-----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, S0fwKHj76OCqAwJTViIOL2L0oc5e7Y1FkH0NTdhqv/QFqJ44WzqmXiCvYQyiPS22 v1rFMTG7Q1d804OE6XDhvQ== 0000931763-99-002892.txt : 19991020 0000931763-99-002892.hdr.sgml : 19991020 ACCESSION NUMBER: 0000931763-99-002892 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991019 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: 99730481 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 QUARTERLY 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, 1999 Commission File Number 0-13394 VIDEO DISPLAY CORPORATION (Exact name of registrant as specified on its charter) Georgia 58-1217564 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 1868 Tucker Industrial Drive, Tucker, Georgia 30084 (Address of principal executive offices) Registrant's telephone number including area code: 770-938-2080 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Class Outstanding at August 31, 1999 - -------------------------- ------------------------------ Common Stock, No Par Value 3,991,232 VIDEO DISPLAY CORPORATION INDEX
Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Consolidated balance sheets - August 31, 1999 and February 28, 1999 3-4 Consolidated statements of income - Fiscal quarter and six months ended August 31, 1999 and 1998 5 Consolidated statements of shareholders' equity and comprehensive income - Twelve months ended February 28, 1999 and the six months ended August 31, 1999 6 Consolidated statements of cash flows - Six months ended August 31, 1999 and August 31, 1998 7-8 Notes to consolidated financial statements - August 31, 1999 9-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-14 PART II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults upon its Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and reports on Form 8-K 15 SIGNATURES
2 Video Display Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS ASSETS
August 31, February 28, 1999 1999 UNAUDITED (NOTE A) --------- -------- Assets Current assets: Cash and cash equivalents (including restricted cash of $34,000) $ 3,016,000 $ 2,150,000 Notes and accounts receivable, less allowance for possible losses of $361,000 and $360,000 9,008,000 8,022,000 Costs and earnings in excess of billings on contracts 1,166,000 952,000 Inventories 26,886,000 28,467,000 Prepaid expenses 1,671,000 1,976,000 ------------ ------------ Total current assets 41,747,000 41,567,000 Property, plant and equipment: Land 540,000 540,000 Buildings 4,855,000 4,696,000 Machinery and equipment 16,191,000 15,453,000 ------------ ------------ 21,586,000 20,689,000 Accumulated depreciation and amortization (14,937,000) (14,336,000) ------------ ------------ 6,649,000 6,353,000 Excess of cost over net assets acquired, net of accumulated amortization of $1,654,000 and $1,493,000 2,032,000 2,193,000 Other assets 1,213,000 1,528,000 ------------ ------------ Total assets $ 51,641,000 $ 51,641,000 ============ ============
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, 1999 1999 UNAUDITED (NOTE A) --------- -------- Liabilities and Shareholders' Equity Current liabilities: Revolving lines of credit (Note E) $ 2,970,000 $ 2,970,000 Notes payable to officers and shareholders (Note E) 2,500,000 2,500,000 Accounts payable 4,967,000 4,875,000 Accrued liabilities 2,675,000 2,982,000 Current maturities of long-term debt (Note D) 1,677,000 1,676,000 ----------- ----------- Total current liabilities 14,789,000 15,003,000 Revolving line of credit (Note E) 4,579,000 4,500,000 Long-term debt less current maturities (Note D) 7,317,000 7,712,000 Convertible subordinated debentures 1,775,000 1,775,000 Deferred income taxes 102,000 102,000 Minority interests 173,000 186,000 Commitments and contingencies -- -- Shareholders' equity Preferred stock, no par value - shares authorized 2,000,000; none issued and outstanding -- -- Common stock, no par value - shares authorized 10,000,000; issued and outstanding shares 3,991,000 3,692,000 3,591,000 Additional paid-in capital 92,000 92,000 Retained earnings 20,661,000 20,216,000 Accumulated other compehensive income (1,538,000) (1,536,000) ----------- ----------- Total shareholders' equity 22,906,000 22,363,000 ----------- ----------- Total liabilities and shareholders' equity $51,641,000 $51,641,000 =========== ===========
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, 1999 1998 1999 1998 ---- ---- ---- ---- Net sales $15,706,000 $13,762,000 $33,232,000 $28,801,000 Cost of goods sold 10,893,000 8,265,000 22,792,000 17,746,000 ----------- ----------- ----------- ----------- Gross profit 4,813,000 5,497,000 10,440,000 11,055,000 Operating expenses: Selling and delivery 1,452,000 1,121,000 2,950,000 2,262,000 General and administrative 2,911,000 2,853,000 5,939,000 5,584,000 ----------- ----------- ----------- ----------- 4,363,000 3,974,000 8,889,000 7,846,000 Operating profit 450,000 1,523,000 1,551,000 3,209,000 Other income (expense) Interest expense (374,000) (214,000) (757,000) (444,000) Other, net (44,000) (106,000) (121,000) (92,000) ----------- ----------- ----------- ----------- (418,000) (320,000) (878,000) (536,000) Income (loss) before minority interest 32,000 1,203,000 673,000 2,673,000 Minority interest expense (income) (4,000) (7,000) (11,000) (8,000) ----------- ----------- ----------- ----------- Income before income taxes 36,000 1,210,000 684,000 2,681,000 Income tax expense (benefit) (55,000) 479,000 239,000 1,054,000 ----------- ----------- ----------- ----------- Net Income $ 91,000 $ 731,000 $ 445,000 $ 1,627,000 =========== =========== =========== =========== Basic earnings per share of common stock $ 0.02 $ 0.19 $ 0.11 $ 0.41 =========== =========== =========== =========== Fully diluted earnings per share of common stock $ 0.02 $ 0.17 $ 0.11 $ 0.37 =========== =========== =========== =========== Basic weighted average shares outstanding 3,964,000 3,942,000 3,964,000 3,942,000 =========== =========== =========== =========== Fully diluted weighted average shares outstanding 4,392,000 4,479,000 4,392,000 4,479,000 =========== =========== =========== ===========
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 28, 1999 and the Six Months Ended August 31, 1999
Accumulated Current Other Additional Year Common Retained Comprehensive Paid In Comprehensive Stock Earnings Income Capital Income ----- -------- ------ ------- ------ Balance at February 28,1998 $ 3,465,000 $19,094,000 $(1,505,000) $ 92,000 $ --- Net income for the year 1,122,000 --- 1,122,000 --- 1,122,000 Currency translation adjustment --- --- 2,000 --- 2,000 Repurchase of common stock (508,000) --- --- --- --- Issuance of common stock for business acquisitions 612,000 --- --- --- --- Issuance of common stock under stock option plan 22,000 --- --- --- --- Unrealized loss on marketagle equity securities --- --- (33,000) --- (33,000) ----------- ----------- ------------- --------- ---------- Balance at February 28, 1999 $ 3,591,000 $20,216,000 $ (1,536,000) $ 92,000 $1,091,000 Issuance of common stock under stock option plan 101,000 --- --- --- --- Net income for period --- 445,000 --- --- 445,000 Currency translation adjustment --- --- 13,000 --- 13,000 Unrealized loss on marketable equity securities --- --- (15,000) --- (15,000) ----------- ----------- ------------- --------- ---------- Balance at August 31, 1999 $ 3,692,000 $20,661,000 $ (1,538,000) $ 92,000 $ 443,000 =========== =========== ============= ========= ==========
6 Video Display Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six months ended August 31,
1999 1998 ---- ---- Net cash provided by (used in) operating activities $ 1,989,000 $ 521,000 Investing activities Purchase of property, plant and equipment (897,000) (701,000) Purchase of assets of Wintron, Inc. -- (400,000) Purchase of stock of MII -- (50,000) (Increase) decrease in other assets 18,000 (174,000) -------------- ------------ Net cash used in investing activities (879,000) (1,325,000) Financing activities Proceeds from long-term debt and lines of credit 5,308,000 20,789,000 Proceeds from exercise of stock option 100,000 22,000 Repurchase of common stock -- (93,000) Proceeds on note receivable 29,000 51,000 Payments on long-term debt and lines of credit (5,692,000) (20,365,000) -------------- ------------ Net cash used in financing activities (255,000) 404,000 Effect of exchange rates on cash 11,000 -- -------------- ------------ Net increase (decrease) in cash 866,000 (400,000) Cash, beginning of period 2,150,000 2,598,000 -------------- ------------ Cash, end of period $ 3,016,000 $ 2,198,000 ============== ============ Noncash transactions Issuance of company stock for equity investment in Infodex $ -- $ 93,000 Issuance of company stock in conjunction of investment in MII $ -- $ 446,000 -------------- ------------ $ -- $ 539,000 ============== ============
The accompanying notes are an integral part of these statements. 7 Video Display Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months ended August 31,
1999 1998 ---- ---- Reconciliation of Net Earnings from Continuing Operations to Net Cash Provided by (Used in) Operating Activities Net earnings from continuing operations $ 445,000 $ 1,627,000 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 762,000 808,000 Amortized interest on note receivable (18,000) (18,000) Decrease in allowance for doubtful accounts 2,000 51,000 Unrealized loss on equity investment 103,000 Changes in operating assets and liabilities net of effects from acquisitions: (Increase) decrease accounts receivable (1,137,000) 382,000 (Increase) decrease in inventory 1,581,000 (1,345,000) (Increase) decrease in prepaid expenses 396,000 104,000 Increase (decrease) in accounts payable and accrued expenses (145,000) (1,080,000) Increase (decrease) in minority interest -- (8,000) ------------ ------------- Net cash provided by (used in) continuing operations $ 1,989,000 $ 521,000 ============ =============
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, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments "consisting of only normal accruals" necessary to present fairly the Company's consolidated financial position as of August 31, 1999 and the Consolidated Statement of earnings for the six months ended August 31, 1999 and 1998. NOTE B - INVENTORIES Inventories are stated at the lower of cost (first in, first out) or market. Inventories consist of: August 31, February 28, 1999 1999 ---- ---- Raw materials $ 3,427,000 $ 6,136,000 Finished goods 23,459,000 22,331,000 ------------ ------------ $ 26,886,000 $ 28,467,000 ============ ============ NOTE C - ACQUISITIONS In June 1998, the Company purchased the common stock of MII and in November 1998, the Company acquired the assets and assumed certain liabilities of the displays division of Aydin, Inc., and in February 1999 the Company acquired the assets of the MegaScan division of Access Radiology. The following table summarized the unaudited pro forma consolidated results of operations of the Company, assuming the acquisitions had occurred at the beginning of the following fiscal period. The pro forma financial information is not necessarily indicative of what would have occurred had the acquisitions been made as of that date, nor is it indicative of future results of operations. 9 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, 1999 1998 1999 1998 ---- ---- ---- ---- Net sales $ 15,706,000 $ 18,351,000 $ 33,232,000 $ 39,046,000 Earnings from continuing operations 450,000 (348,000) 1,551,000 61,000 Net earnings $ 91,000 $ (1,140,000) 445,000 $ (1,521,000) ============ ============ ============ ============ Basic earnings per share $ 0.02 $ (0.28) $ 0.11 $ (0.38) ============ ============ ============ ============ Fully diluted earnings per share $ 0.02 $ (0.28) $ 0.11 $ (0.35) ============ ============ ============ ============
NOTE D - LONG-TERM DEBT
Long-term debt consisted of the following: August 31, February 28, 1999 1999 ---- ---- Term loan facility; floating interest rate based on an Adjusted LIBOR rate (8.0% as of August 31, 1999), Quarterly principal payments commencing November 1999 And maturing November 2005; collateralized by assets of Aydin Display, Inc. $ 7,500,000 $ 7,500,000 Mortgage payable to bank; monthly principal payments of $13,000 plus interest not to exceed 7.5% maturing December 2003; collateralized by land and building. 774,000 774,000 Term loan facility with bank; monthly payments of $67,000 including interest at 7.25%, maturing August 1999, collateralized by certain equipment. -- 400,000 Other 720,000 714,000 ------------ ------------ $ 8,994,000 $ 9,388,000 Less current portion 1,677,000 1,676,000 ------------ ------------ $ 7,317,000 $ 7,712,000 ============ ============
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 Company amended its Primary Line to extend the termination date to July 1, 2000 and to lower the interest rate to a fixed rate of 7.25% per annum. The commitment fee of 1/2% on the unused portion of the Primary line was also eliminated. All other terms of the Primary Line remained the same as the original line of credit. The Secondary Line was extend to October 31, 1999 with the interest rate and all other terms remaining the same, including a commitment fee of 1/2% charged on the unused portion. Borrowing under the Lines are limited by eligible accounts receivable and inventory, as defined. As of August 31, 1999, the outstanding balances on the Primary Line and Secondary Line were $4,579,000 and $2,970,000, respectively. The additional availability under the Primary and Secondary Lines were $921,000 and $59,000, respectively as of August 31, 1999. The Line agreements contain affirmative and negative covenants including requirements related to tangible net worth, indebtedness to tangible net worth and cash flow coverage. Additionally, dividend payments, capital expenditures and acquisitions have certain restrictions. In May 1999, the Company increased the Primary Line by $1,000,000 to $5,500,000. The Company does not anticipate problems renewing the line of credit with the second bank. Also, in the second quarter, the Company borrowed $100,000 from a Director. The note is payable upon demand and accrues interest at prime plus one percent. NOTE F - SUPPLEMENTAL CASH FLOW INFORMATION August 31, August 31, 1999 1998 ---- ---- Cash paid for: Interest $ 681,000 $ 668,000 =========== ========== Income taxes, net of refunds $ 304,000 $ 776,000 =========== ========== NOTE G - SUBSEQUENT EVENTS On September 30, 1999, the Company sold 100% of the stock of Vanco International, Inc. to a privately held Illinois company for approximately $2.4 million. Vanco, a distribution company, had sales of $1,836,000 and $2,068,000 for the six months ended August 31, 1999 and 1998, respectively. 11 PART I ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- The following table sets forth, for the six months ended August 31, 1999 and 1998, the percentages which selected items in the Statements of Income bear to total revenues:
Fiscal Quarter Six Months Ended August 31, Ended August 31, 1999 1998 1999 1998 --------------------- -------------------- Sales CRT and components 72.1% 62.2% 72.8% 61.4% Wholesale electronic parts 27.9 37.8 27.2 38.6 ------- ------- ------- ------- 100.0% 100.0% 100.0% 100.0% Cost and expenses Cost of goods sold 69.4% 60.1% 68.5% 61.6% Selling and delivery 9.2 8.1 8.9 7.9 General and administrative 18.5 20.7 17.9 19.4 ------- ------- ------- ------- 97.1 88.9 95.3 88.9 Income from Operations 2.9 11.1 4.7 11.1 Interest expense (2.4) (1.6) (2.3) (1.5) Other income (expense) (0.3) (0.7) (0.3) (0.3) ------- ------- ------- ------- Income before income taxes 0.2 8.8 2.1 9.3 Provision for income taxes (0.4) 3.5 0.8 3.7 ------- ------- ------- ------- Net income 0.6% 5.3% 1.3% 5.6% ======= ======= ======= =======
Net Sales - --------- Consolidated net sales increased $1,944,000 and $4,431,000 for the three and six months ended August 31, 1999 as compared to August 31, 1998. CRT division sales were up $2,753,000 or 32.2% and $6,500,000 or 36.5% for the three and six month comparative periods. The wholesale consumer electronic parts division sales were down $809,000 or 15.6% and $2,068,000 or 18.6% for the same comparative periods. The net increase in CRT division sales is primarily attributable to internal growth of the Company's newest divisions, Aydin Displays and MegaScan which combined added $3,719,000 and $8,287,000 to the three and six month period ended August 31, 1999 as compared to one year ago. The offsetting declines in sales of $966,000 and $1,787,000 for the three and six month comparative periods are spread across the CRT division segments. The largest six month decline of approximately $1.1 was within the television CRT segment. Volume declines have occurred where customer backlog demands have been met. 12 The decline in revenues from the wholesale consumer electronic parts segment is attributed to a reduction in sales to major electronics distributors during the periods compared. The Company continues to seek other opportunities to increase higher margin consumer electronic sales including a voice activated electronic parts ordering system and implementation of a world wide web parts inquiry and order system. Subsequent to August 31, 1999, the Company sold its Vanco International, Inc. subsidiary. Comparative sales for the three and six month periods ended August 31, 1999 and 1998 were $883,000 and $996,000 and $1,836,000 and $2,068,000, respectively. The sale of this subsidiary reinforces the Company's intent to focus its growth on the display based businesses. Gross margins - ------------- Consolidated gross margins declined from 38.4% to 31.4% for the six months ended August 31, 1999 as compared to August 31, 1998. CRT division margins were lower in the comparative six month period by 10.8%. The decline in margins is the result of several factors. The newest acquisition, Aydin Displays, added $7.4 million of sales, but at a lower profit margin than other CRT segments have historically provided. Subsequent to the acquisitions last year, the Company has realigned several of its manufacturing locations in order to streamline production and to consolidate and reduce manufacturing overhead costs. In the process of this reorganization there has been increased costs as materials have been relocated and personnel trained. Order backlog has increased as the manufacturing locations adjust to the volume and expenses related to the relocated production lines. The Company is planning to consolidate additional facilities in the Data Display segment and is reviewing its foreign operating facilities for additional cost cutting opportunities in an effort to enhance future operating margins. Operating expenses - ------------------ Operating expenses as a percentage to sales has decreased to 27.7% from 28.8% for the three months comparative periods and to 26.8% from 27.3% for the six month comparative periods. The wholesale consumer parts division reduced operating expenses $536,000 for the six months ended August 31, 1999 compared to one year ago. The wholesale division has eliminated two locations and has reduced personnel at its home office in response to the overall decline of sales in that division. CRT division operating expenses had a net increase of $1,580,000 including an increase of $1,794,000 for its newest acquisition. Interest expense - ---------------- Interest expense increased $160,000 and $313,000 for the three and six month comparative periods. The majority of the increase is attributed to the $7,500,000 debt incurred in conjunction with the Aydin acquisition. In August the Company paid off the term note with its primary bank and subsequent to August 31, 1999, the Company sold one of its subsidiaries for $2.4 million which has reduced its outstanding debt. 13 Income taxes - ------------ The effective tax rate for the six months ended August 31, 1999 was 34.9% as compared to 39.3% for the same period one year ago. An income tax benefit from foreign operation losses is the primary reason for the decline. Liquidity and capital resources - ------------------------------- Working capital has increased $394,000 from $26,564,000 to $26,958,000. The increase is a result of normal changes due to ongoing operations. The Company will be required to refinance its revolving line with its secondary bank in the third quarter of fiscal 2000. The Company is not anticipating any problems with the renegotiation. The Company does not anticipate any significant capital acquisitions for the balance of fiscal 2000. Subsequent to August 31, 1999, the Company sold a subsidiary for $2.4 million. The cash received has reduced the Company's outstanding debt. Year 2000 Risks - --------------- As is the case with other companies using computers in their operations, the Company is faced with the task of addressing the Year 2000 issue during the next year. The "Year 2000 Issue" arises from the widespread use of computer programs that rely on two-digit date codes to perform computations or decision-making functions. As a result of this issue, the Company has taken steps to assess at the corporate level, as well as at the subsidiary and branch level, all existing hardware and software applications, computerized or date encoded production equipment and other non technological systems including, but not limited to, heating and air conditioning systems, telephone, voice mail and security systems. The Company has also surveyed critical suppliers and critical customers. None of the Company's products are date encoded and, therefore, are not at risk to customers. The assessment stage has been completed within the Company and a determination of non-compliant systems has been made. At this point, all hardware and software has been categorized as critical or non-critical. All critical hardware and operating systems are compliant with the exception of the Company's newest location which should be compliant by December 1, 1999. All non-critical software will be phased out or replaced by November 1, 1999. All technological systems are compliant. The costs incurred by the Company for the upgrades of hardware and software are estimated at $500,000 of which $200,000 were incurred in fiscal 1999. Other internal time incurred for the labor and management of the project are not tracked separately, but are not estimated to be material to the profits for the year. A part of these estimated costs would have been incurred regardless of the Year 2000 issue as a part normal technological enhancements. The Company's risks associated with the Year 2000 issue and any potential impact on future earnings may be affected by our customers' and suppliers' readiness to meet year 2000 requirements. The Company has surveyed its critical customers and suppliers and while the responses are continually updated, it does not appear that there are any significant Year 2000 issues with these parties. Based on the assessments completed thus far, the Company expects that should any of our suppliers and vendors fail to meet Year 2000 requirements, the financial impact and any resulting liabilities would be minimal. The Company is still developing its contingency plans should it fail to meet its requirements. Forward-Looking Information - --------------------------- This report contains forward-looking statements and information that is based on management's beliefs, as well as assumptions made by, and information currently available to management. When used in this document, the words "anticipate," "believe," "estimate," "intends," "will," and "expect" and similar expressions are intended to identify forward-looking statements. Such statements involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following: business conditions, rapid or unexpected technological changes, product development, inventory risks due to shifts in product demand, competition, domestic and foreign government relations, fluctuations in foreign exchange rates, rising costs for components or unavailability of components, the timing of orders booked, lender relationships, and the risk factors listed from time to time in the Company's reports filed with the Commission. 14 PART II Item 1. Legal Proceedings No new legal proceedings or material changes in existing litigation occurred during the quarter ending August 31, 1999. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other information None Item 6. Exhibits and Reports on Form 8-K The Company did not file any reports on Form 8-K during the six months ended August 31, 1999. 15 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. VIDEO DISPLAY CORPORATION October 18, 1999 By: /s/ Ronald D. Ordway ---------------------------------- Ronald D. Ordway Chief Executive Officer By: /s/ Carol D. Franklin ---------------------------------- Carol D. Franklin Chief Financial Officer and Secretary EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS FEB-28-2000 MAR-01-1999 AUG-31-1999 3,016,000 0 10,535,000 361,000 26,886,000 41,747,000 21,586,000 14,937,000 51,641,000 14,789,000 13,946,000 0 0 3,692,000 19,215,000 51,641,000 33,232,000 33,232,000 22,792,000 31,681,000 110,000 0 757,000 684,000 239,000 445,000 0 0 0 445,000 0.11 0.11
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