Virco Operating Income Nearly Doubles as Second Quarter Revenue Jumps 30%


  • Exemplary Performance by U.S. Factories and Delivery Teams convert record backlog to on-time deliveries for Back-to-School
  • Year-to Date Revenue up 24% to $142 million
  • Year-to-Date Operating Income improves to $20 million

TORRANCE, Calif., Sept. 11, 2023 (GLOBE NEWSWIRE) -- Virco Mfg. Corporation (NASDAQ: VIRC), the largest manufacturer and supplier of movable furniture and equipment for educational environments in the United States, today reported financial results for the quarterly period ended July 31, 2023 (second quarter of fiscal 2024).

Virco Mfg. Corporation today reported that revenue for the second quarter ended July 31 grew 30% YOY from $82,797,000 to $107,321,000 as the Company’s U.S. factories and logistics converted a record backlog to nationwide on-time deliveries for the new school year. In combination with stabilizing material and freight costs, the Company’s domestic operations generated improved profitability on the higher volume. For the second quarter, operating income nearly doubled from $11,174,000 to $21,254,000.

Year-to-date, revenue increased 23.8% from $114,881,000 in the first six months of last year to $142,264,000 this year. Operating income for the first six months improved from $6,430,000 last year to $19,942,000 in the current year.

Gross Margin for the second quarter improved from 38.5% to 45.3%, due to a combination of moderating raw material costs and improved operating efficiencies in the Company’s U.S. factories. SG&A as a percent of sales increased slightly from 25.0% last year to 25.5% this year. For the first six months, gross margin improved from 36.2% last year to 43.4% in the current year. For the same period, SG&A as a percent of sales declined from 30.6% to 29.4%.

Interest expense on the Company’s seasonal credit facility was $1,083,000 for the current quarter compared to $698,000 for the same period last year. Year-to-date, interest expense was $1,795,000, or 1.3% of revenue, compared to $1,125,000, or 1.0% of revenue for the first six months of last year. The Company has adequate availability under its current facility and is able to finance its growth organically, with improved profitability and cash flows being generated by the higher revenue. Management observes that timely deliveries have contributed to timely collections on accounts receivable, leading to strong cash flows through the middle of the Company’s busy season. Other key balance sheet items such as inventories, accounts payable, and accounts receivable remain favorably balanced with the increase in revenue and earnings.

Commenting on the strong second quarter and first six months, Virco CEO and Chairman Robert Virtue said: “We performed exceptionally well in this year’s back-to-school season. We had a record backlog of deliveries to make, and we made them. This ability to execute is directly tied to our domestic U.S. factories and logistics teams. As schools have extended their instruction calendar to make up for pandemic-related learning loss, our summer delivery window has effectively been narrowed. We have the physical footprint and the operating know-how to make and deliver millions of pounds of furniture in what is now a six- to eight-week delivery season. This environment has been increasingly challenging for import-based competitors. We are seeing a meaningful gain in new customers in this new competitive landscape.”

Virco President Doug Virtue offered these additional comments: “We consider ourselves fortunate to have come out of the pandemic stronger than we went in. We are uniquely positioned to help schools as they modify their calendars and curricula to address the learning challenges faced by today’s students. Our vertical model has proven highly adaptable to these accelerations. We have good control over inventories, delivery performance, and the entire order-to-cash cycle. Ultimately, this allows us to better serve educators and students as they seek creative solutions to the challenges of the last few years.”

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

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, 2023, 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.

Financial Tables Follow

Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

 7/31/2023 1/31/2023 7/31/2022
(In thousands)
      
Assets     
Current assets     
Cash$1,600  $1,057  $2,179 
Trade accounts receivables, net 68,592   18,435   44,286 
Other receivables 58   68   95 
Income tax receivable    19   111 
Inventories 71,853   67,406   61,228 
Prepaid expenses and other current assets 2,228   2,083   2,068 
Total current assets 144,331   89,068   109,967 
Non-current assets     
Property, plant and equipment     
Land 3,731   3,731   3,731 
Land improvements 686   686   653 
Buildings and building improvements 51,441   51,310   51,456 
Machinery and equipment 115,899   113,662   115,029 
Leasehold improvements 977   983   1,012 
Total property, plant and equipment 172,734   170,372   171,881 
Less accumulated depreciation and amortization 137,392   135,810   136,973 
Net property, plant and equipment 35,342   34,562   34,908 
Operating lease right-of-use assets 8,285   10,120   12,115 
Deferred tax assets, net 7,100   7,800   488 
Other assets, net 9,279   8,576   8,051 
Total assets$204,337  $150,126  $165,529 
            

Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

 7/31/2023 1/31/2023 7/31/2022
 (In thousands, except share and par value data)
      
Liabilities     
Current liabilities     
Accounts payable$27,854  $19,448  $27,290 
Accrued compensation and employee benefits 10,983   9,554   6,873 
Income tax payable 3,325       
Current portion of long-term debt 32,256   7,360   22,736 
Current portion operating lease liability 5,386   5,082   4,909 
Other accrued liabilities 11,259   7,081   10,057 
Total current liabilities 91,063   48,525   71,865 
Non-current liabilities     
Accrued self-insurance retention 934   1,050   1,436 
Accrued pension expenses 10,827   10,676   15,238 
Income tax payable 81   79   73 
Long-term debt, less current portion 14,261   14,384   14,504 
Operating lease liability, less current portion 4,317   6,796   9,241 
Other long-term liabilities 559   555   667 
Total non-current liabilities 30,979   33,540   41,159 
Commitments and contingencies (Notes 6, 7 and 13)     
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 16,347,314 shares at 7/31/2023 and 16,210,985 at 1/31/2023 and 7/31/2022 164   162   162 
Additional paid-in capital 121,030   120,890   120,684 
Accumulated deficit (36,539)  (50,631)  (62,582)
Accumulated other comprehensive loss (2,360)  (2,360)  (5,759)
Total stockholders’ equity 82,295   68,061   52,505 
Total liabilities and stockholders’ equity$204,337  $150,126  $165,529 
            

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Income

 Three months ended
 7/31/2023 7/31/2022
 (In thousands, except per share data)
Net sales$107,321  $82,797 
Costs of goods sold 58,743   50,952 
Gross profit 48,578   31,845 
Selling, general and administrative expenses 27,324   20,671 
Operating income 21,254   11,174 
Unrealized (gain) loss on investment in trust account (325)  305 
Pension expense 161   196 
Interest expense 1,083   698 
Income before income taxes 20,335   9,975 
Income tax expense 4,801   295 
Net income$15,534  $9,680 
    
    
Net income per common share:   
Basic$0.95  $0.60 
Diluted$0.95  $0.60 
Weighted average shares of common stock outstanding:   
Basic 16,272   16,108 
Diluted 16,294   16,108 
        

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Income

 Six months ended
 7/31/2023 7/31/2022
 (In thousands, except per share data)
Net sales$142,264  $114,881 
Costs of goods sold 80,484   73,329 
Gross profit 61,780   41,552 
Selling, general and administrative expenses 41,838   35,122 
Operating income 19,942   6,430 
Unrealized (gain) loss on investment in trust account (624)  305 
Pension expense 322   391 
Interest expense 1,795   1,125 
Income before income taxes 18,449   4,609 
Income tax expense 4,357   13 
Net income$14,092  $4,596 
    
    
Net income per common share:   
Basic$0.87  $0.29 
Diluted$0.87  $0.29 
Weighted average shares of common stock outstanding:   
Basic 16,242   16,071 
Diluted 16,257   16,071