Virco Mfg. Corporation (Nasdaq:VIRC) today announced third quarter
and year-to-date results in the following letter to stockholders
from Robert A. Virtue, President and CEO:
Results for the third quarter ended October 31, 2010, continued
to track the constrained trajectory of the first half of the year,
reflecting ongoing funding challenges in our core market of
publicly-funded K-12 educational furniture and equipment.
For the three months of August through October, traditionally
the tail end of our summer delivery season, revenue was $60,779,000
compared to $62,920,000 in the same period last year, a decline of
3.4%. Lower prices in response to a highly competitive
environment reduced gross profit in the three months ended October
31, 2010 to $17,193,000 from $21,045,000 in the corresponding
period last year, a decline of 18.3%. Revenue for the nine
months ended October 31, 2010 was $158,002,000 versus $164,592,000
in the corresponding period last year, a decline of 4%. Gross
profit for the nine months ended October 31, 2010 was $46,436,000
versus $55,121,000 in the corresponding period last year, a decline
of 15.8%.
As with the last several recessions, the public sector continues
to lag the overall economic recovery. 2010 has been a year of
significantly lower tax receipts for many states and municipalities
and it now appears that 2011 will also be a challenging year for
these smaller government entities.
Here are our results for the third quarter and the nine months
ended October 31, 2010, and the comparable period last year:
|
Three Months Ended |
Nine Months Ended |
|
10/31/2010 |
10/31/2009 |
10/31/2010 |
10/31/2009 |
|
(In thousands, except share
data) |
(In thousands, except share
data) |
|
|
|
|
|
Net sales |
$60,779 |
$62,920 |
$158,002 |
$164,592 |
Cost of sales |
43,586 |
41,875 |
111,566 |
109,471 |
Gross profit |
17,193 |
21,045 |
46,436 |
55,121 |
Selling, general administrative & other
expense |
17,316 |
17,500 |
48,075 |
49,370 |
Income (loss) before income taxes |
(123) |
3,545 |
(1,639) |
5,751 |
Income tax (benefits) expense |
(277) |
640 |
(749) |
1,787 |
Net income (loss) |
$154 |
$2,905 |
$(890) |
$3,964 |
|
|
|
|
|
Cash dividend declared |
$0.05 |
$0.05 |
$0.10 |
$0.10 |
|
|
|
|
|
Net income (loss) per share - basic (a) |
$0.01 |
$0.21 |
$(0.06) |
$0.28 |
Net income (loss) per share - diluted |
0.01 |
0.20 |
(0.06) |
0.28 |
|
|
|
|
|
Weighted average shares outstanding - basic
(a) |
14,152 |
14,162 |
14,123 |
14,172 |
Weighted average shares outstanding -
diluted |
14,174 |
14,182 |
14,123 |
14,182 |
|
|
|
|
|
(a) Net loss per share
- diluted was calculated based on basic shares outstanding due to
the anti-dilutive effect on the inclusion of common stock
equivalent shares. |
|
10/31/2010 |
1/31/2010 |
10/31/2009 |
Current assets |
$53,256 |
$56,906 |
$53,043 |
Non-current assets |
58,725 |
61,194 |
59,865 |
Current liabilities |
22,714 |
22,926 |
21,091 |
Non-current liabilities |
26,519 |
30,236 |
23,098 |
Stockholders' equity |
62,748 |
64,938 |
68,719 |
We are frequently asked when we expect things to
improve. Despite some encouraging individual projects and what
now, at the end of the season, appears to have been a modest gain
in market share for 2010, the underlying ills facing our market
seem likely to persist for at least one more delivery cycle, and
possibly two. In addition to the continuing challenges facing
tax-supported government spending, it now appears that municipal
and state bonds may be entering a period of difficulty. Bond
funding has been one of the more reliable and resilient elements of
our market for the past few years, so this new development concerns
us.
As we have throughout this recession, we continue to focus on
ways to strengthen both our balance sheet and our brand. Bank
borrowings under our seasonal credit facility with Wells Fargo were
slightly higher at the end of the third quarter compared to last
year, but as of this report are comparable to last year. We
are tightly controlling our inventory levels and this control is
contributing to stable cash flows compared to last year. As
recently reported, we've also been pleased that these controls have
allowed us to continue paying a regular cash dividend to
stockholders.
On the brand development side, we are continuing with the
aggressive product development campaign that we launched seven
years ago. One of our core strategies is to source as much
product as possible from our own U.S. factories. This allows
us to closely control the inputs of safe, high-quality raw
materials as well as giving us greater flexibility in
specifications, colors and on-time delivery.
As a consequence of this strategy, much of our R&D is
focused on tooling and process enhancement. These capital
investments have proceeded unabated through the recession,
reflecting our long-term commitment to supporting America's public
education system with American-made furniture and
equipment. It's been a challenge, but we're proud that we've
been able to preserve these high-quality manufacturing
jobs.
In a related effort, we continued to make progress on our
long-term sustainability initiatives. This year we entered
full production on an in-house recycling process that so far has
generated over 1,000,000 pounds of raw material. This process
will contribute to our goal of 100% utilization of all raw
materials that enter our factory doors (in 2009 we hit
98%). It also supports our unique "Take-Back" program in which
we assist customers by recycling furniture that has reached the end
of its useful life. Importantly, we don't limit our Take-Back
program only to Virco furniture—we will happily recycle furniture
from any source, converting it into new, comfortable, long-lived
designs that extend the life of the original raw materials and
illustrate in a highly tangible way our deep commitment to
sustainability in all its manifestations.
The Virco Mfg. Corporation Logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=521
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: business strategies; market demand
and product development; economic conditions; state and municipal
bond funding; dividend payments, sustainability initiatives;
pricing; and seasonality. 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 which are
anticipated. Such factors include, but are not limited to:
changes in general economic conditions including raw material,
energy and freight costs; state and municipal bond funding, state,
local and municipal tax receipts; 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;
and the competitive landscape, including responses of our
competitors to changes in our prices. See our Annual Report on
Form 10-K for the year ended January 31, 2010, and other materials
filed 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.
CONTACT: Virco Mfg. Corporation
Robert A. Virtue, President and CEO
Douglas A. Virtue, Executive Vice President
Robert E. Dose, Vice President of Finance
(310) 533-0474
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