##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended May 31, 2008.
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period From  to
 Commission File Number 0-13394
 VIDEO DISPLAY CORPORATION
  GEORGIA
    
    58-1217564(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 1868 TUCKER INDUSTRIAL ROAD, TUCKER, GEORGIA 30084
  770-938-2080
  þ o
  Large accelerated filer o
Non-accelerated filer o
    
    Accelerated filer o
Smaller reporting company þ
 o þ




---



##### 



Video Display Corporation and Subsidiaries
Index
  
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets 
May 31, 2008 (unaudited) and February 29, 2008
    
    
    3Consolidated Statements of Operations -
Three months ended May 31, 2008 and 2007 (unaudited)
    
    
    5Consolidated Statement of Shareholders Equity -
Three months ended May 31, 2008 (unaudited)
    
    
    6Consolidated Statements of Cash Flows 
Three months ended May 31, 2008 and 2007 (unaudited)
    
    
    7Notes to Consolidated Financial Statements -
May 31, 2008 (unaudited)
    
    
    9Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations.
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    24Item 4.
    
    Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    25Item 1A.
    
    Risk Factors
    
    
    26Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3.
    
    Defaults upon Senior Securities
    
    
    26Item 4.
    
    Submission of Matters to a Vote of Security Holders.
    
    
    26Item 5.
    
    Other Information
    
    
    26Item 6.
    
    Exhibits
    
    
    26SIGNATURES
    
    
    27EX-31.1 SECTION 302, CERTIFICATION OF THE CEOEX-31.2 SECTION 302, CERTIFICATION OF THE CFOEX-32 SECTION 906, CERTIFICATION OF THE CEO AND CFO
  2




---



##### Table of Contents



ITEM 1.
    
    FINANCIAL STATEMENTS
 
 Video Display Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands)
 May 31,
    
    
    February 29,2008
    
    
    2008(unaudited)AssetsCurrent assetsCash
    
    $
    1,803
    
    
    $
    1,636Accounts receivable, less allowance for
doubtful accounts of $252 and $201
    
    
    9,252
    
    
    
    10,373Inventories, net
    
    
    34,250
    
    
    
    34,550Cost and estimated earnings in excess of
billings on uncompleted contracts
    
    
    2,114
    
    
    
    2,225Deferred income taxes
    
    
    3,111
    
    
    
    2,998Income taxes refundable
    
    
    239
    
    
    
    672Prepaid expenses and other
    
    
    444
    
    
    
    367Total current assets
    
    
    51,213
    
    
    
    52,821Property, plant and equipment:Land
    
    
    585
    
    
    
    585Buildings
    
    
    8,258
    
    
    
    8,258Machinery and equipment
    
    
    21,181
    
    
    
    20,94330,024
    
    
    
    29,786Accumulated depreciation and amortization
    
    
    (22,841
    )
    
    
    (22,470
    )Net property, plant, and equipment
    
    
    7,183
    
    
    
    7,316Goodwill
    
    
    1,343
    
    
    
    1,343Intangible assets, net
    
    
    2,731
    
    
    
    2,954Other assets
    
    
    351
    
    
    
    266Total assets
    
    $
    62,821
    
    
    $
    64,700
  3




---



##### Table of Contents



Video Display Corporation and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
 May 31,
    
    
    February 29,2008
    
    
    2008(unaudited)Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    4,720
    
    
    $
    7,334Accrued liabilities
    
    
    5,013
    
    
    
    5,074Current maturities of notes payable to officers and
directors
    
    
    638
    
    
    
    648Current maturities of long-term debt
and financing lease obligations
    
    
    791
    
    
    
    789Total current liabilities
    
    
    11,162
    
    
    
    13,845Lines of credit
    
    
    15,881
    
    
    
    15,164Long-term debt, less current maturities
    
    
    1,772
    
    
    
    1,928Financing lease obligations, less current maturities
    
    
    270
    
    
    
    313Notes payable to officers and directors,
less current maturities
    
    
    2,278
    
    
    
    2,377Other long term liabilities
    
    
    123
    
    
    
    123Total liabilities
    
    
    31,486
    
    
    
    33,750Commitments and ContingenciesShareholders EquityPreferred stock, no par value  10,000 shares
authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, no par value  50,000 shares
authorized;
9,707 issued and 9,462 outstanding at May 31,
2008 and 9,707 issued and 9,491 outstanding at
February 29, 2008
    
    
    7,293
    
    
    
    7,293Additional paid-in capital
    
    
    139
    
    
    
    127Retained earnings
    
    
    26,727
    
    
    
    26,147Accumulated other comprehensive income
    
    
    85
    
    
    
    85Treasury stock, 304 and 275 shares at cost
    
    
    (2,909
    )
    
    
    (2,702
    )Total shareholders equity
    
    
    31,335
    
    
    
    30,950Total liabilities and shareholders equity
    
    $
    62,821
    
    
    $
    64,700
  4




---



##### Table of Contents



Video Display Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
 Three Months EndedMay 31,2008
    
    
    2007Net sales
    
    $
    19,505
    
    
    $
    21,465Cost of goods sold
    
    
    12,313
    
    
    
    13,925Gross profit
    
    
    7,192
    
    
    
    7,540Operating expensesSelling and delivery
    
    
    1,941
    
    
    
    1,922General and administrative
    
    
    4,180
    
    
    
    3,8856,121
    
    
    
    5,807Operating profit
    
    
    1,071
    
    
    
    1,733Other income (expense)Interest expense
    
    
    (286
    )
    
    
    (471
    )Other, net
    
    
    112
    
    
    
    65(174
    )
    
    
    (406
    )Income before income taxes
    
    
    897
    
    
    
    1,327Income tax expense
    
    
    317
    
    
    
    474Net income
    
    $
    580
    
    
    $
    853Basic earnings per share of common stock
    
    $
    .06
    
    
    $
    .09Diluted earnings per share of common
stock
    
    $
    .06
    
    
    $
    .09Basic weighted average shares outstanding
    
    
    9,469
    
    
    
    9,655Diluted weighted average shares outstanding
    
    
    9,577
    
    
    
    9,716
  5




---



##### Table of Contents



Video Display Corporation and Subsidiaries
Consolidated Statement of Shareholders Equity
Three Months Ended May 31, 2008 (unaudited)
(in thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Compre-Common
    
    
    Share
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    hensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Stock
    
    
    IncomeBalance, February 29, 2008
    
    
    9,491
    
    
    $
    7,293
    
    
    $
    127
    
    
    $
    26,147
    
    
    $
    85
    
    
    $
    (2,702
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    580
    
    
    
    
    
    
    
    
    
    
    $
    580Foreign currency
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    translation adjustmentTotal comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    580Repurchase of Treasury Stock
    
    
    (29
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (207
    )Share based compensation
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    Balance, May 31, 2008
    
    
    9,462
    
    
    $
    7,293
    
    
    $
    139
    
    
    $
    26,727
    
    
    $
    85
    
    
    $
    (2,909
    )
  6




---



##### Table of Contents



Video Display Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
 Three Months EndedMay 31,2008
    
    2007Operating ActivitiesNet income
    
    $
    580
    
    
    $
    853Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    594
    
    
    
    583Provision for doubtful accounts
    
    
    50
    
    
    
    27Provision for inventory reserve
    
    
    270
    
    
    
    494Non-cash charge for share based compensation
    
    
    12
    
    
    
    25Deferred income taxes
    
    
    (201
    )
    
    
    (183
    )Interest on convertible note
    
    
    
    
    
    
    25Changes in working capital, net of effects
from acquisitions:Accounts receivable
    
    
    1,071
    
    
    
    (571
    )Inventories
    
    
    30
    
    
    
    (308
    )Prepaid expenses and other current assets
    
    
    (74
    )
    
    
    73Accounts payable and accrued liabilities
Cost, estimated earnings and billings, net, on
uncompleted contracts
Income taxes refundable
    
    
    (2,676
111
433
    )
    
    
    (1,269
(30
426
    )
)Net cash provided by operating activities
    
    
    200
    
    
    
    145Investing ActivitiesCapital expenditures
    
    
    (238
    )
    
    
    (235
    )Net cash used in investing activities
    
    
    (238
    )
    
    
    (235
    )
 7




---



##### Table of Contents



Video Display Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
 Financing ActivitiesProceeds from long-term debt, lines of creditand financing lease obligations
    
    
    4,339
    
    
    
    6,449Payments on long-term debt, lines of creditand financing lease obligations
    
    
    (3,818
    )
    
    
    (4,486
    )Repayments of notes payable to officers and directors
    
    
    (109
    )
    
    
    (2,113
    )Purchases and retirements of common stock and
purchase of treasury stock
    
    
    (207
    )
    
    
    (129
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    8Net cash provided by (used in) financing activities
    
    
    205
    
    
    
    (271
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    37Net increase(decrease) in cash
    
    
    167
    
    
    
    (324
    )Cash, beginning of period
    
    
    1,636
    
    
    
    1,226Cash, end of period
    
    $
    1,803
    
    
    $
    902
  8




---



##### Table of Contents



Video Display Corporation and Subsidiaries
May 31, 2008
        Fair Values Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities.
 Accounting for Uncertainty in
Income Taxes Accounting for
Income Taxes
 9




---



##### Table of Contents



Business Combinations. purchase method
 Noncontrolling Interest in Consolidated Financial
Statements.
     10




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
     May 31,
    
    
    February 29,2008
    
    
    2008Raw materials
    
    $
    19,147
    
    
    $
    19,028Work-in-process
    
    
    6,639
    
    
    
    6,699Finished goods
    
    
    14,191
    
    
    
    14,37439,977
    
    
    
    40,101Reserves for obsolescence
    
    
    (5,727
    )
    
    
    (5,551
    )$
    34,250
    
    
    $
    34,550
   May 31,
    
    
    February 29,2008
    
    
    2008Costs incurred to date on uncompleted contracts
    
    $
    7,612
    
    
    $
    7,325Estimated earnings recognized to date on these contracts
    
    
    1,296
    
    
    
    1,6178,908
    
    
    
    8,942Billings to date
    
    
    (6,794
    )
    
    
    (6,717
    )Costs and estimated earnings in excess
of billings, net
    
    $
    2,114
    
    
    $
    2,225Costs and estimated earnings in excess of billings
    
    $
    2,114
    
    
    $
    2,225Billings in excess of costs and estimated earnings
    
    
    
    
    
    
    $
    2,114
    
    
    $
    2,225
  11




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
       May 31, 2008
    
    
    February 29, 2008Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationCustomer lists
    
    $
    3,611
    
    
    $
    1,772
    
    
    $
    3,611
    
    
    $
    1,635Non-compete agreements
    
    
    1,245
    
    
    
    866
    
    
    
    1,245
    
    
    
    803Patents
    
    
    777
    
    
    
    304
    
    
    
    765
    
    
    
    274Other intangibles
    
    
    149
    
    
    
    109
    
    
    
    149
    
    
    
    104$
    5,782
    
    
    $
    3,051
    
    
    $
    5,770
    
    
    $
    2,816
 12




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
   May 31,
    
    February 29,2008
    
    2008Note payable to bank syndicate (RBC Centura and
Regions Bank); interest rate at LIBOR plus
applicable margin as defined per the loan
agreement, (4.68% combined rate as of May 31,
2008); monthly principal payments of $50 plus
accrued interest, payable through July 2011;
collateralized by all assets of the Company.
    
    $
    1,900
    
    
    $
    2,050Mortgage payable to bank; interest rate at
Federal Home Loan Bank Board Index rate plus
1.95% (7.25% as of May 31, 2008); monthly
principal and interest payments of $5 payable
through October 2021; collateralized by land and
building of Teltron Technologies, Inc
    
    
    495
    
    
    
    500Other
    
    
    6
    
    
    
    62,400
    
    
    
    2,556Financing lease obligations
    
    
    433
    
    
    
    4742,833
    
    
    
    3,030Less current maturities
    
    
    (791
    )
    
    
    (789
    )$
    2,043
    
    
    $
    2,241
   13




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
   Three MonthsEnded May 31,2008
    
    
    2007Net salesDisplay segment
    
    $
    13,816
    
    
    $
    14,659Wholesale distribution segment
    
    
    5,689
    
    
    
    6,806$
    19,505
    
    
    $
    21,465Operating profitDisplay segment
    
    $
    1,045
    
    
    $
    1,596Wholesale distribution segment
    
    
    26
    
    
    
    137Income from operations
    
    
    1,071
    
    
    
    1,733Interest expense
    
    
    (286
    )
    
    
    (471
    )Other income, net
    
    
    112
    
    
    
    65Income before income taxes
    
    $
    897
    
    
    $
    1,327
   Three MonthsEnded May 31,2008
    
    
    2007Cash Paid for:Interest
    
    $
    277
    
    
    $
    492Income taxes, net of refunds
    
    $
    (8
    )
    
    $
    31
  Earnings Per Share
  14




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
  WeightedAverage
    
    
    EarningsNet
    
    
    Common Shares
    
    
    (Loss) PerIncome (Loss)
    
    
    Outstanding
    
    
    ShareThree months ended May 31, 2008Basic
    
    $
    580
    
    
    
    9,446
    
    
    $
    0.06Effect of dilution:Options
    
    
    
    
    
    
    108Diluted
    
    $
    580
    
    
    
    9,554
    
    
    $
    0.06Three months ended May 31, 2007Basic
    
    $
    853
    
    
    
    9,655
    
    
    $
    0.09Effect of dilution:Options
    
    
    
    
    
    
    61Diluted
    
    $
    853
    
    
    
    9,716
    
    
    $
    0.09
 Stock-Based Compensation Plans
    Stock Repurchase Program
  15




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
         16




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
 
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
  
    
    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 complete range of CRTs for use in data display screen,
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 Companys internal needs.
  Inventory management
  17




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
 Interest rate exposure
 Results of Operations
  Three MonthsEnded May 31,2008
    
    2007SalesDisplay SegmentMonitors
    
    
    54.8
    %
    
    
    46.0
    %Data Display CRT
    
    
    13.8
    
    
    
    18.6Entertainment CRT
    
    
    1.9
    
    
    
    3.0Components Parts
    
    
    0.3
    
    
    
    0.7Total Display Segment
    
    
    70.8
    %
    
    
    68.3
    %Wholesale Distribution Segment
    
    
    29.2
    
    
    
    31.7100.0
    %
    
    
    100.0
    %Costs and expensesCost of goods sold
    
    
    63.1
    %
    
    
    64.9
    %Selling and delivery
    
    
    10.0
    
    
    
    9.0General and administrative
    
    
    21.4
    
    
    
    18.194.5
    %
    
    
    92.0
    %Operating Profit
    
    
    5.5
    %
    
    
    8.0
    %Interest expense
    
    
    (1.5)
    %
    
    
    (2.2
    )%Other income, net
    
    
    0.6
    
    
    
    0.3Income before income taxes
    
    
    4.6
    %
    
    
    6.1
    %Income tax expense
    
    
    1.6
    
    
    
    2.2Net income
    
    
    3.0
    %
    
    
    3.9
    %
 Net sales
  18




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
   Gross margins
   Operating expenses
    19




---



##### Table of Contents



Video Display Corporation and Subsidiaries  May 31, 2008
 Interest expense
  Income taxes
  Accounting for Uncertainty in Income Taxes
 Foreign currency translation
   Liquidity and Capital Resources
      20




---



##### Table of Contents



Video Display Corporation and Subsidiaries
May 31, 2008
    Critical Accounting Policies
  Reserves on inventories
  Revenue Recognition
  21




---



##### Table of Contents



Video Display Corporation and Subsidiaries
May 31, 2008
    Allowance for doubtful accounts
  Warranty reserves
  Other Accounting Policies
  22




---



##### Table of Contents



Video Display Corporation and Subsidiaries
May 31, 2008
 Recent Accounting Pronouncements
 Fair Values Measurements.
 The Fair Value Option for Financial
Assets and Financial Liabilities.
 Accounting for Uncertainty in
Income Taxes Accounting for Income Taxes
 Business Combinations. purchase method
 Noncontrolling Interest in Consolidated
Financial Statements.
 23




---



##### Table of Contents



Video Display Corporation and Subsidiaries
May 31, 2008
 Forward-Looking Information and Risk Factors
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
   
 ITEM 4.
    
    CONTROLS AND PROCEDURES
   Changes in Internal Controls
  24




---



##### Table of Contents



Video Display Corporation and Subsidiaries
May 31, 2008
   
 PART II
 
 Item 1.
    
    Legal Proceedings
 Barco Federal Systems, LLC and
Barco N.V., a Belgian corporation Aydin Displays, Inc. a Pennsylvania corporation
  
 Risk Factors
 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 29, 2008.
There have been no material changes from the risk factors previously disclosed in our
Annual Report on Form 10-K.
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 None.
 25




---



##### Table of Contents



Video Display Corporation and Subsidiaries
May 31, 2008
 
 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
 ExhibitNumber
    
    Exhibit Description3(a)
    
    Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3A to the Companys 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
Companys Registration Statement on Form S-18 filed January 15, 1985).10(e)
    
    $6,800,000 term note dated February 27, 2006 between the Company and
Ronald D. Ordway (holder) (incorporated by reference to Exhibit 10(e)
to the Companys 2006 Annual Report on Form 10-K) .10(h)
    
    Loan and Security Agreement and related documents, dated June 14, 2006,
among Video Display Corporation and Subsidiaries and RBC Centura Bank
and Regions Bank as lenders and RBC Centura Bank as collateral agent
(incorporated by reference to Exhibit 10(h) to the Companys Current
Report on Form 8-K dated June 29, 2006).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 Companys Current Report on Form 8-K
dated June 29, 2006).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.
 26




---



##### Table of Contents



SIGNATURES
  VIDEO DISPLAY CORPORATIONJuly 15, 2008
    By:
    /s/ Ronald D. OrdwayRonald D. OrdwayChief Executive OfficerJuly 15, 2008
    By:
    /s/ Gregory L. OsbornGregory L. OsbornChief Financial Officer 27