<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 MAY 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: 404-938-2080
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 May 31, 1995
-------------------------- ---------------------------
Common Stock, No Par Value 3,902,413
<PAGE>
VIDEO DISPLAY CORPORATION
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (unaudited)
Consolidated balance sheets - May 31, 1995
and February 28, 1995 3-4
Consolidated statements of operations -
Three months ended May 31, 1995 and 1994 5
Consolidated statements of shareholders'
equity - May 31, 1995 and February 28, 1995 6
Consolidated statements of cash flows -
Three Months Ended May 31, 1995 and
May 31, 1994 7-8
Notes to consolidated financial statements -
May 31, 1995 9-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 12-14
PART II. OTHER INFORMATION
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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
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VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MAY 31, February 28,
1995 1995
------------- -------------
UNAUDITED (NOTE A)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,225,000 $ 104,000
Notes and accounts receivable, less
allowance for possible losses of
$193,000 and $196,000, respectively 5,630,000 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 2,730,000 3,140,000
Finished goods 16,491,000 15,304,000
Prepaid expenses 357,000 373,000
Deferred income taxes 668,000 668,000
------------ -----------
Total current assets 27,245,000 25,421,000
Property, plant and equipment:
Land 209,000 209,000
Buildings 3,756,000 3,759,000
Machinery and equipment 11,819,000 11,760,000
------------ -----------
15,784,000 15,728,000
Accumulated depreciation and amortization (10,258,000) (9,878,000)
------------ -----------
5,526,000 5,850,000
Investments (Note B) 482,000 281,000
Note receivable, net of unamortized
discount of $146,000 and allowance
for possible losses of $321,000 854,000 868,000
Excess of cost over net assets acquired,
net of accumulated amortization of
750,000 and $729,000 1,469,000 1,526,000
Other assets 211,000 215,000
------------ -----------
Total assets $35,787,000 $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>
MAY 31, February 28,
1995 1995
------------ -------------
UNAUDITED (NOTE A)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable (Note C) $ 9,784,000 $ 9,388,000
Notes payable to shareholders 280,000 300,000
Accounts payable 3,704,000 2,606,000
Accounts payable to affiliate --- ---
Accrued liabilities 1,176,000 1,100,000
Current maturities of long-term debt
(Note C) 1,314,000 1,314,000
----------- -----------
Total current liabilities 16,258,000 14,708,000
Long-term debt (Note C) 3,402,000 3,717,000
Deferred income taxes 808,000 808,000
Minority interests 339,000 332,000
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
Retained earnings 12,473,000 11,876,000
Net unrealized loss on marketable
equity securities --- (81,000)
Currency translation adjustments (1,022,000) (1,020,000)
----------- -----------
Total shareholders' equity 14,980,000 14,596,000
----------- -----------
Total liabilities and shareholders' equity $35,787,000 $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
For the Fiscal Quarters Ended May 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net sales $11,951,000 $12,795,000
Cost of goods sold 7,462,000 8,306,000
----------- -----------
Gross profit 4,489,000 4,489,000
Operating expenses:
Selling and delivery 1,152,000 1,128,000
General and administrative 2,244,000 2,376,000
----------- -----------
3,396,000 3,504,000
Operating profit 1,093,000 985,000
Other income (expense)
Interest expense (292,000) (261,000)
Other, net 12,000 (18,000)
----------- -----------
(280,000) (279,000)
Income before minority interest 813,000 706,000
Minority interest 1,000 6,000
----------- -----------
Income before income taxes 812,000 700,000
Income taxes 215,000 268,000
----------- -----------
Net Income $ 597,000 $ 432,000
=========== ===========
Earnings per share of common stock $ 0.15 $ 0.10
=========== ===========
Weighted average shares outstanding 4,088,000 4,136,000
=========== ==========
</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 Three Months Ended May 31, 1995
<TABLE>
<CAPTION>
Net Unrealized
Loss on
Foreign Noncurrent
Currency Marketable
Common Retained Translation Equity
Stock Earnings Adjustments Securities
----------- ------------ ------------ ---------------
<S> <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
15,000 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 quarter -- 597,000 -- --
Currency translation adjustment -- -- (2,000) --
Unrealized gain on marketable
equity securities -- -- -- 81,000
Repurchase and retirement of
173,000 shares of common stock (292,000) -- --
---------- ----------- -----------
$3,529,000 $12,473,000 $(1,022,000) $ --
========== =========== =========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
Video Display Corporation
VIDEO DISPLAY CORPORATION
For the Three Months ended May 31,
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,331,000 $ 549,000
INVESTING ACTIVITIES
Purchase of property, plant and equipment (62,000) (134,000)
Purchase of investment (157,000) --
Decrease in investments 37,000 --
(Increase) decrease in other assets (13,000) (18,000)
----------- -----------
Net cash used in investing activities (195,000) (152,000)
FINANCING ACTIVITIES
Proceeds from long-term debt and
lines of credit 8,650,000 5,849,000
Proceeds on note receivable 30,000 --
Payments on long-term debt and
lines of credit (8,589,000) (5,309,000)
Repurchase of common stock (291,000) --
Payments on note to shareholder -- (1,182,000)
----------- -----------
Net cash used in financing activities (200,000) (642,000)
Effect of exchange rates on cash 185,000 --
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Net increase (decrease) in cash 1,121,000 (245,000)
Cash, beginning of period 104,000 976,000
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Cash, end of period $ 1,225,000 $ 731,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
Video Display Corporation
STATEMENTS OF CASH FLOWS
For the Three Months ended May 31,
<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 $ 597,000 $ 432,000
ADJUSTMENTS TO RECONCILE NET EARNINGS
TO NET CASH PROVIDED BY OPERATIONS:
Depreciation and amortization 452,000 456,000
Amortized interest on note receivable (28,000) --
Decrease in allowance for doubtful accounts (3,000) --
Foreign currency translation adjustments -- 77,000
CHANGES IN OPERATING ASSETS AND LIABILITIES
NET OF EFFECTS FROM ACQUISITIONS:
(Increase) decrease in accounts receivable (79,000) 761,000
Increase in inventory (830,000) (364,000)
(Increase) decrease in prepaid expenses -- (119,000)
Increase (decrease) in accounts payable
and accrued expenses 1,215,000 (699,000)
Increase in minority interest 7,000 5,000
---------- ---------
NET CASH PROVIDED BY (USED IN) CONTINUING
OPERATIONS $ 1,331,000 $ 549,000
=========== =========
</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
May 31, 1995 and the Consolidated Statement of Earnings for the three months
ended May 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 May 31, 1995, the market value is $1 13/16 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
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VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Note C - Long-Term Debt
Long-term debt consisted of the following:
MAY 31, February 28,
1995 1995
---------- ------------
<S> <C> <C>
Term loan facility. $3,400,000 $3,600,000
Note payable to bank; quarterly principal
payments of $10,000 plus interest at 86%
of prime (9% at May, 1995); collateralized
by land, building and equipment with a net
book value of $861,000 at May 31, 1995. 99,000 109,000
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
$547,000 at May 31, 1995. 314,000 329,000
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 $601,000 at May 31, 1995. 240,000 247,000
Note payable to bank; monthly principal
payments of $24,000 including interest
at 9%; collateralized by computer
equipment with a net book value of
$791,425 at May 31, 1995. 363,000 425,000
Note payable to bank; monthly payment of $8,000
lus interest at prime plus 1%; collateralized
by machinery and equipment with a net book
value of $455,000 at May 31, 1995. 120,000 143,000
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 $185,000. 138,000 146,000
Other 42,000 32,000
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4,716,000 5,031,000
Less current portion 1,314,000 1,314,000
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$3,402,000 $3,717,000
========== ============
</TABLE>
10
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D - RELATED PARTY TRANSACTIONS
Sales to unconsolidated affiliates were $79,000 for the quarter ended May 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 three months ended May 31, 1995 and
1994, the percentages which selected items in the Statements of Income bear to
total revenues:
<TABLE>
<CAPTION>
Fiscal Quarter Ended May 31,
1995 1994
---- ----
<S> <C> <C> <C> <C>
Sales
CRT and components $5,831,000 48.8% $6,065,000 47.4%
Wholesale electronic parts 6,120,000 51.2 6,730,000 52.6
---------- ---- ---------- ----
11,951,000 100.0% 12,795,000 100.0%
Cost and expenses
Cost of goods sold 7,462,000 62.4% 8,306,000 64.9%
Selling and delivery 1,152,000 9.6 1,128,000 8.8
General and administrative 2,244,000 18.8 2,376,000 18.6
---------- ---- ---------- ----
10,858,000 90.8% 11,810,000 92.3%
Income from Operations 1,093,000 9.2 985,000 7.7
Interest expense (292,000) (2.4) (261,000) (2.1)
Other income (expense) 11,000 -- (24,000) (0.1)
---------- ---- ---------- ----
Income before income taxes 812,000 6.8 700,000 5.5
Provision for income taxes 215,000 1.8 268,000 2.1
---------- ---- ---------- ----
Net income $ 597,000 5.0 432,000 3.4%
=========== ==== ======= ===
</TABLE>
Net Sales
- ---------
Consolidated net sales declined 6.6% or $844,000 for the three months ended May
31, 1995 as compared to the same period one year ago. CRT division sales were
down 3.9% or $234,000 and the wholesale consumer electronic parts division sales
were down 9% or $610,000.
12
<PAGE>
MANAGEMENT'S DICUSSION AND ANALYSIS - (Continued)
The decline in sales of the wholesale electronic parts division continues the
trend reported in the Form 10-K for fiscal 1995. In the first quarter of fiscal
1996 there was a decline of $730,000 in revenues 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 of $425,000 due to the new fire and safety equipment product line
introduced in the middle of the first quarter of fiscal 1995.
Gross Margins
- -------------
Consolidated gross profit margins as a percentage of sales improved from 35.1%
for the quarter ended May 31, 1994 to 37.6% for the quarter ended May 31, 1995.
The CRT and wholesale electronic parts divisions posted increases of 4.2% and
.86% respectively.
Increases in the gross margin for the CRT division are largely attributable to
the change in the Mexican facility from primarily manufacturing CRTs using new
glass to recycling CRTs. The margins at this location alone increased from
29.2% to 41.3%.
Operating Expenses
- ------------------
Selling and general and administrative expenses declined by $108,000 or .3%
over a year ago. The Company continues to reduce its operating expenses in
response to lower sales.
Interest Expense
- ----------------
Interest expense increased $30,000 to $292,000 in the first quarter of 1996 due
to higher interest rates in the current year. The Company derived a $33,000
benefit 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 quarter of fiscal 1996 was 26.5%
as compared to 38.3% for the same period a year ago. The difference in the
effective tax rate is attributable to the increase in earnings in the first
quarter of fiscal 1996 of our foreign subsidiary. The foreign subsidiary has a
tax loss carry forward which is applicable to these earnings.
13
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's working capital was $10,987,000 at May 31, 1995 as compared to
$10,713,000 at February 28, 1995.
Net cash provided by operating activities for the three months ended May 31,
1995 was $1,331,000 on net income of $597,000.
Capital expenditures for fiscal 1996 are not anticipated to be significant.
In fiscal 1995, the Company entered into a new loan agreement with the bank
providing a $4,000,000 five year term loan and a one year $10,000,000 revolving
line of credit. At May 31, 1995, the Company was not in compliance with certain
covenants and other reporting requirements. The related bank has waived
noncompliance with certain covenants and reporting requirements through February
28, 1996. The remaining covenant violation has been waived through May 31,
1995. Management believes that it is probable that the Company will be in
compliance with this covenant for the remaining measurement dates of fiscal
1996.
The revolver is up for renewal in the current fiscal year and the Company is
seeking renewal. The Company does not anticipate problems in the renegotiation
of the debt.
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 larter 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 quarter ending May 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 three months ended May 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
July 14, 1995 By: /s/ Ronald D. Ordway
--------------------
Ronald D. Ordway
Chief Executive Officer
By: /s/ Carol D. Franklin
---------------------
Carol D. Franklin
Secretary and Controller
16
