þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
GEORGIA | 58-1217564 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ |
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EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
2
August 31, | February 28, | |||||||
2011 | 2011 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash |
$ | 183 | $ | 1,399 | ||||
Restricted cash |
| 1,388 | ||||||
Accounts receivable, less allowance for
doubtful accounts of $263 and $134 |
8,384 | 8,496 | ||||||
Inventories, net |
30,138 | 30,593 | ||||||
Cost and estimated earnings in excess of
billings on uncompleted contracts |
2,573 | 2,192 | ||||||
Deferred income taxes |
2,573 | 2,659 | ||||||
Income taxes refundable |
433 | 770 | ||||||
Prepaid expenses and other |
848 | 825 | ||||||
Assets of discontinued operations |
| 5,710 | ||||||
Total current assets |
45,132 | 54,032 | ||||||
Property, plant, and equipment |
||||||||
Land |
336 | 336 | ||||||
Buildings |
6,394 | 6,340 | ||||||
Machinery and equipment |
17,808 | 17,583 | ||||||
24,538 | 24,259 | |||||||
Accumulated depreciation and amortization |
(20,146 | ) | (19,737 | ) | ||||
Net property, plant, and equipment |
4,392 | 4,522 | ||||||
Goodwill |
1,376 | 1,376 | ||||||
Intangible assets, net |
1,347 | 1,504 | ||||||
Deferred income taxes |
809 | 823 | ||||||
Other assets |
6 | 5 | ||||||
Assets of discontinued operations |
| 1,208 | ||||||
Total assets |
$ | 53,062 | $ | 63,470 | ||||
3
August 31, | February 28, | |||||||
2011 | 2011 | |||||||
(unaudited) | ||||||||
Liabilities and Shareholders Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 3,915 | $ | 4,387 | ||||
Accrued liabilities |
2,509 | 3,690 | ||||||
Billings in excess of cost and estimated earnings
on
uncompleted contracts |
487 | 1,026 | ||||||
Current maturities of notes payable to officers and
directors |
396 | 396 | ||||||
Current maturities of long-term debt |
944 | 943 | ||||||
Liabilities of discontinued operations |
| 3,208 | ||||||
Total current liabilities |
8,251 | 13,650 | ||||||
Lines of credit |
10,686 | 13,336 | ||||||
Long-term debt, less current maturities |
5,350 | 5,822 | ||||||
Notes payable to officers and directors,
less current maturities |
698 | 1,374 | ||||||
Other long term liabilities |
123 | 296 | ||||||
Liabilities of discontinued operations |
| 188 | ||||||
Total liabilities |
25,108 | 34,666 | ||||||
Shareholders Equity |
||||||||
Preferred
stock, no par value 10,000 shares authorized; none issued and outstanding |
| | ||||||
Common stock, no par value 50,000 shares
authorized; 9,732 issued and 7,649 outstanding at August 31,
2011 and 9,732 issued and 8,409 outstanding at
February 28, 2011 |
7,293 | 7,293 | ||||||
Additional paid-in capital |
162 | 175 | ||||||
Retained earnings |
30,727 | 28,488 | ||||||
Treasury stock, shares at cost;
2,083 at August 31, 2011 and 1,323 at February 28,
2011 |
(10,228 | ) | (7,152 | ) | ||||
Total shareholders equity |
27,954 | 28,804 | ||||||
Total liabilities and shareholders equity |
$ | 53,062 | $ | 63,470 | ||||
4
Three Months Ended | Six Months Ended | |||||||||||||||
August 31, | August 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
$ | 16,541 | $ | 17,126 | $ | 33,566 | $ | 31,407 | ||||||||
Cost of goods sold |
11,327 | 12,427 | 23,022 | 22,690 | ||||||||||||
Gross profit |
5,214 | 4,699 | 10,544 | 8,717 | ||||||||||||
Operating expenses |
||||||||||||||||
Selling and delivery |
1,358 | 1,148 | 2,581 | 2,103 | ||||||||||||
General and administrative |
2,273 | 1,642 | 4,330 | 3,352 | ||||||||||||
3,631 | 2,790 | 6,911 | 5,455 | |||||||||||||
Operating profit |
1,583 | 1,909 | 3,633 | 3,262 | ||||||||||||
Other income (expense) |
||||||||||||||||
Interest expense |
(205 | ) | (242 | ) | (439 | ) | (497 | ) | ||||||||
Other, net |
80 | 116 | 70 | 171 | ||||||||||||
(125 | ) | (126 | ) | (369 | ) | (326 | ) | |||||||||
Income from continuing operations before
income taxes |
1,458 | 1,783 | 3,264 | 2,936 | ||||||||||||
Income tax expense |
457 | 542 | 1,025 | 975 | ||||||||||||
Net income from continuing operations |
$ | 1,001 | $ | 1,241 | $ | 2,239 | $ | 1,961 | ||||||||
Income (loss) from discontinued
operations, net of income tax expense (benefit)
of $52 and ($21) |
| 103 | | (40 | ) | |||||||||||
Net income |
$ | 1,001 | $ | 1,344 | $ | 2,239 | $ | 1,921 | ||||||||
Net income per share: |
||||||||||||||||
From continuing operations-basic |
$ | .13 | $ | .15 | $ | .29 | $ | .24 | ||||||||
From continuing operations-diluted |
$ | .13 | $ | .14 | $ | .28 | $ | .22 | ||||||||
From discontinued operations-basic |
$ | .00 | $ | .01 | $ | .00 | $ | (.01 | ) | |||||||
From discontinued operations-diluted |
$ | .00 | $ | .01 | $ | .00 | $ | .00 | ||||||||
Basic weighted average shares outstanding |
7,620 | 8,365 | 7,614 | 8,365 | ||||||||||||
Diluted weighted average shares outstanding |
7,936 | 8,680 | 7,940 | 8,690 | ||||||||||||
5
Additional | ||||||||||||||||||||
Common | Share | Paid-in | Retained | Treasury | ||||||||||||||||
Shares | Amount | Capital | Earnings | Stock | ||||||||||||||||
Balance, February 28, 2011 |
8,409 | $ | 7,293 | $ | 175 | $ | 28,488 | $ | (7,152 | ) | ||||||||||
Net income |
| | | 2,239 | | |||||||||||||||
Receipt of treasury stock |
(800 | ) | (3,272 | ) | ||||||||||||||||
Stock awards |
40 | (30 | ) | 196 | ||||||||||||||||
Share based compensation |
| | 17 | | | |||||||||||||||
Balance, August 31, 2011 |
7,649 | $ | 7,293 | $ | 162 | $ | 30,727 | $ | (10,228 | ) | ||||||||||
6
Six Months Ended | ||||||||
August 31, | ||||||||
2011 | 2010 | |||||||
Operating Activities |
||||||||
Net income |
$ | 2,239 | $ | 1,921 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Loss from discontinued operations, net of tax |
| 40 | ||||||
Depreciation and amortization |
566 | 635 | ||||||
Provision for doubtful accounts |
129 | 107 | ||||||
Provision for inventory reserve |
787 | 743 | ||||||
Non-cash charge for share based compensation |
183 | 19 | ||||||
Deferred income taxes |
100 | (379 | ) | |||||
Other |
11 | 19 | ||||||
Changes in working capital: |
||||||||
Accounts receivable |
(18 | ) | (714 | ) | ||||
Inventories |
(331 | ) | 1,080 | |||||
Prepaid expenses and other current assets |
(34 | ) | (124 | ) | ||||
Accounts payable and accrued liabilities |
(1,827 | ) | (3,089 | ) | ||||
Cost, estimated earnings and billings, net, on
uncompleted contracts |
(919 | ) | 234 | |||||
Income taxes refundable/payable |
336 | 1,080 | ||||||
Net cash provided by operating activities |
1,222 | 1,572 | ||||||
Investing Activities |
||||||||
Capital expenditures |
(279 | ) | (295 | ) | ||||
Proceeds from sale of Fox International, Ltd. |
51 | | ||||||
Proceeds on sale of equipment |
| 101 | ||||||
Use of letter of credit/CD |
1,388 | | ||||||
Net cash provided by (used in) investing activities |
1,160 | (194 | ) | |||||
Financing Activities |
||||||||
Proceeds from long-term debt, lines of credit |
3,328 | 8,347 | ||||||
Payments on long-term debt, lines of credit |
(6,450 | ) | (8,879 | ) | ||||
Proceeds from notes payable to officers and directors |
10 | 350 | ||||||
Repayments of notes payable to officers and directors |
(486 | ) | (750 | ) | ||||
Net cash (used in) financing activities |
(3,598 | ) | (932 | ) | ||||
Discontinued Operations |
||||||||
Operating activities |
| 655 | ||||||
Investing activities |
| (88 | ) | |||||
Financing activities |
| (202 | ) | |||||
Net cash provided by discontinued operations |
| 365 | ||||||
Net change in cash |
(1,216 | ) | 811 | |||||
Cash, beginning of year |
1,399 | 465 | ||||||
Cash, end of period |
183 | 1,276 | ||||||
Cash, discontinued operations |
| 389 | ||||||
Cash, continuing operations |
$ | 183 | $ | 887 | ||||
7
8
August 31, | February 28, | |||||||
2011 | 2011 | |||||||
Raw materials |
$ | 20,309 | $ | 20,750 | ||||
Work-in-process |
7,250 | 6,997 | ||||||
Finished goods |
7,184 | 7,760 | ||||||
34,743 | 35,507 | |||||||
Reserves for obsolescence |
(4,605 | ) | (4,914 | |||||
$ | 30,138 | $ | 30,593 | |||||
9
August 31, | February 28, | |||||||
2011 | 2011 | |||||||
Costs incurred to date on uncompleted contracts |
$ | 6,915 | $ | 5,598 | ||||
Estimated earnings recognized to date on these contracts |
3,734 | 2,941 | ||||||
10,649 | 8,539 | |||||||
Billings to date |
(8,563 | ) | (7,373 | ) | ||||
Costs and estimated earnings in excess
of billings, net |
$ | 2,086 | $ | 1,166 | ||||
Costs and estimated earnings in excess of billings |
$ | 2,573 | $ | 2,192 | ||||
Billings in excess of costs and estimated earnings |
(487 | ) | (1,026 | ) | ||||
$ | 2,086 | $ | 1,166 | |||||
10
August 31, 2011 | February 28, 2011 | |||||||||||||||
Accumulated | Accumulated | |||||||||||||||
Cost | Amortization | Cost | Amortization | |||||||||||||
Customer lists |
$ | 3,611 | $ | 2,642 | $ | 3,611 | $ | 2,583 | ||||||||
Non-compete agreements |
1,245 | 1,245 | 1,245 | 1,245 | ||||||||||||
Patents |
777 | 675 | 777 | 627 | ||||||||||||
Other intangibles |
649 | 373 | 649 | 323 | ||||||||||||
$ | 6,282 | $ | 4,935 | $ | 6,282 | $ | 4,778 | |||||||||
August 31, | February 28, | |||||||
2011 | 2011 | |||||||
Note payable to RBC Bank and Community &
Southern Bank; interest rate at LIBOR plus
applicable margin as defined per the loan
agreement, minimum 4.00% (2.51% combined rate
as of August 31, 2011); monthly principal
payments of $58 plus accrued interest,
payable through December 2015; collateralized
by all assets of the Company. Amended as of
May 26, 2011.
|
$ | 3,033 | $ | 3,383 | ||||
Note payable to RBC Bank and Community &
Southern Bank; interest rate at LIBOR plus
applicable margin as defined per the loan
agreement, minimum 4.00% (2.51% combined rate
as of August 31, 2011); monthly principal
payments of $17 plus accrued interest,
payable through December 2025; collateralized
by three properties of the Company and one
property owned by the Chief Executive
Officer. Amended as of May 26, 2011. |
2,867 | 2,967 | ||||||
Mortgage payable to bank; interest rate at
Community Banks Base Rate plus 0.5% (3.75% as
of August 31, 2011); monthly principal and
interest payments of $5 payable through
October 2021; collateralized by land and
building of Aydin Display Systems, Inc.
|
394 | 415 | ||||||
6,294 | 6,765 | |||||||
Less current maturities |
(944 | ) | (943 | ) | ||||
$ | 5,350 | $ | 5,822 | |||||
11
12
Six Months | ||||||||
Ended August 31, | ||||||||
2011 | 2010 | |||||||
Cash paid for: |
||||||||
Interest |
$ | 448 | $ | 496 | ||||
Income taxes, net of refunds |
$ | 589 | $ | 230 | ||||
Non-cash activity: |
||||||||
Receipt of
treasury stock in conjunction with the sale of Fox International, Ltd. |
$ | 3,272 | $ | | ||||
Reduction of
notes payable to officers and directors in conjunction with the sale of Fox International, Ltd. |
$ | 199 | $ | | ||||
13
Weighted | ||||||||||||
Average | Earnings | |||||||||||
Net | Common Shares | Per | ||||||||||
Income | Outstanding | Share | ||||||||||
Three months ended August 31, 2011 |
||||||||||||
Basic-continuing operations |
$ | 1,001 | 7,620 | $ | 0.13 | |||||||
Effect of dilution: |
||||||||||||
Options |
| 316 | (0.00 | ) | ||||||||
Diluted |
$ | 1,001 | 7,936 | $ | 0.13 | |||||||
Three months ended August 31, 2010 |
||||||||||||
Basic-continuing operations |
$ | 1,241 | 8,365 | $ | 0.15 | |||||||
Basic-discontinued operations |
103 | 8,365 | 0.01 | |||||||||
Effect of dilution: |
||||||||||||
Options |
| 315 | (0.01 | ) | ||||||||
Diluted |
$ | 1,344 | 8,680 | $ | 0.15 | |||||||
Six months ended August 31, 2011 |
||||||||||||
Basic-continuing operations |
$ | 2,239 | 7,614 | $ | 0.29 | |||||||
Effect of dilution: |
||||||||||||
Options |
| 326 | (0.01 | ) | ||||||||
Diluted |
$ | 2,239 | 7,940 | $ | 0.28 | |||||||
Six months ended August 31, 2010 |
||||||||||||
Basic-continuing operations |
$ | 1,961 | 8,365 | $ | 0.24 | |||||||
Basic-discontinued operations |
(40 | ) | 8,365 | (0.01 | ) | |||||||
Effect of dilution: |
||||||||||||
Options |
| 325 | (0.01 | ) | ||||||||
Diluted |
$ | 1,921 | 8,690 | $ | 0.22 | |||||||
14
15
16
Three Months Ended | Six Months Ended | |||||||
August 31, 2010 | August 31, 2010 | |||||||
Net sales |
$ | 4,988 | $ | 11,044 | ||||
Cost of goods sold |
2,277 | 5,914 | ||||||
Gross profit |
2,711 | 5,130 | ||||||
Operating expenses |
||||||||
Selling and delivery |
806 | 1,719 | ||||||
General and administrative |
1,713 | 3,398 | ||||||
2,519 | 5,117 | |||||||
Operating loss from discontinued operations |
192 | 13 | ||||||
Other income (expense) |
||||||||
Interest expense |
(45 | ) | (92 | ) | ||||
Other, net |
8 | 18 | ||||||
(37 | ) | (74 | ) | |||||
Income(Loss) from discontinued operations before income taxes |
155 | (61 | ) | |||||
Income tax expense/benefit |
(52 | ) | 21 | |||||
Income(Loss) from discontinued operations |
$ | 103 | (40 | ) | ||||
17
| Monitors offers a complete range of CRT, flat panel and projection display systems for use in training and simulation, military, medical, and industrial applications. | ||
| Data Display CRT offers a wide range of CRTs for use in data display screens, including computer terminal monitors and medical monitoring equipment. | ||
| Entertainment CRT offers a wide range of CRTs and projection tubes for television and home theater equipment. | ||
| Component Parts provides replacement electron guns and other components for CRTs primarily for servicing the Companys internal needs. |
18
Three Months | Six Months | |||||||||||||||
Ended August 31, | Ended August 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Sales |
||||||||||||||||
Monitors |
92.0 | % | 86.1 | % | 91.2 | % | 87.8 | % | ||||||||
Data display CRTs |
7.4 | 13.2 | 8.3 | 11.4 | ||||||||||||
Entertainment CRTs |
0.2 | 0.5 | 0.2 | 0.6 | ||||||||||||
Components parts |
0.4 | 0.2 | 0.3 | 0.2 | ||||||||||||
Total Company |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Costs and expenses |
||||||||||||||||
Cost of goods sold |
68.5 | % | 72.6 | % | 68.6 | % | 72.2 | % | ||||||||
Selling and delivery |
8.2 | 6.7 | 7.7 | 6.7 | ||||||||||||
General and administrative |
13.7 | 9.6 | 12.9 | 10.7 | ||||||||||||
90.4 | % | 88.9 | % | 89.2 | % | 89.6 | % | |||||||||
Income from operations |
9.6 | % | 11.1 | % | 10.8 | % | 10.4 | % | ||||||||
Interest expense |
(1.2) | % | (1.4) | % | (1.3) | % | (1.6) | % | ||||||||
Other income, net |
0.4 | 0.7 | 0.2 | 0.6 | ||||||||||||
Income before income taxes |
8.8 | % | 10.4 | % | 9.7 | % | 9.4 | % | ||||||||
Income tax expense |
2.8 | 3.2 | 3.0 | 3.1 | ||||||||||||
Gain/Loss from discontinued
operations, net of tax |
| 0.6 | | (0.1 | ) | |||||||||||
Net income |
6.0 | % | 7.8 | % | 6.7 | % | 6.2 | % | ||||||||
19
20
21
22
23
24
25
26
Information regarding risk factors appears under the caption Forward-Looking Statements and Risk Factors in Part I, Item 2 of this Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 28, 2011. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K. |
None. |
None. |
27
Exhibit | ||
Number | Exhibit Description | |
3(a)
|
Articles of Incorporation of the Company (incorporated by reference to Exhibit 3A to the Companys Registration Statement on Form S-18 filed January 15, 1985). | |
3(b)
|
By-Laws of the Company (incorporated by reference to Exhibit 3B to the Companys Registration Statement on Form S-18 filed January 15, 1985). | |
10(b)
|
Lease dated June 1, 2008 by and between Registrant (Lessee) and Ronald D. Ordway (Lessor) with respect to premises located at 4601 Lewis Road, Stone Mountain, Georgia. (incorporated by reference to Exhibit 10(b) to the Companys 2009 Annual Report on Form 10-K) | |
10(c)
|
Lease dated November 1, 2008 by and between Registrant (Lessee) and Ronald D. Ordway (Lessor) with respect to premises located at 1868 Tucker Industrial Road, Tucker, Georgia. (incorporated by reference to Exhibit 10(c) to the Companys 2009 Annual Report on Form 10-K) | |
10(d)
|
Purchase Agreement dated March 1, 2011 by and between the Company and FI Acquisition with respect to the sale of the Companys Fox International subsidiary. (incorporated by reference to Exhibit 10(d) to the Companys 2011 Annual Report on Form 10-K) | |
10(e)
|
Amendment to Loan and Security Agreement dated May 26, 2011 (incorporated by reference to Exhibit 10(e) to the Companys 2011 Annual Report on Form 10-K) | |
10(h)
|
Loan and Security Agreement and related documents, dated December 23, 2010, among Video Display Corporation and Subsidiaries and RBC Bank and Community and Southern Bank as lenders and RBC Bank as administrative agent (incorporated by reference to Exhibit 10(h) to the Companys Report on Form 8-K dated December 30, 2010). | |
10(i)
|
$6,000,000 Subordinated Note, dated June 29, 2006, between Video Display Corporation and Ronald D. Ordway (holder) (incorporated by reference to Exhibit 10(i) to the Companys Current Report on Form 8-K dated June 29, 2006). | |
10(j)
|
Video Display Corporation 2006 Stock Incentive Plan. (incorporated by reference to Appendix A to the Companys 2006 Proxy Statement on Schedule 14A) | |
31.1
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
EX-101
|
INSTANCE DOCUMENT | |
EX-101
|
SCHEMA DOCUMENT | |
EX-101
|
CALCULATION LINKBASE DOCUMENT | |
EX-101
|
LABELS LINKBASE DOCUMENT | |
EX-101
|
PRESENTATION LINKBASE DOCUMENT | |
EX-101
|
DEFINITION LINKBASE DOCUMENT |
28
VIDEO DISPLAY CORPORATION |
||||
October 14, 2011 | By: | /s/ Ronald D. Ordway | ||
Ronald D. Ordway | ||||
Chief Executive Officer | ||||
October 14, 2011 | By: | /s/ Gregory L. Osborn | ||
Gregory L. Osborn | ||||
Chief Financial Officer |
29
1. | I have reviewed this quarterly report on Form 10-Q of Video Display Corporation; | ||
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; | ||
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f and 15d-15f) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting. |
Date: October 14, 2011 | /s/ Ronald D. Ordway | |||
Ronald D. Ordway | ||||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Video Display Corporation; | ||
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; | ||
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f and 15d-15f) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting. |
Date: October 14, 2011 | /s/ Gregory L. Osborn | |||
Gregory L. Osborn | ||||
Chief Financial Officer |
This 14th day of October, 2011 | /s/ Ronald D. Ordway | |||
Ronald D. Ordway | ||||
Chief Executive Officer | ||||
This 14th day of October, 2011 | /s/ Gregory L. Osborn | |||
Gregory L. Osborn | ||||
Chief Financial Officer | ||||
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands | Aug. 31, 2011 | Feb. 28, 2011 |
---|---|---|
Current assets | ||
Allowance for doubtful accounts receivable | $ 263 | $ 134 |
Shareholders' Equity | ||
Preferred stock, par value | ||
Preferred stock, shares authorized | 10,000 | 10,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | ||
Common stock, shares authorized | 50,000 | 50,000 |
Common stock, shares issued | 9,732 | 9,732 |
Common stock, shares outstanding | 7,649 | 8,409 |
Treasury stock, shares | 2,083 | 1,323 |
Subsequent Events | 6 Months Ended |
---|---|
Aug. 31, 2011 | |
Subsequent Events [Abstract] | |
Subsequent Events |
Note 16. — Subsequent Events
Subsequent to
August 31, 2011, the Company received approval from RBC Bank and
Community and Southern Bank, to reinstate the Company’s stock purchase program, which previously
was restricted under the Credit Agreement executed by the Company on December 23, 2010. Under the
Company’s stock repurchase program, an additional 781,955 shares remain authorized to be repurchased
by the Company at October 14, 2011.
|
Document and Entity Information (USD $) | 6 Months Ended | |
---|---|---|
Aug. 31, 2011 | Aug. 31, 2010 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | VIDEO DISPLAY CORP | |
Entity Central Index Key | 0000758743 | |
Document Type | 10-Q | |
Document Period End Date | Aug. 31, 2011 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2012 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --02-28 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 9,910,248 | |
Entity Common Stock, Shares Outstanding | 7,648,702 |
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Costs and Estimated Earnings Related to Billings on Uncompleted Contracts | 6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Costs and Estimated Earnings Related to Billings on Uncompleted Contracts [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Costs and Estimated Earnings Related to Billings on Uncompleted Contracts |
Note 5. — Costs and Estimated Earnings Related to Billings on Uncompleted Contracts
Information relative to contracts in progress consisted of the following:
Costs and estimated earnings in excess of billings are the results of contracts in progress
(jobs) in completing orders to customers’ specifications on contracts accounted for under FASB ASC
605-35, “Revenue Recognition: Construction-Type and Production-Type Contracts.” Costs included are
material, labor, and overhead. These jobs require design and engineering effort for a specific
customer purchasing a unique product. The Company records revenue on these fixed-price and
cost-plus contracts on the percentage of completion basis using the ratio of costs incurred to
estimated total costs at completion as the measurement basis for progress toward completion and
revenue recognition. Any losses identified on contracts are recognized immediately. Contract
accounting requires significant judgment relative to assessing risks, estimating contract costs and
making related assumptions for schedule and technical issues. With respect to contract change
orders, claims, or similar items, judgment must be used in estimating related amounts and assessing
the potential for realization. These amounts are only included in contract value when they can be
reliably estimated and realization is probable. Billings are generated based on specific contract
terms, which might be a progress payment schedule, specific shipments, etc. None of the above
contracts in progress contain post-shipment obligations.
Changes in job performance, manufacturing efficiency, final contract settlements, and other
factors affecting estimated profitability may result in revisions to costs and income and are
recognized in the period in which the revisions are determined.
As of August 31, 2011 and February 28, 2011, there were no production costs that exceeded the
aggregate estimated cost of all in-process and delivered units relating to long-term contracts.
Additionally, there were no claims outstanding that would affect the ultimate realization of full
contract values. As of August 31, 2011 and February 28, 2011, there were no progress payments that
had been netted against inventory.
|
Supplemental Cash Flow Information | 6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information |
Note 10. — Supplemental Cash Flow Information
Supplemental cash flow information is as follows (in thousands):
|
Summary of Significant Accounting Policies | 6 Months Ended |
---|---|
Aug. 31, 2011 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies |
Note 1. — Summary of Significant Accounting Policies
The accompanying condensed consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries after elimination of all significant intercompany
accounts and transactions.
As contemplated by the Securities and Exchange Commission (the “SEC” or “Commission”)
instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not
contain all disclosures required in connection with annual consolidated financial statements.
Reference should be made to the Company’s year-end consolidated financial statements and notes
thereto, including a description of the accounting policies followed by the Company, contained in
its Annual Report on Form 10-K for the fiscal year ended February 28, 2011, as filed with the
Commission. There are no material changes in accounting policy during the six months ended August
31, 2011.
The financial information included in this report has been prepared by the Company, without
audit. In the opinion of management, the financial information included in this report contains all
adjustments (all of which are normal and recurring) necessary for a fair presentation of the
results for the interim periods. Nevertheless, the results shown for interim periods are not
necessarily indicative of results to be expected for the full year. The February 28, 2011
consolidated balance sheet data was derived from the audited consolidated financial statements, but
does not include all disclosures required by accounting principles generally accepted in the United
States of America.
|
Long-term Debt | 6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt/Lines of Credit [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt |
Note 7. — Long-term Debt
Long-term debt consisted of the following (in thousands):
|
Income Taxes | 6 Months Ended |
---|---|
Aug. 31, 2011 | |
Income Taxes [Abstract] | |
Income Taxes |
Note 12. — Income Taxes
The effective tax rate for the six months ended August 31, 2011 and 2010 was 31.4% and 33.2%,
respectively. These rates differ from the Federal statutory rate primarily due to the effect of
state taxes, the permanent non-deductibility of certain expenses for tax purposes, and research and
experimentation credits.
|
Lines of Credit | 6 Months Ended |
---|---|
Aug. 31, 2011 | |
Long-term Debt/Lines of Credit [Abstract] | |
Lines of Credit |
Note 8. — Lines of Credit
On December 23, 2010, the Company and its subsidiaries executed a new Credit Agreement with
RBC Bank and Community & Southern Bank (collectively, the “Banks”) to provide new financing to the
Company to replace the existing credit agreement with RBC Bank that terminated in conjunction with
this Agreement. The new Agreement provided for a line of credit of up to $17.5 million and two term
loans of $3.5 million and $3.0 million. The outstanding balance of the line of credit at August 31,
2011 was $10.7 million and the balances of the term loans were $3.0 million and $2.9 million,
respectively. A copy of the new Credit Agreement was filed on an 8-K document with the Securities
and Exchange Commission on December 30, 2010. These loans are secured by all assets and personal
property of the Company and a limited guarantee of the Chief Executive Officer of $3.0 million. The
$3.0 million term loan is secured by real estate property of the Company and a building owned by
the Company’s Chief Executive Officer through Southeastern Metro Savings, LLC. The building will
continue to be in the collateral pool until such time as the note is sufficiently paid down or it
is replaced by other collateral.
The agreement contains three covenants: a fixed charge coverage ratio, ratio of senior funded
debt to earnings before interest, taxes, depreciation, and amortization (EBITDA), and total
liabilities to tangible net worth. The agreement also includes restrictions on the incurrence of
additional debt or liens, investments (including Company stock), divestitures and certain other
changes in the business. The Agreement expires on December 1, 2013. The interest rate on these
loans is a floating LIBOR rate based on a fixed charge coverage ratio, minimum 4.0%, as defined in
the loan documents.
As of February 28, 2011, the Company was not in compliance with the consolidated fixed charge
coverage ratio or the senior funded debt to EBITDA ratio as defined by the RBC and Community &
Southern Bank credit line agreements. The Company subsequently received a waiver of these covenant
violations from RBC Bank and Community & Southern Bank through the July 15, 2011 reporting of the
next measurement of these covenants as of the Company’s first
quarter end. Additionally, RBC Bank
and Community & Southern Bank have amended the Credit Agreement,
at various times, to reduce the revolver commitment
to $15.0 million, to restate the covenants to pertain to only
continuing operations of the Company,
to adjust the targets for the senior funded debt to EBITDA covenant for the Company’s quarters
ending May 31, 2011 and August 31, 2011, and to establish a
swingline on the Company’s facility. The senior funded debt to EBITDA covenant was deemed to be
the most restrictive by the Company and the Banks. The Company was in compliance under the new loan
agreements for the quarters ending May 31, 2011 and August 31, 2011.
|
Intangible Assets | 6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets |
Note 6. — Intangible Assets
Intangible assets consist primarily of the unamortized value of purchased patents, customer
lists, non-compete agreements and other intangible assets. Intangible assets are amortized over
the period of their expected lives, generally ranging from 5 to 15 years. Amortization expense
related to intangible assets was approximately $157 thousand and $177 thousand for the six months
ended August 31, 2011 and 2010, respectively.
The cost and accumulated amortization of intangible assets were as follows (in thousands):
|
Condensed Consolidated Statement of Shareholders' Equity (Unaudited) (USD $) In Thousands | Total | Common Shares | Additional Paid-in Capital | Retained Earnings | Treasury Stock |
---|---|---|---|---|---|
Balance at Feb. 28, 2011 | $ 28,804 | $ 7,293 | $ 175 | $ 28,488 | $ (7,152) |
Balance, shares at Feb. 28, 2011 | 8,409 | ||||
Net income | 2,239 | 2,239 | |||
Receipt of treasury stock | (3,272) | ||||
Receipt of treasury stock, shares | (800) | ||||
Stock awards | (30) | 196 | |||
Stock awards, shares | 40 | ||||
Share based compensation | 17 | ||||
Balance at Aug. 31, 2011 | $ 27,954 | $ 7,293 | $ 162 | $ 30,727 | $ (10,228) |
Balance, shares at Aug. 31, 2011 | 7,649 |
Liquidity | 6 Months Ended |
---|---|
Aug. 31, 2011 | |
Liquidity [Abstract] | |
Liquidity |
Note 2. — Liquidity
On December 23, 2010, the Company and its subsidiaries executed a new Credit Agreement with
RBC Bank and Community & Southern Bank (collectively, the “Banks”) to provide new financing to the
Company to replace the existing credit agreement with RBC Bank that terminated in conjunction with
this Agreement. The new Agreement provided for a line of credit of up to $17.5 million and two term
loans of $3.5 million and $3.0 million. The outstanding balance of the line of credit at August 31,
2011 was $10.7 million and the balances of the term loans were $3.0 million and $2.9 million,
respectively. A copy of the new Credit Agreement was filed on an 8-K document with the Securities
and Exchange Commission on December 30, 2010. These loans are secured by all assets and personal
property of the Company and a limited guarantee of the Chief Executive Officer of $3.0 million. The
$3.0 million term loan is secured by real estate property of the Company and a building owned by
the Company’s Chief Executive Officer through Southeastern Metro Savings, LLC. The building will
continue to be in the collateral pool until such time as the note is sufficiently paid down or it
is replaced by other collateral.
The agreement contains three covenants: a fixed charge coverage ratio, ratio of senior funded
debt to earnings before interest, taxes, depreciation and amortization (EBITDA), and total
liabilities to tangible net worth. The agreement also includes restrictions on the incurrence of
additional debt or liens, investments (including Company stock), divestitures and certain other
changes in the business. The Agreement expires on December 1, 2013. The interest rate on these
loans is a floating LIBOR rate based on a fixed charge coverage ratio, minimum 4.0%, as defined in
the loan documents.
As of February 28, 2011, the Company was not in compliance with the consolidated fixed charge
coverage ratio or the senior funded debt to EBITDA ratio as defined by the RBC and Community &
Southern Bank credit line agreements. The Company subsequently received a waiver of these covenant
violations from RBC Bank and Community & Southern Bank through the July 15, 2011 reporting of the
next measurement of these covenants as of the Company’s first quarter end. Additionally, RBC Bank
and Community & Southern Bank have amended the Credit Agreement,
at various times, to reduce the revolver commitment
to $15.0 million, to restate the covenants to pertain to only
continuing operations of the Company,
to adjust the targets for the senior funded debt to EBITDA covenant for the Company’s quarters
ending May 31, 2011 and August 31, 2011, and to establish a swingline on the
Company’s facility. The senior funded debt to EBITDA covenant was deemed to be
the most restrictive by the Company and the Banks. The Company was in compliance under the new loan
agreements for the quarters ended May 31, 2011 and August 31, 2011.
|
Recent Accounting Pronouncements | 6 Months Ended |
---|---|
Aug. 31, 2011 | |
Recent Accounting Pronouncements [Abstract] | |
Recent Accounting Pronouncements |
Note 3. — Recent Accounting Pronouncements
In December 2010, the FASB issued revised guidance FASB ASU 2010-28, “When to Perform Step 2
of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts”. The
amendments modify Step 1 of the goodwill impairment test for reporting units with zero or negative
carrying amounts. For those reporting units, an entity is required to perform Step 2 of the
goodwill impairment test if it is more likely than not that a goodwill impairment exists. In making
that determination, an entity should consider whether there are any adverse qualitative factors
indicating that impairment may exist. The amendments were effective for the fiscal years and
interim periods beginning January 1, 2011 and did not have a material impact on the Company’s
consolidated financial statements.
In December 2010, the FASB issued guidance FASB ASU 2010-29, “Disclosure of Supplementary Pro
Forma Information for Business Combinations”. This guidance specifies that if a public entity
presents comparative financial statements, the entity should disclose revenue and earnings of the
combined entity as though the business combination(s) that occurred during the current year had
occurred as of the beginning of the comparable prior annual reporting period only. The guidance
also expands the supplemental pro forma disclosures to include a description of the nature and
amount of material, nonrecurring pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenue and earnings. This guidance is effective
prospectively for business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2010. This guidance did not
have a material impact on the Company’s consolidated financial statements and related disclosures.
In June 2011, the FASB issued guidance FASB ASU 2011-05, “Presentation of Comprehensive
Income” that allows an entity to present components of net income and other comprehensive income in
one continuous statement, referred to as the statement of comprehensive income, or in two separate,
but consecutive statements. The new guidance eliminates the current option to report other
comprehensive income and its components in the statement of changes in equity. While the new
guidance changes the presentation of comprehensive income, there are not changes to the components
that are recognized in net income or other comprehensive income under current accounting guidance.
This new guidance is effective for fiscal years and interim periods beginning after December 15,
2011 and is not expected to have a material impact on the Company’s consolidated financial
statements.
|
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Aug. 31, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholder's Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholder's Equity |
Note 11. — Shareholder’s Equity
Earnings Per Share
Basic earnings per share is computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding during each period. Shares issued during
the period are weighted for the portion of the period that they were outstanding. Diluted earnings
per share is calculated in a manner consistent with that of basic earnings per share while giving
effect to all dilutive potential common shares that were outstanding during the period.
The following table sets forth the computation of basic and diluted earnings per share for the
three and six month periods ended August 31, 2011 and 2010 (in thousands, except per share data):
Stock-Based Compensation Plans
For the six-month period ended August 31, 2011 and 2010, the Company recognized general and
administrative expenses of $17.5 thousand and $19.1 thousand, respectively, related to share-based
compensation. The liability for the share-based compensation recognized is presented in the
consolidated balance sheet as part of additional paid in capital. As of August 31, 2011, total
unrecognized compensation costs related to stock options granted was $17.3 thousand. The
unrecognized stock option compensation cost is expected to be recognized over a period of
approximately 1 year.
The Company estimates the fair value of stock options granted using the Black-Scholes
option-pricing model, which requires the Company to estimate the expected term of the stock option
grants and expected future stock price volatility over the term. The term represents the expected
period of time the Company believes the options will remain outstanding based on historical
information. Estimates of expected future stock price volatility are based on the historic
volatility of the Company’s common stock, which represents the standard deviation of the
differences in the weekly stock closing price, adjusted for dividends and stock splits.
No options were granted during the six month periods ended August 31, 2011. Three members of
the board of directors were each granted 3,000 stock options during the six-month period ended
August 31, 2010.
Stock Repurchase Program
The Company has a stock repurchase program, pursuant to which it was originally authorized to
repurchase up to 1,632,500 shares of the Company’s common stock in the open market. On July 8,
2009, the Board of Directors of the Company approved a one time continuation of the stock
repurchase program, and authorized the Company to repurchase up to 1,000,000 additional shares of
the Company’s common stock, depending on the market price of the shares. There is no minimum number
of shares required to be repurchased under the program. Under the Company’s stock repurchase
program, an additional 816,418 shares remain authorized to be repurchased by the Company at August
31, 2011. The Credit Agreement executed by the Company on December 23, 2010 includes restrictions
on investments that restrict further repurchases of stock under this program. For the six months
ended August 31, 2011 and August 31, 2010, no treasury shares were repurchased.
|
Inventories | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
Note 4. — Inventories
Inventories are stated at the lower of cost (first in, first out) or market.
Inventories consisted of the following (in thousands):
|
Legal Proceedings | 6 Months Ended |
---|---|
Aug. 31, 2011 | |
Legal Proceedings [Abstract] | |
Legal Proceedings |
Note 14. — Legal Proceedings
During 2007, the Company acquired the Cathode Ray Tube Manufacturing and Distribution Business
and certain other assets of Clinton Electronics Corp. (“Clinton”), including inventory, fixed
assets, for a total purchase price of $2,550,000, pursuant to an Asset Purchase Agreement between
the parties (the “APA”). The form of consideration for the assets acquired included: (i) a $1.0
million face value Convertible Note; (ii) an agreement to deliver a stock certificate
representing Company Common Shares having a $1,125,000 in market value of the Company’s common
stock in January of 2008; and (iii) an agreement to deliver a stock certificate representing
Company Common Shares having a $500,000 in market value of the Company’s common stock in January of
2009. The Company had paid the $1.0 million Note Payable in January 2008. The Company disputed
certain representations made by Clinton in the APA including, but not limited to,
representations
concerning revenue, expenses, and inventory. As a result of this dispute, the Company did not issue
the stock certificates scheduled for delivery January of 2008 and January of 2009. As such, the
Company had accrued a potential liability of $1,625,000 and this accrued liability was reflected in
the Company’s Balance Sheet until the settlement was reached.
On August 24, 2011, the Company and the Clinton Electronics Corporation signed a settlement
agreement ending the dispute involving the purchase of certain assets by the Company, pursuant to
an Asset Purchase Agreement between the two companies. Prior to the negotiated settlement, the
companies had agreed to arbitrate the dispute.
The terms of the settlement were not disclosed. There was no effect to the income statement
due to the settlement. The previously accrued liability covered the settlement and the write off of
inventory from the original agreement. The settlement did not have a material adverse effect on the
Company’s business, consolidated financial condition, results of operation or cash flows.
|
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Condensed Consolidated Statements of Income Statements (Parenthetical) (USD $) In Thousands | 3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 31, 2011 | Aug. 31, 2010 | Aug. 31, 2011 | Aug. 31, 2010 | |
Other income (expense) | ||||
Tax benefit on discontinued operation | $ 52 | $ (21) | $ 52 | $ (21) |
Discontinued operations | 6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations |
Note 15. — Discontinued operations
On March 1, 2011, the Company sold its Fox International Ltd., Inc. subsidiary to FI
Acquisitions, a company majority owned by the Company’s Chief Executive Officer. The Company put
its Fox International Ltd. subsidiary up for auction on January 15, 2011, and gave all interested
parties a thirty-day due diligence period that was later extended until March 23, 2011, to give any
potential bidders more time. FI Acquisitions was the only bidder and paid the net book value,
approximately $3.5 million, for Fox International Ltd. in a stock sale, satisfied by the Company’s
Chief Executive Officer exchanging 800,000 shares of the Company’s stock valued at approximately
$3.3 million, approximately $50 thousand in cash and a reduction in notes payable to officers and
directors of approximately $200 thousand. As the sale was at net book value, no gain or loss was
recorded by the Company. The Company accounted for this entire business segment as discontinued
operations, and, accordingly, has reclassified the consolidated financial results for all periods
presented to reflect this operating segment as discontinued operations.
The Company sold its Fox International Ltd., Inc. subsidiary on March 1, 2011; therefore,
there is no discontinued financial information for the six months ended August 31, 2011. Summarized
financial information for discontinued operations for the three months and six months ended August
31, 2010, is as follows:
For the three months and six months ended August 31, 2010, there was no interest
allocated from corporate. The subsidiary had its own line of credit and interest expense.
|
Segment Information | 6 Months Ended |
---|---|
Aug. 31, 2011 | |
Segment Information [Abstract] | |
Segment Information |
Note 9. — Segment Information
In accordance with FASB ASC Topic 280, “Segment Reporting”, the Company has determined that it
has one reportable segment. In prior years, the Company had two reportable segments as follows: (1)
the manufacture and distribution of displays and display components (“Display Segment”) and (2) the
wholesale distribution of consumer electronic parts from foreign and domestic manufacturers
(“Wholesale Distribution Segment”). The operations within the Display Segment consist of monitors,
data display CRTs, entertainment (television and projection) CRTs, projectors and other monitors
and component parts. These operations have similar economic criteria, and are appropriately
aggregated consistent with the criteria of FASB ASC Topic 280-10-50, “Segment Reporting:
Disclosure”. On March 1, 2011, the Company sold its Fox International Ltd subsidiary, which
represented the entire wholesale distribution segment. As a result, the Company has determined that
it has one reportable segment.
|
Related Party Transactions | 6 Months Ended |
---|---|
Aug. 31, 2011 | |
Related Party Transactions [Abstract] | |
Related Party Transactions |
Note 13. — Related Party Transactions
In conjunction with an agreement involving re-financing of the Company’s lines of credit and
Loan and Security Agreement, on June 29, 2006 the Company’s CEO provided a $6.0 million
subordinated term note to the Company with monthly principal payments of $33.3 thousand plus
interest through July 2021. The interest rate on this note is equal to the prime rate plus one
percent. The note is secured by a general lien on all assets of the Company, subordinate to the
lien held by RBC Bank and Community & Southern Bank. The balance outstanding under this loan
agreement was approximately $1.1 million at August 31, 2011 and $1.8 million at February 28, 2011.
Interest paid during the quarter ended August 31, 2011 and 2010 on this note was $27.8 thousand and
$56.8 thousand, respectively and interest paid for the six months ending August 31, 2011 and August
31, 2010 was $60.6 thousand and $116.3 thousand, respectively.
The Company’s CEO provides a portion of the collateral for one of the term loans with the
consortium of RBC Bank and Community & Southern Bank. (See Note 8 — Lines of Credit)
On March 1, 2011, the Company sold its Fox International Ltd. subsidiary to FI Acquisitions, a
company owned by Video Display’s Chief Executive Officer. The Company accounted for this entire
business segment as discontinued operations, and accordingly, has reclassified the consolidated
financial results for all periods presented to reflect this operating segment as discontinued
operations.
|