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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, 2010.
 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1868 TUCKER INDUSTRIAL ROAD, TUCKER, GEORGIA 30084
  770-938-2080
  þ o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



Video Display Corporation and Subsidiaries
Index
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets  May 31, 2010 (unaudited) and February 28, 2010
    
    
    3Condensed Consolidated Statements of Operations  Three months ended May 31, 2010 and 2009 (unaudited)
    
    
    5Condensed Consolidated Statement of Shareholders Equity  Three months ended May 31, 2010 (unaudited)
    
    
    6Condensed Consolidated Statements of Cash Flows  Three months ended May 31, 2010 and 2009 (unaudited)
    
    
    7Notes to Condensed Consolidated Financial Statements  May 31, 2010 (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
    
    
    25Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3.
    
    Defaults upon Senior Securities
    
    
    25Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    25Item 5.
    
    Other Information
    
    
    25Item 6.
    
    Exhibits
    
    
    26SIGNATURES
    
    
    2731.1
    
    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.WAIVER TO LOAN DOCUMENTEX-31.1EX-31.2EX-32
  2




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ITEM 1. FINANCIAL STATEMENTS
 
 Video Display Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
 May 31,
    
    
    February 28,2010
    
    
    2010(unaudited)AssetsCurrent assetsCash
    
    $
    896
    
    
    $
    465Accounts receivable, less allowance for
doubtful accounts of $199 and $160
    
    
    8,707
    
    
    
    11,673Inventories, net
    
    
    38,759
    
    
    
    37,997Cost and estimated earnings in excess of
billings on uncompleted contracts
    
    
    4,849
    
    
    
    4,089Deferred income taxes
    
    
    2,862
    
    
    
    2,879Income taxes refundable
    
    
    
    
    
    
    162Outside investments
    
    
    58
    
    
    
    78Prepaid expenses and other
    
    
    530
    
    
    
    520Total current assets
    
    
    56,661
    
    
    
    57,863Property, plant, and equipment:Land
    
    
    586
    
    
    
    585Buildings
    
    
    8,316
    
    
    
    8,292Machinery and equipment
    
    
    22,371
    
    
    
    22,17431,273
    
    
    
    31,051Accumulated depreciation and amortization
    
    
    (25,665
    )
    
    
    (25,322
    )Net property, plant, and equipment
    
    
    5,608
    
    
    
    5,729Goodwill
    
    
    1,376
    
    
    
    1,376Intangible assets, net
    
    
    1,747
    
    
    
    1,843Deferred income taxes
    
    
    789
    
    
    
    760Other assets
    
    
    30
    
    
    
    32Total assets
    
    $
    66,211
    
    
    $
    67,603
  3




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Video Display Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (continued)

(in thousands)
 May 31,
    
    
    February 28,2010
    
    
    2010(unaudited)Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    6,789
    
    
    $
    9,232Accrued liabilities
    
    
    5,031
    
    
    
    4,475Billings in excess of cost and estimated earnings on uncompleted contracts
    
    
    969
    
    
    
    880Current maturities of notes payable to officers and directors
    
    
    499
    
    
    
    511Line of credit
    
    
    20,070
    
    
    
    20,143Income taxes payable
    
    
    210
    
    
    
    Current maturities of long-term debt
and financing lease obligations
    
    
    833
    
    
    
    825Total current liabilities
    
    
    34,401
    
    
    
    36,066Long-term debt, less current maturities
    
    
    783
    
    
    
    957Financing lease obligations, less current maturities
    
    
    195
    
    
    
    221Notes payable to officers and directors,
less current maturities
    
    
    2,346
    
    
    
    2,447Other long term liabilities
    
    
    402
    
    
    
    415Total liabilities
    
    
    38,128
    
    
    
    40,106Commitments and ContingenciesShareholders EquityPreferred stock, no par value  10,000 shares
authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, no par value  50,000 shares authorized;
9,732 issued and 8,365 outstanding at May 31,
2010 and 9,732 issued and 8,365 outstanding at
February 28, 2010
    
    
    7,293
    
    
    
    7,293Additional paid-in capital
    
    
    203
    
    
    
    193Retained earnings
    
    
    27,978
    
    
    
    27,401Treasury stock, 1,367 shares at cost
    
    
    (7,390
    )
    
    
    (7,390
    )Total shareholders equity
    
    
    28,084
    
    
    
    27,497Total liabilities and shareholders equity
    
    $
    66,211
    
    
    $
    67,603
  4




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Video Display Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)
 Three Months EndedMay 31,2010
    
    
    2009Net sales
    
    $
    20,337
    
    
    $
    16,351Cost of goods sold
    
    
    13,900
    
    
    
    10,513Gross profit
    
    
    6,437
    
    
    
    5,838Operating expensesSelling and delivery
    
    
    1,868
    
    
    
    1,783General and administrative
    
    
    3,395
    
    
    
    3,9445,263
    
    
    
    5,727Operating profit
    
    
    1,174
    
    
    
    111Other income (expense)Interest expense
    
    
    (302
    )
    
    
    (200
    )Other, net
    
    
    65
    
    
    
    300(237
    )
    
    
    100Income before income taxes
    
    
    937
    
    
    
    211Income tax expense
    
    
    360
    
    
    
    60Net income
    
    $
    577
    
    
    $
    151Basic earnings per share of common stock
    
    $
    .07
    
    
    $
    .02Diluted earnings per share of common
stock
    
    $
    .07
    
    
    $
    .02Basic weighted average shares outstanding
    
    
    8,365
    
    
    
    8,593Diluted weighted average shares outstanding
    
    
    8,700
    
    
    
    8,883
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Video Display Corporation and Subsidiaries
Condensed Consolidated Statement of Shareholders Equity

Three Months Ended May 31, 2010 (unaudited)
(in thousands)
 AdditionalCommon
    
    
    Share
    
    
    Paid-in
    
    
    Retained
    
    
    TreasuryShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    StockBalance, February 28, 2010
    
    
    8,365
    
    
    $
    7,293
    
    
    $
    193
    
    
    $
    27,401
    
    
    $
    (7,390
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    577
    
    
    
    Share based compensation
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    Balance, May 31, 2010
    
    
    8,365
    
    
    $
    7,293
    
    
    $
    203
    
    
    $
    27,978
    
    
    $
    (7,390
    )
  6




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Video Display Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)
 Three Months EndedMay 31,2010
    
    
    2009Operating ActivitiesNet income
    
    $
    577
    
    
    $
    151Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    440
    
    
    
    581Provision for doubtful accounts
    
    
    53
    
    
    
    19Provision for inventory reserve
    
    
    377
    
    
    
    478Non-cash charge for share based compensation
    
    
    10
    
    
    
    6Deferred income taxes
    
    
    (12
    )
    
    
    (354
    )Net realized/unrealized (gain)/loss on equity securities
    
    
    20
    
    
    
    (116
    )Changes in working capital, net of effects
from acquisitions:Accounts receivable
    
    
    2,913
    
    
    
    1,581Inventories
    
    
    (1,138
    )
    
    
    (549
    )Prepaid expenses and other current assets
    
    
    (10
    )
    
    
    86Accounts payable and accrued liabilities
    
    
    (1,900
    )
    
    
    (1,139
    )Cost, estimated earnings and billings, net, on
uncompleted contracts
    
    
    (671
    )
    
    
    (1,189
    )Income taxes refundable/payable
    
    
    372
    
    
    
    385Net cash provided by (used in) operating activities
    
    
    1,031
    
    
    
    (60
    )Investing ActivitiesCapital expenditures
    
    
    (222
    )
    
    
    (50
    )Net investments in equity securities
    
    
    
    
    
    
    359Net cash provided by (used in) investing activities
    
    
    (222
    )
    
    
    309
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Video Display Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
 Three Months EndedMay 31,2010
    
    
    2009Financing ActivitiesProceeds from long-term debt, lines of credit
and financing lease obligations
    
    
    4,713
    
    
    
    3,793Payments on long-term debt, lines of credit
and financing lease obligations
    
    
    (4,977
    )
    
    
    (3,821
    )Proceeds from notes payable to officers and directors
    
    
    350
    
    
    
    287Repayments of notes payable to officers and directors
    
    
    (464
    )
    
    
    (130
    )Purchases and retirements of common stock and
purchase of treasury stock
    
    
    
    
    
    
    (344
    )Net cash (used in) financing activities
    
    
    (378
    )
    
    
    (215
    )Net increase in cash
    
    
    431
    
    
    
    34Cash, beginning of period
    
    
    465
    
    
    
    662Cash, end of period
    
    $
    896
    
    
    $
    696
  8




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Video Display Corporation and Subsidiaries
May 31, 2010
           9




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Video Display Corporation and Subsidiaries
May 31, 2010
 Consolidation,
 Consolidations Consolidation of Variable Interest Entities
 Fair Value Measurements
and Disclosures  Overall Subtopic
 Subsequent Events
    May 31,
    
    
    February 28,2010
    
    
    2010Raw materials
    
    $
    21,143
    
    
    $
    20,464Work-in-process
    
    
    8,230
    
    
    
    8,396Finished goods
    
    
    14,371
    
    
    
    13,78943,744
    
    
    
    42,649Reserves for obsolescence
    
    
    (4,985
    )
    
    
    (4,652
    )$
    38,759
    
    
    $
    37,997
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Video Display Corporation and Subsidiaries
May 31, 2010
   May 31,
    
    
    February 28,2010
    
    
    2010Costs incurred to date on uncompleted contracts
    
    $
    7,177
    
    
    $
    5,476Estimated earnings recognized to date on these contracts
    
    
    4,140
    
    
    
    2,93411,317
    
    
    
    8,410Billings to date
    
    
    (7,437
    )
    
    
    (5,201
    )Costs and estimated earnings in excess
of billings, net
    
    $
    3,880
    
    
    $
    3,209Costs and estimated earnings in excess of billings
    
    $
    4,849
    
    
    $
    4,089Billings in excess of costs and estimated earnings
    
    
    (969
    )
    
    
    (880
    )$
    3,880
    
    
    $
    3,209
 Revenue Recognition: Construction-Type and Production-Type Contracts
     11




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Video Display Corporation and Subsidiaries
May 31, 2010
  May 31, 2010
    
    
    February 28, 2010Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationCustomer lists
    
    $
    3,611
    
    
    $
    2,496
    
    
    $
    3,611
    
    
    $
    2,466Non-compete agreements
    
    
    1,245
    
    
    
    1,245
    
    
    
    1,245
    
    
    
    1,234Patents
    
    
    777
    
    
    
    546
    
    
    
    777
    
    
    
    516Other intangibles
    
    
    649
    
    
    
    248
    
    
    
    649
    
    
    
    223$
    6,282
    
    
    $
    4,535
    
    
    $
    6,282
    
    
    $
    4,439
   May 31,
    
    
    February 28,2010
    
    
    2010Note payable to RBC Bank; interest rate at LIBOR
plus applicable margin as defined per the loan
agreement, minimum 4.00%(2.51% combined rate as
of May 31, 2010); monthly principal payments of
$50 plus accrued interest, payable through July
2011; collateralized by all assets of the
Company
    
    $
    978
    
    
    $
    1,128Mortgage payable to bank; interest rate at
Federal Home Loan Bank Board Index rate plus
1.95% (7.25% as of May 31, 2010); monthly
principal and interest payments of $5 payable
through October 2021; collateralized by land and
building of Teltron Technologies, Inc
    
    
    446
    
    
    
    4541,424
    
    
    
    1,582Financing lease obligations
    
    
    387
    
    
    
    4211,811
    
    
    
    2,003Less current maturities
    
    
    (833
    )
    
    
    (825
    )$
    978
    
    
    $
    1,178
   12




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Video Display Corporation and Subsidiaries
May 31, 2010
       13




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Video Display Corporation and Subsidiaries
May 31, 2010
 Three MonthsEnded May 31,2010
    
    
    2009Net salesDisplay segment
    
    $
    14,281
    
    
    $
    11,582Wholesale distribution segment
    
    
    6,056
    
    
    
    4,769$
    20,337
    
    
    $
    16,351Operating profitDisplay segment
    
    $
    1,354
    
    
    $
    (210
    )Wholesale distribution segment
    
    
    (180
    )
    
    
    321Income from operations
    
    
    1,174
    
    
    
    111Interest expense
    
    
    (302
    )
    
    
    (200
    )Other income, net
    
    
    65
    
    
    
    300Income before income taxes
    
    $
    937
    
    
    $
    211
   Three MonthsEnded May 31,2010
    
    
    2009Cash Paid for:Interest
    
    $
    310
    
    
    $
    196Income taxes, net of refunds
    
    $
    10
    
    
    $
    29
  Earnings Per Share
   14




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Video Display Corporation and Subsidiaries
May 31, 2010
 WeightedAverage
    
    
    EarningsNet
    
    
    Common Shares
    
    
    PerIncome
    
    
    Outstanding
    
    
    ShareThree months ended May 31, 2010Basic
    
    $
    577
    
    
    
    8,365
    
    
    $
    0.07Effect of dilution:Options
    
    
    
    
    
    
    335Diluted
    
    $
    577
    
    
    
    8,700
    
    
    $
    0.07Three months ended May 31, 2009Basic
    
    $
    151
    
    
    
    8,593
    
    
    $
    0.02Effect of dilution:Options
    
    
    
    
    
    
    290Diluted
    
    $
    151
    
    
    
    8,883
    
    
    $
    0.02
 Stock-Based Compensation Plans
    Stock Repurchase Program
    15




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Video Display Corporation and Subsidiaries
May 31, 2010
         16




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Video Display Corporation and Subsidiaries
May 31, 2010
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
  Segment Reporting
 
    
    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 Companys internal needs.
   Inventory management
  17




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Video Display Corporation and Subsidiaries
May 31, 2010
  Interest rate exposure
 Liquidity
 Results of Operations
  Three MonthsEnded May 31,2010
    
    2009SalesDisplay SegmentMonitors
    
    
    63.2
    %
    
    
    54.7
    %Data Display CRT
    
    
    6.4
    
    
    
    15.0Entertainment CRT
    
    
    0.4
    
    
    
    1.0Components Parts
    
    
    0.2
    
    
    
    0.1Total Display Segment
    
    
    70.2
    %
    
    
    70.8
    %Wholesale Distribution Segment
    
    
    29.8
    
    
    
    29.2100.0
    %
    
    
    100.0
    %Costs and expensesCost of goods sold
    
    
    68.3
    %
    
    
    64.3
    %Selling and delivery
    
    
    9.2
    
    
    
    10.9General and administrative
    
    
    16.7
    
    
    
    24.194.2
    %
    
    
    99.3
    %Operating Profit
    
    
    5.8
    %
    
    
    0.7
    %Interest expense
    
    
    (1.5)
    %
    
    
    (1.2
    )%Other income, net
    
    
    0.3
    
    
    
    1.8Income before income taxes
    
    
    4.6
    %
    
    
    1.3
    %Income tax expense
    
    
    1.8
    
    
    
    0.4Net income
    
    
    2.8
    %
    
    
    0.9
    %
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Video Display Corporation and Subsidiaries
May 31, 2010
 Net sales
    Gross margins
    Operating expenses
  19




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Video Display Corporation and Subsidiaries
May 31, 2010
 Interest expense
  Income taxes
  Liquidity and Capital Resources
         20




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Video Display Corporation and Subsidiaries
May 31, 2010
    Critical Accounting Estimates
  Reserves on inventories
  21




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Video Display Corporation and Subsidiaries
May 31, 2010
 Revenue Recognition
  Revenue Recognition: Principal Agent
Considerations
 Revenue Recognition Construction-Type and Production-Type Contracts
 Revenue Recognition: Principal Agent Considerations
 Allowance for doubtful accounts
  Warranty reserves
  22




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Video Display Corporation and Subsidiaries
May 31, 2010
 Other Accounting Policies
  Recent Accounting Pronouncements
  Consolidation,
 Consolidations Consolidation of Variable Interest Entities
 Fair Value Measurements
and Disclosures  Overall Subtopic
 Subsequent Events
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Video Display Corporation and Subsidiaries
May 31, 2010
 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




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Video Display Corporation and Subsidiaries
May 31, 2010
 
 PART II
 
 Legal Proceedings
   
 Risk Factors
  
 Unregistered Sales of Equity Securities and Use of Proceeds
  
 Defaults upon Senior Securities
  
 Submission of Matters to a Vote of Security Holders
  
 Other information
  25




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Video Display Corporation and Subsidiaries
May 31, 2010
 
 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(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 Companys 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 Companys 2009 Annual Report on Form 10-K)10(d)
    
    Amendment to Loan Documents and Waiver dated May 27, 2009. (incorporated by reference to Exhibit 10(d) to the Companys 2009 Annual Report on Form 10-K)10(e)
    
    Second Amendment to Loan and Security Agreement dated February 26, 2010. (incorporated by reference to Exhibit 10(e) to the Companys 2010 Annual Report on Form 10-K)10(f)
    
    Amendment to Loan and Security Agreement dated May 24, 2010 (incorporated by reference to Exhibit 10(f) to the Companys 2010 Annual Report on Form 10-K)10(g)
    
    Waiver to Loan Document dated July
16, 2010.10(h)
    
    Loan and Security Agreement and related documents, dated September 26, 2008, among Video Display Corporation and Subsidiaries and RBC Centura Bank as lender and RBC
Centura Bank as collateral agent (incorporated by reference to Exhibit 10(h) to the Companys Report on Form 10-Q dated January 14, 2009).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).10(j)
    
    Video Display Corporation 2006 Stock Incentive Plan. (incorporated by reference to Appendix A to the Companys 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.
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SIGNATURES
  VIDEO DISPLAY CORPORATIONJuly 19, 2010
    By:
    /s/ Ronald D. OrdwayRonald D. OrdwayChief Executive OfficerJuly 19, 2010
    By:
    /s/ Gregory L. OsbornGregory L. OsbornChief Financial Officer 27