<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 NOVEMBER 30, 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 November 30, 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 - November 30, 1995
and February 28, 1995 3-4
Consolidated statements of operations -
Fiscal quarter and nine months ended
November 30, 1995 and 1994 5
Consolidated statements of shareholders' equity -
Twelve months ended February 28, 1995 and nine
months ended November 30, 1995 6
Consolidated statements of cash flows -
Nine months ended November 30, 1995 and
November 30, 1994 7-8
Notes to consolidated financial statements -
November 30, 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
Exhibit 11 - Statement of per share earnings 16
2
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30, February 28,
1995 1995
-------------- -------------
UNAUDITED (NOTE A)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 1,240,000 $ 104,000
Notes and accounts receivable, less
allowance for possible losses of
$193,000 and $196,000, respectively 5,938,000 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 3,062,000 3,140,000
Finished goods 17,167,000 15,304,000
Prepaid expenses 452,000 373,000
Deferred income taxes 668,000 668,000
----------- -----------
Total current assets 28,671,000 25,421,000
Property, plant and equipment:
Land 307,000 209,000
Buildings 3,656,000 3,759,000
Machinery and equipment 11,936,000 11,760,000
----------- -----------
15,899,000 15,728,000
Accumulated depreciation and amortization (11,040,000) (9,878,000)
----------- -----------
4,859,000 5,850,000
Investments (Note B) 442,000 281,000
Note receivable, net of unamortized
discount of $113,000 and $146,000
respectively and allowance for
possible losses of $321,000 766,000 868,000
Excess of cost over net assets acquired,
net of accumulated amortization of
$792,000 and $729,000 1,408,000 1,526,000
Other assets 176,000 215,000
----------- -----------
Total assets $36,322,000 $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>
NOVEMBER 30, February 28,
1995 1995
------------- -------------
UNAUDITED (NOTE A)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable (Note C) $ 9,528,000 $ 9,388,000
Notes payable to shareholders 220,000 300,000
Accounts payable 4,267,000 2,606,000
Accounts payable to affiliate --- ---
Accrued liabilities 1,351,000 1,100,000
Current maturities of long-term debt
(Note C) 1,314,000 1,314,000
----------- -----------
Total current liabilities 16,680,000 14,708,000
Long-term debt (Note C) 2,754,000 3,717,000
Deferred income taxes 808,000 808,000
Minority interests 352,000 332,000
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 13,189,000 11,876,000
Net unrealized loss on marketable
equity securities (40,000) (81,000)
Currency translation adjustments (1,031,000) (1,020,000)
----------- -----------
Total shareholders' equity 15,728,000 14,596,000
----------- -----------
Total liabilities and shareholders' equity $36,322,000 $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 Quarter and Nine Months Ended November 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $12,644,000 $11,447,000 $36,087,000 $36,146,000
Cost of goods sold 7,557,000 7,678,000 22,255,000 23,733,000
----------- ----------- ----------- -----------
Gross profit 5,087,000 3,769,000 13,832,000 12,413,000
Operating expenses:
Selling and delivery 1,193,000 1,109,000 3,453,000 3,279,000
General and administrative 2,552,000 2,475,000 7,029,000 7,471,000
----------- ----------- ----------- -----------
3,745,000 3,584,000 10,482,000 10,750,000
Operating profit 1,342,000 185,000 3,350,000 1,663,000
Other income (expense)
Interest expense (289,000) (187,000) (854,000) (778,000)
Foreign currency exchange
gain(loss) (440,000) --- (510,000) ---
Other, net (1,000) 26,000 23,000 (3,000)
----------- ----------- ----------- -----------
(730,000) (161,000) (1,341,000) (781,000)
Income before minority interest 612,000 24,000 2,009,000 882,000
Minority interest 1,000 1,000 13,000 8,000
----------- ----------- ----------- -----------
Income before income taxes 611,000 23,000 1,996,000 874,000
Income taxes 260,000 14,000 683,000 315,000
----------- ----------- ----------- -----------
Net Income $ 351,000 $ 9,000 $1,313,000 $ 559,000
=========== =========== ========== ===========
Earnings per share of
common stock $ 0.09 $ 0.00 $ 0.33 $ 0.13
=========== =========== ========== ===========
Weighted average shares
outstanding 3,963,000 4,132,000 3,963,000 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 Nine Months Ended November 30, 1995
<TABLE>
<CAPTION>
Net Unrealized
Loss on
Foreign Noncurrent
Currency Marketable
Common Additional Retained Translation Equity
Stock Paid In Earnings Adjustments Securities
---------- --------- ---------- ------------- ------------
<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 -- -- 1,313,000 -- --
Currency translation adjustment -- -- (11,000) --
Unrealized gain on marketable
equity securities -- -- -- -- 41,000
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 November 30, 1995 $3,529,000 $81,000 $13,189,000 $(1,031,000) $ (40,000)
========== ======== =========== =========== =========
</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 Nine Months ended November 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,354,000 $ (341,000)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (173,000) (333,000)
Purchase of investments (157,000) ---
Decrease in investments 37,000 ---
Increase in other assets (4,000) ---
----------- -----------
Net cash used in investing activities (297,000) (333,000)
FINANCING ACTIVITIES
Proceeds from long-term debt and
lines of credit 24,030,000 20,316,000
Proceeds from note payables --- 325,000
Proceeds on note receivable 120,000 ---
Proceeds from contribution of capital
from sale of stock by officer 81,000 ---
Repurchase of common stock (291,000) ---
Payments of long-term debt and
lines of credit (24,933,000) (19,139,000)
Payments on note to shareholder --- (1,195,000)
----------- -----------
Net cash used in financing activities (993,000) 307,000
Effect of exchange rates on cash 72,000 143,000
----------- -----------
Net increase (decrease) in cash 1,136,000 (224,000)
Cash, beginning of period 104,000 976,000
----------- -----------
Cash, end of period $ 1,240,000 $ 752,000
=========== ===========
</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 Nine Months ended November 30,
<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 $ 1,313,000 $ 559,000
ADJUSTMENTS TO RECONCILE NET EARNINGS
TO NET CASH PROVIDED BY OPERATIONS:
Depreciation and amortization 1,320,000 1,214,000
Amortized interest on note receivable (30,000) ---
Decrease in allowance for doubtful accounts (3,000) ---
CHANGES IN OPERATING ASSETS AND LIABILITIES
NET OF EFFECTS FROM ACQUISITIONS:
(Increase) decrease in accounts receivable (278,000) 11,000
Increase in inventory (1,810,000) (457,000)
Increase in prepaid expenses (79,000) (274,000)
Increase (decrease) in accounts payable
and accrued expenses 1,901,000 (1,406,000)
Increase in minority interest 20,000 12,000
----------- -----------
NET CASH PROVIDED BY (USED IN) CONTINUING
OPERATIONS $ 2,354,000 $ (341,000)
=========== ===========
</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
November 30, 1995 and the Consolidated Statement of Earnings for the nine months
ended November 30, 1995 and 1994.
NOTE B - INVESTMENTS
The Company currently owns 325,000 shares of MicroTel International, Inc. (MOL),
formerly CXR, Inc., which it accounts for as an available-for-sale security. At
February 28, 1995, MOL had a market value of $3/4 and as of November 30, 1995,
the market value is $7/8 per share resulting in a credit to shareholders' equity
of $41,000 to record the unrealized gain to the extent that it does not exceed
the 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:
NOVEMBER 30, February 28,
1995 1995
------------ ------------
<S> <C> <C>
Term loan facility. $3,000,000 $3,600,000
Note payable to bank; quarterly principal
payments of $10,000 plus interest at 86%
of prime (8.75% at November 30, 1995);
collateralized by land, building and
equipment with a net book value of $797,000
at November 30, 1995. 79,000 109,000
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
$781,000 at November 30, 1995. 284,000 329,000
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 $572,000 at November 30, 1995. 224,000 247,000
Note payable to bank; monthly principal
payments of $24,000 including interest
at 9%; collateralized by computer
equipment with a net book value of
$640,000 at November 30, 1995. 236,000 425,000
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 $419,000 at November 30, 1995. 75,000 143,000
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 $232,000. 123,000 146,000
Other 47,000 32,000
---------- ----------
4,068,000 5,031,000
Less current portion 1,314,000 1,314,000
---------- ----------
$2,754,000 $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 unconsolidated affiliates for the nine months ended
November 30, 1995. Sales to unconsolidated affiliates were $202,000 for the
nine months ended November 30, 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 nine months and three months ended
November 30, 1995 and 1994, the percentages which selected items in the
Statements of Income bear to total revenues:
<TABLE>
<CAPTION>
Fiscal Quarter Nine Months
Ended November 30, Ended November 30,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales
CRT and components 52.3% 45.9% 49.6% 45.3%
Wholesale electronic parts 47.7 54.1 50.4 54.7
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost and expenses
Cost of goods sold 59.8 67.1 61.7 65.7
Selling and delivery 9.4 9.7 9.6 9.1
General and administrative 20.2 21.6 19.4 20.7
----- ----- ----- -----
89.4 98.4 90.7 95.5
Income from Operations 10.6 1.6 9.3 4.5
Interest expense (2.3) (1.6) (2.4) (2.2)
Other income (expense) (3.5) 0.2 (1.4) 0.1
----- ----- ----- -----
Income before income taxes 4.8 0.2 5.5 2.4
Provision for income taxes 2.0 0.2 1.9 0.9
----- ----- ----- -----
Net income 2.8% 0.0% 3.6% 1.5%
===== ===== ===== =====
</TABLE>
Net Sales
- ---------
Consolidated net sales increased by $1,196,308 or 10.5% for the three
months ended November 30, 1995 as compared to the same period one year ago and
by $1,151,000 or 10% as compared to the second quarter of fiscal year 1996.
Consolidated net sales for the nine months ended November 30, 1995 were flat
compared to the nine months ended November 30, 1994.
12
<PAGE>
MANAGEMENT'S DICUSSION AND ANALYSIS - (Continued)
The CRT division was recently awarded a two year production contract from
Hitachi Electronic Devices USA, Inc. of Greenville, SC. The contract, which
specifies minimum shipment requirements of $335,000 monthly, will be performed
by the Company's cathode ray tube facility in Monterrey, Mexico, and is expected
to achieve full production levels on the contract during the first quarter of
the Company's next fiscal year.
The wholesale consumer electronic parts division year to date sales
decreased $1,575,273 or 8.0% 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 $1,254,000 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
34.3% to 38.3% for the nine months ended November 30, 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 CRTs
using recycled glass. The gross margins at the Mexican facility alone changed
from 21% to 40%.
Operating Expenses
- ------------------
Operating expenses have declined $267,000 or 2.5% from one year ago.
Operating expenses as a percentage of sales has declined .7% during the same
period. The Company continues to seek ways to reduce it operating expenses in
response to lower sales.
Interest Expense
- ----------------
Interest expense increased $76,000 to $854,000 for the nine months ended
November 30, 1995. The Company has derived a $121,000 benefit during the nine
months ended November 30, 1995 as compared to a $67,000 benefit during the same
period a year ago from the interest rate swap agreements discussed in the notes
to the financial statements of the Company's Form 10-K. The Company is at risk
with the CAP buyer for the difference in prime rate in excess of 8% on
$7,500,000 from December 1, 1995 through May 15, 1996.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)
Income Taxes
- ------------
The Company's effective tax rate for the first nine months of fiscal 1996
is 34.2% compared to 36.0% 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.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital was $11,991,000 at November 30, 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. The Company is not anticipating any
problems negotiating its debt renewal.
The Company continues to bid 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
None
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1995 Annual Meeting of Shareholders was held on August
18, 1995. The only matter presented to the Security Holders was the
election of directors which was approved by a majority vote.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(11) - Statements re: computation of earnings per-share.
The Company did not file any reports on Form 8-K during
the nine months ended November 30, 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
January 12, 1996 By: /s/ Ronald D. Ordway
--------------------------
Ronald D. Ordway
Chief Executive Officer
By: /s/ Carol D. Franklin
--------------------------
Carol D. Franklin
Secretary and Controller
16
<PAGE>
VIDEO DISPLAY CORPORATION AND SUBSIDIARIES
STATEMENT OF PER SHARE EARNINGS
Quarters and Nine Months Ended November 30,
1995 1994 1995 1994
--------------------- ---------------------
Primary
Weighted average
shares outstanding 3,959,000 4,132,000 3,959,000 4,132,000
Net effect of diluted
stock options--based
on the treasury stock
method using average
market price 4,000 --- 4,000 ---
--------------------------------------------
Adjusted weighted
average shares
outstanding 3,963,000 4,132,000 3,963,000 4,132,000
Earnings per share $ 0.09 $ 0.00 $ 0.33 $ 0.13
============================================
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 1,240,000
<SECURITIES> 0
<RECEIVABLES> 6,275,000
<ALLOWANCES> 193,000
<INVENTORY> 20,229,000
<CURRENT-ASSETS> 28,671,000
<PP&E> 15,899,000
<DEPRECIATION> 11,040,000
<TOTAL-ASSETS> 36,322,000
<CURRENT-LIABILITIES> 16,680,000
<BONDS> 2,754,000
3,529,000
0
<COMMON> 0
<OTHER-SE> 12,199,000
<TOTAL-LIABILITY-AND-EQUITY> 36,322,000
<SALES> 36,087,000
<TOTAL-REVENUES> 36,087,000
<CGS> 22,255,000
<TOTAL-COSTS> 32,737,000
<OTHER-EXPENSES> 530,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 854,000
<INCOME-PRETAX> 1,996,000
<INCOME-TAX> 683,000
<INCOME-CONTINUING> 1,313,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,313,000
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
