-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QNGyt9LvLMyXVimlWevZu1XCJAQzza83tHfn6P0hsuftoNDvcVt/yap4d02vdcWc 55kaOyibRPPDXS1SWMAaSA== 0000931763-98-002657.txt : 19981016 0000931763-98-002657.hdr.sgml : 19981016 ACCESSION NUMBER: 0000931763-98-002657 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIDEO DISPLAY CORP CENTRAL INDEX KEY: 0000758743 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 581217564 STATE OF INCORPORATION: GA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13394 FILM NUMBER: 98725991 BUSINESS ADDRESS: STREET 1: 1868 TUCKER INDUSTRIAL DR CITY: TUCKER STATE: GA ZIP: 30084 BUSINESS PHONE: 4049382080 MAIL ADDRESS: STREET 1: 1868 TUCKER INDUSTRIAL DR STREET 2: 1868 TUCKER INDUSTRIAL DR CITY: TUCKER STATE: GA ZIP: 30084 10-Q 1 THIRD QUARTER 10-Q 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, 1998 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, 1998 - ------------------------- ------------------------------- Common Stock, No Par Value 3,976,312 VIDEO DISPLAY CORPORATION INDEX
Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Consolidated balance sheets - August 31, 1998 and February 28, 1998 3-4 Consolidated statements of operations - Fiscal quarter and six months ended August 31, 1998 and 1997 5 Consolidated statements of shareholders' equity - Twelve months ended February 28, 1998 and the six months ended August 31, 1998 6 Consolidated statements of cash flows - Six months ended August 31, 1998 and August 31, 1997 7-8 Notes to consolidated financial statements - August 31, 1998 9-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 2. Changes in Securities 14 Item 3. Defaults upon its Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and reports on Form 8-K 14 SIGNATURES
2 VIDEO DISPLAY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
AUGUST 31, February 28, 1998 1998 UNAUDITED (NOTE A) ------------ ------------- Assets Current assets: Cash and cash equivalents (including restricted cash of $34,000) $ 2,198,000 $ 2,598,000 Notes and accounts receivable, less allowance for possible losses of $421,000 and $370,000 6,478,000 6,776,000 Inventories 23,256,000 21,491,000 Prepaid expenses 1,209,000 1,710,000 ------------ ------------ Total current assets 33,141,000 32,575,000 Property, plant and equipment: Land 470,000 435,000 Buildings 3,643,000 3,449,000 Machinery and equipment 15,255,000 14,605,000 ------------ ------------ 19,368,000 18,489,000 Accumulated depreciation and amortization (14,499,000) (13,776,000) ------------ ------------ 4,869,000 4,713,000 Excess of cost over net assets acquired, net of accumulated amortization of $1,351,000 and $1,207,000 2,108,000 1,832,000 Other assets 1,660,000 1,462,000 ------------ ------------ Total assets $ 41,778,000 $ 40,582,000 ============ ============
The accompanying notes are an integral part of these statements. 3 VIDEO DISPLAY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED LIABILITIES AND SHAREHOLDERS' EQUITY
AUGUST 31, February 28, 1998 1998 UNAUDITED (NOTE A) ------------ ------------- Liabilities and Shareholders' Equity Current liabilities: Revolving lines of credit (Note E) $ 3,499,000 $ 5,279,000 Notes payable to officers and shareholders (Note E) 1,394,000 2,900,000 Accounts payable 3,204,000 3,108,000 Accrued liabilities 2,479,000 3,872,000 Current maturities of long-term debt (Note D) 975,000 975,000 ----------- ----------- Total current liabilities 11,551,000 16,134,000 Long-term debt (Note D) 4,798,000 1,016,000 Convertible subordinated debentures 1,775,000 1,775,000 Deferred income taxes 256,000 311,000 Minority interests 193,000 200,000 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 3,976,000 3,932,000 3,465,000 Additional paid-in capital 92,000 92,000 Retained earnings 20,722,000 19,094,000 Net unrealized loss on marketable equity securities (243,000) (206,000) Currency translation adjustments (1,298,000) (1,299,000) ----------- ----------- Total shareholders' equity 23,205,000 21,146,000 ----------- ----------- Total liabilities and shareholders' equity $41,778,000 $40,582,000 =========== ===========
The accompanying notes are an integral part of these statements. 4 VIDEO DISPLAY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter Ended August 31, Six Months Ended August 31, 1998 1997 1998 1997 ----------- ----------- ----------- -------------- Net sales $13,762,000 $14,212,000 $28,801,000 $28,534,000 Cost of goods sold 8,265,000 8,775,000 17,746,000 18,120,000 ----------- ---------- ---------- ----------- Gross profit 5,497,000 5,437,000 11,055,000 10,414,000 Operating expenses: Selling and delivery 1,121,000 1,030,000 2,262,000 2,228,000 General and administrative 2,853,000 2,672,000 5,584,000 5,386,000 ----------- ---------- ---------- ----------- 3,974,000 3,702,000 7,846,000 7,614,000 Operating profit 1,523,000 1,735,000 3,209,000 2,800,000 Other income (expense) Interest expense (214,000) (317,000) (444,000) (668,000) Other, net (106,000) 20,000 (92,000) 16,000 ----------- ---------- ---------- ----------- (320,000) (297,000) (536,000) (652,000) Income before minority interest 1,203,000 1,438,000 2,673,000 2,148,000 Minority interest expense (income) (7,000) --- (8,000) 4,000 ----------- ---------- ---------- ----------- Income before income taxes 1,210,000 1,438,000 2,681,000 2,144,000 Income taxes 479,000 552,000 1,054,000 746,000 ----------- ---------- ---------- ----------- Net Income $ 731,000 $ 886,000 $1,627,000 $ 1,398,000 =========== ========== ========== =========== Basic earnings per share of common stock $ 0.19 $ 0.22 $ 0.41 $ 0.35 =========== ========== ========== =========== Fully diluted earnings per share of common stock $ 0.17 $ 0.21 $ 0.37 $ 0.33 =========== ========== ========== =========== Basic weighted average shares outstanding 3,942,000 3,997,000 3,942,000 3,997,000 =========== ========== ========== =========== Fully diluted weighted average shares outstanding 4,479,000 4,438,000 4,479,000 4,438,000 =========== ========== ========== ===========
The accompanying notes are an integral part of these statements. 5 VIDEO DISPLAY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Twelve Months Ended February 28, 1998 and the Six Months Ended August 31, 1998
Net Unrealized Loss on Foreign Noncurrent Currency Additional Marketable Common Retained Translation Paid In Equity Stock Earnings Adjustments Capital Securities ------------ ----------- ------------ ---------- --------------- Balance at February 28 1997 $3,529,000 $15,553,000 $(1,311,000) $92,000 $(120,000) Net income for the year --- 3,541,000 --- --- --- Currency translation adjustment --- --- 12,000 --- --- Repurchase of common stock (271,000) --- --- --- --- Conversion of debt to common stock 150,000 --- --- --- --- Issuance of common stock under stock option plan 57,000 --- --- --- --- Unrealized loss on marketable equity securities --- --- --- --- (86,000) ---------- ----------- ----------- ---------- --------- Balance at February 28, 1998 $3,465,000 $19,094,000 $(1,299,000) $92,000 $(206,000) Issuance of common stock under stock option plan 22,000 --- --- --- --- Net income for quarter --- 1,628,000 --- --- --- Currency translation adjustment --- --- 1,000 --- --- Repurchase of common stock (93,000) --- --- --- --- Issuance of stock in exchange for stock in equity investee 93,000 --- --- --- --- Issuance of stock in conjunction with acquisition of MII 445,000 --- --- --- --- ---------- ----------- ----------- ---------- --------- Balance at August 31, 1998 $3,932,000 $20,722,000 $(1,298,000) $92,000 $(243,000) ========== =========== =========== ========== =========
6 Video Display Corporation STATEMENTS OF CASH FLOWS For the Six months ended August 31,
1998 1997 ------------- ------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 521,000 $ 670,000 INVESTING ACTIVITIES Purchase of property, plant and equipment (701,000) (140,000) Purchase of assets of Wintron, Inc. (400,000) --- Purchase of stock of MII (50,000) Increase in other assets (174,000) (21,000) ------------ ----------- Net cash used in investing activities (1,325,000) (161,000) FINANCING ACTIVITIES Proceeds from long-term debt and lines of credit 20,789,000 5,886,000 Proceeds from exercise of stock option 22,000 --- Repurchase of common stock (93,000) --- Proceeds on note receivable 51,000 45,000 Payments on long-term debt and lines of credit (20,365,000) (6,605,000) ------------ ----------- Net cash used in financing activities 404,000 (674,000) Effect of exchange rates on cash --- 58,000 ------------ ----------- Net increase in cash (400,000) (107,000) Cash, beginning of period 2,598,000 1,043,000 ------------ ----------- Cash, end of period $ 2,198,000 $ 936,000 ============ =========== 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 $ --- ============ ===========
The accompanying notes are an integral part of these statements. 7 VIDEO DISPLAY CORPORATION STATEMENTS OF CASH FLOWS For the Six Months ended August 31,
1998 1997 ------------ ------------ RECONCILIATION OF NET EARNINGS FROM CONTINUING OPERATIONS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net earnings from continuing operations $ 1,627,000 $ 512,000 ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH PROVIDED BY OPERATIONS: Depreciation and amortization 808,000 424,000 Amortized interest on note receivable (18,000) (9,000) Decrease in allowance for doubtful accounts 51,000 (3,000) CHANGES IN OPERATING ASSETS AND LIABILITIES NET OF EFFECTS FROM ACQUISITIONS: Decrease in accounts receivable 382,000 613,000 (Increase) decrease in inventory (1,345,000) 374,000 (Increase) decrease in prepaid expenses 104,000 (207,000) Increase (decrease) in accounts payable and accrued expenses (1,080,000) (1,039,000) Increase (decrease) in minority interest (8,000) 5,000 ----------- ----------- NET CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS $ 521,000 $ 670,000 =========== ===========
The accompanying notes are an integral part of these statements. 8 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, 1998 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, 1998 and the Consolidated Statement of earnings for the six months ended August 31, 1998 and 1997. NOTE B - INVENTORIES Inventories are stated at the lower of cost (first in, first out) or market.
Inventories consist of: August 31, February 28, 1998 1998 ----------- ------------ Raw materials $ 3,072,000 $ 2,925,000 Finished goods 20,184,000 18,566,000 ----------- ----------- $23,256,000 $21,491,000 =========== ===========
NOTE C - ACQUISITIONS In March 1998, the Company purchased the inventory and equipment of Wintron, Inc. for $400,000 cash. In June 1998, the Company acquired Mengel Industries, Inc. for $50,000 cash and the issuance of 44,000 shares of the Company's common stock. 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 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.
Three months ended Six months ended August 31, August 31, 1998 1997 1998 1997 ----------- ------------ ----------- ------------- Net sales $13,762,000 $15,027,000 $29,293,000 $30,094,000 Earnings from continuing operations 1,523,000 1,669,000 3,200,000 2,692,000 Net earnings $ 731,000 $ 824,000 $ 1,618,000 $ 1,306,000 =========== =========== =========== =========== Basic earnings per share $ 0.19 $ 0.21 $ 0.41 $ 0.33 =========== =========== =========== =========== Fully diluted earnings per share $ 0.17 $ 0.19 $ 0.36 $ 0.29 =========== =========== =========== ===========
NOTE D - LONG-TERM DEBT Long-term debt consisted of the following:
AUGUST 31, February 28, 1998 1998 ----------- ------------ Revolving credit facility. $ 4,237,000 --- Term loan facility. 773,000 $ 1,200,000 Mortgage payable to bank; monthly principal payments of $3,000 plus interest at 8.6%; collateralized by land and building with a net book value of $701,000 at August 31, 1998. 250,000 271,000 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 $410,000 at August 31, 1998. 131,000 149,000 Note payable to bank; monthly principal payments of $7,800 including interest at 8.25%; collateralized by computer equipment with a net book value of $586,000 at August 31, 1998. 354,000 329,000 Other 28,000 42,000 ----------- ----------- $ 5,773,000 $ 1,991,000 Less current portion 975,000 975,000 ----------- ----------- $ 4,798,000 $ 1,016,000 =========== ===========
10 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 line of credit had a termination date of July 1, 1998. The line of credit bears interest at the bank's base rate (8.5% and 8.25% as of February 28, 1998 and 1997 respectively) plus 1/2%. A commitment fee of 1/2% is charged on the unused portion of the line of credit. Borrowings under the line of credit are limited by eligible accounts receivable and inventory, as defined. Total amount available under the lines of credit was approximately $257,000 and $2,521,000 as of August 31, 1998 and February 28, 1998. The outstanding balance on the line was $5,279,000 as of February 28, 1998. The Agreement contains affirmative and negative covenants including requirements related to tangible net worth, indebtedness to tangible net worth, cash flow coverage, and restricts dividend payments, capital expenditures and acquisitions. Substantially all of the Company's retained earnings are restricted based upon these covenants. Subsequent to February 28, 1998, the Company amended its line of credit with the primary bank 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 was also eliminated. All other terms remained the same as the original line of credit. This amendment necessitates the reclassification of the revolver to long term debt. The Company does not anticipate problems renewing the line of credit with the secondary bank. Additionally, subsequent to February 28, 1998, the note payable to officer has been repaid. NOTE F - SUPPLEMENTAL CASH FLOW INFORMATION
AUGUST 31, August 31, 1998 1997 ----------- ---------- Cash paid for: Interest $ 444,000 $668,000 Income taxes, net of refunds $2,913,000 $776,000
11 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, 1998 and 1997, the percentages which selected items in the Statements of Income bear to total revenues:
Fiscal Quarter Six Months Ended August 31, Ended August 31, 1998 1997 1998 1997 ------ ------ ------ ------- Sales CRT and components 62.2% 59.3% 61.4% 57.0% Wholesale electronic parts 37.8 40.7 38.6 43.0 ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% Cost and expenses Cost of goods sold 60.1% 61.7% 61.6% 63.5 Selling and delivery 8.1 7.3 7.9 7.8 General and administrative 20.7 18.8 19.4 18.9 ----- ----- ----- ----- 88.9 87.8 88.9 90.2 Income from Operations 11.1 12.2 11.1 9.8 Interest expense (1.6) (2.2) (1.5) (2.3) Other income (expense) (0.7) 0.1 (0.3) --- ----- ----- ----- ----- Income before income taxes 8.8 10.1 9.3 7.5 Provision for income taxes 3.5 3.9 3.7% 2.6% ----- ----- ----- ----- Net income 5.3% 6.2% 5.6% 4.9% ===== ===== ===== =====
Net Sales - --------- Consolidated net sales decreased $450,000 or 3.2% and increased $267,000 or 0.9% for the three and six months ended August 31, 1998 as compared to the same period one year ago. CRT division sales were up 1.6% or $137,000 and $1,420,000 or 8.7% for the three and six months ended August 31, 1998. The wholesale consumer electronic parts division sales decreased 10.1% or $587,000 and $1,153,000 or 9.4% for the same comparative periods. The net increase in sales of the CRT division is primarily attributable to internal growth of the Company's newest divisions, MII and Wintron, which added $773,000 and $1,247,000 for the three and six months ended August 31, 1998. The remaining net increase in six month CRT sales and decreases in three month of CRT sales is a result of a slowing of demand in color TV tubes after the completion of filling backlogged requirements of one of the Company's major accounts. 12 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 is seeking 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. Gross margins - ------------- Consolidated gross profit margins as a percentage of sales increased from 38.3% for the quarter ended August 31, 1997 to 39.9% for the quarter ended August 31, 1998. Gross margins were 38.4% versus 36.5% for the same comparative six month period. The overall increases in margins can be attributed to increases of bulk purchases of primarily television CRTs at reduced prices being sold in the current period and higher plant utilization whereby increases in volume did not correspondingly increase overhead rates. Additionally, revisions in product mix increase margins as well. Operating expenses - ------------------ Selling and general and administrative expenses increased slightly in dollar amounts and in percentage of sales in the comparative three and six months ended August 31, 1998 and 1997 from 26.1% to 28.8% and 26.7% to 27.3%. The increase is due primarily to the additions of SG&A of the newest locations of Wintron and MII. These additions added $229,000 and $305,000 for the comparative three and six month periods. The Company continues to seek ways to reduce operating expenses. Interest expense - ---------------- Interest expense decreased $103,000 for the three months and $224,000 for the six months ended August 31, 1998 compared to the same periods a year ago. Interest rates were lowered to 7.25% on the Company's primary credit facility. Additionally, principal amounts outstanding have been lowered. Income taxes - ------------ The Company's effective tax rate for the second quarter of fiscal 1998 was 39.5% as compared to 38.3% for the same period a year ago. The difference in the effective tax rate is attributable to the utilization of the tax loss carry forward at the Mexican facility in previous quarters. Liquidity and capital resources - ------------------------------- The Company's working capital was $21,590,000 at August 31, 1998 as compared to $16,441,000 at February 28, 1998. The increase includes a reclassification of the Company's revolving credit facility from short term to long term due to the amendment extending the note until July 31, 1000. Also included in the increase is net assets acquired during the first half of the current year which added $789,000 to working capital. 13 PART II Item 1. Legal Proceedings No new legal proceedings or material changes in existing litigation occurred during the quarter ending August 31, 1998. 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, 1998. 14 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 14, 1998 By: /s/ Ronald D. Ordway ---------------------------------- Ronald D. Ordway Chief Executive Officer By: /s/ Carol D. Franklin ---------------------------------- Carol D. Franklin Chief Financial Officer and Secretary EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS FEB-28-1999 MAR-01-1998 AUG-31-1998 2,198,000 0 6,899,000 421,000 23,256,000 33,141,000 19,368,000 14,499,000 41,778,000 11,551,000 6,573,000 0 0 3,932,000 19,273,000 41,778,000 28,801,000 28,801,000 17,746,000 25,592,000 84,000 0 444,000 2,681,000 1,054,000 1,627,000 0 0 0 1,627,000 $0.41 $0.37
-----END PRIVACY-ENHANCED MESSAGE-----