Virco Announces Third Quarter Results and Resumption of Quarterly Dividend
December 14 2017 - 10:47AM
Virco Mfg. Corporation (NASDAQ:VIRC) today announced third quarter
and YTD results for the period ended October 31, 2017, as well as
the resumption of a quarterly cash dividend of $0.015 per share,
payable January 10, 2018 to shareholders of record as of December
28, 2017.
For the third quarter inclusive of August, September, and
October, revenue increased 1.5% to $68,794,000 from $67,795,000 the
prior year. Through nine months, revenue increased 9.8% to
$164,665,000 from $149,976,000 the year before.
At the beginning of the Company’s fiscal year in February 2017,
Management made a strategic decision to raise prices only modestly
as part of a longer-term initiative to gain market share and expand
distribution channels. As a result, while Company revenue
grew twice as fast as underlying school spending, which was up 4%
according to a report by NASBO (The National Association of State
Budget
Officers—https://marketbrief.edweek.org/marketplace-k-12/state-spending-on-k-12-rises-slightly-in-2017-despite-headwinds/),
operating margins declined. For the quarter, pre-tax
operating income declined 28% to $4,684,000 from $6,532,000.
Through nine months, operating income is down 12.3% to $9,825,000
from $11,199,000. Despite this, Management believes that
underlying operating efficiencies combined with an appropriate
price increase next year will correct this year’s margin
slippage.
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Three Months Ended |
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Nine Months Ended |
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10/31/2017 |
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10/31/2016 |
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10/31/2017 |
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10/31/2016 |
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(In thousands, except per share data) |
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Net sales |
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$ |
68,794 |
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$ |
67,795 |
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$ |
164,665 |
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$ |
149,976 |
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Cost of sales |
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44,327 |
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43,484 |
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105,088 |
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93,864 |
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Gross profit |
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24,467 |
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24,311 |
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59,577 |
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56,112 |
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Selling, general administrative & other expense |
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19,783 |
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17,779 |
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49,752 |
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44,913 |
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Operating income |
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4,684 |
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6,532 |
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9,825 |
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11,199 |
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Interest expense, net |
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456 |
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326 |
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1,280 |
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1,076 |
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Income before income taxes |
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4,228 |
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6,206 |
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8,545 |
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10,123 |
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Income tax expense (benefit) |
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1,704 |
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(17,792 |
) |
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3,204 |
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(17,622 |
) |
Net income |
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$ |
2,524 |
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$ |
23,998 |
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$ |
5,341 |
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$ |
27,745 |
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Net income per share - basic |
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$ |
0.16 |
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$ |
1.59 |
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$ |
0.35 |
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$ |
1.84 |
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Net income per share - diluted |
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$ |
0.16 |
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$ |
1.57 |
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$ |
0.35 |
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$ |
1.83 |
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Weighted average shares outstanding - basic |
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15,317 |
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15,128 |
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15,220 |
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15,047 |
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Weighted average shares outstanding - diluted |
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15,483 |
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15,293 |
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15,324 |
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15,186 |
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10/31/2017 |
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1/31/2017 |
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10/31/2016 |
Current assets |
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$ |
60,827 |
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$ |
48,493 |
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$ |
54,903 |
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Non-current assets |
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64,818 |
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59,694 |
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59,678 |
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Current liabilities |
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28,054 |
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21,585 |
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22,087 |
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Non-current liabilities |
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32,017 |
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27,248 |
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30,269 |
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Stockholders' equity |
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65,574 |
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59,354 |
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62,225 |
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Virco Chairman and CEO Robert Virtue said: “Overall, market
stability and operating efficiencies have improved enough that we
feel comfortable resuming payment of a quarterly cash
dividend. As with our prior practice over many decades of
paying a cash dividend, the board will consider cash flows, capital
investments, and likely future trends on a quarterly basis. I
am very pleased to have reached this important stage in our
recovery from the Great Recession.”
“As noted in the NASBO report, the Great Recession was very
damaging to public school spending. Our fortunes tend
to rise and fall in parallel with the health of America’s public
schools, so the downturn hit us hard. Now that school funding
has stabilized, and as our own market share has expanded, Virco’s
cash flows have become more reliable. We are pleased to be
able to share this recovery with our loyal shareholders, whose
patience permitted us to execute our long-term strategy.”
Operating efficiencies continued their gradual improvement in
labor, overhead, sales, and administration, declining as a percent
of revenue in each area. Due to a substantial increase in
full service deliveries during the busy summer season, service
expenses associated with those orders increased on an absolute
basis.
During the year material costs increased significantly.
Management made a strategic decision to hold pricing and to gain
market share at the expense of margin. While prices did not
keep pace with the underlying material cost increases, Management
believes that a moderate and appropriate price increase has been
put in place for the coming year which will improve the company’s
results.
Virco President Doug Virtue said: “We continue to work hard on
operating efficiencies. We feel a dual obligation to our
shareholders and to our ultimate customers—the American taxpayers
and their families—to be as efficient as possible. With our
U.S. factories and distribution centers staffed by experienced
workers, we have a strong foundation that has allowed us to resume
payment of a cash dividend. We hope a moderate price increase
next year will restore operating margins to normal levels and allow
us to continue this long-overdue recovery.”
Contact: Virco Mfg. Corporation (310) 533-0474 Robert A.
Virtue, Chairman and Chief Executive Officer Robert Dose, Chief
Financial Officer Doug Virtue, President
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: future price increases for our products; our
future operating margins; business strategies; market demand and
product development; order rates and trends in seasonality; product
relevance; economic conditions and patterns; the educational
furniture industry including the domestic market for classroom
furniture; state and municipal bond and/or tax funding; the rate of
completion of bond funded construction projects; cost control
initiatives; absorption rates; the relative competitiveness of
domestic vs. international supply chains; trends in shipping costs;
use of temporary workers; marketing initiatives; and international
or non K-12 markets. 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:
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,
2017 and other material 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.
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