and the use of these proceeds plus * of cash on hand to
repurchase debentures at *, positive net worth is not
attained during the projected period.
- Assuming the sale of Telebusiness for * in net proceeds
and the use of these proceeds plus * of cash on hand to
repurchase debentures at *, positive net worth is attained
in 1997.
.
Datapoint Corporation 44 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
DISCOUNTED CASH FLOW VALUATION
SUMMARY PROJECTED FINANCIAL INFORMATION -
UPSIDE CASE, TELEBUSINESS SOLD FOR *
($ in millions)
<TABLE><CAPTION>
Projected
----------------------------------------------------------------
PF 1996 1997 1998 1999 2000 2001
------------ ------------- ------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $113.7 $125.1 $137.6 $151.4 $166.5 $183.2
Gross profit $34.9 $38.4 $42.2 $46.5 $51.1 $56.2
Gross margin % 31% 31% 31% 31% 31% 31%
EBITDA $13.7 $16.2 $18.9 $21.9 $25.4 $29.2
EBITDA margin % 12% 13% 14% 14% 15% 16%
Income before extraordinary items $2.8 $5.3 $7.7 $10.3 $13.1 $16.3
Total assets $68.2 $74.3 $83.8 $96.2 $111.7 $130.6
Total debt * $31.3 $31.3 $31.3 $31.3 $31.3
Total cash and equivalents $12.2 $18.2 $26.7 $37.3 $50.3 $65.9
Book value of equity * ($9.0) ($1.3) $9.0 $22.1 $38.3
</TABLE>
. In the upside case Datapoint achieves a positive net worth in fiscal year
1999.
- Assuming the sale of Telebusiness for * in net
proceeds and use of these proceeds plus * in cash on
hand to repurchase debentures at *, positive net worth
is attained in 2000.
- Assuming the sale of Telebusiness for * in net proceeds
and the use of these proceeds plus * in cash on hand to
repurchase debentures at *, positive net worth is attained
in 1997.
Datapoint Corporation 45 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
DISCOUNTED CASH FLOW VALUATION
CALCULATION OF DATAPOINT WEIGHTED AVERAGE COST OF CAPITAL
<TABLE>
<CAPTION>
CALCULATION OF COST OF EQUITY
USING CAPITAL ASSET PRICING MODEL WEIGHTED AVERAGE COST OF CAPITAL
- ------------------------------------------------------ ------------------------------------------------------
<S> <C> <C> <C>
Beta (a) 1.35 Assumed constant debt-to-value ratio (f) 20.0%
Market risk premium ("Rm - Rf") (b) 7.1%
Small company risk premium ("Rs") (c) 5.3% Assumed after tax cost of debt (g) 6.4%
Risk-free rate ("Rf") (d) 6.6%
------------
Cost of equity ("Ke") (e) 21.5% Cost of equity per CAPM 21.5%
============
Weighted average cost of capital 18.5%
============
</TABLE>
- ------------------------------------------
(a) Control Data Corp.'s Beta is used as a proxy for Datapoint's Beta after the
sale of Telebusiness and reduction of leverage. Datapoint's Beta is presently
1.29. (b) Common stock total returns minus intermediate-term government bond
total returns for 1926-1992, based on mean returns as derived by Ibbotson &
Associates. Intermediate-term government bond is measured by Ibbotson using a
one-bond portfolio with a maturity of five years. (c) Ibbotson & Associates
small stock returns less total common stock returns. (d) Represents the yield on
a five year government bond on July 12, 1995 (Source: Bloomberg). (e) Calculated
using CAPM, where Ru = Rf +Rs+ (B * (Rm - Rf)). (f) Chosen based on the low (0%)
value ratio of Control Data Corp. (g) Adjusted for tax shield at a tax rate of
33%, which assumes the utilization of some NOLs. Cost of debt is assumed to be
9.5%, based on Datapoint's current borrowing costs.
Datapoint Corporation 46 Confidential
<PAGE>
Patricof & Co. Capital Corp.
DISCOUNTED CASH FLOW VALUATION
EQUITY VALUATION MATRICES
- -----------------------------------------------------------------------------
BASE CASE - TELEBUSINESS SOLD FOR *
Terminal Value EBITDA Multiple
-----------------------------------------------
6.0x 7.0x 8.0x
--------------- --------------- ---------------
Discount 13.3% $46.9 $50.6 $54.3
Rate 15.3% 40.9 44.3 47.7
17.3% 36.0 39.1 42.2
19.3% 31.8 34.7 37.5
21.3% 28.2 30.9 33.5
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
DOWNSIDE CASE - TELEBUSINESS SOLD FOR *
Terminal Value EBITDA Multiple
-----------------------------------------------
6.0x 7.0x 8.0x
--------------- --------------- ---------------
Discount 13.3% $24.1 $26.4 $28.6
Rate 15.3% 20.6 22.7 24.7
17.3% 17.7 19.6 21.5
19.3% 15.3 17.0 18.7
21.3% 13.1 14.7 16.3
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
UPSIDE CASE - TELEBUSINESS SOLD FOR *
Terminal Value EBITDA Multiple
-----------------------------------------------
6.0x 7.0x 8.0x
--------------- --------------- ---------------
Discount 13.3% $109.3 $117.1 $124.9
Rate 15.3% 96.2 103.4 110.6
17.3% 85.6 92.2 98.7
19.3% 76.7 82.7 88.8
21.3% 69.1 74.6 80.2
- -----------------------------------------------------------------------------
Datapoint Corporation 47 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
DISCOUNTED CASH FLOW VALUATION (CONTINUED)
TELEBUSINESS SALE PRICE SENSITIVITY
- -----------------------------------------------------------------------------
BASE CASE - TELEBUSINESS SOLD FOR *
Terminal Value EBITDA Multiple
-----------------------------------------------
6.0x 7.0x 8.0x
--------------- --------------- ---------------
Discount 13.3% $34.4 $38.1 $41.8
Rate 15.3% 28.4 31.8 35.2
17.3% 23.5 26.6 29.7
19.3% 19.3 22.2 25.0
21.3% 15.7 18.4 21.0
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
BASE CASE - TELEBUSINESS SOLD FOR *
Terminal Value EBITDA Multiple
-----------------------------------------------
6.0x 7.0x 8.0x
--------------- --------------- ---------------
Discount 13.3% $59.4 $63.1 $66.8
Rate 15.3% 53.4 56.8 60.2
17.3% 48.5 51.6 54.7
19.3% 44.3 47.2 50.0
21.3% 40.7 43.4 46.0
- -----------------------------------------------------------------------------
Note:
- ----
Matrices on these pages assume a range of 15% to 25% cost of equity which
results in a weighted average cost of capital range of 13.3% to 21.3%.
Datapoint Corporation 48 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
DISCOUNTED CASH FLOW VALUATION
RESULTS OF DISCOUNTED CASH FLOW VALUATION
<TABLE>
<CAPTION>
Equity value range at Datapoint cost of equity of
--------------------------------------------------------------------------------
15% 20% 25%
-------------------------- -------------------------- --------------------------
Low High Low High Low High
------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Telebusiness sold for * $55.0 $62.0 $42.0 $49.0 $33.0 - $40.0
Telebusiness sold for * $42.0 $49.0 $29.0 $36.0 $21.0 - $28.0
Telebusiness sold for * $66.0 $73.0 $54.0 $61.0 $46.0 - $53.0
</TABLE>
Note:
- ----
Value ranges chosen based on weighted average of management's base, downside and
upside cases.
Datapoint Corporation 49 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
VALUATION OF PREFERRED STOCK
The Preferred Stock was valued at the present value of the dividends in arrears
and future dividends, weighted for different projections scenarios. Datapoint
achieves a positive net worth in a different year in each of the nine projection
scenarios (base case projections with Telebusiness proceeds of * ; downside
case with Telebusiness proceeds of * ; and upside case at each level of
proceeds). The values which result from this analysis, at the different
Telebusiness sale prices and at different discount rates, are as follows:
RESULTS OF PREFERRED DISCOUNTED DIVIDEND VALUATION ANALYSIS
Value per share at discount rate of:
---------------------------------------
15% 20% 25%
------------ ------------- ------------
- Telebusiness sold for * $7.87 $6.54 $5.50
- Telebusiness sold for * $5.55 $4.28 $3.36
- Telebusiness sold for * $9.86 $9.44 $9.07
Datapoint Corporation 50 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
VALUATION OF PREFERRED STOCK BASED ON DIVIDENDS
. The sale of Telebusiness is critical to Datapoint's ability to attain a
positive net worth. If the Company does not attain a positive net worth, it
cannot pay dividends on the Preferred Stock. The Company plans to use the
proceeds of the sale of Telebusiness to repurchase debentures on the open
market. The repurchase of debentures at a discount would also increase net
worth.
. The following matrix illustrates the sensitivity of Datapoint's pro forma
1996 net worth to the sale price of Telebusiness and the percentage of face
value at which the Debentures are repurchased (this analysis assumes that
the net proceeds of the sale of Telebusiness plus * of cash on hand are
utilized to repurchase Debentures).
NET WORTH GIVEN TELEBUSINESS PROCEEDS *
($ in millions)
* * * * *
---------------------------------------------------------
* ($21.5) ($7.2) $7.1 $21.4 $35.7
* ($26.8) ($14.3) ($1.8) $10.7 $23.2
* ($31.0) ($19.9) ($8.8) $2.3 $13.5
* ($34.3) ($24.3) ($14.3) ($4.3) $5.7
Datapoint Corporation 51 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
VALUATION OF PREFERRED STOCK BASED ON DIVIDENDS (CONTINUED)
The following matrix contains the discounted value of the arrearages and
dividends per share of Preferred Stock at differing discount rates ranging
from 15% - 25% (a range which includes Datapoint's CAPM calculated cost of
equity of 21.5%). The column on the left indicates the year in which
Datapoint reaches a positive net worth, and is thus able to pay the
arrearage and begin paying dividends.
Dividends beginning in: Cost of equity
----------------------------------------
15.0% 20.0% 25.0%
------------ ------------- -------------
1997 $9.86 $9.44 $9.07
1998 $9.33 $8.56 $7.89
1999 $8.77 $7.72 $6.83
2000 $8.20 $6.91 $5.87
2001 $7.62 $6.16 $5.02
2002 $7.06 $5.47 $4.28
2003 $6.52 $4.84 $3.64
2004 $5.99 $4.26 $3.08
Datapoint Corporation 52 Confidential
<PAGE>
Patricof & Co. Capital Corp.
VALUATION OF PREFERRED STOCK BASED ON DIVIDENDS (CONTINUED)
. The following tables calculate the expected value of the Preferred Stock
given Telebusiness proceeds of *, * and *. The calculation is based on
the value of the Preferred Stock in each of management's base, downside
and upside projections at each level of proceeds, weighted at 60% for the
base case and 20% for the downside and upside cases. In the tables that
follow, the year in which Datapoint is projected to reach positive net
worth is stated in parentheses for each case.
PREFERRED STOCK VALUE - TELEBUSINESS PROCEEDS OF *
Cost of equity
----------------------------------------
15.0% 20.0% 25.0%
------------ ------------- -------------
Base case (2000) $8.20 $6.91 $5.87
Downside case (2004) $5.99 $4.26 $3.08
Upside case (1999) $8.77 $7.72 $6.83
Weighted
- --------
Base case (2000) $4.92 $4.15 $3.52
Downside case (2004) $1.20 $0.85 $0.62
Upside case (1999) $1.75 $1.54 $1.37
------------ ------------- -------------
Weighted value $7.87 $6.54 $5.50
============ ============= =============
Preferred shares outstanding 1.868 1.868 1.868
============ ============= =============
Aggregate value of Preferred Stock $14.7 $12.2 $10.3
============ ============= =============
Datapoint Corporation 53 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
VALUATION OF PREFERRED STOCK BASED ON DIVIDENDS (CONTINUED)
PREFERRED STOCK VALUE - TELEBUSINESS PROCEEDS OF *
Cost of equity
----------------------------------------
15.0% 20.0% 25.0%
------------ ------------- -------------
Base case (2003) $6.52 $4.84 $3.64
Downside case (never) $0.00 $0.00 $0.00
Upside case (2000) $8.20 $6.91 $5.87
Weighted
- --------
Base case (2000) $3.91 $2.90 $2.18
Downside case (2004) $0.00 $0.00 $0.00
Upside case (1999) $1.64 $1.38 $1.17
------------ ------------- -------------
Weighted value $5.55 $4.28 $3.36
============ ============= =============
Preferred shares outstanding 1.868 1.868 1.868
============ ============= =============
Aggregate value of Preferred Stock $10.4 $8.0 $6.3
============ ============= =============
Datapoint Corporation 54 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
VALUATION OF PREFERRED STOCK BASED ON DIVIDENDS (CONTINUED)
PREFERRED STOCK VALUE - TELEBUSINESS PROCEEDS OF *
Cost of equity
----------------------------------------
15.0% 20.0% 25.0%
------------ ------------- -------------
Base case (1997) $9.86 $9.44 $9.07
Downside case (1997) $9.86 $9.44 $9.07
Upside case (1997) $9.86 $9.44 $9.07
Weighted
- --------
Base case (2000) $5.91 $5.67 $5.44
Downside case (2004) $1.97 $1.89 $1.81
Upside case (1999) $1.97 $1.89 $1.81
------------ ------------- -------------
============ ============= =============
Weighted value $9.86 $9.44 $9.07
============ ============= =============
Preferred shares outstanding 1.868 1.868 1.868
============ ============= =============
Aggregate value of Preferred Stock $18.4 $17.6 $16.9
============ ============= =============
Datapoint Corporation 55 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
VALUATION OF PREFERRED STOCK
CONCLUSION
RESULTS OF PREFERRED DISCOUNTED DIVIDEND VALUATION ANALYSIS
Value per share at discount rate of:
-------------------------------------
15% 20% 25%
------------ ------------ -----------
- Telebusiness sold for * $7.87 $6.54 $5.50
- Telebusiness sold for * $5.55 $4.28 $3.36
- Telebusiness sold for * $9.86 $9.44 $9.07
Datapoint Corporation 56 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
CONCLUSION
. Management's projections assume the sale of Telebusiness and the use of
proceeds to repurchase debentures. These actions reduce the capital deficit
of Datapoint and, therefore, increase the present value of potential
dividend payments on the Preferred Stock. Assuming the net proceeds of the
sale are between * and *, and that the net proceeds plus * in cash on hand
is used to repurchase debentures at *, the following table presents the per
share values which result for the Common Stock before the Exchange Offer.
<TABLE>
VALUE OF COMMON STOCK BEFORE EXCHANGE
($ in millions except per share amounts)
<CAPTION>
Net Proceeds from Telebusiness Sale
-------------------------------------------------------------------------------
* * *
-------------------------- -------------------------- -------------------------
Equity value range: Low High Low High Low High
------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Comparative company $42.5 $52.5 $55.0 $65.0 $67.5 $77.5
Discounted cash flow (20% cost of equity) 29.0 36.0 42.0 49.0 54.0 61.0
------------ ------------- ------------ ------------- ------------ ------------
Average equity value 35.8 44.3 48.5 57.0 60.8 69.3
Discounted dividend value
of Preferred Stock (20% cost of equity) 8.0 8.0 12.2 12.2 17.6 17.6
------------ ------------- ------------ ------------- ------------ ------------
Common equity value $27.7 $36.2 $36.3 $44.8 $43.1 $51.6
Common Stock outstanding 13.670 13.670 13.670 13.670 13.670 13.670
Value per share of Common Stock $2.03 $2.65 $2.65 $3.28 $3.15 $3.78
============ ============= ============ ============= ============ ============
</TABLE>
Datapoint Corporation 57 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
CONCLUSION (CONTINUED)
The following table presents the calculation of value per share of Common
Stock after the Exchange Offer, assuming the sale of Telebusiness:
VALUE OF COMMON STOCK AFTER EXCHANGE
($ in millions except per share amounts)
<TABLE>
<CAPTION>
Net Proceeds from Telebusiness Sale
-------------------------------------------------------------------------------
* * *
-------------------------- -------------------------- -------------------------
Equity value range: Low High Low High Low High
------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Comparative company $42.5 $52.5 $55.0 $65.0 $67.5 $77.5
Discounted cash flow (20% cost of equity) 29.0 36.0 42.0 49.0 54.0 61.0
------------ ------------- ------------ ------------- ------------ ------------
Average equity value $35.8 $44.3 $48.5 $57.0 $60.8 $69.3
Common Stock outstanding 13.670 13.670 13.670 13.670 13.670 13.670
Preferred @ 3.25:1 6.071 6.071 6.071 6.071 6.071 6.071
------------ ------------- ------------ ------------- ------------ ------------
Common Stock after conversion 19.741 19.741 19.741 19.741 19.741 19.741
Value per Common Share 1.81 2.24 2.46 2.89 3.08 3.51
============ ============= ============ ============= ============ ============
</TABLE>
Datapoint Corporation 58 Confidential
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
Patricof & Co. Capital Corp.
CONCLUSION (CONTINUED)
. The following table compares the value per share of Common Stock before
and after the Exchange Offer, given a range of net proceeds from the sale
of Telebusiness, assuming a 15% to 25% range of cost of equity for
Datapoint.
SUMMARY OF PER SHARE COMMON STOCK VALUE BEFORE AND AFTER EXCHANGE OFFER
<TABLE>
<CAPTION>
Net Proceeds from Telebusiness Sale
-------------------------------------------------------------------------------
* * *
-------------------------- -------------------------- -------------------------
(15% cost of equity) Low High Low High Low High
------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Value per share of Common Stock
Before Exchange Offer $2.33 $2.95 $2.95 $3.57 $3.54 $4.16
After Exchange Offer 2.14 2.57 2.79 3.22 3.38 3.81
<CAPTION>
Net Proceeds from Telebusiness Sale
-------------------------------------------------------------------------------
* * *
-------------------------- -------------------------- -------------------------
(20% cost of equity) Low High Low High Low High
------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Value per share of Common Stock
Before Exchange Offer $2.03 $2.65 $2.65 $3.28 $3.15 $3.78
After Exchange Offer 1.81 2.24 2.46 2.89 3.08 3.51
<CAPTION>
Net Proceeds from Telebusiness Sale
-------------------------------------------------------------------------------
* * *
-------------------------- -------------------------- -------------------------
(25% cost of equity) Low High Low High Low High
------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Value per share of Common Stock
Before Exchange Offer $1.86 $2.49 $2.47 $3.09 $2.91 $3.53
After Exchange Offer 1.61 2.04 2.23 2.66 2.87 3.31
</TABLE>
. Because the value per share of Common Stock is within the same range
before and after the Exchange Offer, the Exchange Offer is fair, from a
financial point of view, to the holders of Common Stock.
. In addition, the holders of Common Stock benefit in non-quantifiable ways
from the Exchange Offer, including the removal of a potential impediment to
distributing value to holders of the Common Stock.
Datapoint Corporation 59 Confidential
* Confidential portions omitted and filed separately with the Commission.
