Virco Mfg. Corporation (Nasdaq:VIRC) today announced fourth
quarter and year-to-date results in the following letter to
stockholders from Robert A. Virtue, President and CEO:
As with the past several big recessions in American History
(1982-83, 1991-92, 2001-2002), the effects of the Great Recession
(2008-2009) continued to have a lagging impact on tax collections
and purchasing behaviors of public institutions long after the
recession had officially ended. In 2010 this was certainly the
case for our primary market of K-12 furniture, fixtures and
equipment, which by our estimate suffered a contraction of roughly
20%.
Against that backdrop, and as with prior recessions, we fared
somewhat better within our own market, gaining share and expanding
our list of satisfied customers. Also as with prior
recessions, these share gains came at the cost of profitability and
were insufficient to offset the overall downward pressure on
revenue. For the year ended January 31, 2011, revenues dropped
5% from $190,513,000 to $180,995,000. For the 4th quarter
comprising November through January, revenues declined 11.3% from
$25,921,000 to $22,993,000. Our net loss for the full year was
$17,594,000, which consisted of a pre-tax loss of $8,587,000 plus a
valuation allowance on deferred tax assets. Operating results
for the quarter were a pre-tax loss of $6,948,000 compared to a
pre-tax loss in last year's fourth quarter of $7,202,000. This
slight quarterly improvement reflects the implementation of cost
controls which are ongoing and may yield further improvements as
our annual cycle progresses through its summer peak with seasonal
volumes that we believe will be 4-5 times higher than these winter
lows.
Here are the numbers for the 4th quarter and the full fiscal
year 2010:
|
Three Months Ended |
Twelve Months Ended |
|
1/31/2011 |
As Adjusted (b) 1/31/2010 |
1/31/2011 |
As Adjusted (b) 1/31/2010 |
|
(In thousands, except share
data) |
(In thousands, except
share data) |
|
|
|
|
|
|
|
Net sales |
$22,993 |
$25,921 |
$180,995 |
$190,513 |
Cost of sales |
18,055 |
19,952 |
129,621 |
129,423 |
Gross profit |
4,938 |
5,969 |
51,374 |
61,090 |
Selling, general administrative & other
expense |
11,886 |
13,171 |
59,961 |
62,541 |
Loss before income taxes |
(6,948) |
(7,202) |
(8,587) |
(1,451) |
Income tax expense (benefits) |
9,756 |
(2,513) |
9,007 |
(726) |
Net loss |
$(16,704) |
$(4,689) |
$(17,594) |
$(725) |
|
|
|
|
|
Cash dividend declared |
$0.00 |
$0.00 |
$0.10 |
$0.10 |
|
|
|
|
|
Net loss per share - basic (a) |
$(1.18) |
$(0.33) |
$(1.25) |
$(0.05) |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic
(a) |
14,152 |
14,124 |
14,130 |
14,155 |
|
|
|
|
|
|
|
|
|
|
(a) Net loss per share was
calculated based on basic shares outstanding due to the
anti-dilutive effect on the inclusion of common stock equivalent
shares. |
|
|
|
|
(b) The results of
operations and ending balance sheet for 01/31/2010 have been
modified to reflect a change in accounting principle. |
|
|
|
|
|
|
|
|
|
1/31/2011 |
|
As Adjusted (b) 1/31/2010 |
Current assets |
|
$49,515 |
|
$61,312 |
Non-current assets |
|
51,073 |
|
61,120 |
Current liabilities |
|
20,017 |
|
22,926 |
Non-current liabilities |
|
30,169 |
|
30,236 |
Stockholders' equity |
|
50,402 |
|
69,270 |
We are often asked our opinion about the future of the domestic
educational furniture market. Simply stated, demand for our
furniture depends on the health of the entire public sector,
including federal, state, and especially municipal
agencies. Each of these depends on different funding streams,
all of which appear to be recovering at different rates. We
hesitate to generalize about macro- and micro-economic trends, but
until tax receipts at local and state levels return to something
like their pre-recession norms, we expect our market to reflect the
highly uneven nature of the current recovery.
As corroboration, last year we saw a resurgence of support for
public education in parts of the country that didn't participate in
the real estate bubble and subsequent crash. Statisticians
might have called this a 'regression to the mean,' with bigger
urban and suburban districts suffering disproportionately compared
to districts in smaller communities with agricultural and/or
resource-based economies.
Broadly speaking, this regression to the mean seems to be part
of an ongoing fragmentation of the American public school system,
which has long been dominated by major urban or suburban districts
with their large populations and tax bases. As those
populations and tax bases shift in search of employment and more
affordable, livable communities, and as parents seek out
educational alternatives such as charters and private schools, we
expect the pattern of fragmentation to continue. This may
introduce a granularity to our market that hasn't existed since the
suburban demographic shift of the baby boom following
WWII. Whether or not these regional trends persist over the
long term, we believe fragmentation and funding uncertainties will
continue to influence our market for at least the next few years.
On the positive side, we believe our domestic factories with
their shorter supply chains, in combination with a multi-channel
distribution strategy, position us to respond quickly and
effectively to this rapidly evolving market.
To further support the changing needs of educators, we are
continuing our aggressive product development efforts. In
addition, we're actively expanding our full suite of project
management services. These service offerings now match or
exceed those of certain 'pure distributors,' with the added benefit
of more dependable quality and delivery from our own
factories. In our opinion this makes us the most reliable
single-source supplier for America's educators.
We're also actively developing various international markets,
with their compelling demographics and currently strong
funding. Adult education remains a top focus as well, because
we believe adult re-education will play an important role in the
long term recovery from this recession. As we continue with
our brand development efforts we will as always pay close attention
to the balance sheet (despite last year's headwinds, tight controls
allowed us to generate positive operating cash flow of
$5,452,000).
Most importantly, we continue to focus on our core constituency:
American K-12 educators and students. We believe more
fervently than ever that education is the best path to prosperity
for a healthy civil society. Our close relationships with
educators give us crucial insight into their needs, including the
need to support rapidly evolving classroom technologies. We
intend to use our design/engineering skills and agile factories to
serve – with custom products and services if necessary – the
educators and students whose teaching and learning will shape this
country's future.
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; the educational furniture
industry; international markets; state and municipal bond funding;
adult re-education; the addition and development of multi-channel
distribution partners; the fragmentation of American public school
systems and our ability to respond to this change; 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, 2011, 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: Robert A. Virtue, President
Douglas A. Virtue, Executive Vice President
Robert E. Dose, Vice President Finance
Virco Mfg. Corporation
(310) 533-0474
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