<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, 1999 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, 1999
- -------------------------- ------------------------------
Common Stock, No Par Value 3,991,232
<PAGE>
VIDEO DISPLAY CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated balance sheets - August 31, 1999 and
February 28, 1999 3-4
Consolidated statements of income -
Fiscal quarter and six months ended August 31, 1999 and 1998 5
Consolidated statements of shareholders' equity and comprehensive income -
Twelve months ended February 28, 1999 and the six months
ended August 31, 1999 6
Consolidated statements of cash flows - Six months
ended August 31, 1999 and August 31, 1998 7-8
Notes to consolidated financial statements -
August 31, 1999 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
</TABLE>
2
<PAGE>
Video Display Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31, February 28,
1999 1999
UNAUDITED (NOTE A)
--------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (including restricted cash
of $34,000) $ 3,016,000 $ 2,150,000
Notes and accounts receivable, less allowance for
possible losses of $361,000 and $360,000 9,008,000 8,022,000
Costs and earnings in excess of billings on contracts 1,166,000 952,000
Inventories 26,886,000 28,467,000
Prepaid expenses 1,671,000 1,976,000
------------ ------------
Total current assets 41,747,000 41,567,000
Property, plant and equipment:
Land 540,000 540,000
Buildings 4,855,000 4,696,000
Machinery and equipment 16,191,000 15,453,000
------------ ------------
21,586,000 20,689,000
Accumulated depreciation and amortization (14,937,000) (14,336,000)
------------ ------------
6,649,000 6,353,000
Excess of cost over net assets acquired, net of
accumulated amortization of $1,654,000 and
$1,493,000 2,032,000 2,193,000
Other assets 1,213,000 1,528,000
------------ ------------
Total assets $ 51,641,000 $ 51,641,000
============ ============
</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,
1999 1999
UNAUDITED (NOTE A)
--------- --------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Revolving lines of credit (Note E) $ 2,970,000 $ 2,970,000
Notes payable to officers and shareholders (Note E) 2,500,000 2,500,000
Accounts payable 4,967,000 4,875,000
Accrued liabilities 2,675,000 2,982,000
Current maturities of long-term debt (Note D) 1,677,000 1,676,000
----------- -----------
Total current liabilities 14,789,000 15,003,000
Revolving line of credit (Note E) 4,579,000 4,500,000
Long-term debt less current maturities (Note D) 7,317,000 7,712,000
Convertible subordinated debentures 1,775,000 1,775,000
Deferred income taxes 102,000 102,000
Minority interests 173,000 186,000
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 3,991,000 3,692,000 3,591,000
Additional paid-in capital 92,000 92,000
Retained earnings 20,661,000 20,216,000
Accumulated other compehensive income (1,538,000) (1,536,000)
----------- -----------
Total shareholders' equity 22,906,000 22,363,000
----------- -----------
Total liabilities and shareholders' equity $51,641,000 $51,641,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Video Display Corporation
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended August 31, Six Months Ended August 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $15,706,000 $13,762,000 $33,232,000 $28,801,000
Cost of goods sold 10,893,000 8,265,000 22,792,000 17,746,000
----------- ----------- ----------- -----------
Gross profit 4,813,000 5,497,000 10,440,000 11,055,000
Operating expenses:
Selling and delivery 1,452,000 1,121,000 2,950,000 2,262,000
General and administrative 2,911,000 2,853,000 5,939,000 5,584,000
----------- ----------- ----------- -----------
4,363,000 3,974,000 8,889,000 7,846,000
Operating profit 450,000 1,523,000 1,551,000 3,209,000
Other income (expense)
Interest expense (374,000) (214,000) (757,000) (444,000)
Other, net (44,000) (106,000) (121,000) (92,000)
----------- ----------- ----------- -----------
(418,000) (320,000) (878,000) (536,000)
Income (loss) before minority interest 32,000 1,203,000 673,000 2,673,000
Minority interest expense (income) (4,000) (7,000) (11,000) (8,000)
----------- ----------- ----------- -----------
Income before income taxes 36,000 1,210,000 684,000 2,681,000
Income tax expense (benefit) (55,000) 479,000 239,000 1,054,000
----------- ----------- ----------- -----------
Net Income $ 91,000 $ 731,000 $ 445,000 $ 1,627,000
=========== =========== =========== ===========
Basic earnings per share of common stock $ 0.02 $ 0.19 $ 0.11 $ 0.41
=========== =========== =========== ===========
Fully diluted earnings per share of
common stock $ 0.02 $ 0.17 $ 0.11 $ 0.37
=========== =========== =========== ===========
Basic weighted average shares outstanding 3,964,000 3,942,000 3,964,000 3,942,000
=========== =========== =========== ===========
Fully diluted weighted average shares
outstanding 4,392,000 4,479,000 4,392,000 4,479,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Video Display Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
COMPREHENSIVE INCOME
For the Twelve Months Ended February 28, 1999 and
the Six Months Ended August 31, 1999
<TABLE>
<CAPTION>
Accumulated Current
Other Additional Year
Common Retained Comprehensive Paid In Comprehensive
Stock Earnings Income Capital Income
----- -------- ------ ------- ------
<S> <C> <C> <C> <C> <C>
Balance at February 28,1998 $ 3,465,000 $19,094,000 $(1,505,000) $ 92,000 $ ---
Net income for the year 1,122,000 --- 1,122,000 --- 1,122,000
Currency translation adjustment --- --- 2,000 --- 2,000
Repurchase of common stock (508,000) --- --- --- ---
Issuance of common stock for business
acquisitions 612,000 --- --- --- ---
Issuance of common stock under
stock option plan 22,000 --- --- --- ---
Unrealized loss on marketagle equity
securities --- --- (33,000) --- (33,000)
----------- ----------- ------------- --------- ----------
Balance at February 28, 1999 $ 3,591,000 $20,216,000 $ (1,536,000) $ 92,000 $1,091,000
Issuance of common stock under stock
option plan 101,000 --- --- --- ---
Net income for period --- 445,000 --- --- 445,000
Currency translation adjustment --- --- 13,000 --- 13,000
Unrealized loss on marketable equity
securities --- --- (15,000) --- (15,000)
----------- ----------- ------------- --------- ----------
Balance at August 31, 1999 $ 3,692,000 $20,661,000 $ (1,538,000) $ 92,000 $ 443,000
=========== =========== ============= ========= ==========
</TABLE>
6
<PAGE>
Video Display Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six months ended August 31,
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net cash provided by (used in) operating activities $ 1,989,000 $ 521,000
Investing activities
Purchase of property, plant and equipment (897,000) (701,000)
Purchase of assets of Wintron, Inc. -- (400,000)
Purchase of stock of MII -- (50,000)
(Increase) decrease in other assets 18,000 (174,000)
-------------- ------------
Net cash used in investing activities (879,000) (1,325,000)
Financing activities
Proceeds from long-term debt and lines of credit 5,308,000 20,789,000
Proceeds from exercise of stock option 100,000 22,000
Repurchase of common stock -- (93,000)
Proceeds on note receivable 29,000 51,000
Payments on long-term debt and lines of credit (5,692,000) (20,365,000)
-------------- ------------
Net cash used in financing activities (255,000) 404,000
Effect of exchange rates on cash 11,000 --
-------------- ------------
Net increase (decrease) in cash 866,000 (400,000)
Cash, beginning of period 2,150,000 2,598,000
-------------- ------------
Cash, end of period $ 3,016,000 $ 2,198,000
============== ============
Noncash transactions
Issuance of company stock for equity investment in Infodex $ -- $ 93,000
Issuance of company stock in conjunction of investment in MII $ -- $ 446,000
-------------- ------------
$ -- $ 539,000
============== ============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
Video Display Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months ended August 31,
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Reconciliation of Net Earnings from Continuing
Operations to Net Cash Provided by (Used in)
Operating Activities
Net earnings from continuing operations $ 445,000 $ 1,627,000
Adjustments to reconcile net earnings to net cash provided
by operations:
Depreciation and amortization 762,000 808,000
Amortized interest on note receivable (18,000) (18,000)
Decrease in allowance for doubtful accounts 2,000 51,000
Unrealized loss on equity investment 103,000
Changes in operating assets and liabilities net of effects
from acquisitions:
(Increase) decrease accounts receivable (1,137,000) 382,000
(Increase) decrease in inventory 1,581,000 (1,345,000)
(Increase) decrease in prepaid expenses 396,000 104,000
Increase (decrease) in accounts payable and accrued expenses (145,000) (1,080,000)
Increase (decrease) in minority interest -- (8,000)
------------ -------------
Net cash provided by (used in) continuing operations $ 1,989,000 $ 521,000
============ =============
</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.
The balance sheet at February 28, 1999 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, 1999 and the Consolidated Statement of earnings for the six months
ended August 31, 1999 and 1998.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or market.
Inventories consist of:
August 31, February 28,
1999 1999
---- ----
Raw materials $ 3,427,000 $ 6,136,000
Finished goods 23,459,000 22,331,000
------------ ------------
$ 26,886,000 $ 28,467,000
============ ============
NOTE C - ACQUISITIONS
In June 1998, the Company purchased the common stock of MII and in November
1998, the Company acquired the assets and assumed certain liabilities of the
displays division of Aydin, Inc., and in February 1999 the Company acquired the
assets of the MegaScan division of Access Radiology.
The following table summarized the unaudited pro forma consolidated results of
operations of the Company, assuming the acquisitions had occurred at the
beginning of the following fiscal period. The pro forma financial information is
not necessarily indicative of what would have occurred had the acquisitions been
made as of that date, nor is it indicative of future results of operations.
9
<PAGE>
Video Display Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The pro forma amounts give effect to appropriate adjustments for the fair value
of the net assets acquired, amortization of the excess of the purchase price
over the net assets acquired interest expense and income taxes.
<TABLE>
<CAPTION>
Three months ended Six months ended
August 31, August 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 15,706,000 $ 18,351,000 $ 33,232,000 $ 39,046,000
Earnings from continuing operations 450,000 (348,000) 1,551,000 61,000
Net earnings $ 91,000 $ (1,140,000) 445,000 $ (1,521,000)
============ ============ ============ ============
Basic earnings per share $ 0.02 $ (0.28) $ 0.11 $ (0.38)
============ ============ ============ ============
Fully diluted earnings per share $ 0.02 $ (0.28) $ 0.11 $ (0.35)
============ ============ ============ ============
</TABLE>
NOTE D - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consisted of the following: August 31, February 28,
1999 1999
---- ----
<S> <C> <C>
Term loan facility; floating interest rate based on an
Adjusted LIBOR rate (8.0% as of August 31, 1999),
Quarterly principal payments commencing November 1999
And maturing November 2005; collateralized by assets of
Aydin Display, Inc. $ 7,500,000 $ 7,500,000
Mortgage payable to bank; monthly principal payments of
$13,000 plus interest not to exceed 7.5% maturing
December 2003; collateralized by land and building. 774,000 774,000
Term loan facility with bank; monthly payments of
$67,000 including interest at 7.25%, maturing August
1999, collateralized by certain equipment. -- 400,000
Other 720,000 714,000
------------ ------------
$ 8,994,000 $ 9,388,000
Less current portion 1,677,000 1,676,000
------------ ------------
$ 7,317,000 $ 7,712,000
============ ============
</TABLE>
10
<PAGE>
Video Display Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E - LINES OF CREDIT
During early 1998, the Company refinanced its loan agreement ("Agreement") to
provide for a $4,500,000 line of credit with its primary bank and $3,500,000
with a second bank secured by substantially all assets of the Company. In
conjunction with this refinancing, the Company borrowed $2,800,000 from the CEO
to pay down the original line of credit. The Company amended its Primary Line to
extend the termination date to July 1, 2000 and to lower the interest rate to a
fixed rate of 7.25% per annum. The commitment fee of 1/2% on the unused portion
of the Primary line was also eliminated. All other terms of the Primary Line
remained the same as the original line of credit. The Secondary Line was extend
to October 31, 1999 with the interest rate and all other terms remaining the
same, including a commitment fee of 1/2% charged on the unused portion.
Borrowing under the Lines are limited by eligible accounts receivable and
inventory, as defined. As of August 31, 1999, the outstanding balances on the
Primary Line and Secondary Line were $4,579,000 and $2,970,000, respectively.
The additional availability under the Primary and Secondary Lines were $921,000
and $59,000, respectively as of August 31, 1999. The Line agreements contain
affirmative and negative covenants including requirements related to tangible
net worth, indebtedness to tangible net worth and cash flow coverage.
Additionally, dividend payments, capital expenditures and acquisitions have
certain restrictions.
In May 1999, the Company increased the Primary Line by $1,000,000 to $5,500,000.
The Company does not anticipate problems renewing the line of credit with the
second bank.
Also, in the second quarter, the Company borrowed $100,000 from a Director. The
note is payable upon demand and accrues interest at prime plus one percent.
NOTE F - SUPPLEMENTAL CASH FLOW INFORMATION
August 31, August 31,
1999 1998
---- ----
Cash paid for:
Interest $ 681,000 $ 668,000
=========== ==========
Income taxes, net of refunds $ 304,000 $ 776,000
=========== ==========
NOTE G - SUBSEQUENT EVENTS
On September 30, 1999, the Company sold 100% of the stock of Vanco
International, Inc. to a privately held Illinois company for approximately $2.4
million. Vanco, a distribution company, had sales of $1,836,000 and $2,068,000
for the six months ended August 31, 1999 and 1998, respectively.
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, 1999
and 1998, 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,
1999 1998 1999 1998
--------------------- --------------------
<S> <C> <C> <C> <C>
Sales
CRT and components 72.1% 62.2% 72.8% 61.4%
Wholesale electronic parts 27.9 37.8 27.2 38.6
------- ------- ------- -------
100.0% 100.0% 100.0% 100.0%
Cost and expenses
Cost of goods sold 69.4% 60.1% 68.5% 61.6%
Selling and delivery 9.2 8.1 8.9 7.9
General and administrative 18.5 20.7 17.9 19.4
------- ------- ------- -------
97.1 88.9 95.3 88.9
Income from Operations 2.9 11.1 4.7 11.1
Interest expense (2.4) (1.6) (2.3) (1.5)
Other income (expense) (0.3) (0.7) (0.3) (0.3)
------- ------- ------- -------
Income before income taxes 0.2 8.8 2.1 9.3
Provision for income taxes (0.4) 3.5 0.8 3.7
------- ------- ------- -------
Net income 0.6% 5.3% 1.3% 5.6%
======= ======= ======= =======
</TABLE>
Net Sales
- ---------
Consolidated net sales increased $1,944,000 and $4,431,000 for the three and six
months ended August 31, 1999 as compared to August 31, 1998. CRT division sales
were up $2,753,000 or 32.2% and $6,500,000 or 36.5% for the three and six month
comparative periods. The wholesale consumer electronic parts division sales were
down $809,000 or 15.6% and $2,068,000 or 18.6% for the same comparative periods.
The net increase in CRT division sales is primarily attributable to internal
growth of the Company's newest divisions, Aydin Displays and MegaScan which
combined added $3,719,000 and $8,287,000 to the three and six month period ended
August 31, 1999 as compared to one year ago. The offsetting declines in sales of
$966,000 and $1,787,000 for the three and six month comparative periods are
spread across the CRT division segments. The largest six month decline of
approximately $1.1 was within the television CRT segment. Volume declines have
occurred where customer backlog demands have been met.
12
<PAGE>
The decline in revenues from the wholesale consumer electronic parts segment is
attributed to a reduction in sales to major electronics distributors during the
periods compared. The Company continues to seek other opportunities to increase
higher margin consumer electronic sales including a voice activated electronic
parts ordering system and implementation of a world wide web parts inquiry and
order system.
Subsequent to August 31, 1999, the Company sold its Vanco International, Inc.
subsidiary. Comparative sales for the three and six month periods ended August
31, 1999 and 1998 were $883,000 and $996,000 and $1,836,000 and $2,068,000,
respectively. The sale of this subsidiary reinforces the Company's intent to
focus its growth on the display based businesses.
Gross margins
- -------------
Consolidated gross margins declined from 38.4% to 31.4% for the six months ended
August 31, 1999 as compared to August 31, 1998. CRT division margins were lower
in the comparative six month period by 10.8%. The decline in margins is the
result of several factors. The newest acquisition, Aydin Displays, added $7.4
million of sales, but at a lower profit margin than other CRT segments have
historically provided. Subsequent to the acquisitions last year, the Company has
realigned several of its manufacturing locations in order to streamline
production and to consolidate and reduce manufacturing overhead costs. In the
process of this reorganization there has been increased costs as materials have
been relocated and personnel trained. Order backlog has increased as the
manufacturing locations adjust to the volume and expenses related to the
relocated production lines.
The Company is planning to consolidate additional facilities in the Data Display
segment and is reviewing its foreign operating facilities for additional cost
cutting opportunities in an effort to enhance future operating margins.
Operating expenses
- ------------------
Operating expenses as a percentage to sales has decreased to 27.7% from 28.8%
for the three months comparative periods and to 26.8% from 27.3% for the six
month comparative periods. The wholesale consumer parts division reduced
operating expenses $536,000 for the six months ended August 31, 1999 compared to
one year ago. The wholesale division has eliminated two locations and has
reduced personnel at its home office in response to the overall decline of sales
in that division. CRT division operating expenses had a net increase of
$1,580,000 including an increase of $1,794,000 for its newest acquisition.
Interest expense
- ----------------
Interest expense increased $160,000 and $313,000 for the three and six month
comparative periods. The majority of the increase is attributed to the
$7,500,000 debt incurred in conjunction with the Aydin acquisition. In August
the Company paid off the term note with its primary bank and subsequent to
August 31, 1999, the Company sold one of its subsidiaries for $2.4 million which
has reduced its outstanding debt.
13
<PAGE>
Income taxes
- ------------
The effective tax rate for the six months ended August 31, 1999 was 34.9% as
compared to 39.3% for the same period one year ago. An income tax benefit from
foreign operation losses is the primary reason for the decline.
Liquidity and capital resources
- -------------------------------
Working capital has increased $394,000 from $26,564,000 to $26,958,000. The
increase is a result of normal changes due to ongoing operations.
The Company will be required to refinance its revolving line with its secondary
bank in the third quarter of fiscal 2000. The Company is not anticipating any
problems with the renegotiation. The Company does not anticipate any significant
capital acquisitions for the balance of fiscal 2000.
Subsequent to August 31, 1999, the Company sold a subsidiary for $2.4 million.
The cash received has reduced the Company's outstanding debt.
Year 2000 Risks
- ---------------
As is the case with other companies using computers in their operations, the
Company is faced with the task of addressing the Year 2000 issue during the next
year. The "Year 2000 Issue" arises from the widespread use of computer programs
that rely on two-digit date codes to perform computations or decision-making
functions.
As a result of this issue, the Company has taken steps to assess at the
corporate level, as well as at the subsidiary and branch level, all existing
hardware and software applications, computerized or date encoded production
equipment and other non technological systems including, but not limited to,
heating and air conditioning systems, telephone, voice mail and security
systems. The Company has also surveyed critical suppliers and critical
customers. None of the Company's products are date encoded and, therefore, are
not at risk to customers.
The assessment stage has been completed within the Company and a determination
of non-compliant systems has been made. At this point, all hardware and
software has been categorized as critical or non-critical. All critical
hardware and operating systems are compliant with the exception of the Company's
newest location which should be compliant by December 1, 1999. All non-critical
software will be phased out or replaced by November 1, 1999. All technological
systems are compliant.
The costs incurred by the Company for the upgrades of hardware and software are
estimated at $500,000 of which $200,000 were incurred in fiscal 1999. Other
internal time incurred for the labor and management of the project are not
tracked separately, but are not estimated to be material to the profits for the
year. A part of these estimated costs would have been incurred regardless of
the Year 2000 issue as a part normal technological enhancements.
The Company's risks associated with the Year 2000 issue and any potential impact
on future earnings may be affected by our customers' and suppliers' readiness to
meet year 2000 requirements. The Company has surveyed its critical customers
and suppliers and while the responses are continually updated, it does not
appear that there are any significant Year 2000 issues with these parties.
Based on the assessments completed thus far, the Company expects that should any
of our suppliers and vendors fail to meet Year 2000 requirements, the financial
impact and any resulting liabilities would be minimal. The Company is still
developing its contingency plans should it fail to meet its requirements.
Forward-Looking Information
- ---------------------------
This report contains forward-looking statements and information that is based on
management's beliefs, as well as assumptions made by, and information currently
available to management. When used in this document, the words "anticipate,"
"believe," "estimate," "intends," "will," and "expect" and similar expressions
are intended to identify forward-looking statements. Such statements involve a
number of risks and uncertainties. Among the factors that could cause actual
results to differ materially are the following: business conditions, rapid or
unexpected technological changes, product development, inventory risks due to
shifts in product demand, competition, domestic and foreign government
relations, fluctuations in foreign exchange rates, rising costs for components
or unavailability of components, the timing of orders booked, lender
relationships, and the risk factors listed from time to time in the Company's
reports filed with the Commission.
14
<PAGE>
PART II
Item 1. Legal Proceedings
No new legal proceedings or material changes in existing litigation
occurred during the quarter ending August 31, 1999.
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, 1999.
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 18, 1999 By: /s/ Ronald D. Ordway
----------------------------------
Ronald D. Ordway
Chief Executive Officer
By: /s/ Carol D. Franklin
----------------------------------
Carol D. Franklin
Chief Financial Officer and Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> AUG-31-1999
<CASH> 3,016,000
<SECURITIES> 0
<RECEIVABLES> 10,535,000
<ALLOWANCES> 361,000
<INVENTORY> 26,886,000
<CURRENT-ASSETS> 41,747,000
<PP&E> 21,586,000
<DEPRECIATION> 14,937,000
<TOTAL-ASSETS> 51,641,000
<CURRENT-LIABILITIES> 14,789,000
<BONDS> 13,946,000
0
0
<COMMON> 3,692,000
<OTHER-SE> 19,215,000
<TOTAL-LIABILITY-AND-EQUITY> 51,641,000
<SALES> 33,232,000
<TOTAL-REVENUES> 33,232,000
<CGS> 22,792,000
<TOTAL-COSTS> 31,681,000
<OTHER-EXPENSES> 110,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 757,000
<INCOME-PRETAX> 684,000
<INCOME-TAX> 239,000
<INCOME-CONTINUING> 445,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 445,000
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.11
</TABLE>
