##### 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, 2009.
 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  (Registrants telephone number including area code)
 þ o
 o þ
  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 Statements.Condensed Consolidated Balance Sheets 
May 31, 2009 (unaudited) and February 28, 2009
    
    
    3Condensed Consolidated Statements of Operations -
Three months ended May 31, 2009 and 2008 (unaudited)
    
    
    5Condensed Consolidated Statement of Shareholders Equity -
Three months ended May 31, 2009 (unaudited)
    
    
    6Condensed Consolidated Statements of Cash Flows 
Three months ended May 31, 2009 and 2008 (unaudited)
    
    
    7Notes to Condensed Consolidated Financial Statements -
May 31, 2009 (unaudited)
    
    
    9Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations.
    
    
    17Item 3. Quantitative and Qualitative Disclosure About Market Risk.
    
    
    25Item 4. Controls and Procedures.
    
    
    25PART 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
    
    
    28EX-10(J)EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS
 Video Display Corporation and Subsidiaries
 
 Condensed Consolidated Balance Sheets
 (in thousands)
 May 31,
    
    
    February 28,2009
    
    
    2009(unaudited)AssetsCurrent assetsCash
    
    $
    696
    
    
    $
    662Accounts receivable, less allowance for
doubtful accounts of $627 and $608
    
    
    7,488
    
    
    
    9,088Inventories, net
    
    
    36,763
    
    
    
    36,692Cost and estimated earnings in excess of
billings on uncompleted contracts
    
    
    2,548
    
    
    
    1,421Deferred income taxes
    
    
    2,989
    
    
    
    2,724Income taxes refundable
    
    
    1,451
    
    
    
    1,836Investments
    
    
    92
    
    
    
    335Prepaid expenses and other
    
    
    526
    
    
    
    612Total current assets
    
    
    52,553
    
    
    
    53,370Property, plant and equipment:Land
    
    
    585
    
    
    
    585Buildings
    
    
    8,266
    
    
    
    8,262Machinery and equipment
    
    
    21,832
    
    
    
    21,78630,683
    
    
    
    30,633Accumulated depreciation and amortization
    
    
    (24,233
    )
    
    
    (23,866
    )Net property, plant, and equipment
    
    
    6,450
    
    
    
    6,767Goodwill
    
    
    1,376
    
    
    
    1,376Intangible assets, net
    
    
    1,870
    
    
    
    2,083Deferred income taxes
    
    
    665
    
    
    
    576Other assets
    
    
    36
    
    
    
    36Total assets
    
    $
    62,950
    
    
    $
    64,208
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Video Display Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
(in thousands)
 May 31,
    
    
    February 28,2009
    
    
    2009(unaudited)Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    6,329
    
    
    $
    7,175Accrued liabilities
    
    
    4,953
    
    
    
    5,245Billings in excess of cost and estimated
earnings on uncompleted contracts
    
    
    46
    
    
    
    108Current maturities of notes payable to officers
and directors
    
    
    396
    
    
    
    396Line of credit
    
    
    3,493
    
    
    
    3,493Current maturities of long-term debt
and financing lease obligations
    
    
    772
    
    
    
    544Total current liabilities
    
    
    15,989
    
    
    
    16,961Line of credit
    
    
    16,494
    
    
    
    16,498Long-term debt, less current maturities
    
    
    1,401
    
    
    
    1,707Financing lease obligations, less current maturities
    
    
    216
    
    
    
    162Notes payable to officers and directors,
less current maturities
    
    
    2,149
    
    
    
    1,992Other long term liabilities
    
    
    123
    
    
    
    123Total liabilities
    
    
    36,372
    
    
    
    37,443Commitments 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 8,372 outstanding at May 31,
2009 and 9,707 issued and 8,601 outstanding at
February 28, 2009
    
    
    7,293
    
    
    
    7,293Additional paid-in capital
    
    
    153
    
    
    
    147Retained earnings
    
    
    26,612
    
    
    
    26,461Accumulated other comprehensive loss
    
    
    (90
    )
    
    
    (90
    )Treasury stock, 1,394 and 1,165 shares at cost
    
    
    (7,390
    )
    
    
    (7,046
    )Total shareholders equity
    
    
    26,578
    
    
    
    26,765Total liabilities and shareholders equity
    
    $
    62,950
    
    
    $
    64,208
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Video Display Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Operations (unaudited)
 (in thousands, except per share data)
 Three Months EndedMay 31,2009
    
    
    2008Net sales
    
    $
    16,351
    
    
    $
    19,226Cost of goods sold
    
    
    10,513
    
    
    
    12,034Gross profit
    
    
    5,838
    
    
    
    7,192Operating expensesSelling and delivery
    
    
    1,783
    
    
    
    1,941General and administrative
    
    
    3,944
    
    
    
    4,1805,727
    
    
    
    6,121Operating profit
    
    
    111
    
    
    
    1,071Other income (expense)Interest expense
    
    
    (200
    )
    
    
    (286
    )Other, net
    
    
    300
    
    
    
    112100
    
    
    
    (174
    )Income before income taxes
    
    
    211
    
    
    
    897Income tax expense
    
    
    60
    
    
    
    317Net income
    
    $
    151
    
    
    $
    580Net income per share  basic
    
    $
    .02
    
    
    $
    .06Net income per share  diluted
    
    $
    .02
    
    
    $
    .06Average shares outstanding  basic
    
    
    8,593
    
    
    
    9,469Average shares outstanding  diluted
    
    
    8,883
    
    
    
    9,577
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Video Display Corporation and Subsidiaries
 
 Condensed Consolidated Statement of Shareholders Equity
 Three Months Ended May 31, 2009 (unaudited)
 (in thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Compre-Common
    
    
    Share
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    hensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    IncomeBalance, February 28, 2009
    
    
    8,601
    
    
    $
    7,293
    
    
    $
    147
    
    
    $
    26,461
    
    
    $
    (90
    )
    
    $
    (7,046
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    $
    151Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    151Repurchase of Treasury Stock
    
    
    (229
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (344
    )Share based compensation
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Balance, May 31, 2009
    
    
    8,372
    
    
    $
    7,293
    
    
    $
    153
    
    
    $
    26,612
    
    
    $
    (90
    )
    
    $
    (7,390
    )
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Video Display Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (unaudited)
 (in thousands)
 Three Months EndedMay 31,2009
    
    
    2008Operating ActivitiesNet income
    
    $
    151
    
    
    $
    580Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    581
    
    
    
    594Provision for doubtful accounts
    
    
    19
    
    
    
    50Provision for inventory reserve
    
    
    478
    
    
    
    270Non-cash charge for share based compensation
    
    
    6
    
    
    
    12Deferred income taxes
    
    
    (354
    )
    
    
    (201
    )Net realized/unrealized gain on equity securities
    
    
    (116
    )
    
    
    Changes in working capital, net of effects
from acquisitions:Accounts receivable
    
    
    1,581
    
    
    
    1,071Inventories
    
    
    (549
    )
    
    
    30Prepaid expenses and other current assets
    
    
    86
    
    
    
    (74
    )Accounts payable and accrued liabilities
    
    
    (1,139
    )
    
    
    (2,676
    )Cost, estimated earnings and billings, net, on
uncompleted contracts
    
    
    (1,189
    )
    
    
    111Income taxes refundable
    
    
    385
    
    
    
    433Net cash provided by (used in) operating activities
    
    
    (60
    )
    
    
    200Investing ActivitiesCapital expenditures
    
    
    (50
    )
    
    
    (238
    )Net investments in equity securities
    
    
    359
    
    
    
    Net cash provided by (used in) investing activities
    
    
    309
    
    
    
    (238
    )
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Video Display Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
 Financing ActivitiesProceeds from long-term debt, lines of credit
and financing lease obligations
    
    
    3,793
    
    
    
    4,339Payments on long-term debt, lines of credit
and financing lease obligations
    
    
    (3,821
    )
    
    
    (3,818
    )Proceeds from notes payable to officers and directors
    
    
    287
    
    
    
    Repayments of notes payable to officers and directors
    
    
    (130
    )
    
    
    (109
    )Purchases and retirements of common stock and
purchase of treasury stock
    
    
    (344
    )
    
    
    (207
    )Net cash provided by (used in) financing activities
    
    
    (215
    )
    
    
    205Net increase in cash
    
    
    34
    
    
    
    167Cash, beginning of period
    
    
    662
    
    
    
    1,636Cash, end of period
    
    $
    696
    
    
    $
    1,803
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Video Display Corporation and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements
 May 31, 2009
       Fair Values Measurements.
 The Fair Value Option for Financial
Assets and Financial Liabilities.
 Accounting for Uncertainty in
Income Taxes Accounting for Income Taxes
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Video Display Corporation and Subsidiaries
May 31, 2009
  Business Combinations. purchase method
 Non-controlling Interest in Consolidated
Financial Statements.
 Determination of the Useful Life of Intangible
Assets Goodwill and Other Intangible Assets
   10




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Video Display Corporation and Subsidiaries
May 31, 2009
      May 31,
    
    
    February 28,2009
    
    
    2009Raw materials
    
    $
    19,958
    
    
    $
    20,086Work-in-process
    
    
    7,801
    
    
    
    7,938Finished goods
    
    
    12,898
    
    
    
    12,24540,657
    
    
    
    40,269Reserves for obsolescence
    
    
    (3,894
    )
    
    
    (3,577
    )$
    36,763
    
    
    $
    36,692
   May 31,
    
    
    February 28,2009
    
    
    2009Costs incurred to date on uncompleted contracts
    
    $
    4,587
    
    
    $
    3,423Estimated earnings recognized to date on these contracts
    
    
    2,199
    
    
    
    1,5156,786
    
    
    
    4,938Billings to date
    
    
    (4,284
    )
    
    
    (3,625
    )Costs and estimated earnings in excess
of billings, net
    
    $
    2,502
    
    
    $
    1,313Costs and estimated earnings in excess of billings
    
    $
    2,548
    
    
    $
    1,421Billings in excess of costs and estimated earnings
    
    
    (46
    )
    
    
    (108
    )$
    2,502
    
    
    $
    1,313
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Video Display Corporation and Subsidiaries
May 31, 2009
       May 31, 2009
    
    
    February 28, 2009Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationCustomer lists
    
    $
    3,611
    
    
    $
    2,240
    
    
    $
    3,611
    
    
    $
    2,124Non-compete
agreements
    
    
    1,245
    
    
    
    1,116
    
    
    
    1,245
    
    
    
    1,054Patents
    
    
    777
    
    
    
    425
    
    
    
    777
    
    
    
    395Other intangibles
    
    
    149
    
    
    
    131
    
    
    
    149
    
    
    
    126$
    5,782
    
    
    $
    3,912
    
    
    $
    5,782
    
    
    $
    3,699
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Video Display Corporation and Subsidiaries
May 31, 2009
  May 31,
    
    
    February 28,2009
    
    
    2009Note payable to RBC Bank; interest rate at
LIBOR plus applicable margin as defined per the
loan agreement, (2.51% combined rate as of May
31, 2009); monthly principal payments of $50
plus accrued interest, payable through July
2011; collateralized by all assets of the
Company.
    
    $
    1,478
    
    
    $
    1,553Mortgage payable to bank; interest rate at
Federal Home Loan Bank Board Index rate plus
1.95% (7.25% as of May 31, 2009); monthly
principal and interest payments of $5 payable
through October 2021; collateralized by land
and building of Teltron Technologies, Inc
    
    
    472
    
    
    
    478Other
    
    
    33
    
    
    
    331,983
    
    
    
    2,064Financing lease obligations
    
    
    406
    
    
    
    3492,389
    
    
    
    2,413Less current maturities
    
    
    (772
    )
    
    
    (544
    )$
    1,617
    
    
    $
    1,869
    13




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Video Display Corporation and Subsidiaries
May 31, 2009
     Three MonthsEnded May 31,2009
    
    
    2008Net salesDisplay segment
    
    $
    11,582
    
    
    $
    13,816Wholesale distribution segment
    
    
    4,769
    
    
    
    5,410$
    16,351
    
    
    $
    19,226Operating profitDisplay segment
    
    $
    (210
    )
    
    $
    1,045Wholesale distribution segment
    
    
    321
    
    
    
    26Income from operations
    
    
    111
    
    
    
    1,071Interest expense
    
    
    (200
    )
    
    
    (286
    )Other income, net
    
    
    300
    
    
    
    112Income before income taxes
    
    $
    211
    
    
    $
    897
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Video Display Corporation and Subsidiaries
May 31, 2009
 Three MonthsEnded May 31,2009
    
    
    2008Cash paid for:Interest
    
    $
    196
    
    
    $
    277Income taxes, net of refunds
    
    $
    29
    
    
    $
    (8
    )
  Net Income Per Share
   Average
    
    Net IncomeNet
    
    Shares
    
    PerIncome
    
    Outstanding
    
    ShareThree months ended May 31, 2009Basic
    
    $
    151
    
    
    
    8,593
    
    
    $
    0.02Effect of dilution:Options
    
    
    
    
    
    
    290Diluted
    
    $
    151
    
    
    
    8,883
    
    
    $
    0.02Three months ended May 31, 2008Basic
    
    $
    580
    
    
    
    9,469
    
    
    $
    0.06Effect of dilution:Options
    
    
    
    
    
    
    108Diluted
    
    $
    580
    
    
    
    9,577
    
    
    $
    0.06
 Stock-Based Compensation Plans
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Video Display Corporation and Subsidiaries
May 31, 2009
   Stock Repurchase Program
       16




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Video Display Corporation and Subsidiaries
May 31, 2009
     
 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




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Video Display Corporation and Subsidiaries
May 31, 2009
  Interest rate exposure
 Results of Operations
  Three MonthsEnded May 31,2009
    
    2008SalesDisplay SegmentMonitors
    
    
    54.7
    %
    
    
    55.6
    %Data Display CRT
    
    
    15.0
    
    
    
    14.0Entertainment CRT
    
    
    1.0
    
    
    
    2.0Components Parts
    
    
    0.1
    
    
    
    0.3Total Display Segment
    
    
    70.8
    %
    
    
    71.9
    %Wholesale Distribution Segment
    
    
    29.2
    
    
    
    28.1100.0
    %
    
    
    100.0
    %Costs and expensesCost of goods sold
    
    
    64.3
    %
    
    
    62.6
    %Selling and delivery
    
    
    10.9
    
    
    
    10.1General and administrative
    
    
    24.1
    
    
    
    21.799.3
    %
    
    
    94.4
    %Operating Profit
    
    
    0.7
    %
    
    
    5.6
    %
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Video Display Corporation and Subsidiaries
May 31, 2009
 Three MonthsEnded May 31,2009
    
    2008Interest expense
    
    
    (1.2
    )%
    
    
    (1.5
    )%Other income, net
    
    
    1.8
    
    
    
    0.6Income before income taxes
    
    
    1.3
    %
    
    
    4.7
    %Income tax expense
    
    
    0.4
    
    
    
    1.7Net income
    
    
    0.9
    %
    
    
    3.0
    %
 Net sales
    Gross margins
   19




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Video Display Corporation and Subsidiaries
May 31, 2009
 Operating expenses
  Interest expense
  Income taxes
  Liquidity and Capital Resources
    20




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Video Display Corporation and Subsidiaries
May 31, 2009
       Critical Accounting Policies
  Reserves on inventories
  21




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Video Display Corporation and Subsidiaries
May 31, 2009
  Revenue Recognition
     Allowance for doubtful accounts
  Warranty reserves
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Video Display Corporation and Subsidiaries
May 31, 2009
  Other Accounting Policies
  Reclassified Revenues
  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.
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purchase method
 Non-controlling Interest in Consolidated
Financial Statements.
 Determination of the Useful Life of Intangible
Assets Goodwill and Other Intangible Assets
   Forward-Looking Information and Risk Factors
  24




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Video Display Corporation and Subsidiaries
May 31, 2009
   
 ITEM 4. CONTROLS AND PROCEDURES
   Changes in Internal Controls
  
 PART II
 
 Legal Proceedings
  25




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Video Display Corporation and Subsidiaries
May 31, 2009
   
 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
  
 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).
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Video Display Corporation and Subsidiaries
May 31, 2009
 ExhibitNumber
    
    Exhibit Description10(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(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 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)
    
    Amendment to Loan Documents and Waiver between Video Display
Corporation and RBC Bank dated August 27, 200931.1
    
    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 CORPORATIONAugust 27, 2009
    By:
    /s/ Ronald D. OrdwayRonald D. OrdwayChief Executive OfficerAugust 27, 2009
    By:
    /s/ Gregory L. OsbornGregory L. OsbornChief Financial Officer 28