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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended February 28, 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 of Incorporation)
    
    (IRS Employer Identification No.)1868 Tucker Industrial Road, Tucker Georgia
    
    30084(Address of principal executive offices)
    
    (Zip code)
 (770) 938-2080
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, no par value
    
    NASDAQ/NMS
  YES o  NO þ
 YES o  NO þ
 þ o
 þ
 o 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
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



VIDEO DISPLAY CORPORATION
TABLE OF CONTENTS
 ITEM
    
    
    PAGENUMBER
    
    
    NUMBERPART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    7Item 1B.
    
    Unresolved Staff Comments
    
    
    11Item 2.
    
    Properties
    
    
    12Item 3.
    
    Legal Proceedings
    
    
    12Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    13PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    14Item 6.
    
    Selected Financial Data
    
    
    15Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    16Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 8.
    
    Financial Statements and Supplementary Data
    
    
    26Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    53Item 9A(T).
    
    Controls and Procedures
    
    
    53Item 9B.
    
    Other Information
    
    
    54PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    55Item 11.
    
    Executive Compensation
    
    
    55Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    55Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence.
    
    
    55Item 14.
    
    Principal Accounting Fees and Services
    
    
    55PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    56Signatures
    
    
    57EX-10.EEX-10.FEX-21EX-23.1EX-31.1EX-31.2EX-32




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PART I
 
 Item 1. Business.
 General
  Description of Principal Business
   
     2




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Segment Information
  Principal Products In Display Segment
 Monitors
      3




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Data Display CRTs and Entertainment CRTs
       Component Parts
   4




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Principal Products in Wholesale Distribution Segment
  Patents and Trademarks
  Seasonal Variations in Business
  Working Capital Practices
  Concentration of Customers
  5




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Backlog
  Government Contracts
  Environmental Matters
  Research and Development
  Employees
  Competition
  6




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Item 1A. Risk Factors.
 Forward looking statements and risk factors
  7




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Our industry is highly competitive and competitive conditions may adversely affect our business.
   Competitors or third parties may infringe on our intellectual property.
  Migration to flat panel and other technology may negatively affect our CRT business.
   8




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Future acquisitions may not provide benefits to the Company.
  Changes in government priorities may affect military spending, and our financial condition and
results of operations could suffer if their purchases decline.
  If we are unable to retain certain key personnel and hire new highly skilled personnel, we may not
be able to execute our business plan.
  Our business operations could be disrupted if our information technology systems fail to perform
adequately.
  Changes to accounting rules or regulations may adversely affect our results of operations.
  The Companys stock price may be negatively affected by a variety of factors.
  Changes to estimates related to long-term assets, or operating results that are lower than our
current estimates, may cause us to incur impairment charges.
  9




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International factors could negatively affect our business.
  
    
    Economic downturns;
    
    Currency exchange rate and interest rate fluctuations;
    
    Changes in governmental policy, including, among others, those relating to taxation;
    
    International military, political, diplomatic and terrorist incidents;
    
    Government instability;
    
    Nationalization of foreign assets; and
    
    Tariffs and governmental trade policies.
  Our inability to refinance our debt could negatively affect the future of our business.
 
    
    Our inability to refinance with our current bank or others, if necessary, could expose
us to the risk of the bank exercising its rights against the collateral under the terms of
the loan; and
    
    Our inability to refinance with a commercial bank could expose us to the risk of
increased interest rates;
 Our level of indebtedness could adversely affect the future operation of our business.
  
    
    making it more difficult for us to make payments on the debt, as our
business may not be able to generate sufficient cash flows from
operating activities to meet our debt service obligations;
    
    increasing our vulnerability to general economic and industry conditions;
    
    requiring a substantial portion of cash flow from operating activities
to be dedicated to the payment of our outstanding lines of credit and
long-term debt, and as a result reducing our ability to use our cash
flow to fund our operations and capital expenditures, capitalize on
future business opportunities and expand our business and execute our
strategy;
    
    exposing us to the risk of increased interest rates since much of our
borrowings are at variable rates of interest;
    
    causing us to make non-strategic divestitures;
    
    limiting our ability to obtain additional financing for working
capital, capital expenditures, debt
 10




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service requirements and other
general corporate purposes; and
    
    limiting our ability to adjust to changing market conditions and to
react to competitive pressure and placing us at a competitive
disadvantage compared to our competitors who may have lower debt
leverage.
 Our debt agreements contain covenants that limit our flexibility in operating our business.
  
    
    incur additional indebtedness;
    
    make certain investments, loans or advances;
    
    transfer and sell certain assets;
    
    create or permit liens on assets;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
    
    engage in any business activity substantially different from our current businesses;
    
    pay dividends; and
    
    cause, permit, or suffer a change in capital ownership.
  
 Item 1B. Unresolved Staff Comments.
  11




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Item 2. Properties.
  Location
    
    Square Feet
    
    Lease ExpiresCRT, Monitor and Electron Gun  Manufacturing and Warehouse FacilitiesTucker, Georgia
    
    
    59,000
    
    
    October 31, 2018Stone Mountain, Georgia
    
    
    45,000
    
    
    May 31, 2018White Mills, Pennsylvania
    
    
    110,000
    
    
    Company OwnedBossier City, Louisiana
    
    
    26,000
    
    
    Company OwnedBirdsboro, Pennsylvania
    
    
    40,000
    
    
    Company Owned (a)Phelps, New York
    
    
    32,000
    
    
    Company OwnedCape Canaveral, Florida
    
    
    30,000
    
    
    January 17, 2011Lexington, Kentucky
    
    
    80,000
    
    
    March 31, 2015Wholesale Electronic Parts DistributionBedford Heights, Ohio
    
    
    60,000
    
    
    Company OwnedBedford Heights, Ohio
    
    
    40,000
    
    
    January 31, 2011Beachwood, Ohio
    
    
    16,000
    
    
    July 31, 2010Richardson, Texas
    
    
    13,000
    
    
    April 30, 2012Buffalo, New York
    
    
    30,000
    
    
    June 1, 2013
 
 (a)
    
    The Birdsboro, Pennsylvania property secures mortgage loans from a bank
with a principal balance of $0.5 million as of February 28, 2010. This mortgage
loan bears an interest rate of approximately 7.3%. Monthly principal and interest
payments of approximately $5,000 are payable through October 2021. 
 Item 3. Legal Proceedings.
     12




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Item 4. Submission of Matters to a Vote of Security Holders.
  13




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities.
   For Fiscal Years EndedFebruary 28, 2010
    
    February 28, 2009Quarter Ended
    
    High
    
    Low
    
    High
    
    LowMay
    
    $
    3.64
    
    
    $
    1.23
    
    
    $
    7.90
    
    
    $
    6.86August
    
    
    3.53
    
    
    
    2.90
    
    
    
    8.42
    
    
    
    7.00November
    
    
    5.19
    
    
    
    3.19
    
    
    
    9.30
    
    
    
    7.00February
    
    
    4.90
    
    
    
    3.84
    
    
    
    8.02
    
    
    
    2.00
   Securities Authorized for Issuance Under Equity Compensation Plans
  Number of securitiesNumber of
    
    
    
    
    
    remaining available forsecurities to be
    
    
    
    
    
    future issuance underissued upon exercise
    
    Weighted-average
    
    equity compensationof outstanding
    
    exercise price of
    
    plans (excludingoptions, warrants
    
    outstanding options,
    
    securities reflected inStock Option Plan
    
    and rights
    
    warrants and rights
    
    first column)Equity compensation plans
approved by security holders
    
    
    93,000
    
    
    $
    5.32
    
    
    
    741,000
 Issuer Purchases of Equity Securities
  14




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##### Table of Contents



Maximum Numberof Shares thatTotal
    
    
    
    
    
    Total Number of
    
    May Yet BeNumber
    
    Average
    
    Shares Purchased
    
    Purchased Underof
    
    Price
    
    as Part of Publicly
    
    the Plans orShares
    
    Paid Per
    
    Announced Plans
    
    Programs atFiscal Period
    
    Purchased
    
    Share
    
    or Programs
    
    Period EndDecember 1, 2009 through December 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    816,418January 1, 2010 through January 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    816,418February 1, 2010 through February 28, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    816,418Total Fourth Quarter
Fiscal 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    816,418
 
 Item 6. Selected Financial Data
  15




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
 Segment Reporting
 
    
    Monitors offers a wide range of CRT, flat panel and projection display systems for use
in training and simulation, military, medical, and industrial applications.
    
    Data Display CRTs offers a wide range of CRTs for use in data display screens,
including computer terminal monitors and medical monitoring equipment.
    
    Entertainment CRTs 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
  Interest rate exposure
 16




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Operations
   2010
    
    
    2009Amount
    
    
    %
    
    
    Amount
    
    
    %Net SalesDisplay SegmentMonitors
    
    $
    42,135
    
    
    
    59.8
    %
    
    $
    40,596
    
    
    
    55.7
    %Data Display CRTs
    
    
    7,181
    
    
    
    10.2
    
    
    
    8,003
    
    
    
    11.0Entertainment CRTs
    
    
    579
    
    
    
    0.8
    
    
    
    1,281
    
    
    
    1.7Component Parts
    
    
    181
    
    
    
    0.3
    
    
    
    263
    
    
    
    0.4Total Display Segment
    
    
    50,076
    
    
    
    71.1
    
    
    
    50,143
    
    
    
    68.8Wholesale Distribution Segment
    
    
    20,355
    
    
    
    28.9
    
    
    
    22,760
    
    
    
    31.2$
    70,431
    
    
    
    100.0
    %
    
    $
    72,903
    
    
    
    100.0
    %Costs and expensesCost of goods sold
    
    $
    46,651
    
    
    
    66.2
    %
    
    $
    48,023
    
    
    
    65.9
    %Selling and delivery
    
    
    6,961
    
    
    
    9.9
    
    
    
    7,388
    
    
    
    10.1General and administrative
    
    
    14,642
    
    
    
    20.8
    
    
    
    16,854
    
    
    
    23.168,254
    
    
    
    96.9
    
    
    
    72,265
    
    
    
    99.1Income from operations
    
    
    2,177
    
    
    
    3.1
    
    
    
    638
    
    
    
    0.9Interest expense
    
    
    (1,086
    )
    
    
    (1.5
    )
    
    
    (1,083
    )
    
    
    (1.5
    )Other income, net
    
    
    337
    
    
    
    0.5
    
    
    
    325
    
    
    
    0.4Income before income taxes
    
    
    1,428
    
    
    
    2.1
    
    
    
    (120
    )
    
    
    (0.2
    )Provision (benefit) for income taxes
    
    
    488
    
    
    
    0.7
    
    
    
    (434
    )
    
    
    (0.6
    )Net income
    
    $
    940
    
    
    
    1.4
    %
    
    $
    314
    
    
    
    0.4
    %
 17




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Fiscal 2010 Compared to Fiscal 2009
         18




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19




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Managements Discussion of Liquidity and Capital Resources
        20




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Transactions with Related Parties, Contractual Obligations, and Commitments
  21




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Contractual Obligations
  Payments due by periodLess than
    
    1 - 3
    
    3 - 5
    
    More thanTotal
    
    1 year
    
    years
    
    years
    
    5 yearsLong-term debt obligations
    
    $
    24,685
    
    
    $
    21,281
    
    
    $
    1,377
    
    
    $
    858
    
    
    $
    1,169Capital lease obligations
    
    
    420
    
    
    
    201
    
    
    
    185
    
    
    
    34
    
    
    
    Interest obligations on
long-term debt and capital
lease obligations (a)
    
    
    3,169
    
    
    
    1,722
    
    
    
    1,028
    
    
    
    257
    
    
    
    162Operating lease obligations
    
    
    6,504
    
    
    
    1,440
    
    
    
    2,213
    
    
    
    1,705
    
    
    
    1,146Purchase obligations
    
    
    1,855
    
    
    
    1,855
    
    
    
    
    
    
    
    
    
    
    
    Warranty reserve obligations
    
    
    451
    
    
    
    451
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    37,084
    
    
    $
    26,950
    
    
    $
    4,803
    
    
    $
    2,854
    
    
    $
    2,477
 
 (a)
    
    This line item was calculated by utilizing the effective rate on outstanding debt as of
February 28, 2010. Off-Balance Sheet Arrangements
  Critical Accounting Estimates
  Reserves on inventories
  22




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Revenue and profit or loss recognition
  Revenue Recognition: Principal Agent
Considerations,
 Revenue Recognition Construction-Type and Production-Type Contracts
 Revenue Recognition: Principal Agent Considerations
 Allowance for bad debts
  23




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Warranty reserves
  Other loss contingencies
  Recent Accounting Pronouncements
    24




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Impact of Inflation
  25




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 8. Financial Statements and Supplementary Data.
   Report of Independent Registered Public Accounting Firm
    
    
    27Consolidated Balance Sheets as of February 28, 2010 and February 28, 2009
    
    
    28Consolidated Statements of Operations for the years ended
February 28, 2010 and February 28, 2009
    
    
    30Consolidated Statements of Shareholders Equity and Comprehensive Income
for the years ended February 28, 2010 and February 28, 2009
    
    
    31Consolidated Statements of Cash Flows for the years ended
February 28, 2010 and February 28, 2009
    
    
    32Notes to Consolidated Financial Statements
    
    
    33
 26




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Report of Independent Registered Public Accounting Firm
 
     
 27




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February 28,
    
    
    February 28,2010
    
    
    2009AssetsCurrent AssetsCash
    
    $
    465
    
    
    $
    662Accounts receivable, less allowance for
Bad debts of $160 and $530, respectively
    
    
    11,673
    
    
    
    9,088Inventories, net
    
    
    37,997
    
    
    
    36,692Cost and estimated earnings in excess of
billings on uncompleted contracts
    
    
    4,089
    
    
    
    1,421Deferred income taxes
    
    
    2,879
    
    
    
    2,724Income taxes refundable
    
    
    162
    
    
    
    1,836Outside Investments
    
    
    78
    
    
    
    335Prepaid expenses and other current assets
    
    
    520
    
    
    
    612Total current assets
    
    
    57,863
    
    
    
    53,370Property, plant and equipment:Land
    
    
    585
    
    
    
    585Buildings
    
    
    8,292
    
    
    
    8,262Machinery and equipment
    
    
    22,174
    
    
    
    21,78631,051
    
    
    
    30,633Accumulated depreciation
    
    
    (25,322
    )
    
    
    (23,866
    )Net property, plant and equipment
    
    
    5,729
    
    
    
    6,767Goodwill
    
    
    1,376
    
    
    
    1,376Intangible assets, net
    
    
    1,843
    
    
    
    2,083Deferred income taxes
    
    
    760
    
    
    
    576Other assets
    
    
    32
    
    
    
    36Total assets
    
    $
    67,603
    
    
    $
    64,208
  28




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February 28,
    
    
    February 28,2010
    
    
    2009Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    9,232
    
    
    $
    7,175Accrued liabilities
    
    
    4,475
    
    
    
    5,245Billings in excess of cost and estimated earnings
on uncompleted contracts
    
    
    880
    
    
    
    108Current maturities of notes payable to officers
and directors
    
    
    511
    
    
    
    396Line of credit
    
    
    20,143
    
    
    
    3,493Current
maturities of long-term debt And financing lease obligations
    
    
    825
    
    
    
    544Total current liabilities
    
    
    36,066
    
    
    
    16,961Lines of credit
    
    
    
    
    
    
    16,498Long-term debt, less current maturities
    
    
    957
    
    
    
    1,707Financing lease obligations, less current maturities
    
    
    221
    
    
    
    162Notes payable to officers and directors,
less current maturities
    
    
    2,447
    
    
    
    1,992Other long-term liabilities
    
    
    415
    
    
    
    123Total liabilities
    
    
    40,106
    
    
    
    37,443Commitments and contingencies (See Note 15)
    
    
    
    
    
    
    Shareholders 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
February 28, 2010, and 9,732 issued and 8,601
outstanding at February 28, 2009
    
    
    7,293
    
    
    
    7,293Additional paid-in capital
    
    
    193
    
    
    
    147Retained earnings
    
    
    27,401
    
    
    
    26,461Accumulated other comprehensive income (loss)
    
    
    
    
    
    
    (90
    )Treasury stock, 1,367 shares at February 28, 2010
and 1,131 shares at February 28, 2009 at cost
    
    
    (7,390
    )
    
    
    (7,046
    )Total shareholders equity
    
    
    27,497
    
    
    
    26,765Total liabilities and shareholders equity
    
    $
    67,603
    
    
    $
    64,208
  29




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February 28,
    
    
    February 28,2010
    
    
    2009Net sales
    
    $
    70,431
    
    
    $
    72,903Cost of goods sold
    
    
    46,651
    
    
    
    48,023Gross profit
    
    
    23,780
    
    
    
    24,880Operating expensesSelling and delivery
    
    
    6,961
    
    
    
    7,388General and administrative
    
    
    14,642
    
    
    
    16,85421,603
    
    
    
    24,242Operating income
    
    
    2,177
    
    
    
    638Other income (expense)Interest expense
    
    
    (1,086
    )
    
    
    (1,083
    )Other, net
    
    
    337
    
    
    
    325(749
    )
    
    
    (759
    )Income before income taxes
    
    
    1,428
    
    
    
    (120
    )Provision (benefit) for income taxes
    
    
    488
    
    
    
    (434
    )Net income
    
    $
    940
    
    
    $
    314Net income per share  basic
    
    $
    0.11
    
    
    $
    0.03Net income per share  diluted
    
    $
    0.11
    
    
    $
    0.03Average shares outstanding  basic
    
    
    8,427
    
    
    
    9,315Average shares outstanding  diluted
    
    
    8,744
    
    
    
    9,664
  30




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CurrentAccumulated
    
    
    
    
    
    
    YearAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Compre-Common
    
    
    Share
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    hensiveShares*
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Stock
    
    
    IncomeBalance, February 29, 2008
    
    
    9,491
    
    
    
    7,293
    
    
    
    127
    
    
    
    26,147
    
    
    
    85
    
    
    
    (2,702
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314
    
    
    
    
    
    
    
    
    
    
    $
    314Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (175
    )
    
    
    
    
    
    
    (175
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    139Issuance of common stock
from treasury
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77Repurchase of treasury stock
    
    
    (899
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,421
    )Share based compensation
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    Balance, February 28, 2009
    
    
    8,601
    
    
    
    7,293
    
    
    
    147
    
    
    
    26,461
    
    
    
    (90
    )
    
    
    (7,046
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    940
    
    
    
    
    
    
    
    
    
    
    $
    940Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    90Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,030Repurchase of treasury stock
    
    
    (229
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (344
    )Share based compensation
    
    
    
    
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    Adjustment to correct shares
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, February 28, 2010
    
    
    8,365
    
    
    $
    7,293
    
    
    $
    193
    
    
    $
    27,401
    
    
    $
    
    
    
    $
    (7,390
    )
 
 *
    
    Common Shares are shown net of Treasury Shares  31




---



##### Table of Contents



February 28,
    
    
    February 28,2010
    
    
    2009Operating ActivitiesNet income
    
    $
    940
    
    
    $
    314Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    2,196
    
    
    
    2,387Provision for bad debts
    
    
    230
    
    
    
    406Reserves on inventories
    
    
    1,399
    
    
    
    1,247Non-cash charge for share based compensation
    
    
    46
    
    
    
    20Deferred income taxes
    
    
    (340
    )
    
    
    (110
    )Loss on disposal of equipment
    
    
    
    
    
    
    36Change in other assets and liabilities
    
    
    5
    
    
    
    Changes in working capital items, net of effect of acquisitions:Accounts receivable
    
    
    (2,815
    )
    
    
    879Inventories
    
    
    (2,704
    )
    
    
    (3,389
    )Cost, estimated earnings and billings, net on uncompleted contracts
    
    
    (1,896
    )
    
    
    912Prepaid expenses and other assets
    
    
    92
    
    
    
    (241
    )Decrease (increase) in income taxes refundable
    
    
    1,674
    
    
    
    (1,164
    )Accounts payable and accrued liabilities
    
    
    1,579
    
    
    
    12Net cash provided by operating activities
    
    
    406
    
    
    
    1,309Investing ActivitiesCapital expenditures
    
    
    (418
    )
    
    
    (991
    )Patents
    
    
    
    
    
    
    (12
    )License Agreement
    
    
    (500
    )
    
    
    Sales of (investments in) equity securities
    
    
    257
    
    
    
    (334
    )Net cash used in investing activities
    
    
    (661
    )
    
    
    (1,337
    )Financing ActivitiesProceeds from long-term debt, lines of credit
and financing lease obligations
    
    
    13,760
    
    
    
    24,763Repayments of long-term debt, lines of credit
and financing lease obligations
    
    
    (14,018
    )
    
    
    (20,552
    )Proceeds from notes payable from officers and directors
    
    
    1,166
    
    
    
    115Repayments of notes payable to officers and directors
    
    
    (596
    )
    
    
    (2,459
    )Purchases and retirements of common stock and purchases of treasury stock
    
    
    (344
    )
    
    
    (2,638
    )Net cash used in financing activities
    
    
    (32
    )
    
    
    (771
    )Effect of exchange rates on cash
    
    
    90
    
    
    
    (175
    )Net change in cash
    
    
    (197
    )
    
    
    (974
    )Cash, beginning of year
    
    
    662
    
    
    
    1,636Cash, end of year
    
    $
    465
    
    
    $
    662
 
 32




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##### Table of Contents



Note 1. Summary of Significant Accounting Policies
 Fiscal Year
  Nature of Business
  Principles of Consolidation
  Basis of Accounting
  Use of Estimates
  33




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##### Table of Contents



Banking and Liquidity
    Revenue Recognition
     34




---



##### Table of Contents



Research and Development
  Financial Instruments
  Accounts Receivable and Allowance for Doubtful Accounts
  Warranty Reserves
  Inventories
   35




---



##### Table of Contents



Property, Plant and Equipment
   Goodwill and Other Intangibles
   Stock-Based Compensation Plans
  36




---



##### Table of Contents



Comprehensive Income
 Comprehensive Income
 Stock Repurchase Program
  Taxes on Income
     37




---



##### Table of Contents



Foreign Currency Translations
  Earnings per Share
   Average Shares
    
    
    Net IncomeNet Income
    
    
    Outstanding
    
    
    Per Share2010Basic
    
    $
    940
    
    
    
    8,427
    
    
    $
    0.11Effect of dilution:Options
    
    
    
    
    
    
    317Diluted
    
    $
    940
    
    
    
    8,744
    
    
    $
    0.112009Basic
    
    $
    314
    
    
    
    9,315
    
    
    $
    0.03Effect of dilution:Options
    
    
    
    
    
    
    349Diluted
    
    $
    314
    
    
    
    9,664
    
    
    $
    0.03
  Segment Reporting
  Recent Accounting Pronouncements
  38




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##### Table of Contents



39




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##### Table of Contents



Note 2. Costs and Estimated Earnings Related to Billings on Uncompleted Contracts
  February 28,
    
    
    February 28,2010
    
    
    2009Costs incurred to date on uncompleted contracts
    
    $
    5,476
    
    
    $
    3,423Estimated earnings recognized to date on these contracts
    
    
    2,934
    
    
    
    1,5158,410
    
    
    
    4,938Billings to date
    
    
    (5,201
    )
    
    
    (3,625
    )Costs and estimated earnings in excess of billings, net
    
    $
    3,209
    
    
    $
    1,313Costs and estimated earnings in excess of billings
    
    $
    4,089
    
    
    $
    1,421Billings in excess of costs and estimated earnings
    
    
    (880
    )
    
    
    (108
    )$
    3,209
    
    
    $
    1,313
   40




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##### Table of Contents



Note 3. Intangible Assets
  February 28, 2010
    
    
    February 28, 2009Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationCustomer lists
    
    $
    3,611
    
    
    $
    2,466
    
    
    $
    3,611
    
    
    $
    2,124Non-compete
agreements
    
    
    1,245
    
    
    
    1,234
    
    
    
    1,245
    
    
    
    1,054Patents/designs
    
    
    777
    
    
    
    516
    
    
    
    777
    
    
    
    395Other intangibles
    
    
    649
    
    
    
    223
    
    
    
    149
    
    
    
    126$
    6,282
    
    
    $
    4,439
    
    
    $
    5,782
    
    
    $
    3,699
  Year
    
    Amort. Exp.2011
    
    $
    3392012
    
    $
    2832013
    
    $
    2382014
    
    $
    2382015
    
    $
    163Thereafter
    
    $
    582
 Note 4. Business Acquisitions
  41




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##### Table of Contents



Note 5. Inventories
  February 28,
    
    
    February 28,2010
    
    
    2009Raw materials
    
    $
    20,464
    
    
    $
    20,086Work-in-process
    
    
    8,396
    
    
    
    7,938Finished goods
    
    
    13,789
    
    
    
    12,24542,649
    
    
    
    40,269Reserves for obsolescence
    
    
    (4,652
    )
    
    
    (3,577
    )$
    37,997
    
    
    $
    36,692
  Note 6. Long-Term Debt
  February 28,
    
    
    February 28,2010
    
    
    2009Note 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 February 28, 2010);
monthly principal payments of $50 plus
accrued interest, payable through July
2011; collateralized by all assets of the
Company.
    
    $
    1,128
    
    
    $
    1,553Mortgage payable to bank; interest rate at
Federal Home Loan Bank Board Index rate
plus 1.95% (7.25% as of February 28, 2010);
monthly principal and interest payments of
$5 payable through October 2021;
collateralized by land and building of
Teltron Technologies, Inc.
    
    
    454
    
    
    
    478Other
    
    
    
    
    
    
    331,582
    
    
    
    2,064Financing lease obligations
    
    
    421
    
    
    
    3492,003
    
    
    
    2,413Less current maturities
    
    
    (825
    )
    
    
    (544
    )$
    1,178
    
    
    $
    1,869
  Year
    
    Amount2011
    
    $
    8252012
    
    
    6812013
    
    
    902014
    
    
    502015
    
    
    51Thereafter
    
    
    306$
    2,003
 42




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##### Table of Contents



Note 7. Lines of Credit
      Note 8. Notes Payable to Officers and Directors
  43




---



##### Table of Contents



Note 9. Accrued Expenses and Warranty Obligations
  2010
    
    
    2009Balance at beginning of year
    
    $
    585
    
    
    $
    576Provision for current year sales
    
    
    761
    
    
    
    1,713Warranty costs incurred
    
    
    (895
    )
    
    
    (1,704
    )Balance at end of year
    
    $
    451
    
    
    $
    585
  February 28,
    
    
    February 28,2010
    
    
    2009Accrued compensation and benefits
    
    $
    1,089
    
    
    $
    1,095Accrued liability to issue stock
    
    
    1,625
    
    
    
    1,625Accrued warranty
    
    
    451
    
    
    
    585Accrued customer advances
    
    
    77
    
    
    
    128Accrued other
    
    
    1,233
    
    
    
    1,813$
    4,475
    
    
    $
    5,245
 Note 10. Stock Options
  44




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##### Table of Contents



AverageNumber of
    
    
    ExerciseShares
    
    
    Price(in thousands)
    
    
    Per ShareOutstanding at February 29, 2008
    
    
    124
    
    
    $
    5.31Granted
    
    
    6
    
    
    
    8.08Forfeited or expired
    
    
    (43
    )
    
    
    5.40Outstanding at February 28, 2009
    
    
    87
    
    
    $
    5.46Granted
    
    
    6
    
    
    
    3.27Forfeited or expired
    
    
    
    
    
    
    Outstanding at February 28, 2010
    
    
    93
    
    
    $
    5.21Options exercisableFebruary 28, 2010
    
    
    52
    
    
    $
    3.94February 28, 2009
    
    
    46
    
    
    
    3.40
 Options Outstanding
    
    Options ExercisableNumber
    
    Weighted Average
    
    
    
    
    
    NumberOutstanding at
    
    Remaining
    
    Weighted
    
    Exercisable at
    
    WeightedRange
    
    
    February 28, 2010
    
    Contractual Life
    
    Average
    
    February 28, 2010
    
    Averageof Exercise Prices
    
    
    (in thousands)
    
    (in years)
    
    Exercise Price
    
    (in thousands)
    
    Exercise Price$2.20 - 2.20
    
    
    
    20
    
    
    
    1.8
    
    
    $
    2.20
    
    
    
    20
    
    
    $
    2.203.25 - 3.40
    
    
    
    26
    
    
    
    0.9
    
    
    
    3.25
    
    
    
    20
    
    
    
    3.257.71 - 8.08
    
    
    
    47
    
    
    
    5.7
    
    
    
    7.78
    
    
    
    12
    
    
    
    8.0093
    
    
    
    3.5
    
    
    $
    5.32
    
    
    
    52
    
    
    $
    3.94
  45




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##### Table of Contents



Note 11. Taxes on Income
  Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009Current:Federal
    
    $
    85
    
    
    $
    (400
    )State
    
    
    64
    
    
    
    76Foreign
    
    
    
    
    
    
    149
    
    
    
    (324
    )Deferred:Federal
    
    
    295
    
    
    
    (96
    )State
    
    
    44
    
    
    
    (14
    )339
    
    
    
    (110
    )Total
    
    $
    488
    
    
    $
    (434
    )
  Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009U.S. operations
    
    $
    1,563
    
    
    $
    (52
    )Foreign operations
    
    
    (135
    )
    
    
    (68
    )$
    1,428
    
    
    $
    (120
    )
  Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009Statutory U.S. federal income tax rate
    
    $
    531
    
    
    $
    (39
    )State income taxes, net of federal benefit
    
    
    62
    
    
    
    (2
    )Foreign operating income (loss)
    
    
    (46
    )
    
    
    (23
    )Research and experimentation credits
    
    
    (128
    )
    
    
    (408
    )Deemed Dividend Credit
    
    
    10
    
    
    
    State NOL adj  Fed. benefit
    
    
    41
    
    
    
    Transfer pricing adjustment
    
    
    
    
    
    
    42Non-deductible expenses
    
    
    36
    
    
    
    55Domestic production activities deduction
    
    
    (45
    )
    
    
    (23
    )Other
    
    
    27
    
    
    
    (34
    )Taxes at effective income tax rate
    
    $
    488
    
    
    $
    (434
    )
 46




---



##### Table of Contents



Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009Deferred tax assets:Uniform capitalization costs
    
    $
    646
    
    
    $
    720Inventory reserves
    
    
    1,768
    
    
    
    1,359Accrued liabilities
    
    
    669
    
    
    
    712Allowance for doubtful accounts
    
    
    61
    
    
    
    231Amortization of intangibles
    
    
    673
    
    
    
    5593,817
    
    
    
    3,581State NOL
    
    
    79
    
    
    
    134Foreign tax credit carryforward
    
    
    108
    
    
    
    107Deferred tax liabilities:Basis difference of property, plant and equipment
    
    
    (325
    )
    
    
    (483
    )Other
    
    
    (40
    )
    
    
    (39
    )Net deferred tax assets
    
    $
    3,639
    
    
    $
    3,300Current asset
    
    $
    2,879
    
    
    $
    2,724Non-current asset
    
    
    760
    
    
    
    576$
    3,639
    
    
    $
    3,300
   47




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##### Table of Contents



Note 12. Segment Information
     Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009Net SalesDisplay SegmentMonitors
    
    $
    42,135
    
    
    $
    40,596Data display CRTs
    
    
    7,181
    
    
    
    8,003Entertainment CRTs
    
    
    579
    
    
    
    1,281Component parts
    
    
    182
    
    
    
    26350,077
    
    
    
    50,143Wholesale Distribution Segment
    
    
    20,354
    
    
    
    22,760$
    70,431
    
    
    $
    72,903
 Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009Income (loss) before income taxesDisplay SegmentMonitors
    
    $
    2,168
    
    
    $
    1,252Data display CRTs
    
    
    704
    
    
    
    504Entertainment CRTs
    
    
    (571
    )
    
    
    (173
    )Component parts
    
    
    92
    
    
    
    3172,393
    
    
    
    1,900Wholesale Distribution Segment
    
    
    (216
    )
    
    
    (1,262
    )2,177
    
    
    
    638Other income (expense)Interest expense
    
    
    (1,086
    )
    
    
    (1,083
    )Other, net
    
    
    337
    
    
    
    325$
    1,428
    
    
    $
    (120
    )
 48




---



##### Table of Contents



Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009Depreciation and amortizationDisplay SegmentMonitors
    
    $
    1,624
    
    
    $
    1,804Data display CRTs
    
    
    152
    
    
    
    166Entertainment CRTs
    
    
    32
    
    
    
    34Component parts
    
    
    5
    
    
    
    51,813
    
    
    
    2,009Wholesale Distribution Segment
    
    
    383
    
    
    
    378$
    2,196
    
    
    $
    2,387
 Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009Capital Expenditures**Display SegmentMonitors
    
    $
    146
    
    
    $
    770Data display CRTs
    
    
    
    
    
    
    82Entertainment CRTs
    
    
    
    
    
    
    Component parts
    
    
    
    
    
    
    146
    
    
    
    852Wholesale Distribution Segment
    
    
    272
    
    
    
    139$
    418
    
    
    $
    991
 
 **
    
    Includes non-cash additions and additions to fixed assets through business acquisitions. Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009Identifiable AssetsDisplay SegmentMonitors
    
    $
    43,923
    
    
    $
    49,232Data display CRTs
    
    
    15,110
    
    
    
    4,576Entertainment CRTs
    
    
    763
    
    
    
    2,181Component parts
    
    
    495
    
    
    
    90460,291
    
    
    
    56,785Wholesale Distribution Segment
    
    
    7,312
    
    
    
    7,315$
    67,603
    
    
    $
    64,208
 49




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##### Table of Contents



Fiscal Year EndedFebruary 28,
    
    
    February 28,2010
    
    
    2009Geographic sales informationUnited States
    
    $
    62,557
    
    
    $
    63,399All other
    
    
    7,874
    
    
    
    9,504$
    70,431
    
    
    $
    72,903
 Note 13. Benefit Plan
  Note 14. Commitments and Contingencies
 Operating Leases
   Fiscal Year
    
    Amount2011
    
    $
    1,4402012
    
    
    1,1732013
    
    
    1,0402014
    
    
    8602015
    
    
    845Thereafter
    
    
    1,146$
    6,504
 Related Party Leases
   Fiscal Year
    
    Amount2011
    
    $
    3142012
    
    
    3142013
    
    
    3142014
    
    
    3142015
    
    
    314Thereafter
    
    
    1,102$
    2,672
 50




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##### Table of Contents



Legal Proceedings
     Note 15. Concentrations of Risk and Major Customers
   51




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##### Table of Contents



Note 16. Supplemental Cash Flow Information
 Fiscal Year Ended(in thousands)February 28,
    
    
    February 28,2010
    
    
    2009Cash paid for:Interest
    
    $
    1,057
    
    
    $
    1,083Income taxes, net of refunds
    
    $
    (847
    )
    
    $
    751
 Non-cash investing and financing activities:
  Note 17. Selected Quarterly Financial Data (unaudited)
  2010First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter(in thousands, except per share amounts)Net Sales
    
    $
    16,351
    
    
    $
    16,840
    
    
    $
    17,513
    
    
    $
    19,727Gross profit
    
    
    5,838
    
    
    
    5,968
    
    
    
    5,185
    
    
    
    6,789Net income (loss)
    
    
    151
    
    
    
    26
    
    
    
    70
    
    
    
    693Basic net income
(loss) per share
    
    $
    0.02
    
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    0.08Diluted net income
(loss) per share
    
    $
    0.02
    
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    0.08
 2009First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter(in thousands, except per share amounts)Net Sales
    
    $
    19,226
    
    
    $
    18,988
    
    
    $
    18,208
    
    
    $
    16,481Gross profit
    
    
    7,192
    
    
    
    7,068
    
    
    
    5,619
    
    
    
    5,001Net income (loss)
    
    
    580
    
    
    
    553
    
    
    
    (265
    )
    
    
    (554
    )Basic net income
(loss) per share
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    (0.03
    )
    
    $
    (0.06
    )Diluted net income
(loss) per share
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    (0.03
    )
    
    $
    (0.06
    )
 52




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##### Table of Contents



Note 18. Subsequent Events
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A (T). Controls and Procedures.
 Evaluation of disclosure controls and procedures.
    Changes in Internal Controls
  Managements Report on Internal Control Over Financial Reporting
  53




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##### Table of Contents



Internal Control- Integrated
Framework.
  Limitations on the effectiveness of controls.
  
 Item 9B. Other Information.
  54




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
  
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accounting Fees and Services.
  55




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules.
    Report of Independent Registered Public Accounting FirmCondensed Consolidated Balance Sheets as of February 28, 2010 and February 28, 2009.Condensed Consolidated Statements of Operations  Fiscal Years Ended
February 28, 2010 and February 28, 2009.Condensed Consolidated Statements of Shareholders Equity and Comprehensive Income -
Fiscal Years Ended February 28, 2010 and February 28, 2009.Condensed Consolidated Statements of Cash Flows  Fiscal Years Ended February 28, 2010
and February 28, 2009.Notes to Condensed Consolidated Financial Statements
    Exhibit Number
    
    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, 201010(f)
    
    Amendment to Loan and Security Agreement dated May 24, 201010(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 2009 Annual Report on
Form 10-K).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).21
    
    Subsidiary companies23.1
    
    Consent of Carr, Riggs & Ingram, LLC31.1
    
    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
  Date:  May 28, 2010
    VIDEO DISPLAY CORPORATIONBy:
    /s/ Ronald D. OrdwayRonald D. OrdwayChairman of the Board and
Chief Executive Officer POWER OF ATTORNEY
   Signature -Name
    
    Capacity
    
    Date/s/ Ronald D. Ordway

Ronald D. Ordway
    
    Chief Executive Officer,
Treasurer and Director(Principal Executive Officer)
    
    May 28, 2010/s/ Gregory L. Osborn

Gregory L. Osborn
    
    Chief Financial Officer
(Principal Financial Officer)
    
    May 28, 2010/s/ Murray Fox

Murray Fox
    
    Director
    
    May 28, 2010/s/ Carolyn Howard

Carolyn Howard
    
    Director
    
    May 28, 2010/s/ Peter Frend

Peter Frend
    
    Director
    
    May 28, 2010/s/ Carleton Sawyer

Carleton Sawyer
    
    Director
    
    May 28, 2010
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Report of Independent Registered Public Accounting Firm




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##### Table of Contents



Column A
    
    Column B
    
    Column C
    
    Column D
    
    Column EAdditionsBalance at
    
    Charged to
    
    Charged to
    
    
    
    
    
    Balance atBeginning
    
    Costs and
    
    Other
    
    
    
    
    
    End ofDescription
    
    of Period
    
    Expenses
    
    Accounts
    
    Deductions
    
    PeriodAllowance for doubtful
accounts:February 28, 2010
    
    $
    608
    
    
    $
    230
    
    
    $
    
    
    
    $
    678
    
    
    $
    160February 28, 2009
    
    
    201
    
    
    
    462
    
    
    
    
    
    
    
    55
    
    
    
    608Reserves for inventory:February 28, 2010
    
    $
    3,577
    
    
    $
    1,399
    
    
    $
    
    
    
    $
    324
    
    
    $
    4,652February 29, 2009
    
    
    5,551
    
    
    
    1,247
    
    
    
    
    
    
    
    3,221
    
    
    
    3,577