<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended AUGUST 31, 1995 Commission File Number 0-13394
VIDEO DISPLAY CORPORATION
------------------------------------------------------
(Exact name of registrant as specified on its charter)
GEORGIA 58-1217564
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1868 TUCKER INDUSTRIAL DRIVE, TUCKER, GEORGIA 30084
----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number including area code: 770-938-2080
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Class Outstanding at August 31, 1995
-------------------------- ------------------------------
Common Stock, No Par Value 3,902,413
<PAGE>
VIDEO DISPLAY CORPORATION
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
--------- -----------
Item 1. Financial Statements (unaudited)
Consolidated balance sheets - August 31, 1995
and February 28, 1995 3-4
Consolidated statements of operations -
Fiscal Quarter and Six Months ended
August 31, 1995 and 1994 5
Consolidated statements of shareholders' equity
Twelve Months ended February 28, 1995
and the Six Months Ended August 31, 1995 6
Consolidated statements of cash flows -
Six Months Ended August 31, 1995 and
August 31, 1994 7-8
Notes to consolidated financial statements -
August 31, 1995 9-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 12-14
PART II. OTHER INFORMATION
----- -----------
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon its Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and reports on Form 8-K 15
SIGNATURES
2
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AUGUST 31, February 28,
1995 1995
------------- -------------
UNAUDITED (NOTE A)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 871,000 $ 104,000
Accounts receivable, less allowance
for possible losses of $194,000
and $196,000, respectively 6,024,000 5,537,000
Receivable from affiliates -- 163,000
Note receivable, net of unamortized
discount of $36,000 and $33,000,
respectively 144,000 132,000
Inventories:
Raw materials 2,788,000 3,140,000
Finished goods 16,558,000 15,304,000
Prepaid expenses 317,000 373,000
Deferred income taxes 668,000 668,000
------------ -----------
Total current assets 27,370,000 25,421,000
Property, plant and equipment:
Land 209,000 209,000
Buildings 3,759,000 3,759,000
Machinery and equipment 11,868,000 11,760,000
------------ -----------
15,836,000 15,728,000
Accumulated depreciation and amortization (10,675,000) (9,878,000)
------------ -----------
5,161,000 5,850,000
Investments (Note B) 482,000 281,000
Note receivable, net of unamortized
discount of $122,000 and $146,000,
respectively, and allowance for
possible losses of $321,000 802,000 868,000
Excess of cost over net assets acquired,
net of accumulated amortization of
783,000 and $729,000 1,441,000 1,526,000
Other assets 185,000 215,000
------------ -----------
Total assets $ 35,441,000 $34,161,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
AUGUST 31, February 28,
1995 1995
------------ -------------
UNAUDITED (NOTE A)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable (Note C) $ 8,934,000 $ 9,388,000
Notes payable to shareholders 420,000 300,000
Accounts payable 3,691,000 2,606,000
Accrued liabilities 1,375,000 1,100,000
Current maturities of long-term debt
(Note C) 1,315,000 1,314,000
----------- -----------
Total current liabilities 15,735,000 14,708,000
Long-term debt (Note C) 3,058,000 3,717,000
Deferred income taxes 808,000 808,000
Minority interests 353,000 332,000
Commitments and contingencies --- ---
SHAREHOLDERS' EQUITY
Preferred stock, no par value - shares
authorized 2,000,000; none issued and
outstanding --- ---
Common stock, no par value - shares
authorized 10,000,000; issued and
outstanding shares 3,902,000 and
4,075,000, respectively 3,529,000 3,821,000
Additional paid in capital 81,000 ---
Retained earnings 12,838,000 11,876,000
Net unrealized loss on marketable
equity securities --- (81,000)
Currency translation adjustments (961,000) (1,020,000)
----------- -----------
Total shareholders' equity 15,487,000 14,596,000
----------- -----------
Total liabilities and shareholders' equity $35,441,000 $34,161,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Fiscal Quarter For the Six Months
Ended August 31, Ended August 31,
1995 1994 1995 1994
------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C>
Net sales $11,492,000 $11,904,000 $23,443,000 $24,699,000
Cost of goods sold 7,236,000 7,749,000 14,698,000 16,055,000
----------- ----------- ----------- -----------
Gross profit 4,256,000 4,155,000 8,745,000 8,644,000
Operating expenses:
Selling and delivery 1,108,000 1,042,000 2,260,000 2,170,000
General and administrative 2,233,000 2,620,000 4,477,000 4,996,000
----------- ----------- ----------- -----------
3,341,000 3,662,000 6,737,000 7,166,000
Operating profit 915,000 493,000 2,008,000 1,478,000
Other income (expense)
Interest expense (273,000) (330,000) (565,000) (591,000)
Other, net (58,000) (11,000) (46,000) (29,000)
----------- ----------- ----------- -----------
(331,000) (341,000) (611,000) (620,000)
Income before minority interest 584,000 152,000 1,397,000 858,000
Minority interest 11,000 1,000 12,000 7,000
----------- ----------- ----------- -----------
Income before income taxes 573,000 151,000 1,385,000 851,000
Income taxes 208,000 33,000 423,000 301,000
----------- ----------- ----------- ----------
Net Income $ 365,000 $ 118,000 $ 962,000 $ 550,000
=========== =========== =========== ==========
Earnings per share of
common stock $ 0.09 $ 0.03 $ 0.24 $ 0.13
=========== =========== =========== ==========
Weighted average shares
outstanding 4,017,000 4,132,000 4,017,000 4,132,000
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Twelve Months Ended February 28, 1995 and
the Six Months Ended August 31, 1995
<TABLE>
Net Unrealized
Loss on
Foreign Noncurrent
Currency Marketable
Common Additional Retained Translation Equity
Stock Paid In Earnings Adjustments Securities
---------- ---------- ---------- ----------- ---------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance at February 28, 1994 $4,100,000 $ $11,866,000 $ (89,000) --
Net earnings for year -- -- 10,000 --
Retirement of 82,306 shares
of common stock related to
settlement of litigation (250,000) -- -- -- --
Repurchase and retirement of
156,000 shares of common stock (29,000) -- -- -- --
Currency translation adjustment -- -- (931,000) --
Net unrealized loss on noncurrent
marketable equity securities -- -- -- -- (81,000)
---------- ---------- ----------- ------------ ---------------
Balance at February 28, 1995 $3,821,000 -- $11,876,000 $(1,020,000) $ (81,000)
---------- ---------- ----------- ------------ ---------------
Net income for the period -- -- 962,000 -- --
Currency translation adjustment -- -- 59,000 --
Unrealized gain on marketable
equity securities -- -- -- -- 81,000
Repurchase and retirement of
173,000 shares of common stock (292,000) -- -- -- --
Contribution of gain from sale
of stock by officer -- 81,000 -- -- --
---------- ---------- ----------- ------------ ---------------
Balance at August 31, 1995 $3,529,000 $ 81,000 $12,838,000 $ (961,000) $ --
========== ========= =========== ============ ===============
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW For the Six Months ended August 31,
(UNAUDITED)
1995 1994
----------- -----------
<TABLE>
<CAPTION>
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,036,000 $ 373,000
INVESTING ACTIVITIES
Purchase of property, plant and equipment (119,000) (284,000)
Purchase of investment (157,000) --
Decrease in investments 37,000 --
(Increase) decrease in other assets -- (5,000)
----------- -----------
Net cash used in investing activities (239,000) (289,000)
FINANCING ACTIVITIES
Proceeds from long-term debt and
lines of credit 16,231,000 10,990,000
Proceeds on note receivable 75,000 --
Payments on long-term debt and
lines of credit (17,224,000) (11,244,000)
Repurchase of common stock (291,000) --
Contribution of capital from
sale of stock by officer 81,000 --
----------- -----------
Net cash used in financing activities (1,128,000) (254,000)
Effect of exchange rates on cash 98,000 --
----------- -----------
Net increase (decrease) in cash 767,000 (170,000)
Cash, beginning of period 104,000 976,000
----------- -----------
Cash, end of period $ 871,000 $ 806,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Six Months ended August 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
RECONCILIATION OF NET EARNINGS FROM
CONTINUING OPERATIONS TO NET CASH
PROVIDED BY (USED IN) OPERATING
ACTIVITIES
Net earnings from continuing operations $ 962,000 $ 550,000
ADJUSTMENTS TO RECONCILE NET EARNINGS
TO NET CASH PROVIDED BY OPERATIONS:
Depreciation and amortization 912,000 899,000
Amortized interest on note receivable (21,000) --
Decrease in allowance for doubtful accounts (2,000) --
Foreign currency translation adjustments -- 115,000
CHANGES IN OPERATING ASSETS AND LIABILITIES
NET OF EFFECTS FROM ACQUISITIONS:
(Increase) decrease in accounts receivable (392,000) 48,000
Increase in inventory (926,000) (811,000)
(Increase) decrease in prepaid expenses 54,000 (330,000)
Increase (decrease) in accounts payable
and accrued expenses 1,428,000 (106,000)
Increase in minority interest 21,000 8,000
---------- ---------
NET CASH PROVIDED BY (USED IN) CONTINUING
OPERATIONS $ 2,036,000 $ 373,000
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries after elimination of all significant
intercompany accounts and transactions.
Investments in 50% or less-owned affiliated companies are accounted for on the
equity method.
The balance sheet at February 28, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments "consisting of only normal accruals"
necessary to present fairly the Company's consolidated financial position as of
August 31, 1995 and the Consolidated Statement of Earnings for the six months
ended August 31, 1995 and 1994.
NOTE B - INVESTMENTS
The Company currently owns 345,000 shares of CXR, Inc. (CXR) which it accounts
for as an available-for-sale security. At February 28, 1995, CXR had a market
value of $3/4 and as of August 31, 1995, the market value is $1 7/16 per share
resulting in a credit to shareholders' equity of $81,000 to record the
unrealized gain to the extent of original cost of $1 per share.
In March 1995, the Company acquired a 42% interest in Quality Cables, Inc. for
$157,000.
9
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note C - Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consisted of the following:
AUGUST 31, February 28,
1995 1995
----------- -----------
<S> <C> <C>
Term loan facility. $3,200,000 $3,600,000
Note payable to bank; quarterly principal
payments of $10,000 plus interest at 86%
of prime (8.75% at August 31, 1995);
collateralized by land, building and
equipment with a net book value of $829,000
at August 31, 1995. 89,000 109,000
Mortgage payable to bank; monthly principal
payments of $5,000 plus interest at prime
plus 1%; balloon payment of outstanding
principal due October 1, 1996; collateralized
by land and building with a net book value of
$463,000 at August 31, 1995. 309,000 329,000
Note payable to industrial development
authority; monthly payment of $4,000
including interest at 6.5%; collateralized
by land and building with a net book value
of $586,000 at August 31, 1995. 232,000 247,000
Note payable to bank; monthly principal
payments of $24,000 including interest
at 9%; collateralized by computer
equipment with a net book value of
$706,000 at August 31, 1995. 301,000 425,000
Note payable to bank; monthly payment of $8,000
plus interest at prime plus 1%; collateralized
by machinery and equipment with a net book
value of $431,000 at August 31, 1995. 98,000 143,000
Note payable to bank; monthly payment of
$2,000 plus interest at prime plus 1%;
collateralized by land and buildings
with a net book value of $147,000. 120,000 146,000
Other 24,000 32,000
---------- -----------
4,373,000 5,031,000
Less current portion 1,315,000 1,314,000
---------- -----------
$3,058,000 $3,717,000
========== ===========
</TABLE>
10
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D - RELATED PARTY TRANSACTIONS
There were no sales to affiliates for the six months ended August 31, 1995.
Sales to unconsolidated affiliates were $191,000 for the six months ended
August 31, 1994.
11
<PAGE>
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The following table sets forth, for the six months ended August 31, 1995 and
1994, the percentages which selected items in the Statements of Income bear to
total revenues:
<TABLE>
<CAPTION>
Fiscal Quarter Six Months
Ended August 31, Ended August 31,
1995 1994 1995 1994
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales
CRT and components 47.4% 42.5% 48.1% 45.1%
Wholesale electronic parts 52.6 57.5 51.9 54.9
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost and expenses
Cost of goods sold 63.0 65.1 62.7 65.0
Selling and delivery 9.6 8.8 9.6 8.8
General and administrative 19.4 22.0 19.1 20.2
----- ----- ----- -----
92.0 95.9 91.4 94.0
Income from operations 8.0 4.1 8.6 6.0
Interest expense (2.5) (2.7) (2.5) (2.4)
Other income (expense) (0.5) (0.1) (0.2) (0.1)
----- ----- ----- -----
Income before income taxes 5.0 1.3 5.9 3.5
Provision for income taxes 1.8 0.3 1.8 1.2
----- ----- ----- -----
Net income 3.2% 1.0% 4.1% 2.3%
===== ===== ===== =====
</TABLE>
Net Sales
- ---------
Consolidated net sales declined by $412,000 or 3.5% for the three months ended
August 31, 1995 as compared to the same period one year ago. Consolidated net
sales decreased by 5.1% for the six month period ended August 31, 1995 as
compared to the six month period ended August 31, 1994.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
Net Sales-continued
- -------------------
The wholesale consumer electronic parts division year to date sales decreased
$1,404,000 or 10.3% compared to the same period a year ago. This decline is
caused by certain consumer product manufacturers bypassing standard distribution
channels by selling parts direct. As an offset to this decline, the wholesale
parts division reported an increase in sales of $875,000 of the fire and safety
equipment product line which was introduced in the middle of the first quarter
of fiscal 1995.
Gross Margins
- -------------
Consolidated gross profit margins as a percentage of sales improved from 35% to
37.3% for the six months ended August 31, 1995. The increase in gross margins
is largely attributed to the CRT division's change of product in the Mexican
facility from CRTs primarily manufactured using new glass to using recycled
glass. The margins at the Mexican facility alone changed from 24% to 41%.
Operating Expenses
- ------------------
Operating expenses have declined $429,000 or 6.0% from one year ago. The
Company continues to seek ways to reduce its operating expenses in response to
lower sales.
Interest Expense
- ----------------
Interest expense decreased $26,000 to $565,000 for the six months ended August
31, 1995. The Company derived a $91,000 benefit during the six months ended
August 31, 1995 as compared to a $31,000 benefit during the same period a year
ago from an interest rate swap agreement with a bank that fixed the interest
rate on $7,500,000 of the Company's debt at 6.25% through September 29, 1995.
Income Taxes
- ------------
The Company's effective tax rate for the first six months of fiscal 1996 was
30.5% compared to 35.4% a year ago. The reduction in the rate is attributed to
the increased earnings reported by the Company's foreign subsidiaries. There is
a tax loss carry forward applicable to the foreign earnings.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
Liquidity and Capital Resources
- -------------------------------
The Company's working capital was $11,635,000 at August 31, 1995 and
$10,713,000 at February 28, 1995.
On August 31, 1995 the Company renewed its $10,000,000 revolving credit note
with a bank through January 15, 1996.
On August 31, 1995 the Company owed the Chairman of the Board and Chief
Executive Officer $200,000. The borrowing is under the terms of an unsecured
demand note bearing interest at prime plus 1%.
The Company is currently bidding on sales contracts for additional revenues
which could significantly increase its requirements for working capital. It is
the Company's intent to finance its short term capital requirements through its
existing bank borrowing relationships; however, longer term sources of more
permanent capital may be required if certain larger contracts are awarded to the
Company.
14
<PAGE>
PART II
Item 1. Legal Proceedings
No new legal proceedings or material changes in existing
litigation occurred during the six months ending August 31, 1995.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the six months ended August 31, 1995.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
VIDEO DISPLAY CORPORATION
October 12, 1995 By: /s/ Ronald D. Ordway
---------------------------
Ronald D. Ordway
Chief Executive Officer
By: /s/ Carol D. Franklin
---------------------------
Carol D. Franklin
Secretary and Controller
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 871,000
<SECURITIES> 0
<RECEIVABLES> 6,362,000
<ALLOWANCES> 194,000
<INVENTORY> 19,346,000
<CURRENT-ASSETS> 27,370,000
<PP&E> 15,836,000
<DEPRECIATION> 10,675,000
<TOTAL-ASSETS> 35,441,000
<CURRENT-LIABILITIES> 15,735,000
<BONDS> 3,058,000
<COMMON> 3,529,000
0
0
<OTHER-SE> 11,958,000
<TOTAL-LIABILITY-AND-EQUITY> 35,441,000
<SALES> 23,443,000
<TOTAL-REVENUES> 23,443,000
<CGS> 14,698,000
<TOTAL-COSTS> 21,435,000
<OTHER-EXPENSES> 58,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 565,000
<INCOME-PRETAX> 1,385,000
<INCOME-TAX> 423,000
<INCOME-CONTINUING> 962,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 962,000
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
