Virco Announces First Quarter Results
June 09 2011 - 5:01PM
Virco Mfg. Corporation (Nasdaq:VIRC) today announced first quarter
results in the following letter to stockholders from Robert A.
Virtue, President and CEO:
Our first quarter results reflect the continued softness in
state and municipal funding in general, and public school funding
in particular. First quarter sales declined by 2.4% from
$24,860,000 in fiscal 2010 to $24,256,000. Although sales declined
modestly, pre-tax operating loss improved compared to the prior
year from $6,494,000 to $5,372,000.
Publicly funded entities are suffering budget challenges not
experienced in recent history. A reduction in tax revenues
coupled with structural spending deficits are threatening budgets
for education spending, typically the largest line item in a state
budget. Most states, cities, counties, and school districts
are facing significant reductions in operating budgets requiring
cutbacks in personnel and services, leaving less money for
replacement furniture. Bond funding for public schools has
declined, but is relatively strong.
While first quarter 2011 sales were comparable to the prior
year, order rates have deteriorated, particularly in April 2011,
the last month of the quarter. For the first quarter of 2011,
order rates compared to the prior year have declined by nearly
22%. Well publicized debates regarding proposed tax increases
or threatened service reductions have led to uncertainty and delays
in the budgeting process, and we are hopeful that order rates will
improve in the near future as spending budgets are
approved. We believe that until the private sector recovers
fully and structural spending issues are addressed by the public
sector, spending for new schools and new school furniture will
remain below the levels of the past few years.
We remind investors that our first quarter is seasonally light
and therefore not a proportional representation for the full
year. Our market remains highly volatile and current trends
could deteriorate or improve as the year progresses. Here are
our results for the first quarter ended April 30, 2011, and the
comparable period last year:
|
|
|
Three Months Ended |
|
4/30/2011 |
4/30/2010 |
|
(In thousands, except share
data) |
|
|
|
Net sales |
$24,256 |
$24,860 |
Cost of sales |
17,478 |
18,589 |
Gross profit |
6,778 |
6,271 |
Selling, general administrative
& other expense |
12,150 |
12,765 |
Loss before income taxes |
(5,372) |
(6,494) |
Income tax expense
(benefits) |
28 |
(1,413) |
Net loss |
$(5,400) |
$(5,081) |
|
|
|
Cash dividend declared |
$0.05 |
$0.05 |
|
|
|
Net loss per share - basic
(a) |
$(0.38) |
$(0.36) |
|
|
|
|
|
|
Weighted average shares
outstanding - basic (a) |
14,205 |
14,157 |
|
|
|
|
|
|
(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. |
|
|
|
|
|
4/30/2011 |
1/31/2011 |
4/30/2010 |
Current assets |
$64,722 |
$49,515 |
$76,502 |
Non-current assets |
50,568 |
51,073 |
60,600 |
Current liabilities |
39,059 |
20,017 |
41,697 |
Non-current liabilities |
31,741 |
30,169 |
31,872 |
Stockholders' equity |
44,490 |
50,402 |
63,533 |
|
|
|
|
Despite a modest reduction in first quarter sales, our first
quarter operating results showed improvement. Gross profit
improved to 27.9% of net sales from 25.2% due to a combination of
increased selling prices, slightly higher factory utilization, and
cost reductions offset in part by the increased cost of raw
materials. Our cost control efforts also enabled us to reduce
our selling, general and administrative expenses, both in absolute
dollars and as a percentage of sales.
Cost controls implemented in the fourth quarter of 2010 allowed
for modestly improved results in the first quarter of 2011, but
will not be adequate to achieve profitability if order rates
continue at the current rate. We continue to aggressively
pursue all profitable business in our market, and we continue to
bring new products to market in an effort to gain market
share. In response to the reduction in orders, we are
evaluating different methods to further reduce our cost structure
and to control spending. The seasonal nature of our business
will allow us to control our inventory levels this summer, and we
have already taken measures to establish production levels
appropriate to this summer's anticipated business activity.
Longer term, underlying demographic trends remain as favorable
as at any time since the early 1960's. Annual births in the U.S.
are now slightly above their average of 4 million during each of
the 19 years of the famed "Baby Boom" (1945-1964). Despite
underlying demographic strength the domestic market for classroom
furniture seems likely to remain soft until the economy and the
related state and local tax receipts recover. We believe that
there is no reasonable alternative to a public school system, and
we have significant market penetration in alternatives such as
private and charter schools.
Along with our ongoing sales to public, private, and charter
schools, the Company is accelerating efforts to increase sales to
customers who purchase furniture and equipment through the General
Services Administration (GSA). Virco is also experiencing
growing success in several international markets. To
complement these efforts, Virco is increasing our outreach to
customers in colleges and universities nationwide.
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; order rates; economic conditions; the
educational furniture industry; state and municipal bond funding;
cost control 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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