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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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FORM 10-Q/A

QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended November 30, 2002

Commission File Number 0-13394

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VIDEO DISPLAY CORPORATION
(Exact name of registrant as specified on its charter)

Georgia (State or other jurisdiction of incorporation or organization)		58-1217564 (I.R.S.Employer Identification No.)
1868 Tucker Industrial Drive, Tucker, Georgia 30084 (Address of principal executive offices)
Registrant's telephone number including area code:		770-938-2080

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date:

Class		Outstanding at November 30, 2002
Common Stock, No Par Value		4,761,833

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Video Display Corporation and Subsidiaries

INDEX

						Page
PART I.		FINANCIAL INFORMATION
		Item 1.    Financial Statements
				Consolidated balance sheets—November 30, 2002 (unaudited) and February 28, 2002 (audited)		3-4
				Consolidated statements of operations—Three and nine months ended November 30, 2002 and 2001 (unaudited)		5
				Consolidated statements of shareholders' equity and comprehensive income (loss)—Twelve months ended February 28, 2002 (audited) and the nine months ended November 30, 2002 (unaudited)		6
				Consolidated statements of cash flows—Nine months ended November 30, 2002 and 2001 (unaudited)		7
				Notes to consolidated financial statements—November 30, 2002 (unaudited)		8-13
		Item 2.    Management's Discussion and Analysis of Financial Condition and                 Results of Operations				14-18
		Item 3.    Quantitative and Qualitative Disclosure About Market Risk				19
		Item 4.    Controls and Procedures				19
PART II.		OTHER INFORMATION
		Item 1.    Legal Proceedings				20
		Item 2.    Changes in Securities and Use of Proceeds				20
		Item 3.    Defaults upon its Senior Securities				20
		Item 4.    Submission of Matters to a Vote of Security Holders				20
		Item 5.    Other Information				20
		Item 6.    Exhibits and Reports on Form 8-K				20
SIGNATURES						21
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002						22-23
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (Exhibit 99.1)						24

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Video Display Corporation and Subsidiaries

Consolidated Balance Sheets

			November 30, 2002			February 28, 2002
			(unaudited)			(audited)
Assets
Current assets
	Cash and cash equivalents		$	1,894,000		$	1,615,000
	Accounts receivable, less allowance for possible losses of $515,000 and $343,000			12,609,000			12,712,000
	Inventories (Note D)			29,978,000			31,920,000
	Prepaid expenses			4,203,000			3,276,000
Total current assets				48,684,000			49,523,000
Property, plant and equipment:
	Land			600,000			600,000
	Buildings			7,050,000			6,814,000
	Machinery and equipment			18,323,000			18,845,000
				25,973,000			26,259,000
	Accumulated depreciation and amortization			(17,222,000	)		(16,891,000	)
Net property, plant, and equipment				8,751,000			9,368,000
Other assets				2,344,000			2,950,000
Total assets			$	59,779,000		$	61,841,000

The accompanying notes are an integral part of these statements.

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Video Display Corporation and Subsidiaries

Consolidated Balance Sheets—Continued

			November 30, 2002			February 28, 2002
			(unaudited)			(audited)
Liabilities and Shareholders' Equity
Current liabilities
	Accounts payable		$	7,141,000		$	4,808,000
	Accrued liabilities			4,147,000			4,800,000
	Accrued foreign currency translation loss			1,296,000			—
	Lines of credit (Note F)			9,191,000			3,779,000
	Notes payable to shareholders			7,617,000			7,124,000
	Current maturities of long-term debt (Note E)			2,739,000			1,443,000
Total current liabilities				32,131,000			21,954,000
Convertible subordinated debentures				1,000,000			1,000,000
Lines of credit (Note F)				—			8,785,000
Long-term debt, less current maturities (Note E)				5,965,000			4,955,000
Notes payable to shareholders, less current maturities				151,000			217,000
Deferred income taxes				113,000			113,000
Total liabilities				39,360,000			37,024,000
Minority interests				188,000			158,000
Redeemable common stock				100,000			—
Commitments				—			—
Shareholders' Equity
	Preferred stock, no par value—2,000,000 shares authorized; none issued and outstanding			—			—
	Common stock, no par value—10,000,000 shares authorized; 4,762,000 and 4,749,000 issued and outstanding			3,791,000			3,826,000
Additional paid in capital				92,000			92,000
Retained earnings				17,906,000			22,134,000
Accumulated other comprehensive loss				(1,658,000	)		(1,393,000	)
Total shareholders' equity				20,131,000			24,659,000
Total liabilities and shareholders' equity			$	59,779,000		$	61,841,000

The accompanying notes are an integral part of these statements.

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Video Display Corporation and Subsidiaries

Consolidated Statements of Operations (unaudited)

			Three Months Ended November 30,						Nine Months Ended November 30,
			2002			2001			2002			2001
Net sales			$	18,240,000		$	17,034,000		$	56,666,000		$	53,334,000
Cost of goods sold				17,281,000			11,248,000			43,924,000			36,338,000
	Gross profit			959,000			5,786,000			12,742,000			16,996,000
Operating expenses
	Selling and delivery			1,926,000			1,601,000			5,867,000			4,780,000
	General and administrative			3,714,000			3,091,000			9,818,000			9,292,000
	Recognized foreign currency translation loss			1,296,000			—			1,296,000			—
				6,936,000			4,692,000			16,981,000			14,072,000
	Operating profit (loss)			(5,977,000	)		1,094,000			(4,239,000	)		2,924,000
Other income (expense)
	Interest expense			(447,000	)		(324,000	)		(1,153,000	)		(1,252,000	)
	Other, net			66,000			(24,000	)		158,000			24,000
				(381,000	)		(348,000	)		(995,000	)		(1,228,000	)
	Income (loss) before minority interest			(6,358,000	)		746,000			(5,234,000	)		1,696,000
Minority interest expense				18,000			2,000			30,000			6,000
	Income (loss) before income taxes			(6,376,000	)		744,000			(5,264,000	)		1,690,000
Income tax expense (benefit)				(1,452,000	)		291,000			(1,036,000	)		652,000
Net income (loss)			$	(4,924,000	)	$	453,000		$	(4,228,000	)	$	1,038,000
Basic earnings per share of common stock			$	(1.03	)	$	0.10		$	(0.89	)	$	0.22
Diluted earnings per share of common stock			$	(1.03	)	$	0.10		$	(0.89	)	$	0.22
Basic weighted average shares outstanding				4,761,000			4,749,000			4,761,000			4,685,000
Diluted weighted average shares outstanding				4,761,000			5,024,000			4,761,000			5,010,000

The accompanying notes are an integral part of these statements.

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Video Display Corporation and Subsidiaries

Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)

for the Twelve Months Ended February 28, 2002 (audited) and

the Nine Months Ended November 30, 2002 (unaudited)

					Common Stock			Additional Paid In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Current Period Comprehensive Income (Loss)
Balance at February 28, 2001					$	3,034,000		$	92,000		$	(1,479,000	)	$	20,952,000
	Net income for the year					—			—			—			1,182,000		$	1,182,000
	Unrealized loss on marketable equity securities					—			—			(2,000	)		—			(2,000	)
	Foreign currency translation adjustment					—			—			88,000			—			88,000
			Total comprehensive income														$	1,268,000
	Issuance of common stock under stock option plan					17,000			—			—			—
	Conversion of subordinated debentures to common stock					775,000			—			—			—
Balance at February 28, 2002						3,826,000			92,000			(1,393,000	)		22,134,000
Net loss for the period						—			—			—			(4,228,000	)	$	(4,228,000	)
Unrealized loss on marketable equity securities						—			—			(4,000	)		—			(4,000	)
Foreign currency translation adjustment						—			—			(261,000	)		—			(261,000	)
			Total comprehensive loss														$	(4,493,000	)
Issuance of common stock under stock option plan						11,000			—			—			—
Repurchase of common stock						(46,000	)		—			—			—
Balance at November 30, 2002					$	3,791,000		$	92,000		$	(1,658,000	)	$	17,906,000

The accompanying notes are an integral part of these statements.

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Video Display Corporation and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

		Nine Months Ended November 30,
		2002			2001
Reconciliation of Net Income to Net Cash Provided by (Used in) Operating Activities
Net (loss) income		$	(4,228,000	)	$	1,038,000
Adjustments to reconcile net income (loss) to net cash used in operations:
Depreciation and amortization			1,152,000			1,239,000
Provision for inventory reserves and write-downs			4,397,000			430,000
Provision for bad debts			542,000			(41,000	)
Loss on disposal of fixed assets			725,000			—
Deferred income taxes			(55,000	)		—
Recognized foreign currency translation loss			1,296,000			—
Net income allocated to minority interests			30,000			6,000
Changes in working capital, net of effects from acquisitions:
Accounts receivable			(439,000	)		(1,461,000	)
Inventories			(2,355,000	)		(663,000	)
Prepaid expenses and other assets			(872,000	)		(472,000	)
Accounts payable and accrued liabilities			1,680,000			(338,000	)
Net cash provided by (used in) operating activities			1,873,000			(262,000	)
Investing activities
Capital expenditures			(1,123,000	)		(1,503,000	)
Purchase of assets of Christie, Inc.			—			(2,700,000	)
Other investing activities			158,000			(387,000	)
Net cash used in investing activities			(965,000	)		(4,590,000	)
Financing activities
Proceeds from long-term debt and lines of credit			11,456,000			23,127,000
Repayments of long-term debt and lines of credit			(12,096,000	)		(19,750,000	)
Proceeds from exercise of stock options			11,000			16,000
Repurchase of shares of common stock			(46,000	)		—
Net cash (used in) provided by financing activities			(675,000	)		3,393,000
Effect of exchange rates on cash			46,000			28,000
Net change in cash and cash equivalents			279,000			(1,431,000	)
Cash and cash equivalents, beginning of period			1,615,000			4,137,000
Cash and cash equivalents, end of period			1,894,000			2,706,000

The accompanying notes are an integral part of these statements.

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Video Display Corporation and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principals for interim financial information and in accordance with instructions for Form 10-Q as found in Article 10 of Regulation S-X. Accordingly, such consolidated financial statements do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the periods covered have been reflected in the statements. The accompanying consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended February 28, 2002 included in the Company's Annual Report on Form 10-K.

        The consolidated financial statements included the accounts of the Company and its majority owned subsidiaries after elimination of all significant intercompany accounts and transactions.

        Assets and liabilities of foreign subsidiaries are translated using the exchange rate in effect at the end of the period. Revenues and expenses are translated using the average of the exchange rates in effect during the period. Translation adjustments and transaction gains and losses related to long-term intercompany transactions are accumulated as a separate component of shareholders' equity. The Company has a subsidiary in the U.K., which is not material, and uses the British pound as its functional currency.

        The Company reported its Mexican subsidiary on the basis of the functional currency being the U.S. dollar, effective January 1, 1997, as over 90% of the subsidiary's sales and purchases were with the parent with accounts receivable and accounts payable settled in U.S. dollars. Due to the winding down of the Mexican operations, cumulative foreign currency translation losses of $1,296,000 were recognized in operating expense in the third quarter of fiscal 2003 to reflect the impairment of the Company's investment in the Mexican subsidiary.

NOTE B—ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

        In June 2001, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. This statement also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS No. 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually.

        In addition, SFAS No. 142 requires that the Company identify reporting units for purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized finite-lived intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS No. 142. This statement is required to be applied in fiscal years beginning after December 15, 2001, to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS No. 142 requires the Company to complete a transitional goodwill impairment test within six months from the date of adoption and reassess the useful lives of other intangible assets within the first interim quarter after adoption.

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        The Company adopted SFAS Nos. 141 and 142 on March 1, 2002, and accordingly, ceased amortization of goodwill at that time. Goodwill amortization expense of $81,000 and $243,000 was included in the consolidated financial statements for the three and nine months ended November 30, 2001, respectively. Had goodwill amortization expense not been recognized in 2001, basic earnings per share would have increased from $0.10 per share to $0.11 per share for the three months ended November 30, 2001, and from $0.22 per share to $0.27 per share for the nine months ended November 30, 2001.

        As of November 30, 2002, the Company completed the first phase of transitional testing for the potential impairment of goodwill relating to its Monitor division. The Company used a mulitple of EBITDA (earnings before interest, taxes, depreciation and amortization expense) in evaluating the fair value of the Monitor division. As a result of such testing, the Company determined there was no impairment of goodwill that should be included in the accompanying financial statements. At November 30, 2002, the net book value recorded for goodwill was $1,142,000.

NOTE C—ACCOUNTING STANDARDS NOT YET ADOPTED

        In June 2001, the FASB approved the issuance of SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS 143 establishes accounting standards for the recognition and measurement of legal obligations associated with the retirement of tangible long-lived assets and requires recognition of a liability for an asset retirement obligation in the period in which it is incurred. The provisions of this statement are effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company currently anticipates that adoption of this statement will not have a material impact on its consolidated financial statements.

        In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 addresses financial accounting for the impairment or disposal of long-lived assets. The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company currently anticipates that adoption of this statement will not have a material impact on its consolidated financial statements.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS No. 4, 44, 64, Amendment of SFAS No. 13, and Technical Corrections." SFAS 4, which was amended by SFAS 64, required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Opinion 30 will now be used to classify those gains and losses. SFAS 13 was amended to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The Company has not entered into any sale-leaseback transactions and management anticipates the adoption of SFAS 145 will not have a material impact on the Company's consolidated financial statements.

        In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." Generally, SFAS 146 provides that defined exit costs (including restructuring and employee termination costs) are to be recorded on an incurred basis rather than on a commitment basis as is presently required. SFAS 146 is effective for exit or disposal activities initiated after December 31, 2002. The Company currently anticipates that adoption of this statement will not have a material impact on its consolidated financial statements.

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        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." SFAS 148 amends the transition and disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." Certain of the disclosure requirements are required for all companies, regardless if the fair value method or intrinsic value method is used to account for stock-based employee compensation arrangements. The Company continues to account for its incentive stock option plan under the intrinsic value method in accordance with the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees." The amendments to SFAS 123 will be effective for financial statements for fiscal years ended after December 15, 2002 and for interim periods beginning after December 15, 2002. The Company anticipates that the adoption of SFAS 148 will not have an impact on the Company's consolidated financial statements.

        NOTE D—INVENTORIES

        Inventories are stated at the lower of cost (first in, first out) or market.

        Inventories consist of:

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NOTE E—LONG-TERM DEBT

        Long-term debt consisted of the following:

NOTE F—LINES OF CREDIT

        In May 2001, the Company and its primary bank agreed to consolidate an existing line of credit and term note payable into a $10,000,000 credit facility. The interest rate on the line of credit is based on a floating LIBOR rate (3.9% at November 30, 2002), based on a ratio of debt to EBITDA, as defined. The note matures on July 1, 2003, and accordingly has been classified as current on the November 30, 2002 balance sheet. The amount of credit available for advance was reduced by $500,000 on July 1, 2001. A second scheduled reduction of $500,000 scheduled for July 1, 2002 was extended indefinitely while the company currently negotiates changes to the line of credit. Advance rates remain the same as under the previous line, including a commitment fee of 0.25% for the unused portion. The agreement contains affirmative and negative covenants, including requirements related to tangible net worth and debt service coverage. Additionally, dividend payments, capital expenditures and acquisitions

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have certain restrictions. Substantially all of the Company's retained earnings are restricted based upon these covenants. As of November 30, 2002, the Company was not in compliance with certain covenants due to the third quarter adjustment and write-off of inventories, equipment, and other assets as a result of the internal reorganization and closure of three facilities. Subsequent to November 30, 2002, the bank has waived those covenant violations with respect to the fiscal quarter ended November 30, 2002. As of November 30, 2002, the outstanding balance on the line of credit was $9,191,000.

        On August 1, 2002, the Company converted its wholesale consumer parts (Fox International) line of credit facility to a term loan facility.

NOTE G—SUPPLEMENTAL CASH FLOW INFORMATION

        Cash Paid for:

NOTE H—EARNINGS PER SHARE

        Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of shares outstanding during each year. Shares issued or repurchased during the year are weighted for the portion of the year that they were outstanding. Diluted earnings per share is calculated by dividing net income (adjusted for interest savings, net of tax, on assumed subordinated debenture conversion) by the actual shares outstanding and share equivalents that would arise from the exercise of stock options and the assumed conversion of debentures when such assumption have a dilutive effect on the calculation. Out-of-the-money (exercise price higher than market price) stock options are excluded from the calculation because they are anti-dilutive.

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        The following table sets forth the computation of basic and diluted earnings per share for the three and nine-month periods ended November 30, 2002 and 2001:

			Three Months Ended November 30,						Nine Months Ended November 30,
			2002			2001			2002			2001
Numerator for basic EPS:
	Net income (loss)		$	(4,924,000	)	$	453,000		$	(4,228,000	)	$	1,038,000
Denominator for Basic EPS:
	Beginning shares outstanding			4,764,000			4,749,000			4,749,000			4,561,000
	Additional shares issued			—			—			16,000			124,000
	Repurchased shares			(3,000	)		—			(4,000	)		—
	Weighted average shares outstanding—Basic			4,761,000			4,749,000			4,761,000			4,685,000
Numerator for diluted EPS:
	Net income (loss)		$	(4,924,000	)	$	453,000		$	(4,228,000	)	$	1,038,000
	Interest savings, net of tax, on assumed conversion of debentures			—			26,000			—			50,000
	Adjusted net income		$	(4,924,000	)	$	479,000		$	(4,228,000	)	$	1,088,000
Denominator for diluted EPS:
	Weighted average shares outstanding—Basic			4,761,000			4,749,000			4,761,000			4,685,000
	Effect of dilutive stock options			—			50,000			—			43,000
	Assumed conversion of debentures			—			225,000			—			282,000
	Weighted average shares outstanding—Diluted			4,761,000			5,024,000			4,761,000			5,010,000

        For the three and nine months ended November 30, 2002, stock options and assumed conversion of debentures were not included in the diluted earning per share calculations as their inclusion would have been anti-dilutive because of the net losses experienced in those respective periods.

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Video Display Corporation and Subsidiaries

PART I

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with the attached interim consolidated financial statements and with the Company's 2002 Annual Report to Stockholders, which included audited financial statements and notes thereto for the fiscal year ended February 28, 2002, as well as Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

        The following table sets forth, for the three and nine months ended November 30, 2002 and 2001, the percentages which selected items in the Statements of Operations bear to total sales:

					Three Months Ended November 30,				Nine Months Ended November 30,
					2002		2001		2002		2001
Sales
	CRT Segment
		Data Display CRT's			13.5	%	12.0	%	13.4	%	15.1	%
		Entertainment CRT's			7.8		9.4		8.3		9.0
		Electron Guns and Components			2.2		2.3		1.9		1.9
		Monitors			52.6		57.6		54.5		55.2
			Total CRT Segment		76.1	%	81.3	%	78.1	%	81.2	%
	Wholesale Consumer Parts Segment				23.9		18.7		21.9		18.8
					100.0	%	100.0	%	100.0	%	100.0	%
Costs and expenses
	Cost of goods sold				94.7	%	66.0	%	77.5	%	68.1	%
	Selling and delivery				10.6		9.4		10.4		9.0
	General and administrative				20.4		18.1		17.3		17.4
	Recognized foreign currency translation loss				7.1	%	—		2.3	%	—
					132.8	%	93.5	%	107.5	%	94.5	%
Income (loss) from operations					(32.8	)%	6.5	%	(7.5	)%	5.5	%
Interest expense					(2.5	)%	(1.9	)%	(2.0	)%	(2.3	)%
Other income (expense)					0.3		(0.2	)	0.2		0.0
Income before income taxes					(35.0	)%	4.4	%	(9.3	)%	3.2	%
Provision for income taxes					(8.0	)	1.7		(1.8	)	1.3
Net income (loss)					(27.0	)%	2.7	%	(7.5	)%	1.9	%

Net sales

        Consolidated net sales increased $1,206,000 and $3,332,000 for the three and nine months ended November 30, 2002 as compared to the same period ended November 30, 2001. CRT segment sales increased $34,000 and $944,000 for the three and nine months comparative periods ended

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November 30, 2002. The wholesale parts segment increased $1,172,000 and $2,388,000 for the three and nine months comparative periods ended November 30, 2002.

        Overall CRT segment sales were flat for the third quarter ended November 30, 2002 as compared to one year ago. The data display division sales for the quarter increased $406,000. There were offsetting declines in sales for the quarter within this segment in the entertainment and monitor divisions of $171,000 and $212,000, respectively. The component division sales were relatively flat for the comparative periods.

        The increase in comparative quarterly sales for the data display division is primarily attributed to increases within the European market. The Company's UK location posted increases to sales of $343,000 for the quarter.

        The decline of entertainment sales is the net result of declines in television tube sales of $301,000 offset by increases in projection tube sales of $130,000. The Company continues to expand its marketing efforts of projection tubes for use in home theater and commercial applications through greater direct sales contact and internet marketing. While the Company continues to maintain its majority of the market share of the television tube replacement market, there continues to be declines due to depressed overall economic conditions. The Company's entertainment sales revenues have been negatively impacted by the reduced volume requirements of two of its largest customers of replacement tubes.

        The monitor division's overall decline reflects the impact of the closure of the Wolcott facility and the continued loss of sales at the MegaScan facility accounting for $905,000 of the $212,000 overall decline for the nine month period. The Lexel operations, based in Kentucky, had a decline in sales in the comparable quarter of $699,000, but for the nine month period showed an increase of $747,000 over last year. Lexel had to locate a new source for certain raw materials used in production and had to make adjustments to a manufacturing process that delayed shipments during the third quarter. Lexel began to ship in the latter part of the third quarter against the increased backlog that arose from these delays. The Company's Florida location, which supplies projection display products used in simulation, commercial and home theatre applications, continues to contribute increased revenues in the monitor division. The Florida location increased its sales by $1,359,000 and $3,653,000 for the three and nine months comparatives, respectively.

        The wholesale consumer parts segment reflects growth as well in the three and nine month periods ended November 30, 2002. This segment's growth is attributed to the additions of the Applica and Norelco distribution agreements. These distribution agreements added $1,037,000 and $2,900,000 for the three and nine month periods as compared to one year ago.

Gross margins

        Consolidated gross profit margins decreased from 34.0% and 31.9% to 5.3% and 22.5% for the three and nine months ended November 30, 2002 as compared to November 30, 2001. Included in the third quarter of fiscal 2003 are write-downs and write-offs of inventories and manufacturing equipment in the amount of $4,896,000 related to the closing of operations in Mexico, Wolcott, MegaScan, and Aydin UK operations. These locations, which during the past few years had experienced reduced sales volume, lower margins due to aging product lines with limited potential for future product development and high overhead were part of an internal restructuring of operations. Other locations within the Company with excess capacity and newer, complementary product lines were determined to be the successors of these related customer bases. As such, certain raw materials inventories and equipment used in the manufacturing process of these closed locations were written down or off as the Company has been able to more affordably source these products from overseas vendors or to shift the processes to more efficient locations within the Company. Management determined it cost prohibitive to physically transfer the related materials and equipment to other Company locations. Included in the

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above charge to cost of sales in the third quarter of fiscal 2003 was a write-down of $1,082,000, which reflects the carrying cost of inventories previously manufactured by the Mexican operation to current net realizable value as well as the write-off of older or large quantity stocks.

        The remainder of the decrease in CRT segment margins is primarily attributed to the margin reductions of the Florida location which declined from 50.2% to 38.7% for the nine months ended November 30, 2002 as compared to November 30, 2001. This decline is due to the fact that products sold in the previous year included inventories acquired at significantly reduced costs related to the acquisition of the Marquee™ product line in the third quarter of fiscal 2002. As these inventories have been sold, replacement items have been purchased at current market costs and, thus, have increased the cost of items produced. Margins in the current year of 38.7% are more reflective of what is expected in the future.

        The wholesale consumer parts segment increased to 46.4% from 39.0% and to 44.5% from 37.4% for the same comparative periods. The increase in the wholesale consumer parts segment margins is largely attributable to the Applica Inc. and Norelco distribution agreements. The revenues associated with these agreements include primarily handling charges and shipping income, which accounts for an approximately 79% profit margin before the effects of offsetting operating expenses.

Operating expenses

        Operating expenses as a percentage of sales increased from 27.5% to 38.0% and from 26.4% to 30.0% for the three and nine months ended November 30, 2002 as compared to November 30, 2001. Included in operating expenses for the third quarter were write-offs of accounts receivable and other assets in the amount of $572,000 related to the Mexico manufacturing location that was in the process of being shut down. A non-cash charge of $1,296,000 was recognized in the third quarter ended November 30, 2002 for the cumulative foreign currency translation adjustment to reflect the impairment of the Company's investment in the Mexican subsidiary. Offsetting these increases, the Company adopted SFAS No. 142 at the beginning of fiscal 2003, and, accordingly, ceased amortization of goodwill at that time. Goodwill amortization expense was $81,000 and $243,000 for the three and nine months ended November 30, 2001, respectively.

        The wholesale parts segment operating expenses were up $1,018,000 for the nine month comparative periods, but as a percentage of sales it increased from 40.0% to 40.9%. The increase is a factor of the increased delivery, labor and commission expenses associated with the Applica and Norelco revenue increases.

Interest expense

        Interest expense increased $123,000 and decreased $99,000 for the three and nine months ended November 30, 2002 as compared to a year ago. The Company maintains various debt agreements with differing interest rates, most of which are based on the prime rate or LIBOR. LIBOR and prime rates were slightly lower during the comparable periods. While overall debt decreased from November 30, 2001 to November 30, 2002 by approximately $620,000, the mix of interest rates changed. There were increased borrowings of $700,000 from an officer of the Company which carries an interest rate of prime plus 1%.

Income taxes

        The effective rate for the nine months ended November 30, 2002 as compared to November 30, 2001 is a benefit of 19.7% as compared to charge of 38.6%. The effective tax rate for the nine months ended November 30, 2002 was lower than the Federal Statutory rate due to differences between income tax and financial reporting purposes relating primarily to the abandonment of Mexican net operating losses and the effect of state income taxes.

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Liquidity and capital resources

        As of November 30, 2002, the Company had total cash and cash equivalents of $1,894,000. The Company's working capital was $16,553,000 and $27,569,000 at November 30, 2002 and February 28, 2002, respectively. Included in the decrease in working capital of $11,016,000 were effects of reclassifications of the line of credit from long-term to current due to the July 1, 2003 maturity date and the conversion of another line of credit previously reported as current, to a term note maturing in 2004. These reclassifications reduced working capital by $5,998,000 for the comparative periods. Additionally, decreases in working capital are a direct result of the fiscal 2003 third quarter adjustment of $3,472,000 (net of tax benefit) of inventories and other current assets resulting from the internal reorganization of the Company and the $1,296,000 cumulative foreign currency translation adjustment related to the closure of the Mexican operations. The remaining declines in working capital of $280,000 are primarily the result of increases to inventory funded by increases to accounts payable offset by better collection of accounts receivable as compared to a year ago.

        Cash provided by operations for the nine-month period ended November 30, 2002 was $1,873,000 as compared to cash used in operations of $262,000 in the same period a year ago. Net losses for the nine months ended November 30, 2002, adjusted for non-cash items provided cash of $3,859,000. Increases in inventories used cash of $2,355,000 for the nine months ended November 30, 2002. Increases in accounts receivables and prepaid expenses used cash of $1,311,000. Increases in accounts payable and accrued liabilities provided cash of $1,680,000. During the nine months ended November 30, 2001, net income adjusted for non-cash items provided $2,672,000. Increases in inventories, prepaids and accounts receivable used cash of $2,596,000. Decreases in accounts payable used cash of $338,000. Fluctuations in receivables and inventories are primarily a function of sales levels and better collection results during the first nine months of fiscal 2003.

        Investing activities used $965,000 for the nine months ended November 30, 2002. Included in this amount was $1,123,000 of additions to property, plant and equipment. Constructions costs for a building addition represented $479,000 of this total.

        Financing activities used cash of $675,000 for the nine month period ended November 30, 2002. Of this amount, $46,000 was used to repurchase Company common stock and the remainder was used to repay long-term debt.

        The Company has completed the process of consolidating its Horsham, PA location into the newly enlarged Birdsboro, PA facility. Total construction costs included in the nine months ended November 30, 2002 was $157,000. The Company obtained $371,000 of low interest financing from the Pennsylvania Industrial Development Authority to finance these costs. Additional financing in the amount of approximately $175,000 is expected to be completed by the end of the fiscal year. This financing will be used to offset costs already incurred by the Company.

        The Company continues to examine its operating cash needs and is currently investigating financing opportunities to ease its current cash and debt situations. The Company has experienced growth in certain divisions, requiring investment in inventories. Additionally, the Company has had to fund costs associated with shutdowns and relocations of three facilities. The Company has obtained financing from the CEO to assist in this short term situation but is in negotiations with its current lender to expand its current line to meet the future operating needs of the Company.

Critical Accounting Policies

        Management's Discussion and Analysis of Results of Operations and Financial Condition are based upon the Company's consolidated financial statements. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in

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the financial statements and related notes. The accounting policies that may involve a higher degree of judgments, estimates, and complexity include reserves on inventories, the allowance for bad debts and warranty reserves. The Company uses the following methods and assumptions in determining its estimates:

Reserves on inventories

        Reserves on inventories result in a charge to operations when the estimated net realizable value declines below cost. Management regularly reviews the Company's investment in inventories for declines in value and establishes reserves when it is apparent that the expected realizable value of the inventory falls below its original cost. The age of the inventory is not as significant as is the projected demand for CRTs. Management is able to identify consumer buying trends, such as size and application, well in advance of supplying replacement CRTs. Thus, the Company is able to adjust inventory-stocking levels according to the projected demand. The average life of a CRT is five to seven years, at which time the Company's replacement market develops. These reviews include observations of product development trends of the OEM's, new products being marketed, and technological advances relative to the product capabilities of the Company's existing inventories.

Allowance for bad debts

        The allowance for bad debts is determined by reviewing known customer exposures and applying historical credit loss experience to the current receivable portfolio with consideration given to the current condition of the economy, assessment of the financial position of the creditors and overall trends in past due accounts compared to established thresholds. The company monitors credit exposure and assesses the adequacy of the allowance for bad debts on a regular basis.

Warranty reserves

        The warranty reserve is determined by recording a specific reserve for known warranty issues and a general reserve based on historical claims experience. Actual claims incurred could differ from the original estimates, requiring adjustments to the reserve.

Other Accounting Policies

        Other loss contingencies are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will exceed the recorded provision. Contingent liabilities are often resolved over long time periods. Estimating probable losses requires analysis of multiple factors that often depend on judgments about potential actions by third parties.

Forward-Looking Information

        This report contains forward-looking statements and information that is based on management's beliefs, as well as assumptions made by, and information currently available to management. When used in this document, the words "anticipate", "believe", "estimate", "intends", "will", and "expect" and similar expressions are intended to identify forward-looking statements.

        Such statements involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following: business conditions, rapid or unexpected technological changes, product development, inventory risks due to shifts in product demand, competition, domestic and foreign government relations, fluctuations in foreign exchange rates, rising costs for components or unavailability of components, the timing of orders booked, lender relationships, and the risk factors listed from time to time in the Company's reports filed with the Commission.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        The Company's primary market risks include fluctuations in interest rates and variability in interest rate spread relationships, such as prime to LIBOR spreads. Approximately $26,663,000 of outstanding debt at November 30, 2002 related to long-term indebtedness under variable rate debt. Interest on the outstanding balance of this debt will be charged based on a variable rate related to the prime rate or the LIBOR rate. Both rate bases are incremented for margins specified in their agreements. Thus, the Company's interest rate is subject to market risk in the form of fluctuations in interest rates. The effect of a hypothetical one percentage point increase across all maturities of variable rate debt would result in an decrease of approximately $267,000 in pre-tax net income assuming no further changes in the amount of borrowings subject to variable rate interest from amounts outstanding at November 30, 2002. The Company does not trade in derivative financial instruments.

        The Company has a subsidiary in the U.K., which is not material, but uses the British pound as its functional currency. Due to its limited operations outside of the U.S., the Company's exposure to changes in foreign currency exchange rates between the U.S. dollar and foreign currencies or to weakening economic conditions in foreign markets is not expected to significantly effect the Company's financial position.

        Beginning January 1, 1997, the Company reported its Mexican subsidiary on the basis of the functional currency being the U.S. dollar as over 90% of the subsidiary's sales and purchases were with the parent with accounts receivable and accounts payable settled in U.S. dollars. Due to the winding down of the Mexican subsidiary operations in the third quarter of fiscal 2003, cumulative foreign currency translation losses of $1,296,000 previously included as a separate component of shareholders' equity were recognized in operating expense. These translation losses accumulated prior to January 1, 1997, when the functional currency of this subsidiary was the Mexican peso.

ITEM 4.    CONTROLS AND PROCEDURES

a)

Evaluation of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date (the "Evaluation Date") within 90 days before the filing date of this annual report, have concluded that, as of the Evaluation Date, our disclosure controls and procedures were adequate with regards to the domestic operations of the Company and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to our chief executive officer and our chief financial officer by others within those entities. Due to the restatement of the third quarter for transactions effecting the international operations, the Company determined that a review of those internal controls were necessary in order to prevent similar future situations.



b)

Changes in internal controls. There were changes to internal controls to provide for more timely review and accurate reconciliations of intercompany transactions. There were no other significant changes in our internal controls or in other factors that could significantly affect our internal controls and procedures subsequent to the Evaluation Date.

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Video Display Corporation and Subsidiaries

PART II

Item 1.    Legal Proceedings

        No new legal proceedings or material changes in existing litigation occurred during the quarter ended November 30, 2002.

Item 2.    Changes in Securities and Use of Proceeds

        None.

Item 3.    Defaults upon Senior Securities

        None.

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

        None.

Item 5.    Other information

        None

Item 6.    Exhibits and Reports on Form 8-K

        No reports on Form 8-K were filed or required to be filed during the quarter ended November 30, 2002.

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SIGNATURES

        Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

		VIDEO DISPLAY CORPORATION
June 13, 2003		By:		/s/  RONALD D. ORDWAY       Ronald D. Ordway Chief Executive Officer
		By:		/s/  CAROL D. FRANKLIN       Carol D. Franklin Chief Financial Officer and Secretary

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CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald D. Ordway, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Video Display Corporation;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rulers 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of the quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data had have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 13, 2003

/s/  RONALD D. ORDWAY       Ronald D. Ordway Chief Executive Officer

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CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Carol D. Franklin, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Video Display Corporation;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rulers 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of the quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data had have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 13, 2003

/s/  CAROL D. FRANKLIN       Carol D. Franklin Chief Financial Officer

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QuickLinks

INDEX
Video Display Corporation and Subsidiaries Consolidated Balance Sheets
Video Display Corporation and Subsidiaries Consolidated Balance Sheets—Continued
Video Display Corporation and Subsidiaries Consolidated Statements of Operations (unaudited)
Video Display Corporation and Subsidiaries Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss) for the Twelve Months Ended February 28, 2002 (audited) and the Nine Months Ended November 30, 2002 (unaudited)
Video Display Corporation and Subsidiaries Consolidated Statements of Cash Flows (unaudited)
Video Display Corporation and Subsidiaries Notes to Consolidated Financial Statements (unaudited)
PART I
PART II
SIGNATURES
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002