<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, 2000 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, 2000
-------------------------- ------------------------------
Common Stock, No Par Value 3,789,567
<PAGE>
VIDEO DISPLAY CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated balance sheets - August 31, 2000 and
February 29, 2000 3-4
Consolidated statements of income -
Fiscal quarter and six months ended August 31, 2000 and 1999 5
Consolidated statements of shareholders' equity and comprehensive income -
Twelve months ended February 29, 2000 and the six months
ended August 31, 2000 6
Consolidated statements of cash flows - Six months
ended August 31, 2000 and August 31, 1999 7-8
Notes to consolidated financial statements -
August 31, 2000 9-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults upon its Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
SIGNATURES
2
<PAGE>
Video Display Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31, February 29,
2000 2000
UNAUDITED (NOTE A)
--------- --------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 4,212,000 $ 4,235,000
Notes and accounts receivable, less allowance for
possible losses of $427,000 and $495,000 10,842,000 8,947,000
Costs and earnings in excess of billings on contracts 751,000 131,000
Inventories (Note B) 29,438,000 25,622,000
Prepaid expenses 1,683,000 1,334,000
------------ ------------
Total current assets 46,926,000 40,269,000
Property, plant and equipment:
Land 600,000 540,000
Buildings 5,457,000 4,889,000
Machinery and equipment 17,192,000 15,347,000
------------ ------------
23,249,000 20,776,000
Accumulated depreciation and amortization (15,107,000) (14,572,000)
------------ ------------
8,142,000 6,204,000
Excess of cost over net assets acquired, net of
accumulated amortization of $1,954,000 and
$1,734,000 1,407,000 1,627,000
Deferred income taxes 122,000 122,000
Other assets 1,106,000 1,435,000
------------ ------------
Total assets $ 57,703,000 $ 49,657,000
============ ============
</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 29,
2000 2000
UNAUDITED (NOTE A)
--------- --------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities
Revolving lines of credit and short-term debt (Note E) $ 11,386,000 $ 6,010,000
Notes payable to officers and shareholders (Note E) 3,783,000 2,400,000
Accounts payable 7,575,000 5,008,000
Accrued liabilities 2,504,000 3,482,000
Current maturities of long-term debt (Note D) 1,507,000 1,507,000
------------- ------------
Total current liabilities 26,755,000 18,407,000
Long-term debt less current maturities (Note D) 5,952,000 6,702,000
Convertible subordinated debentures 1,775,000 1,775,000
Minority interests 157,000 167,000
------------- ------------
Total Liabilities 34,639,000 27,051,000
------------- ------------
Commitments and contingencies --- ---
Shareholders' equity
Preferred stock, no par value - 2,000,000 shares authorized;
none issued and outstanding --- ---
Common stock, no par value - 10,000,000 shares authorized;
3,790,000 shares issued and outstanding 2,994,000 2,994,000
Additional paid-in capital 92,000 92,000
Retained earnings 21,463,000 20,921,000
Accumulated other comprehensive income (1,485,000) (1,401,000)
------------- ------------
Total shareholders' equity 23,064,000 22,606,000
------------- ------------
Total liabilities and shareholders' equity $ 57,703,000 $ 49,657,000
============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Video Display Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended August 31, Six Months Ended August 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $18,061,000 $15,706,000 $34,681,000 $33,232,000
Cost of goods sold 12,354,000 10,893,000 23,808,000 22,792,000
----------- ----------- ----------- -----------
Gross profit 5,707,000 4,813,000 10,873,000 10,440,000
Operating expenses
Selling and delivery 1,632,000 1,452,000 3,203,000 2,950,000
General and administrative 2,849,000 2,911,000 5,687,000 5,939,000
----------- ----------- ----------- -----------
4,481,000 4,363,000 8,890,000 8,889,000
Operating profit 1,226,000 450,000 1,983,000 1,551,000
Other income (expense)
Interest expense (584,000) (374,000) (943,000) (757,000)
Other, net (181,000) (44,000) (190,000) (121,000)
----------- ----------- ----------- -----------
(765,000) (418,000) (1,133,000) (878,000)
Income (loss) before minority interest 461,000 32,000 850,000 673,000
Minority interest expense (income) (4,000) (4,000) (3,000) (11,000)
----------- ----------- ----------- -----------
Income before income taxes 465,000 36,000 853,000 684,000
Income tax expense (benefit) 163,000 (55,000) 311,000 239,000
----------- ----------- ----------- -----------
Net Income $ 302,000 $ 91,000 $ 542,000 $ 445,000
=========== =========== =========== ===========
Basic earnings per share of common stock $ 0.08 $ 0.02 $ 0.14 $ 0.11
=========== =========== =========== ===========
Diluted earnings per share of common stock $ 0.08 $ 0.02 $ 0.14 $ 0.11
=========== =========== =========== ===========
Basic weighted average shares outstanding 3,790,000 3,964,000 3,790,000 3,964,000
=========== =========== =========== ===========
Diluted weighted average shares
outstanding 4,254,000 4,392,000 4,257,000 4,392,000
=========== =========== =========== ===========
</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 29, 2000 and
the Six Months Ended August 31, 2000
<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, 1999 $3,591,000 $20,216,000 $(1,536,000) $ 92,000 $ ---
Net income for the year --- 705,000 --- --- 705,000
Unrealized gain on marketable equity
securities --- --- 22,000 --- 22,000
Realized loss on marketable equity
Securities --- --- 100,000 --- 100,000
Currency translation adjustment --- --- 13,000 --- 13,000
Issuance of common stock under stock
option plan 100,000 --- --- --- ---
Repurchase of common stock (697,000) --- --- --- ---
---------- ----------- ----------- --------- ---------
Balance at February 29, 2000 $2,994,000 $20,921,000 $(1,401,000) $ 92,000 $ 840,000
Net income for the period --- 542,000 --- --- 542,000
Currency translation adjustment --- --- (62,000) --- (62,000)
Unrealized loss on marketable equity
securities --- --- (22,000) --- (22,000)
---------- ----------- ----------- --------- ---------
Balance at August 31, 2000 $2,994,000 $21,463,000 $(1,485,000) $ 92,000 $ 458,000
========== =========== =========== ========= =========
</TABLE>
6
<PAGE>
Video Display Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six months ended August 31,
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net cash provided by (used in) operating activities $ (858,000) $ 1,989,000
------------- -------------
Investing activities
Purchase of property, plant and equipment (820,000) (897,000)
Purchase of stock of Lexel Imaging Systems, Inc. (3,000,000) ---
Purchase of assets of IST (1,598,000) ---
Decrease in other asset 257,000 18,000
------------- -------------
Net cash used in investing activities (5,161,000) (879,000)
------------- -------------
Financing activities
Proceeds from long-term debt and lines of credit 20,665,000 5,308,000
Proceeds from exercise of stock option --- 100,000
Proceeds on note receivable 51,000 29,000
Payments on long-term debt and lines of credit (14,657,000) (5,692,000)
------------- -------------
Net cash provided (used) in financing activities 6,059,000 (255,000)
------------- -------------
Effect of exchange rates on cash (63,000) 11,000
------------- -------------
Net increase (decrease) in cash (23,000) 866,000
Cash, beginning of period 4,235,000 2,150,000
------------- -------------
Cash, end of period $ 4,212,000 $ 3,016,000
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
Video Display Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months ended August 31,
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Reconciliation of Net Earnings from Continuing
Operations to Net Cash Provided by (Used in)
Operating Activities
Net earnings from continuing operations $ 542,000 $ 445,000
Adjustments to reconcile net earnings to net cash provided
by operations:
Depreciation and amortization 755,000 762,000
Amortized interest on note receivable -- (18,000)
Decrease in allowance for doubtful accounts (68,000) 2,000
Unrealized loss on equity investment -- 103,000
Changes in working capital, net of effects
from acquisitions:
Accounts receivable (1,649,000) (1,137,000)
Inventories (6,000) 1,581,000
Prepaid expenses (349,000) 396,000
Accounts payable and accrued expenses (73,000) (145,000)
Minority interests (10,000) ---
------------ -----------
Net cash provided by (used in) continuing operations $ (858,000) $ 1,989,000
============ ===========
</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 29, 2000 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, 2000 and the Consolidated Statement of earnings for the six months
ended August 31, 2000 and 1999.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or market.
Inventories consist of:
August 31, February 29,
2000 2000
---- ----
Raw materials $ 5,215,000 $ 4,262,000
Finished goods 24,223,000 21,360,000
----------- -----------
$29,438,000 $25,622,000
=========== ===========
NOTE C - ACQUISITIONS
In May 2000, the Company purchased the common stock of Lexel Imaging Systems,
Inc. ("Lexel") and in June 2000 the Company purchased certain assets and assumed
certain liabilities of the electro optical division of Imaging and Sensing
Technology ("IST"). The Company paid $3,000,000 and $1,598,000 for Lexel and
IST, respectively. The purchase price for Lexel was financed by short-term,
unsecured debt, guaranteed by an officer of the Corporation with a stated
interest rate of LIBOR plus 2%. The IST purchase price was financed by a demand
note payable with an officer of the Corporation with a stated interest rate of
prime plus 1%. Both of these notes were entered into with the intent to be
consolidated into one facility at the time of the Primary line of credit
refinancing.
All of the above transactions have been accounted for under the purchase method
of accounting and the results of operations of the acquired businesses since
their acquisition dates have been included in the consolidated financial
statements.
9
<PAGE>
Video Display Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes the unaudited pro forma consolidated results of
operations of the Company, assuming the acquisitions had occurred at the
beginning of the following fiscal periods. 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.
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,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $18,061,000 $19,834,000 $37,508,000 $ 41,191,000
Earnings from continuing operations 1,226,000 681,000 1,918,000 1,949,000
Net earnings $ 302,000 $ 323,000 475,000 $ 846,000
=========== =========== =========== ============
Basic earnings per share $ 0.08 $ 0.08 $ 0.13 $ 0.21
=========== =========== =========== ============
Diluted earnings per share $ 0.08 $ 0.07 $ 0.11 $ 0.19
=========== =========== =========== ============
</TABLE>
NOTE D - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consisted of the following: August 31, February 29,
2000 2000
---- ----
<S> <C> <C>
Term loan facility; floating interest rate based
on an adjusted LIBOR rate (9.5% as of August 31,
2000), quarterly principal payments commencing
November 1999 and maturing November 2005;
collateralized by assets of Aydin Display, Inc. $ 6,250,000 $ 6,875,000
Mortgage payable to bank; monthly principal
payments of $13,000 plus interest not to exceed
7.5% and maturing December 2003; collateralized by land
and building. 693,000 774,000
Other 516,000 560,000
------------- -------------
$ 7,459,000 $ 8,209,000
Less current portion 1,507,000 1,507,000
------------- -------------
$ 5,952,000 $ 6,702,000
============= =============
</TABLE>
10
<PAGE>
Video Display Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E - LINES OF CREDIT AND SHORT-TERM DEBT
During early 1998, the Company refinanced its loan agreement ("Agreement") to
provide for a $4,500,000 (increased to $5,500,000 in May 1999) 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 December 1,
2000 and to lower the interest rate to a fixed rate of 7.25% per annum. The
commitment fee of 0.5% 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 extended to November 30, 2000
with the interest rate and all other terms remaining the same, including a
commitment fee of 0.5% charged on the unused portion. Borrowings under the Lines
are limited by eligible accounts receivable and inventory, as defined. As of
August 31, 2000, the outstanding balances on the Primary Line and Secondary Line
were $5,266,000 and $3,120,000, respectively. The additional availability under
the Primary and Secondary Lines were $234,000 and $108,000, respectively, as of
August 31, 2000. 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 2000, the Company entered into a $3,000,000 note payable with its primary
bank to finance the acquisition of Lexel as discussed in Note C above. The 120
day note has a stated interest rate of LIBOR (6.698% as of August 31, 2000) plus
2%. The note is guaranteed by the CEO of the Company. The note was extended to
December 1, 2000.
In June 2000, the Company borrowed an additional $1,400,000 from the CEO to
assist with the acquisition of the electro optics division of IST. As of August
31, 2000, the Company owes the CEO $3,600,000. Also during the second quarter of
fiscal 2001, the Company repaid $17,000 on a note payable to a Director, leaving
a balance of $183,000 at August 31, 2000.
Subsequently, in September 2000, the Company signed a letter of intent with its
primary bank to consolidate its existing Primary Line and the $3,000,000 Lexel
acquisition loan into one $10,000,000 credit facility. The interest rate will be
based on a floating LIBOR rate based on a debt to EBITDA ratio. The effective
rate at the date of commitment was 9.375%. The note will mature July 1, 2003.
The principal balance will be reduced by $500,000 on July 1, 2001 and $500,000
on July 1, 2002.
Advance rates will remain the same as under the previous line and included is a
commitment fee for the unused portion of 0.25%. The Company does not anticipate
any problems in closing this transaction, nor does the Company anticipate
problems renewing its Secondary Line.
11
<PAGE>
Video Display Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE F - SUPPLEMENTAL CASH FLOW INFORMATION
August 31, August 31,
2000 1999
---- ----
Cash paid for:
Interest $ 943,000 $ 681,000
=========== ==========
Income taxes, net of refunds $ 441,000 $ 304,000
=========== ==========
NOTE G - SUBSEQUENT EVENT
In September 2000, the Company announced that it had acquired, through its Lexel
subsidiary, the cathode ray tube manufacturing operations of Raytheon Company.
The operations will be consolidated into the Lexel facility based in Lexington,
KY. The Company paid cash consideration from its Primary Line in the amount of
$560,000. The purchase price includes a four year declining royalty payment
based on net revenues collected during that period.
12
<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 and six months ended August
31, 2000 and 1999, 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,
2000 1999 2000 1999
-------------------- ------------------
<S> <C> <C> <C> <C>
Sales
CRT and components 80.1% 72.1% 78.2% 72.8%
Wholesale electronic parts 19.9 27.9 21.8 27.2
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
Cost and expenses
Cost of goods sold 68.4% 69.4% 68.6% 68.5%
Selling and delivery 9.0 9.2 9.2 8.9
General and administrative 15.8 18.5 16.4 17.9
------ ------ ------ ------
93.2 97.1 94.2 95.3
Income from Operations 6.8 2.9 5.8 4.7
Interest expense (3.2) (2.4) (2.7) (2.3)
Other income (expense) (0.1) (0.3) (0.1) (0.3)
------ ------ ------ ------
Income before income taxes 3.5 0.2 3.0 2.1
Provision for income taxes 1.8 (0.4) 1.4 0.8
------ ------ ------ ------
Net income 1.7% 0.6% 1.6% 1.3%
====== ====== ====== =====
</TABLE>
Net Sales
---------
Consolidated net sales increased $2,355,000 and $1,449,000 for the three and six
months ended August 31, 2000 as compared to the same periods ended August 31,
1999. CRT division sales were up $3,155,000 or 27.9% and $2,948,000 or 12.2% for
the three and six month comparative periods. The wholesale consumer electronic
parts division sales were down $801,000 or 18.2% and $1,499,000 or 16.6% for the
same comparative periods.
The net increase in CRT division sales is primarily attributable to growth
within the display and monitor segments. The Company's newest locations within
the display segment in Connecticut and Florida, acquired in the third and fourth
quarters, respectively, of fiscal 2000, contributed revenues of $1,149,000 and
$1,644,000 for the three and six months ended August 31, 2000. Within the
monitor segment, the
13
<PAGE>
Company's subsidiary location, Lexel, acquired in May 2000, provided $3,044,000
for the three months and $4,348,000 for the six months ended August 31, 2000.
There were no comparative revenues for these locations in the same periods a
year ago.
Offsetting declines in sales within the CRT division of $599,000 and $1,012,000
for the comparative three and six month periods ended August 31, 2000 are
attributed primarily to the entertainment segment. This reflects the decline in
sales to major television retailers. Television retail sales, particularly
extended warranty sales to end user consumers, as well as the size of sets sold,
negatively impacted the entertainment division sales.
The decline in sales in the wholesale consumer parts segment of $801,000 and
$1,499,000 for the three and six month comparative periods ended August 31, 2000
and 1999, respectively, is attributed primarily to the sale of Vanco
International, Inc. ("Vanco"), a former subsidiary, in September 1999. The three
and six months ended August 31, 1999 included sales of $884,000 and $1,836,000,
respectively, for Vanco.
Gross margins
-------------
Consolidated gross margins remain unchanged from 31.4% for the six months ended
August 31, 2000 as compared to August 31, 1999. CRT division margins were higher
in the comparative six month period by 2.1%, while wholesale consumer parts
declined 5.8% for the comparative period.
The CRT division margins are up slightly due to volume increases within the
monitor and display segments. The Company continued to consolidate facilities in
the second quarter of fiscal 2001. Earlier realignments within the monitor
segment have begun to positively impact revenues and margins in fiscal 2001.
The wholesale consumer parts division margins are down in part due to the
exclusion of Vanco in fiscal 2001, and also due to declines in margins realized
on the fire and safety and other existing consumer parts product lines. During
the second quarter, these product line margin declines resulted from reduced
selling prices to move some older, slower moving merchandise as well as effects
of the mix of products sold that were purchased at higher costs than some bulk
purchases realized in the past.
Operating expenses
------------------
Operating expenses as a percentage of sales decreased to 24.8% from 27.7% for
the three month comparative periods and to 25.6% from 26.8% for the six month
comparative periods.
The CRT division operating expenses increased $1,087,000 during the comparative
six month period. Included in these increases are $706,000 of expenses relating
to the new locations within the monitor and display segments not in fiscal 2000
comparative figures. Increases in sales volume as well as the positive impact of
internal restructuring and reorganization have contributed in the decline of
operating expenses as a percentage of sales.
14
<PAGE>
The wholesale consumer parts division reduced operating expenses $1,086,000 for
the six months ended August 31, 2000 compared to the same period one year ago.
Included in the decline within this division is the elimination of operating
costs of Vanco, which were $670,000 for the six months ended August 31, 1999.
Additionally, the remaining subsidiary within the division has eliminated two
locations and reduced personnel at its home office in response to the recent
decline in sales within that division.
Interest expense
----------------
Interest expense increased $210,000 and $186,000 for the three and six month
comparative periods. The majority of the increase is attributed to the increase
in debt incurred in conjunction with the recent business acquisitions.
Income taxes
------------
The effective tax rate for the six months ended August 31, 2000 was 36.5% as
compared to 34.9% for the same period one year ago. An income tax benefit in the
prior year comparative period from foreign operation losses is the primary
reason for the increase in fiscal 2001.
Liquidity and capital resources
-------------------------------
Working capital has decreased $1,691,000 from $21,862,000 to $20,171,000. The
decrease is a result of the impact of short-term debt utilized in recent
acquisitions.
The Company entered into short-term debt arrangements in order to complete the
recent acquisitions of Lexel and IST with the intent to consolidate these notes
during the renewal of the Company's existing Primary Line during the second
quarter of fiscal 2001. The short-term notes and Primary Line were extended to
December 1, 2000 in order to complete the renewal with the Company's primary
bank. In September 2000, the Company reached an agreement to increase its
current line to $10,000,000 at a floating interest rate based on LIBOR. The
effective rate will be 9.375% based on LIBOR at the date of commitment. The note
will mature on July 1, 2003, and has a decreasing principal of $500,000 on July
1, 2001 and $500,000 on July 1, 2002. The note includes advance rates based on
available eligible receivables and inventory as well as the collateral of
certain real estate and equipment. Included in the agreement is an unused
commitment fee of 0.25% payable quarterly.
The Secondary Line was extended to November 30, 2000. The Company will be
required to refinance its revolving line with its secondary bank in the third
quarter of fiscal 2001. The Company is not anticipating any problems with this
renegotiation.
The Company does not anticipate any significant capital investments for the
balance of fiscal 2001.
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.
15
<PAGE>
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.
16
<PAGE>
PART II
Item 1. Legal Proceedings
No new legal proceedings or material changes in existing
litigation occurred during the quarter ended August 31, 2000.
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
quarter ended August 31, 2000.
17
<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 13, 2000 By: /s/ Ronald D. Ordway
-------------------------------------
Ronald D. Ordway
Chief Executive Officer
By: /s/ Carol D. Franklin
------------------------------------
Carol D. Franklin
Chief Financial Officer and Secretary
