-----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, QNg7lZtf2NPMUettlL1k1twwWrz73bnBn7LQLJt4gDtHk1IvhQs9/BAIsW0hl6rS 4JLcS6VwsE7Al5y4eqp9ig== 0000931763-97-001717.txt : 19971016 0000931763-97-001717.hdr.sgml : 19971016 ACCESSION NUMBER: 0000931763-97-001717 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971015 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: 97695938 BUSINESS ADDRESS: STREET 1: 1868 TUCKER INDUSTRIAL DR CITY: TUCKER STATE: GA ZIP: 30084 BUSINESS PHONE: 4049382080 MAIL ADDRESS: STREET 2: 1868 TUCKER INDUSTRIAL DR CITY: TUCKER STATE: GA ZIP: 30084 10-Q 1 FORM 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, 1997 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, 1997 - -------------------------- ------------------------------- Common Stock, No Par Value 3,907,413 VIDEO DISPLAY CORPORATION INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Consolidated balance sheets - August 31, 1997 and February 28, 1997 3-4 Consolidated statements of operations - Fiscal quarter and six months ended August 31, 1997 and 1996 5 Consolidated statements of shareholders' equity - Twelve months ended February 28, 1997 and the six months ended August 31, 1997 6 Consolidated statements of cash flows - Six months ended August 31, 1997 and August 31, 1996 7-8 Notes to consolidated financial statements - August 31, 1997 9-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 2. Changes is 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, 1997 1997 UNAUDITED (NOTE A) --------------- -------------- Assets Current assets: Cash and cash equivalents (including restricted cash of $34,000) $ 1, 394,000 $ 1,043,000 Notes and accounts receivable, less allowance for possible losses of $267,000 and $247,000 7,255,000 7,568,000 Note receivable, net of unamortized discount of $36,000 144,000 144,000 Inventories 22,510,000 22,534,000 Prepaid expenses 539,000 550,000 Deferred income taxes 677,000 677,000 ------------ ------------ Total current assets 32,519,000 32,516,000 Property, plant and equipment: Land 435,000 435,000 Buildings 3,910,000 3,905,000 Machinery and equipment 13,756,000 13,485,000 ------------ ------------ 18,101,000 17,825,000 Accumulated depreciation and amortization (13,313,000) (12,637,000) ------------ ------------ 4,788,000 5,188,000 Investments 515,000 147,000 Note receivable, net of unamortized discount of $53,000 and $146,000 and allowance for possible losses of $221,000 641,000 686,000 Excess of cost over net assets acquired, net of accumulated amortization of $1,032,000 and $889,000 1,975,000 2,118,000 Other assets 256,000 232,000 ------------ ------------ Total assets $ 40,694,000 $ 40,887,000 ============ ============
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, 1997 1997 UNAUDITED (NOTE A) ------------ ------------- Liabilities and Shareholders' Equity Current liabilities: Note payable (Note C) $ 6,662,000 $ 9,657,000 Notes payable to officers and shareholders (Note C) 3,620,000 1,220,000 Accounts payable 3,699,000 4,328,000 Accrued liabilities 2,659,000 2,534,000 Current maturities of long-term debt (Note C) 993,000 993,000 ----------- ----------- Total current liabilities 17,633,000 18,732,000 Long-term debt (Note C) 1,451,000 1,962,000 Subordinated debentures 2,000,000 2,000,000 Deferred income taxes 256,000 256,000 Minority interests 200,000 194,000 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 3,907,000 3,529,000 3,529,000 Additional paid-in capital 92,000 92,000 Retained earnings 16,951,000 15,553,000 Net unrealized loss on marketable equity securities (160,000) (120,000) Currency translation adjustments (1,258,000) (1,311,000) ----------- ----------- Total shareholders' equity 19,154,000 17,743,000 ----------- ----------- Total liabilities and shareholders' equity $40,694,000 $40,887,000 =========== ===========
The accompanying notes are an integral part of these statements. 4 VIDEO DISPLAY CORPORATION CONSOLIDATED STATEMENTS OF INCOME For the Fiscal Quarters Ended August 31, (UNAUDITED)
1997 1996 1997 1996 ------------ ------------ ------------ ------------ Net sales $14,212,000 $12,961,000 $28,534,000 $25,059,000 Cost of goods sold 8,775,000 8,376,000 18,120,000 16,435,000 ----------- ----------- ----------- ----------- Gross profit 5,437,000 4,585,000 10,414,000 8,624,000 Operating expenses: Selling and delivery 1,030,000 1,111,000 2,228,000 2,052,000 General and administrative 2,672,000 2,372,000 5,386,000 4,808,000 ----------- ----------- ----------- ----------- 3,702,000 3,483,000 7,614,000 6,860,000 Operating profit 1,735,000 1,102,000 2,800,000 1,764,000 Other income (expense) Interest expense (317,000) (331,000) (668,000) (614,000) Other, net 20,000 (1,000) 16,000 9,000 ----------- ----------- ----------- ----------- (297,000) (332,000) (652,000) (605,000) Income before minority interest 1,438,000 770,000 2,148,000 1,159,000 Minority interest --- 9,000 (4,000) 14,000 ----------- ----------- ----------- ----------- Income before income taxes 1,438,000 761,000 2,144,000 1,145,000 Income taxes 552,000 187,000 746,000 318,000 ----------- ----------- ----------- ----------- Net Income $ 886,000 $ 574,000 $1,398,000 $ 827,000 =========== =========== ========== =========== Basic earnings per share of common stock $ 0.22 $ 0.14 $ 0.35 $ 0.21 =========== =========== ========== =========== Fully diluted earnings per share of common stock $ 0.21 $ 0.14 $ 0.33 $ 0.20 ========== ============ ========== ========== Basic weighted average shares outstanding 3,997,000 3,986,000 3,997,000 3,986,000 ========== ========== ========== ========== Fully diluted weighted average shares outstanding 4,438,000 4,111,000 4,438,000 4,111,000 ========== ========== ========== ==========
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, 1997 and the Six Months Ended August 31, 1997
Net Unrealized Loss on Foreign Noncurrent Currency Additional Marketable Common Retained Translation Paid In Equity Stock Earnings Adjustments Capital Securities ----------- ----------- ------------ ---------- --------------- Balance at February 29, 1996 $3,529,000 $13,655,000 $(1,186,000) $81,000 $ 200,000 Net earnings for year --- 1,898,000 --- --- --- Contribution of capital from gain realized on sale of stock by officer --- --- --- 11,000 --- Currency translation adjustment --- --- (125,000) --- --- Net unrealized loss on noncurrent marketable equity securities --- --- --- --- (320,000) ----------- ----------- ----------- ---------- -------------- Balance at February 28, 1997 $3,529,000 $15,553,000 $(1,311,000) $92,000 $(120,000) Net income for period --- 1,398,000 --- --- --- Currency translation adjustment --- --- 53,000 --- --- Unrealized loss on marketable equity securities --- --- --- --- (40,000) ----------- ----------- ----------- ---------- -------------- Balance at August 31, 1997 $3,529,000 $16,951,000 $(1,258,000) $92,000 $(160,000) =========== =========== =========== ========== ==============
6 Video Display Corporation STATEMENTS OF CASH FLOWS For the Six months ended August 31,
1997 1996 ------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,167,000 $ 504,000 INVESTING ACTIVITIES Purchase of property, plant and equipment (272,000) (262,000) Cash received in Z-Axis, Inc. acquisition --- 150,000 Teltron acquisition --- (40,000) Purchase of investment (408,000) --- Increase in other assets (42,000) (64,000) ------------ ------------ Net cash used in investing activities (722,000) (216,000) FINANCING ACTIVITIES Proceeds from long-term debt and lines of credit 18,235,000 11,426,000 Proceeds on note receivable 60,000 90,000 Payments on long-term debt and lines of credit (19,341,000) (11,283,000) ------------ ------------ Net cash provided (used in) by financing activities (1,046,000) 233,000 Effect of exchange rates on cash 11,000 (162,000) ------------ ------------ Net increase in cash 410,000 359,000 Cash, beginning of period 984,000 1,057,000 ------------ ------------ Cash, end of period $ 1,394,000 $ 1,416,000 ============ ============
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,
1997 1996 ------------ ------------ RECONCILIATION OF NET EARNINGS FROM CONTINUING OPERATIONS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net earnings from continuing operations $1,398,000 $ 827,000 ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH PROVIDED BY OPERATIONS: Depreciation and amortization 837,000 618,000 Amortized interest on note receivable (12,000) (18,000) Decrease in allowance for doubtful accounts 26,000 --- CHANGES IN OPERATING ASSETS AND LIABILITIES NET OF EFFECTS FROM ACQUISITIONS: Decrease in accounts receivable 310,000 140,000 (Increase) decrease in inventory 86,000 (1,183,000) (Increase) decrease in prepaid expenses 15,000 (98,000) Increase (decrease) in accounts payable and accrued expenses (499,000) 201,000 Increase in minority interest 6,000 17,000 ---------- ----------- NET CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS $2,167,000 $ 504,000 ========== ===========
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, 1997 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, 1997 and the Consolidated Statement of earnings for the six months ended August 31, 1997 and 1996. NOTE B - ACQUISITIONS In April 1996, the Company purchased substantially all the assets and assumed certain liabilities of Teltron Technologies, Inc. In June 1996, the Company acquired 100% of the stock of Z-Axis, Inc. 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. The proforma information is not presented for the three month period ended August 31, 1997 as both acquisitions were completed prior to the second quarter of fiscal 1997. 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.
Six months ended August 31, 1997 1996 ---- ---- Net sales $28,534,000 $26,093,000 Earnings from continuing operations 2,800,000 1,938,000 Net earnings $ 1,398,000 $ 935,000 =========== =========== Basic earnings per share $ 0.35 $ 0.24 =========== =========== Fully diluted earnings per share $ 0.33 $ 0.23 =========== ===========
9 VIDEO DISPLAY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE C - LONG-TERM DEBT
Long-term debt consisted of the following: AUGUST 31, February 28, 1997 1997 ----------- ----------- Term loan facility. $1,600,000 $2,000,000 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 $734,000 at August 31, 1997. 296,000 317,000 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 $469,000 at August 31, 1997. 167,000 184,000 Note payable to bank; monthly principal payments of $9,000 including interest at 8.25%; collateralized by computer equipment with a net book value of $758,000 at August 31, 1997. 361,000 402,000 Other 20,000 52,000 ---------- ---------- $2,444,000 $2,955,000 Less current portion 993,000 993,000 ---------- ---------- $1,451,000 $1,962,000 ========== ==========
In March 1997, Company amended its line of credit with the primary bank to allow a maximum available line of $4,500,000 and to eliminate the $1,000,000 letter of credit facility. The interest rates and covenants remained the same as the original line of credit. The line of credit expires July 1, 1998. Additionally, the Company entered into a second agreement with a second bank that provides a $3,500,000 maximum line of credit. An intercreditor agreement has been executed between the two banks. The second line of credit has essentially the same terms and conditions as the first agreement including an expiration date of July 1, 1998. In conjunction with the amendment of the original line, and the setup of the second line, the Company received proceeds of $2,800,000 from an officer to pay down the original line of credit. The proceeds were in the form of a demand note payable with interest due monthly at prime plus 1%. Subsequently, the Company has repaid $700,000 on the demand note. 10 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, 1997 and 1996, the percentages which selected items in the Statements of Income bear to total revenues:
Fiscal Quarter Six Months Ended August 31, Ended August 31, 1997 1996 1997 1996 ------ ------ ------ ------ Sales CRT and components 59.3% 51.4% 57.0% 49.6% Wholesale electronic parts 40.7 48.6 43.0 50.4 ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% Cost and expenses Cost of goods sold 61.7% 64.6% 63.5% 65.6 Selling and delivery 7.3 8.6 7.8 8.2 General and administrative 18.8 18.3 18.9 19.2 ----- ----- ----- ----- 87.8 91.5 90.2 93.0 Income from Operations 12.2 8.5 9.8 7.0 Interest expense (2.2) (2.6) (2.3) (2.5) Other income (expense) 0.1 --- --- --- ----- ----- ----- ----- Income before income taxes 10.1 5.9 7.5 4.5 Provision for income taxes 3.9 1.4 2.6% 1.2% ----- ----- ----- ----- Net income 6.2% 4.5% 4.9% 3.3% ===== ===== ===== =====
Net Sales - --------- Consolidated net sales increased $1,251,000 or 9.7% and $3,475,000 or 13.9% for the three and six months ended August 31, 1997 as compared to the same period one year ago. CRT division sales were up 26.5% or $1,762,000 and $3,829,000 or 30.8% for the three and six months ended August 31, 1997. The wholesale consumer electronic parts division sales decreased 8.1% or $511,000 and 2.8% or $354,000 or 2.8% 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, Z-Axis and Teltron Technologies, which added $1,128,000 and $2,821,000 for the three and six months ended August 31, 1997. The remaining increase in CRT sales is a result of increases in all segments of the CRT division including data display, projection and television CRT sales. 11 The net decrease in sales of the wholesale electronic parts division is primarily attributed to decreases in sales to major electronic distributors of $824,000 year to date in fiscal 1997. These decreases were offset by increases in fire safety and sales to retail consumers. Gross margins - ------------- Consolidated gross profit margins as a percentage of sales increased from 35.4% for the quarter ended August 31, 1996 to 38.3% for the quarter ended August 31, 1997. Gross margins were 36.5% versus 34.4% for the same comparative six month period. The overall increases in margins can be attributed to increases in the consumer parts division due to decline in sales of replacement parts to major electronics distributors in the six months ended August 31, 1997. Those sales are at considerably lower margins and were replaced by sales to other dealer and end user consumers at higher margins. Additionally, increased volume in the CRT division as well as revisions in product mix increased margins in that segment. Operating expenses - ------------------ Selling and general and administrative expenses increased slightly in dollar amounts in the three and six month comparative periods, but decreased as a percentage of sales from 26.9% to 26.7% and 27.4% to 26% for the three and six months ended August 31, 1997 and 1996. The Company continues to seek ways to reduce operating expenses. Interest expense - ---------------- Interest expense decreased $14,000 for the three months and $54,000 for the six months ended August 31, 1997 compared to the same periods a year ago. Income taxes - ------------ The Company's effective tax rate for the second quarter of fiscal 1998 was 38.4% as compared to 36.3% for the same period a year ago. The difference in the effective tax rate is attributable to the decreased ratio of earnings in the first quarter of fiscal 1998 of the Company's foreign subsidiary as compared to the same period a year ago. The foreign subsidiary has a tax loss carry forward which is applicable to these earnings. The tax loss carry forward has been utilized and future earnings by the Mexican subsidiary will reflect the effective tax rate. Liquidity and capital resources - ------------------------------- The Company's working capital was $15,528,000 at August 31, 1997 as compared to $13,784,000 at February 28, 1997. The increase in working capital includes increases of $1,079,000 due to the acquisitions of Z-Axis and Teltron. The offsetting decline reflects decreases in receivables, inventory and accounts payable. Net cash provided by operating activities for the six months ended August 31, 1997 was $2,167,000 compared to $504,000 a year ago. 12 Capital expenditures for fiscal 1998 are not anticipated to be significant. In August 1994, the Company entered into a loan agreement with a bank that provided a $4,000,000 five year term loan and a one year $10,000,000 line of credit. The line of credit had been renewed through March 18, 1997. In March 1997, the Company renegotiated and reduced its line of credit with this bank to $4,500,000. The Company entered into an additional agreement with a second bank establishing a $3,500,000 line of credit bearing interest at the bank's base rate (8.25% as of the closing) plus 1/2%. Both lines expire July 31, 1997. The Company, at the same time, borrowed $2,800,000 from the CEO of the Company and subsequently repaid $300,000. This borrowing was under the terms of an unsecured demand note bearing interest at prime plus 1%. Proceeds from the borrowing were used by the Company to reduce the outstanding balance of the original line of credit. The Company will seek to renew the agreements for a one year term and does not anticipate problems in the renegotiation. As in the prior year, the Company is negotiating or bidding on sales contracts for additional revenues which could impact its working capital requirements. The intent is to finance short term requirements through existing bank borrowing relationships; however, longer term sources of more permanent capital may be required if certain larger contracts are awarded to the Company. 13 PART II Item 1. Legal Proceedings No new legal proceedings or material changes in existing litigation occurred during the quarter ending August 31, 1997. 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, 1997. 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, 1997 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-28-1998 MAR-01-1997 AUG-31-1997 1,394,000 0 7,666,000 267,000 22,510,000 32,519,000 18,101,000 13,313,000 40,694,000 17,632,000 3,451,000 0 0 3,529,000 15,625,000 40,694,000 28,534,000 28,534,000 18,120,000 25,734,000 (12,000) 0 668,000 2,144,000 746,000 1,398,000 0 0 0 1,398,000 0.35 0.33
-----END PRIVACY-ENHANCED MESSAGE-----