Video Display Corp. has a market cap of $33.7 million; its shares were traded at around $4.025 with a P/E ratio of 25.16 and P/S ratio of 0.48. VIDE is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Consolidated net sales increased $4.0 million for the three months ended May 31, 2010 compared to the three months ended May 31, 2009. Display segment sales increased $2.7 million for the three-month comparative period and sales within the Wholesale Distribution segment increased $1.3 million for the three-month comparative period.
The net increase in Display Segment sales for the three months ended May 31, 2010 is primarily attributed to the monitor division, as compared to the same period ended May 31, 2009. The Monitor revenues increased $3.9 million over the three-month period primarily due to the implementation of long-term contracts. As these are long term contracts, the Company expects the Monitor division to continue to perform well throughout the year. The Data Display CRT revenues decreased $1.1 million over the three-month period primarily due to the decline in the replacement CRT market. Entertainment CRTs revenues declined $0.1 million over the comparable three-month period. A significant portion of the entertainment divisions sales are to major television retailers as replacements for products sold under manufacturer and extended warranties. Due to continued lower retail sales prices for mid-size television sets (25 to 30), fewer extended warranties were sold by retailers, a trend consistent with recent prior fiscal years. The Company remains the primary supplier of product to meet manufacturers standard warranties. Growth in this division will be negatively impacted by the decreasing number of extended warranties sold for the larger, more expensive sets.
As of May 31, 2010, the Company had total cash of $0.9 million. The Companys working capital was $22.3 million and $21.8 million at May 31, 2010 and February 28, 2010, respectively. In recent years, the Company has financed its growth and cash needs primarily through income from operations, borrowings under revolving credit facilities, advances from the Companys Chief Executive Officer and long-term debt. Liquidity provided by operating activities of the Company is reduced by working capital requirements, largely inventories and accounts receivable, debt service, capital expenditures, product line additions and dividends.
The Company is in negotiations with RBC Bank for a new senior secured credit facility. The bank has indicated its intentions to renew with Video Display Corporation and is interviewing for a partner to syndicate the loans. The $21.5 million facility is expected to have three parts, a $15.5 million LOC, a $3.0 million equipment term loan for 5 years, and a $3.0 million real estate term loan for 10 years. The LOC is for a period of 35 months. The initial pricing is Libor +300 bps, with a minimum interest rate of 4% and will adjusted quarterly based on a quarterly fixed charge cover ratio test with the minimum of 4% in effect. The Company is also considering an asset based loan facility with RBC Bank and other institutions.
Cash provided by operations for the three months ended May 31, 2010 was $1.0 million as compared to cash used in operations of $0.1 million for the three months ended May 31, 2009. This net increase in cash provided is primarily the result of an increase in profitability from $0.2 million for the three months ended May 31, 2009 to $0.6 million for the three months ended May 31, 2010 and cash provided by the net change in Accounts Receivable/Accounts Payable of $1.0 million for the three months ended May 31, 2010 compared to $0.4 million for the three months ended May 31, 2009.
During 2007, the Company acquired the Cathode Ray Tube Manufacturing and Distribution Business and certain other assets of Clinton Electronics Corp. (Clinton), including inventory, fixed assets, for a total purchase price of $2,550,000, pursuant to an Asset Purchase Agreement between the parties (the APA). The form of consideration for the assets acquired included: (i) a $1.0 million face value Convertible Note; (ii) an agreement to deliver a stock certificate representing Company Common Shares having a $1,125,000 in market value of the Companys common stock in January of 2008; and (iii) an agreement to deliver a stock certificate representing Company Common Shares having a $500,000 in market value of the Companys common stock in January of 2009. The Company has paid the $1.0 million Note Payable. The Company is disputing certain representations made by Clinton in the APA including but not limited to representations concerning revenue, expenses, and inventory. As a result of this dispute, the Company has not issued the stock certificates scheduled for delivery January of 2008 and January of 2009. As such, the Company has accrued a potential liability of $1,625,000 and this accrued liability is reflected in the Companys current balance sheet.
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