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Video Display Corp. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: May 27, 2011 06:17PM
Video Display Corp. (VIDE) filed Annual Report for the period ended 2011-02-28. Video Display Corp. has a market cap of $30.8 million; its shares were traded at around $3.54 with a P/E ratio of 14.7 and P/S ratio of 0.4.
Highlight of Business Operations:
Although Southwest Vacuum markets its products to independent customers, the majority of electron guns produced by the Company are consumed internally among the Companys own CRT manufacturing facilities. Sales to these related divisions, which have been eliminated in the consolidated financial statements, amounted to approximately $223,000 and $234,000 for fiscal 2011 and 2010, respectively.
The Company is currently in the process of applying for patents on newly developed products and technology and holds patents with respect to certain products and services. The Company also sells products under various trademarks and trade names. Additionally, the Company licenses certain electronic technology to other manufacturing companies, which generated royalty revenues of approximately $224,000 and $258,000 in fiscal 2011 and 2010, respectively. The Company believes that its patents and trademarks are of value and intends to protect its rights when, in its view, these rights are infringed upon. The Companys key patents expire in 2014. The Company believes that success in its industry primarily will be dependent upon incorporating emerging technology into new product line introductions, frequent product enhancements, and customer support and service.
On December 23, 2010, the Company and its subsidiaries executed a new Credit Agreement with RBC Bank and Community & Southern Bank (Collectively, the Banks) to provide new financing to the Company to replace the existing credit agreement with RBC Bank that terminated in conjunction with this Agreement. The new Agreement provided for a line of credit of up to $17.5 million and two term loans of $3.5 million and $3.0 million. The outstanding balance at February 28, 2011 of the line of credit was $13.3 million and the balances of the term loans were $3.4 million and $3.0 million, respectively. A copy of the new Credit Agreement was filed in an 8-K document with the Securities and Exchange Commission on December 30, 2010. These loans are secured by all assets and personal property of the Company and a limited guarantee of the Chief Executive Officer of $3.0 million The $3.0 million term loan is secured by real estate property of the Company including a building owned by the Companys Fox International subsidiary. The Fox International subsidiary was sold to FI Acquisitions on March 1, 2011(see Note 19- Subsequent
The Companys backlog is comprised of undelivered, firm customer orders, which are scheduled to ship within eighteen months. The Companys backlog was approximately $30.9 million at February 28, 2011 and $31.9 million at February 28, 2010. It is anticipated that more than 87% of the February 28, 2011 backlog will ship during fiscal 2012.
The Company, primarily through its Aydin, Lexel, and Display Systems subsidiaries, had contracts with the U.S. government (principally the Department of Defense and Department of Defense subcontractors) which generated net sales of approximately $27.2 million and $18.6 million for fiscal 2011 and 2010, respectively. The Companys costs and earnings in excess of billings on these contracts were approximately $2.2 million at February 28, 2011 and $4.1 million at February 28, 2010. The Company had billings in excess of costs and earnings on these contracts of $1.0 million at February 28, 2011 and $0.9 million at February 28, 2010. These contracts are typically less than twelve months in duration and specify a delivery schedule for units ordered. Most of these government contracts specify a designated number of units to be delivered at a specified price, rather than on a cost plus basis. These contracts are subject to government audit to ensure conformity with design specifications.
The Company utilizes flat panel displays in many of its monitor units. These flat panels are purchased from OEMs. The consolidated net sales generated in fiscal 2011 from products utilizing flat panel technology were $16.4 million as compared to $11.1 million in fiscal 2010. Since a significant portion of the Companys revenues is generated from the replacement market, the Company has the opportunity to see trends in OEM sales, and while the growth in flat panel products is outpacing growth in CRT products, the CRT market remains a quite viable market for its products. As trends continue to become more defined, and replacement of these products occurs in five to seven years, the Company foresees a bigger impact and utilization of flat panel products in its business. There is competition in the area of flat panel technology and the Company will strive to rely on its ability to adapt and incorporate designs into its future products so that it may compete in a profitable manner. Currently, the flat panel market is made up of many competitors of various sizes, none holding a dominant position in the flat panel marketplace.
Stocks Discussed: VIDE,