-----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, EDkFW2pbVg541L4eFr0py18jk0KK4neLr5qELjlrPqsoOQZIWIpMXAqsiud9oDdC pDFd559fKcWVgS0pKy97YQ== /in/edgar/work/0000931763-00-002270/0000931763-00-002270.txt : 20001017 0000931763-00-002270.hdr.sgml : 20001017 ACCESSION NUMBER: 0000931763-00-002270 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001016 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIDEO DISPLAY CORP CENTRAL INDEX KEY: 0000758743 STANDARD INDUSTRIAL CLASSIFICATION: [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: 740419 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 0001.txt QUARTERLY FINANCIAL REPORT 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 VIDEO DISPLAY CORPORATION INDEX
Page 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
SIGNATURES 2 Video Display Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS ASSETS
August 31, February 29, 2000 2000 UNAUDITED (NOTE A) --------- -------- 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 ============ ============
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 29, 2000 2000 UNAUDITED (NOTE A) --------- -------- 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 ============= ============
The accompanying notes are an integral part of these statements. 4 Video Display Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter Ended August 31, Six Months Ended August 31, 2000 1999 2000 1999 ---- ---- ---- ---- 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 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 5 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
Accumulated Current Other Additional Year Common Retained Comprehensive Paid In Comprehensive Stock Earnings Income Capital Income ----- -------- ------ ------- ------ 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 ========== =========== =========== ========= =========
6 Video Display Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six months ended August 31,
2000 1999 ---- ---- 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 ============= =============
The accompanying notes are an integral part of these statements. 7 Video Display Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months ended August 31,
2000 1999 ---- ---- 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 ============ ===========
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 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 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.
Three months ended Six months ended August 31, August 31, 2000 1999 2000 1999 ---- ---- ---- ---- 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 =========== =========== =========== ============
NOTE D - LONG-TERM DEBT
Long-term debt consisted of the following: August 31, February 29, 2000 2000 ---- ---- 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 ============= =============
10 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 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 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:
Fiscal Quarter Six Months Ended August 31, Ended August 31, 2000 1999 2000 1999 -------------------- ------------------ 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% ====== ====== ====== =====
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 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 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 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 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 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 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 6-MOS FEB-28-2001 MAR-01-2000 AUG-31-2000 4,212,000 0 12,020,000 427,000 29,438,000 46,926,000 23,249,000 15,107,000 57,703,000 26,755,000 7,884,000 0 0 2,994,000 20,170,000 57,703,000 34,681,000 34,681,000 23,808,000 32,698,000 940,000 0 943,000 853,000 311,000 542,000 0 0 0 542,000 0.14 0.14
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