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Virco Reports Third Quarter Revenue Increased 35%, Driving Improved Financial Performance Across Multiple Metrics

  • Strong Execution by U.S. Factories and Logistics Provide Timely Delivery to Public and Private Schools
  • YTD Revenue up 32.9% to $192.3 million
  • YTD Gross Margin Improves to 37.6% vs. 34.8% in Prior Year
  • YTD SG&A Declines from 31.8% to 29.7%
  • YTD Operating Income Up Over 3X, from $4.3 million to $15.2 million
  • Company Releases Updated Investor Presentation and Corporate Governance Guidelines at www.virco.com

TORRANCE, Calif., Dec. 12, 2022 (GLOBE NEWSWIRE) -- Virco Mfg. Corporation (Nasdaq: VIRC) reported today that net revenue for the Company’s third quarter ended October 31, 2022 increased 35.0% to $77.4 million compared to $57.3 million in the same period of the prior year. While last year’s operations were constrained by supply chain and staffing challenges, the conclusion of this year’s summer delivery season was notable for improved efficiencies across most levels of the Company’s vertical business model. Gross margin for the third quarter was 39.8%, up from 35.4% in the same period of the prior year. The improvement in gross margin was due to a combination of higher volume and previously implemented price increases, which partially offset the ongoing impacts of inflation. SG&A declined to 28.4% from 31.0% in the prior year. Operating income improved proportionately to $8.8 million from $2.5 million in the prior year. After interest and taxes, total net income for the third quarter was $7.9 million vs. $1.3 million for the same period in the prior year.

Through nine months, net revenue increased 32.9% to $192.3 million from $144.7 million last year. Gross margin improved to 37.6% from 34.8%. SG&A through nine months declined to 29.7% from 31.8%. Operating income through nine months was up 3.6 times, from $4.3 million last year to $15.2 million this year. Interest expense through nine months was $1.7 million vs. $1.0 million in the prior year, due to a combination of higher revenue and higher interest rates. As a percent of sales, interest was 0.9% through nine months vs. 0.7% in the same period last year. For the nine months ended October 31, 2022 and 2021, the effective income tax rates were 2.6% and 22.2%, respectively. The change in effective tax rates for the nine months ended October 31, 2022, was primarily due to the recording of a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards which commenced in the fourth quarter of fiscal year ended January 31, 2022 and continued through the period ended October 31, 2022. Through nine months, earnings per share are $0.77 vs. $0.07 last year.

The Company has also released an updated Investor Presentation on its website www.virco.com. This presentation addresses the unique characteristics of Virco’s domestically-based vertical model and how it relates to the highly seasonal market for school furniture and equipment, as well as the Company’s favorable position in regard to “re-shoring.” Virco currently operates over 2.3 million square feet of highly automated manufacturing and distribution infrastructure at its facilities in Torrance, California (strategically located ten miles from the Ports of Los Angeles and Long Beach), and Conway, Arkansas, which services the eastern two-thirds of the U.S. market.

Robert Virtue, Virco’s Chairman and CEO, commented on this year’s strong summer performance: “The COVID pandemic subjected many companies and institutions to a stress test. This was especially true for Virco, where for the past two years many of our public school customers were literally closed for business. But the diversity of our customer base is significant, and includes private schools, international schools, and public schools in regions of the U.S. where in-person schooling continued during the pandemic. This diversity demanded that Virco stay open to support students in those schools that were able to function. We maintained globally competitive costs, outputs, and deliveries despite the interruptions that characterized import-based models. I believe the stresses of the pandemic validated our efforts to preserve and enhance our domestic capacity. We are especially proud that our dedicated workforce came to work every day and delivered material improvements to efficiency, despite the many distractions of the pandemic.

“What we do as a Company depends on what they do as individuals. Every chair or desk has to get made. Every chair or desk has to get delivered and installed. Our people delivered and installed over 21,000,000 pounds of school furniture in the months of June, July, and August. This level of operational strength may be un-equaled in our market. We look forward to building on this strength to support students, educators, and communities, and to delivering a well-deserved return to our loyal shareholders who have supported these efforts.”

Doug Virtue, Virco’s President, elaborated: “We devoted a lot of energy to enhancing the capabilities of our U.S. operations. These enhancements continued even during the COVID pandemic, when many of our school customers were closed. We always believed that in-person schooling was essential—not just for students—but for parents, teachers, communities, and our shared aspirations as people.

“I was inspired by the activity in our factories and shipping docks during this year’s summer season. Thanks to the optimism and resolve of our staff, we proved there is dignity in a job well done. I am thankful to our employees for their heroic efforts, and to our shareholders whose patience supported this performance. I also look forward to supporting the renaissance in public and private education. The last few years were hard, but the future looks bright.”

Statement Concerning Forward-Looking Information

This news release contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding: our future financial results and growth in our business; business strategies; market demand and product development; estimates of unshipped backlog; order rates and trends in seasonality; product relevance; economic conditions and patterns; the educational furniture industry generally, including the domestic market for classroom furniture; cost control initiatives; absorption rates; and supply chain challenges. Forward-looking statements are based on current expectations and beliefs about future events or circumstances, and you should not place undue reliance on these statements. Such statements involve known and unknown risks, uncertainties, assumptions and other factors, many of which are out of our control and difficult to forecast. These factors may cause actual results to differ materially from those that are anticipated. Such factors include, but are not limited to: uncertainties surrounding the severity, duration and effects of the COVID-19 pandemic; changes in general economic conditions including raw material, energy and freight costs; state and municipal bond funding; state, local, and municipal tax receipts; order rates; the seasonality of our markets; the markets for school and office furniture generally, the specific markets and customers with which we conduct our principal business; the impact of cost-saving initiatives on our business; the competitive landscape, including responses of our competitors and customers to changes in our prices; demographics; and the terms and conditions of available funding sources. See our Annual Report on Form 10-K for the year ended January 31, 2022, our Quarterly Reports on Form 10-Q, and other reports and material that we file with the Securities and Exchange Commission for a further description of these and other risks and uncertainties applicable to our business. We assume no, and hereby disclaim any, obligation to update any of our forward-looking statements. We nonetheless reserve the right to make such updates from time to time by press release, periodic reports, or other methods of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements which are not addressed by such an update remain correct or create an obligation to provide any other updates.

Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

 10/31/2022 1/31/2022 10/31/2021
(In thousands)
      
Assets     
Current assets     
Cash$        2,175 $        1,359 $        1,742
Trade accounts receivables, net 28,028  17,769  24,824
Other receivables 102  118  60
Income tax receivable 106  152  108
Inventories 57,465  47,373  40,483
Prepaid expenses and other current assets 1,671  2,076  1,839
Total current assets 89,547  68,847  69,056
Non-current assets     
Property, plant and equipment     
Land 3,731  3,731  3,731
Land improvements 686  653  734
Buildings and building improvements 51,459  51,334  51,308
Machinery and equipment 114,762  113,315  113,816
Leasehold improvements 1,012  1,009  1,017
Total property, plant and equipment 171,650  170,042  170,606
Less accumulated depreciation and amortization 136,998  134,715  134,659
Net property, plant and equipment 34,652  35,327  35,947
Operating lease right-of-use assets 11,116  13,870  14,685
Deferred tax assets, net 160  399  10,364
Other assets, net 8,245  8,002  8,034
Total assets$        143,720 $        126,445 $        138,086

Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

 10/31/2022 1/31/2022 10/31/2021
 (In thousands, except share and par value data)
      
Liabilities     
Current liabilities     
Accounts payable$        18,926  $        19,785  $        15,786 
Accrued compensation and employee benefits 9,084   5,596   5,547 
Current portion of long-term debt 2,457   340   504 
Current portion operating lease liability 4,985   4,734   4,686 
Other accrued liabilities 7,767   5,829   6,983 
Total current liabilities 43,219   36,284   33,506 
Non-current liabilities     
Accrued self-insurance retention 1,454   965   1,121 
Accrued pension expenses 11,776   15,430   18,654 
Income tax payable 77   71   68 
Long-term debt, less current portion 14,444   14,173   12,547 
Operating lease liability, less current portion 8,028   11,437   12,402 
Other long-term liabilities 694   639   687 
Total non-current liabilities 36,473   42,715   45,479 
Commitments and contingencies     
Stockholders’ equity     
Preferred stock:     
Authorized 3,000,000 shares, $0.01 par value; none issued or outstanding        
Common stock:     
Authorized 25,000,000 shares, $0.01 par value; issued and outstanding 16,210,985 shares at 10/31/2022 and 16,102,023 at 1/31/2022 and 10/31/202 162   161   161 
Additional paid-in capital 120,787   120,492   120,238 
Accumulated deficit (54,707)  (67,178)  (50,866)
Accumulated other comprehensive loss (2,214)  (6,029)  (10,432)
Total stockholders’ equity 64,028   47,446   59,101 
Total liabilities and stockholders’ equity$        143,720  $        126,445    $        138,086 

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Income

 Three months ended
 10/31/2022 10/31/2021
 (In thousands, except per share data)

Net sales$        77,395  $        57,331
Costs of goods sold 46,618   37,032
Gross profit 30,777   20,299
Selling, general and administrative expenses 21,977   17,782
Operating income 8,800   2,517
Unrealized gain on investment in trust account (220)  
Pension expense 259   570
Interest expense 567   327
Income before income taxes 8,194   1,620
Income tax expense 319   295
Net income$        7,875  $        1,325
    
    
Net income per common share:   
Basic$        0.49  $        0.08
Diluted$        0.48  $        0.08
Weighted average shares of common stock outstanding:   
Basic 16,211   16,033
Diluted 16,249   16,082

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Income

 Nine months ended
 10/31/2022 10/31/2021
 (In thousands, except per share data)

Net sales$        192,276  $        144,720
Costs of goods sold 119,947  94,414
Gross profit 72,329  50,306
Selling, general and administrative expenses 57,099  46,016
Operating income 15,230  4,290
Unrealized loss on investment in trust account 85  
Pension expense 650  1,800
Interest expense 1,692  979
Income before income taxes 12,803  1,511
Income tax expense 332  335
Net income$        12,471  $        1,176
    
    
Net income per common share:   
Basic$        0.77 $        0.07
Diluted$        0.77 $        0.07
Weighted average shares of common stock outstanding:   
Basic 16,118  15,927
Diluted 16,136  15,963

Contact:
Virco Mfg. Corporation
(310) 533-0474
Robert A. Virtue, Chairman and Chief Executive Officer
Doug Virtue, President
Robert Dose, Chief Financial Officer


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