SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] Quarterly Report Pursuant To Section 13 Or 15(d) Of The
Securities Exchange Act Of 1934 For the quarterly period ended May
2, 1998
OR
[ ] Transition Report Pursuant To Section 13 or 15(d) Of The
Securities Exchange Act Of 1934 For the transition period from
_________ to _________
Commission file number 1-7636
DATAPOINT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1605174
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 rue d'Aguesseau 75008, Paris, France
8410 Datapoint Drive
San Antonio, Texas 78229-8500
(Address of principal executive offices and zip code)
(331) 4007 3737
(210) 593-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No___.
As of May 2, 1998, 18,035,269 shares of Datapoint Corporation Common Stock
were outstanding, exclusive of 2,955,948 shares held in Treasury.
<PAGE>
DATAPOINT CORPORATION AND SUBSIDIARIES
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
May 2, 1998 and August 2, 1997 3
Consolidated Statements of Operations -
Quarter and Nine Months Ended May 2, 1998 and
April 26, 1997 4
Consolidated Statements of Cash Flows -
Nine Months Ended May 2, 1998 and
April 26, 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information
Item 1. Legal Proceedings 12
Signature 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
Datapoint Corporation and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except share data)
(Unaudited)
May 2, August 2,
1998 1997
------------ ---------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $8,821 $15,490
Restricted cash and cash equivalents -- 154
Accounts receivable, net of allowance for doubtful
accounts of $1,163 and $1,654, respectively 33,039 22,731
Inventories 4,936 3,962
Prepaid expenses and other current assets 4,033 3,003
- ----------------------------------------------------------------------------------------------
Total current assets 50,829 45,340
Fixed assets, net 9,783 11,764
Other assets, net 5,453 5,284
- ----------------------------------------------------------------------------------------------
$66,065 $62,388
==============================================================================================
Liabilities and Stockholders' Deficit
Current liabilities:
Payables to banks $6,869 $7,346
Current maturities of long-term debt 668 1,271
Accounts payable 19,221 12,209
Accrued expenses 17,310 20,195
Deferred revenue 10,210 11,386
Income taxes payable 2,015 1,272
- ----------------------------------------------------------------------------------------------
Total current liabilities 56,293 53,679
Long-term debt, exclusive of current maturities 58,115 60,875
Other liabilities 13,417 11,918
Stockholders' deficit:
Preferred stock of $1.00 par value. Shares authorized
10,000,000; shares issued and outstanding 721,976 in
1998 and 721,976, in 1997 (aggregate liquidation
preference, including dividend in arrears, $17,147 in
1998 and $16,605 in 1997). 722 722
Common stock of $0.25 par value. Shares authorized
40,000,000; shares issued 20,991,217, including
treasury shares of 2,955,948 in 1998 and 3,203,102 in 1997. 5,248 5,248
Other capital 212,039 212,655
Pension liability adjustment (4,488) (4,488)
Foreign currency translation adjustment 6,456 4,613
Retained deficit (277,135) (276,202)
Treasury stock, at cost (4,602) (6,632)
----------------------------------------------------------------------------------------------
Total stockholders' deficit (61,760) (64,084)
- -----------------------------------------------------------------------------------------------
$66,065 $62,388
==============================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Datapoint Corporation and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May 2, 1998 Apr. 26, 1997 May 2, 1998 Apr. 26, 1997
----------- ------------- ----------- -------------
Revenue:
Sales $20,624 $21,973 $64,993 $57,523
Service and other 15,480 15,787 46,628 47,498
- ------------------------------------------------------------------------------------------------------------------
Total revenue 36,104 37,760 111,621 105,021
Operating costs and expenses:
Cost of sales 15,934 16,774 51,166 42,482
Cost of service and other 9,967 10,052 29,805 32,150
Research and development 641 564 1,847 1,518
Selling, general and administrative 8,160 8,612 24,726 26,957
Reorganization/restructuring costs -- 55 52 2,413
- ------------------------------------------------------------------------------------------------------------------
Total operating costs and expenses 34,702 36,057 107,596 105,520
- ------------------------------------------------------------------------------------------------------------------
Operating income (loss) 1,402 1,703 4,025 (499)
Non-operating income (expense):
Interest expense (1,561) (1,670) (4,612) (4,999)
Other, net (838) 1,270 1,253 4,616
- ------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and
extraordinary credit (997) 1,303 666 (882)
Income tax expense 328 492 1,016 512
- ------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary credit (1,325) 811 (350) (1,394)
- ------------------------------------------------------------------------------------------------------------------
Extraordinary credit -- debt extinguishment -- 253 555 1,156
- ------------------------------------------------------------------------------------------------------------------
Net income (loss) $(1,325) $1,064 $205 $(238)
==================================================================================================================
Net income (loss) applicable to common shareholders:
Net income (loss) $(1,325) $1,064 $205 (238)
Preferred stock dividends accumulated (181) (181) (542) (829)
Gain on exchange and retirement of preferred stock -- -- -- 3,810
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common shareholder $(1,506) $883 $(337) $2,743
===================================================================================================================
Basic and Diluted Earnings (Loss) Per Common Share:
Income (loss) before extraordinary credit $(.08) $.04 $(.05) $.10
Extraordinary credit -- .01 .03 .07
==================================================================================================================
Net income (loss) per common share $(.08) $.05 $(.02) $.17
==================================================================================================================
Average Common Shares Outstanding:
Basic 18,026,258 17,666,876 17,945,046 15,818,095
Diluted 18,026,258 17,696,298 17,945,046 15,818,095
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Datapoint Corporation and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
Nine Months Ended
May 2, April 26,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $205 $(238)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 2,670 3,937
Provision for losses (recoveries) on accounts receivable (161) 74
Gain on debt extinguishment (555) (1,156)
Deferred income taxes 41 (5)
Realized gain on sale of property (1,205) --
Changes in assets and liabilities:
Increase in receivables (7,868) (790)
Increase in inventory (787) (794)
Increase (decrease) in accounts payable and accrued expenses 3,187 (6,674)
(Increase) decrease in other liabilities and deferred credits 69 (4)
Other, net (453) (723)
- ----------------------------------------------------------------------------------------------------------
Net cash used in operating activities (4,857) (6,373)
Cash flows from investing activities:
Payments for fixed assets (1,580) (2,843)
Proceeds from dispositions of fixed assets 3,200 --
Other, net (583) 186
- ----------------------------------------------------------------------------------------------------------
Net cash provided from (used in) investing activities 1,037 (2,657)
Cash flows from financing activities:
Proceeds from borrowings 45,709 10,016
Payments on borrowings (49,199) (10,384)
Restricted cash for letters of credit 154 709
- ----------------------------------------------------------------------------------------------------------
Net cash provided from (used in) financing activities (3,336) 341
Effect of foreign currency translation on cash 487 (1,714)
- -----------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (6,669) (10,403)
Cash and cash equivalents at beginning of year 15,490 23,184
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $8,821 $12,781
====== =======
Cash payments for:
Interest $3,362 $3,687
Income taxes, net $280 $546
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DATAPOINT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands)
(Unaudited)
1. Preparation of Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
by Datapoint Corporation (the "Company"), in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the information furnished reflects all adjustments, which are
necessary for a fair statement of the results of the interim periods presented.
All adjustments made in the interim statements are of a normal recurring nature.
It is recommended that these statements are read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
and Form 10-K for the year ended August 2, 1997.
The results of operations for the quarter-ended ended May 2, 1998, are not
necessarily indicative of the results to be expected for the full year.
2. Inventories
Inventories consist of:
May 2, August 2,
1998 1997
Raw materials $216 $143
Work in process 986 1,077
Finished and purchased products 3,734 2,742
----- -----
$4,936 $3,962
====== ======
3. Commitments and Contingencies
From time to time, the Company is a defendant in lawsuits generally incidental
to its business. The Company is not currently aware of any such suit which, if
decided adversely to the Company, would result in a material liability.
4. Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share". Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share exclude any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements. The Company adopted this new standard during the
second quarter of fiscal year 1998.
Basic earnings (loss) per common share is based on the weighted average shares
outstanding during the period after deducting preferred stock dividend
requirements and, for the nine months ended April 26, 1997 includes the gain on
exchange and retirement of preferred stock, see Note 6. Diluted earnings (loss)
per share includes in average shares outstanding employee stock options which
are dilutive.
<PAGE>
5. Non-operating Income (Expense)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
05/02/98 04/26/97 05/02/98 04/26/97
<S> <C> <C> <C> <C>
Interest earned $99 $99 $341 $421
Foreign currency gains (losses) (827) 1,463 (34) 4,927
Realized gain on sale of property -- -- 1,205 --
Other (110) (292) (259) (732)
----- ----- ----- -----
$(838) $1,270 $1,253 $4,616
====== ====== ====== ======
</TABLE>
6. Preferred Stock Exchange
During the second quarter of 1997, the Company accepted 1,145,945 shares of its
$1.00 Exchangeable Preferred Stock, liquidation preference $20 per share ("the
$1.00 Preferred Stock"), tendered in its exchange offer described in the proxy
statement/prospectus delivered to the holders of the Company's common stock, par
value $.25 per share (the "Common Stock"), and to the holders of $1.00 Preferred
Stock. Under the terms of the exchange offer, each share of $1.00 Preferred
Stock tendered was exchanged for 3.25 shares of Common Stock. For purposes of
calculating net income applicable to common shareholders and related per share
amounts, a gain on exchange and retirement of preferred stock has been added to
net income or loss. This gain includes the excess of the carrying value of
preferred stock accepted in the exchange over the fair value of the common stock
issued. In addition, the gain includes accumulated dividends on the retired
preferred stock. The effect of this gain on income before extraordinary items
per common share was approximately $.24 for the nine month period ending April
26, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Years Referred to are Fiscal Years)
Overview
For 1998, the Company's main objectives are as follows:
1. Product marketing to maintain stabilized revenue levels,
2. Continued review and reduction of operating costs; and
3. The vigorous pursuit of patent royalties due from the licensing and
enforcement of its video conferencing and multi- speed patents.
The Company had operating income of $1.4 million and a net loss of $1.3 million
for the third quarter of 1998 and operating income of $4.0 million and net
income of $205 thousand for the first nine months of 1998. This compares with
operating income of $1.7 million and net income of $1.1 million for the third
quarter of 1997 and an operating loss of $499 thousand and a net loss of $238
thousand for the first nine months of 1997.
Revenue during the third quarter of 1998 decreased $1.7 million, or 4.4%,
compared with the same period of the prior year. Approximately $1.2 million of
the decrease in revenue was the result of a stronger U.S. dollar, on average,
during the third quarter of 1998 as compared to the same period of 1997. For the
first nine months of 1998, total revenue increased $6.6 million or 6.3% when
compared with the same period of the prior year. The increase in revenue was
primarily due to the receipt of several new contracts awarded to the Company's
Spanish, Italian and British subsidiaries and continued strong hardware sales in
the Swedish subsidiary. This revenue increase reflects the offset of
approximately $8.2 million, resulting from a stronger U.S. dollar, on average,
during the first nine months of fiscal 1998, as compared to the same period of
1997.
While the Company did not repurchase any of its 8 7/8% convertible subordinated
debentures during the third quarter of fiscal 1998, the Company did repurchase
in the public market approximately $2.7 million at face value of its 8 7/8%
convertible subordinated debentures during the first nine months of 1998. These
purchases resulted in an extraordinary gain of $555 thousand for the first nine
months of fiscal 1998.
<PAGE>
Non-operating expense of $2.4 million during the third quarter of 1998 consisted
primarily of interest expense of $1.6 million, and transaction losses, resulting
from the weakening U.S. dollar against foreign currencies, of $827 thousand.
Non-operating income and expense for the first nine months of 1998, includes
interest expense of $4.6 million offset by a recorded gain on the sale of excess
real estate of $1.2 million and foreign exchange losses of $34 thousand. These
foreign exchange losses on short term intercompany notes and international
subsidiary U.S. dollar denominated cash are offset by translation adjustment to
Stockholders' Equity and therefore have no impact on the Company's consolidated
financial position. Non-operating income and expense for the quarter ended April
26, 1997, included interest expense of $1.7 million offset by $1.5 million of
transaction gains as a result of the strengthening U.S. dollar against foreign
currencies during the quarter. Non-operating income and expense for the first
nine months of 1997, included interest expense of $5.0 million offset by $4.9
million of transaction gains.
During the first quarter of 1998, the Company sold the three buildings it owns
in San Antonio, Texas to a private unaffiliated group for approximately $3.2
million (net of mortgage obligations and closing costs). The sales contract
provides for the leaseback by the Company of one of the buildings (approximately
40,000 square feet) for an initial lease term of five years. Of the total gain
of approximately $2.3 million related to the sale, the Company recorded in
non-operating income a gain of approximately $1.2 million during the first
quarter of 1998. The remainder of the gain ($1.1 million) was deferred and will
be amortized over the lease term.
During the second quarter of 1997, the Company accepted 1,145,945 shares of its
$1.00 Exchangeable Preferred Stock, liquidation preference $20 per share ("the
$1.00 Preferred Stock"), tendered in its exchange offer described in the proxy
statement/prospectus delivered to the holders of the Company's common stock, par
value $.25 per share (the "Common Stock"), and to the holders of $1.00 Preferred
Stock. Under the terms of the exchange offer, each share of $1.00 preferred
Stock tendered was exchanged for 3.25 shares of Common Stock. For purposes of
calculating net income applicable to common shareholders and related per share
amounts, a gain on exchange and retirement of preferred stock has been added to
net income or loss. This gain includes the excess of the carrying value of
preferred stock accepted in the exchange over the fair value of the common stock
issued. In addition, the gain includes accumulated dividends on the retired
preferred stock. The effect of this gain on income before extraordinary items
per common share was approximately $.24 for the nine month period ending April
26, 1997.
Patents and Trademarks
Datapoint owns certain patents, copyrights, trademarks and trade secrets in both
network and video conferencing technologies, which it considers valuable
proprietary assets. The Company believes that in particular its video
conferencing patents and multi-speed network processing patents and the related
patents are of material importance to its business as a whole.
Video Conferencing Patents
Datapoint, along with John Frassanito and David A. Monroe, owns United States
Patent Nos. 4,710,917 and 4,847,829 related to video teleconferencing
technology. Datapoint has filed infringement actions against several companies.
In 1995, the Company negotiated two settlements for such infringement for an
aggregate of $1.0 million, and, in 1996, the Company entered into an agreement
with NEC America, Inc. for the licensing of the `917 and `829 patents for an
undisclosed amount.
The status of the patent infringement litigation is as follows:
(1) Datapoint Corporation v. PictureTel Corporation, No. 3:93-CV-2381-D
(N.D. Texas). This case was tried in March and April of 1998 with an adverse
result. Notice of Appeal has been filed.
(2) Datapoint Corporation v. Compression Labs, Inc. No. 3:93-CV-2522-D
(N.D. Texas); Datapoint Corporation v. Teleos Communications, Inc. No.
95-4455-AET (D.N.J.); Datapoint Corporation v. Videolan Technologies, Inc.;
Videolan Technologies, Inc. v. Datapoint Corporation, No. 96 CV-604-H (W.D.
Kentucky) et al; Datapoint Corporation v. Intel Corp. No. 97-CV-2581 (N.D.
Texas). These cases will be dismissed subject to being reopened if the Company
is successful in its appeal of certain of the issues adversely determined in the
PictureTel litigation described above.
<PAGE>
Multi-speed Networking Patents
Datapoint is also the owner of United States Patent Nos. 5,008,879 and 5,077,732
related to network technology. The Company believes these patents cover most
products introduced by various suppliers to the networking industry and
dominates certain types of dual-speed technology on networking recently
introduced by various industry leaders. Datapoint has asserted one or both of
these patents in the United States District Court for the Eastern District of
New York against a number of parties:
(1) Datapoint Corporation v. Standard Micro-Systems, Inc. and Intel
Corporation, No. C.V.-96-1685;
(2) Datapoint Corporation v. Cisco Systems, Plaintree Systems Corp., Accton
Technologies Corp., Cabletron Systems, Inc., Bay Networks, Inc., Crosscom Corp.
and Assante Technologies, Inc. No. CV 96 4534;
(3) Datapoint Corporation v. Dayna Communications, Inc., Sun Microsystems,
Inc., Adaptec, Inc. International Business Machines Corp., Lantronix, SVEC
America Computer Corporation, and Nbase Communications, No. CV 96 6334; and
(4) Datapoint Corporation v. Standard Microsystems Corp. and Intel Corp.,
individually, and as representatives of the class of all manufacturers, vendors
and users of Fast Ethernet-compliant, dual protocol local-area network products,
No. CV-96-03819.
These actions have been consolidated for discovery, and for purposes of claim
construction. On January 20, 1998, a hearing commenced in the United States
District Court that concluded on January 23, 1998 during which claim
construction was submitted to a Special Master. The Special Master's report was
issued April of 1998. The Company has filed objections to certain portions of
this report. A hearing on such objections has been scheduled for June of 1998.
These objections ultimately may have to be resolved at the Appellate Court
level.
The above actions represent the Company's continuing efforts to license and
enforce its video conferencing and multi-speed networking patents through
negotiations and/or litigation. The Company believes that these patents provide
broad coverage in video conferencing and multi-speed networking technology and
present the opportunity for further royalty bearing licenses. While such royalty
bearing licenses and enforcement of its patents are a primary strategy of the
Company's business to create long-term value for its stockholders, the ultimate
outcome of the above litigation, appeals with respect to the litigation, and /or
negotiations cannot be determined at this time.
Results of Operations
The Company had operating income of $1.4 million and a net loss $1.3 million for
the third quarter of 1998 and operating income of $4.0 million and net income of
$205 thousand for the first nine months of 1998. This compares with operating
income of $1.7 million and net income of $1.1 million for the third quarter of
1997 and an operating loss of $499 thousand and net loss of $238 thousand for
the first nine months of 1997. The following is a summary of the Company's
sources of revenue:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
(In thousands) 05/02/98 04/26/97 05/02/98 04/26/97
<S> <C> <C> <C> <C>
Sales:
U.S. $671 $709 $2,544 $2,806
Foreign 19,953 21,264 62,449 54,717
------ ------ ------ ------
20,624 21,973 64,993 57,523
Service and other:
U.S. 276 268 840 900
Foreign 15,204 15,519 45,788 46,598
------ ------ ------ ------
15,480 15,787 46,628 47,498
------ ------ ------ ------
Total revenue $36,104 $37,760 $111,621 $105,021
======= ======= ======== ========
</TABLE>
<PAGE>
Revenue during the third quarter of 1998 decreased $1.7 million, or 4.4%,
compared with the same period of the prior year. Approximately $1.2 million of
the decrease in revenue was the result of a stronger U.S. dollar, on average,
during the third quarter of 1998 as compared to the same period of 1997. For the
first nine months of 1998, total revenue increased $6.6 million or 6.3% when
compared with the same period of the prior year. The increase in revenue was
primarily due to the receipt of several new contracts awarded to the Company's
Spanish, Italian and British subsidiaries and continued strong hardware sales in
the Swedish subsidiary. This revenue increase reflects the offset of
approximately $8.2 million, resulting from a stronger U.S. dollar, on average,
during the first nine months of fiscal 1998, as compared to the same period of
1997.
The gross profit margin for the third quarter of 1998 and the first nine months
of 1998 was 28.3% and 27.5%, respectively, compared with 29.0% and 28.9%,
respectively, for the same periods of the prior year. The decrease was primarily
the result of a large volume of sales by a Northern European subsidiary of lower
margin product and competitive pricing pressures worldwide offset by higher
service margins due to continued cost cutting actions and higher revenue levels
during fiscal 1998.
Operating expenses during the third quarter of 1998 declined $375 thousand from
the same period a year ago and for the first nine months of 1998 decreased $1.9
million when compared with the same period of the prior year. This decrease
reflects approximately $200 thousand and $1.4 million, respectively, resulting
from a stronger U.S. dollar, on average, during these periods in fiscal year
1998 as compared to the same periods of 1997. The remainder was due to the
result of continued cost cutting actions undertaken by the Company.
Non-operating expense of $2.4 million during the third quarter of 1998 consisted
primarily of interest expense of $1.6 million, and transaction losses, resulting
from the weakening U.S. dollar against foreign currencies, of $827 thousand.
Non-operating income and expense for the first nine months of 1998, includes
interest expense of $4.6 million offset by a recorded gain on the sale of excess
real estate of $1.2 million and foreign exchange losses of $34 thousand. These
foreign exchange losses on short term intercompany notes and international
subsidiary U.S. dollar denominated cash are offset by translation adjustment to
Stockholders' Equity and therefore have no impact on the Company's consolidated
financial position. Non-operating income and expense for the quarter ended April
26, 1997, included interest expense of $1.7 million offset by $1.5 million of
transaction gains as a result of the strengthening U.S. dollar against foreign
currencies during the quarter. Non-operating income and expense for the first
nine months of 1997, included interest expense of $5.0 million offset by $4.9
million of transaction gains.
While the Company did not repurchase any of its 8 7/8% convertible subordinated
debentures during the third quarter of fiscal 1998, the Company did repurchase
in the public market approximately $2.7 million at face value of its 8 7/8%
convertible subordinated debentures during the first nine months of 1998. These
purchases resulted in an extraordinary gain of $555 thousand for the first nine
months of fiscal 1998.
Financial Condition
During the first nine months of 1998, the Company's cash and cash equivalents
decreased $6.7 million due primarily to the usage of cash in operations. The
decrease in cash was chiefly a result of the semi-annual bond interest payment
and the repurchase of $2.7 million face value of the 8 7/8% subordinated
debentures for $2.2 million.
During the first nine months of 1998, the Company's net cash provided from
investing activities was approximately $1.0 million. Approximately $3.2 million
was related to the proceeds received from the sale of the buildings, offset by
approximately $1.6 million which was used for the purchase of fixed assets
(primarily test equipment, spares and internally used equipment).
During the first nine months of 1998, the Company used $3.3 million in financing
activities, primarily consisting of paydowns of Company debt.
As of May 2, 1998, the Company had cash and cash equivalents of $8.8 million.
The Company believes its available cash and cash equivalents and funds generated
from operations will be sufficient to provide its working capital and cash
requirements for fiscal 1998.
<PAGE>
Reorganization/Restructuring Costs
(In thousands)
A rollforward of the restructuring accrual from July 29, 1995, through May 2,
1998, is as follows:
TOTAL
Restructuring accrual as of July 29, 1995 $4,168
Fiscal 1996 additions 263
Fiscal 1996 payments (3,776)
- ------------------------------------------------------------------
Restructuring accrual as of July 27, 1996 655
Fiscal 1997 additions 2,425
Fiscal 1997 payments (2,572)
- ------------------------------------------------------------------
Restructuring accrual as of August 2, 1997 $508
Fiscal 1998 additions 52
Fiscal 1998 payments (379)
- ------------------------------------------------------------------
Restructuring accrual as of May 2, 1998 $181
====
The projected payout of the restructuring accrual balance as of May 2, 1998,
which related almost entirely to unpaid employee termination costs, is as
follows:
Fourth quarter 1998 $68
First quarter 1999 68
Second quarter 1999 29
Beyond 16
- ------------------------------------------------------------------
Restructuring accrual as of May 2, 1998 $181
====
Restructuring charges are not recorded until specific employees are determined
(and notified of termination) by management in accordance with its overall
restructuring plan. Employee termination payments are generally paid out over a
period of time rather than as one lump sum. As the Company continues to pursue
its objective to review and reduce operating costs, it may incur additional
restructuring charges. However, a reasonable estimate of the amount of future
restructuring costs cannot be made at this time.
Cautionary Statement Regarding Risks and Uncertainties That May Affect
Future Results
This Quarterly Report on Form 10-Q contains forward-looking statements about the
business, financial condition and prospects of the Company. The actual results
of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties including,
without limitation, changes in product demand, the availability of products,
changes in competition, economic conditions, new product development, various
inventory risks due to changes in market conditions, changes in tax and other
governmental rules and regulations applicable to the Company, and other risks
indicated in the Company's filings with the Securities and Exchange Commission.
These risks and uncertainties are beyond the ability of the Company to control,
and in many cases, the Company cannot predict the risks and uncertainties that
could cause its actual results to differ materially from those indicated by the
forward-looking statements. When used in this Quarterly Report on Form 10-Q, the
words "believes," "estimates," "plans," "expects," and "anticipates" and similar
expressions as they relate to the Company or its management are intended to
identify forward-looking statements.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3 of Registrant's Report on Form 10-K for the fiscal year ended August
2, 1997, for a description of certain legal proceedings heretofore reported.
The Company is a Plaintiff in a number of actions related to its patents and
trademarks, which are more fully described in the Management's Discussion and
Analysis overview section of this Form 10Q.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATAPOINT CORPORATION
(Registrant)
DATE: June 16, 1998 /s/ Ronald G.Conn
Ronald G. Conn
Chief Financial Officer
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Datapoint Corporation's Consolidated Statements of
Operation and Consolidated Balance Sheet and the related notes and schedules
as of May 2, 1998 and for the nine months then ended, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000205239
<NAME> DATAPOINT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-01-1998
<PERIOD-END> MAY-02-1998
<CASH> 8,821
<SECURITIES> 0
<RECEIVABLES> 33,039
<ALLOWANCES> 1,163
<INVENTORY> 4,936
<CURRENT-ASSETS> 50,829
<PP&E> 63,306
<DEPRECIATION> 53,523
<TOTAL-ASSETS> 66,065
<CURRENT-LIABILITIES> 56,293
<BONDS> 58,115
0
722
<COMMON> 5,248
<OTHER-SE> (67,730)
<TOTAL-LIABILITY-AND-EQUITY> 66,065
<SALES> 64,993
<TOTAL-REVENUES> 111,621
<CGS> 80,971
<TOTAL-COSTS> 107,596
<OTHER-EXPENSES> (1,253)
<LOSS-PROVISION> (161)
<INTEREST-EXPENSE> 4,612
<INCOME-PRETAX> 666
<INCOME-TAX> 1,016
<INCOME-CONTINUING> (350)
<DISCONTINUED> 0
<EXTRAORDINARY> 555
<CHANGES> 0
<NET-INCOME> 205
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This RESTATED Financial Data Schedule contains
summary financial information extracted from Datapoint Corporation's
Consolidated Statements of Operation and Consolidated Balance Sheet and the
related notes and schedules as of April 26, 1997 and for the nine months then
ended, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000205239
<NAME> DATAPOINT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-02-1997
<PERIOD-END> APR-26-1997
<CASH> 12,936
<SECURITIES> 0
<RECEIVABLES> 32,418
<ALLOWANCES> 2,474
<INVENTORY> 3,982
<CURRENT-ASSETS> 52,405
<PP&E> 70,829
<DEPRECIATION> 58,294
<TOTAL-ASSETS> 73,745
<CURRENT-LIABILITIES> 65,327
<BONDS> 60,925
0
722
<COMMON> 5,248
<OTHER-SE> (65,872)
<TOTAL-LIABILITY-AND-EQUITY> 73,745
<SALES> 57,523
<TOTAL-REVENUES> 105,021
<CGS> 74,632
<TOTAL-COSTS> 105,520
<OTHER-EXPENSES> (4,616)
<LOSS-PROVISION> 74
<INTEREST-EXPENSE> 4,999
<INCOME-PRETAX> (882)
<INCOME-TAX> 512
<INCOME-CONTINUING> (1,394)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,156
<CHANGES> 0
<NET-INCOME> (238)
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This RESTATED Financial Data Schedule contains
summary financial information extracted from Datapoint Corporation's
Consolidated Statement of Operations and Consolidated Balance Sheet and the
related notes and schedules as of January 25, 1997 and for the six months then
ended, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000205239
<NAME> DATAPOINT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-02-1997
<PERIOD-END> JAN-25-1997
<CASH> 12,551
<SECURITIES> 0
<RECEIVABLES> 32,650
<ALLOWANCES> 2,759
<INVENTORY> 4,764
<CURRENT-ASSETS> 52,977
<PP&E> 125,509
<DEPRECIATION> 112,138
<TOTAL-ASSETS> 75,484
<CURRENT-LIABILITIES> 65,562
<BONDS> 61,434
0
722
<COMMON> 5,248
<OTHER-SE> (58,252)
<TOTAL-LIABILITY-AND-EQUITY> 75,484
<SALES> 35,550
<TOTAL-REVENUES> 67,261
<CGS> 47,806
<TOTAL-COSTS> 69,463
<OTHER-EXPENSES> (3,346)
<LOSS-PROVISION> 134
<INTEREST-EXPENSE> 3,329
<INCOME-PRETAX> (2,185)
<INCOME-TAX> 20
<INCOME-CONTINUING> (2,205)
<DISCONTINUED> 0
<EXTRAORDINARY> 903
<CHANGES> 0
<NET-INCOME> (1,302)
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This RESTATED Financial Data Schedule contains
summary financial information extracted from Datapoint Corporation's
Consolidated Statement of Operations and Consolidated Balance Sheet and the
related notes and schedules as of August 2, 1997 and for the year then
ended, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000205239
<NAME> DATAPOINT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-02-1997
<PERIOD-END> AUG-02-1997
<CASH> 15,644
<SECURITIES> 0
<RECEIVABLES> 22,731
<ALLOWANCES> 1,654
<INVENTORY> 3,926
<CURRENT-ASSETS> 45,340
<PP&E> 66,573
<DEPRECIATION> 54,809
<TOTAL-ASSETS> 62,388
<CURRENT-LIABILITIES> 53,679
<BONDS> 60,783
0
722
<COMMON> 5,248
<OTHER-SE> (70,054)
<TOTAL-LIABILITY-AND-EQUITY> 62,388
<SALES> 78,368
<TOTAL-REVENUES> 142,121
<CGS> 100,180
<TOTAL-COSTS> 140,088
<OTHER-EXPENSES> (5,924)
<LOSS-PROVISION> (164)
<INTEREST-EXPENSE> 6,776
<INCOME-PRETAX> 1,181
<INCOME-TAX> 8
<INCOME-CONTINUING> 1,173
<DISCONTINUED> 0
<EXTRAORDINARY> 1,210
<CHANGES> 0
<NET-INCOME> 2,383
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This RESTATED Financial Data Schedule contains
summary financial information extracted from Datapoint Corporation's
Consolidated Statement of Operations and Consolidated Balance Sheet and the
related notes and schedules as of July 27, 1996 and for the year then
ended, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000205239
<NAME> DATAPOINT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-27-1996
<PERIOD-END> JUL-27-1996
<CASH> 24,048
<SECURITIES> 0
<RECEIVABLES> 38,735
<ALLOWANCES> 2,791
<INVENTORY> 3,726
<CURRENT-ASSETS> 69,995
<PP&E> 129,346
<DEPRECIATION> 114,721
<TOTAL-ASSETS> 93,818
<CURRENT-LIABILITIES> 76,965
<BONDS> 63,652
0
1,868
<COMMON> 5,248
<OTHER-SE> (62,318)
<TOTAL-LIABILITY-AND-EQUITY> 93,818
<SALES> 98,876
<TOTAL-REVENUES> 179,541
<CGS> 124,007
<TOTAL-COSTS> 178,524
<OTHER-EXPENSES> (30,309)
<LOSS-PROVISION> 170
<INTEREST-EXPENSE> 8,619
<INCOME-PRETAX> 22,707
<INCOME-TAX> 3,692
<INCOME-CONTINUING> 19,015
<DISCONTINUED> 0
<EXTRAORDINARY> 327
<CHANGES> 0
<NET-INCOME> 19,342
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This RESTATED Financial Data Schedule contains
summary financial information extracted from Datapoint Corporation's
Consolidated Statement of Operations and Consolidated Balance Sheet and the
related notes and schedules as of July 29, 1995 and for the year then
ended, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000205239
<NAME> DATAPOINT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-END> JUL-29-1995
<CASH> 11,042
<SECURITIES> 0
<RECEIVABLES> 43,072
<ALLOWANCES> 3,012
<INVENTORY> 9,754
<CURRENT-ASSETS> 67,506
<PP&E> 136,787
<DEPRECIATION> 117,910
<TOTAL-ASSETS> 101,751
<CURRENT-LIABILITIES> 100,256
<BONDS> 64,394
0
1,846
<COMMON> 5,248
<OTHER-SE> (81,210)
<TOTAL-LIABILITY-AND-EQUITY> 101,751
<SALES> 84,187
<TOTAL-REVENUES> 174,901
<CGS> 117,397
<TOTAL-COSTS> 193,133
<OTHER-EXPENSES> 580
<LOSS-PROVISION> 2,147
<INTEREST-EXPENSE> 9,332
<INCOME-PRETAX> (28,144)
<INCOME-TAX> 199
<INCOME-CONTINUING> (28,343)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,343)
<EPS-PRIMARY> (2.28)
<EPS-DILUTED> (2.28)
</TABLE>
