Virco Mfg. Corporation (NASDAQ: VIRC), the largest manufacturer and
supplier of movable furniture and equipment to the education market
in the United States, today reported preliminary, unaudited
financial results for the fourth quarter—and full year-ended
January 31, 2022 (“fiscal 2022”).
Preliminary net sales were $40.1 million in the fourth quarter
of fiscal 2022, an increase of 119% from $18.3 million in the same
period of the prior fiscal year.
Preliminary pre-tax loss was $5.2 million for the fourth quarter
of fiscal 2022, compared to a pre-tax loss of $6.5 million for the
same period of the prior fiscal year. Unrecovered material cost
increases combined with higher costs associated with material
costs, freight and logistic costs had a negative impact on
operating margins, largely offsetting the doubling of revenue.
Order rates and demand for school furniture remain strong. In
the fourth quarter, typically a slow time for orders in the
seasonal cycle for school furniture, orders were up 65% compared to
the same period of the prior year. This led to a record backlog at
year-end. Order rates in the early months of fiscal year ending
January 31, 2023 (“fiscal 2023”) have expanded the backlog even
further, into record territory compared to the past twenty years.
As of March 31, 2022, fiscal year-to-date shipments plus unshipped
backlog (“Shipments + Backlog”), the Company’s preferred measure of
current and future business activity, was $85.1 million. This
compares to $52.1 million and $44.8 million on March 31, 2021 and
2020, respectively. The backlog component of this measure was $67.8
million, compared to $35.8 million and $32.7 million on March 31,
2021 and 2020, respectively. For fiscal 2022, order rates increased
by 39%, returning to levels last seen immediately before China was
admitted to the World Trade Organization in 2001.
Robert Virtue, Chairman and CEO of Virco, said: “As expected, we
had a very strong finish to fiscal 2022 with net sales more than
doubling from the fourth quarter of fiscal 2021. We have been able
to successfully add staff in order to increase our production
levels to support the strong demand we are seeing, and the
increased efficiencies we are getting from our operations led to
improvement to both gross margin and SG&A as a percentage of
net sales compared to the fourth quarter of fiscal 2021. Our
pricing for fiscal 2023 has been adjusted upward and reflects the
higher material and freight costs we are seeing due to inflationary
pressures, which should enable us to offset the margin pressure
that we experienced throughout most of fiscal 2022. We believe this
will allow more of our revenue growth to have a positive impact on
profitability going forward.”
Doug Virtue, President of Virco, added: “We continue to
successfully capitalize on robust market conditions resulting from
higher levels of funding for public schools, as well as the
competitive advantage we have from our domestic production and
distribution model that is enabling us to consistently take market
share from overseas competitors who we believe cannot consistently
match our quality, innovation, and reliability. As of March 31,
2022, our fiscal year-to-date Shipments + Backlog was 63% higher
than at the same point last year and incoming orders are at the
highest level in nearly 20 years. We also continue to see services
increase as a percentage of our net sales, which positively impacts
our profitability. Given the strong demand that we are seeing, we
believe that we are well positioned to deliver improved financial
performance in fiscal 2023, while the longer-term shift back to
domestic producers and suppliers continues to accelerate and
creates a favorable environment for generating profitable growth in
the coming years. We also recently extended our $70.0 million
working capital credit facility with PNC Bank, giving us the
liquidity to capitalize on our strong operating foundation.”
Fourth Quarter Fiscal 2022 Financial
Results
The following are our preliminary unaudited results for the
quarter ended January 31, 2022:
Preliminary net sales were $40.1 million for the fourth quarter
of fiscal 2022, an increase of 119% from $18.3 million for the same
period of the prior fiscal year.
Gross margin was 26.5% for the fourth quarter of fiscal 2022,
compared with 24.8% in the same period of the prior fiscal year.
The increase in gross margin was primarily attributable to the
higher level of revenue, which increase absorption of fixed
manufacturing costs. This improvement was partially offset by
higher raw material costs and transportation expenses.
Selling, general, administrative and other expenses (SG&A)
was $15.2 million for the fourth quarter of fiscal 2022, compared
to $10.3 million in the same period of the prior fiscal year. The
increase in SG&A expense was attributable to a combination of
higher freight costs on shipments to customers as well as higher
selling expense, most of which was related to the higher level of
shipments and revenue. As a percent of revenue, SG&A declined
from 56.4% of revenue in the fourth quarter of the prior year to
38.0% in the fourth quarter of fiscal 2022.
Interest expense was $216,000 in the fourth quarter of fiscal
2022, compared with $221,000 in the same period of the prior fiscal
year.
Preliminary pre-tax loss was $5.2 million for the fourth quarter
of 2022, compared with a pre-tax loss of $6.5 million for the same
period of the prior fiscal year. The improvement in the pre-tax
loss for the seasonally light fourth quarter was due primarily to
higher revenue, partially offset by unrecovered raw material and
freight costs.
Income tax expense was $11.1 million for the fourth quarter of
fiscal 2022, compared with an income tax benefit of $1.0 million in
the same period of the prior year. This change reflects a non-cash
valuation allowance related to the Company’s expectation of
realizing deferred tax benefits, as will be described more
thoroughly in the Company’s Form 10-K filing for fiscal 2022.
Fiscal Year 2022 Financial Results
The following are our preliminary unaudited results for the year
ended January 31, 2022:
Preliminary net sales were $184.8 million for the 12 months
ended January 31, 2022, an increase of 21% from $152.8 million for
the same period of the prior fiscal year. The increase in net sales
was primarily attributable to completion of new school construction
projects that had been delayed by the pandemic, augmented by
additional stimulus from federal and state government. Management
also believes it took market share from overseas competitors
experiencing longer delays in product availability and shipping
times.
Gross margin was 33.0% for the 12 months ended January 31, 2022,
compared with 36.0% in the same period of the prior fiscal year.
The decrease in gross margin was primarily attributable to higher
raw material and inbound freight costs.
SG&A was $61.3 million for the 12 months ended January 31,
2022, compared with $54.2 million in the same period of the prior
fiscal year. The increase in SG&A expense was primarily
attributable to higher freight costs to customers as well as higher
selling costs resulting from the increase in shipments and revenue.
As a percentage of revenue, SG&A declined to 33.1% in fiscal
2022 from 35.5% in fiscal 2021 due to the inherent efficiencies
achieved through higher volume with the Company’s vertical
operating model.
Interest expense was $1.2 million for the 12 months ended
January 31, 2022, compared with $1.5 million in the same period of
the prior fiscal year. The decline in interest expense was
primarily attributable to a lower level of debt financing compared
to the prior year period, despite the overall increase in
revenue.
Preliminary pre-tax loss was $3.7 million for the 12 months
ended January 31, 2022, compared to a pre-tax loss of $3.0 million
for the same period of the prior fiscal year. The increase in
pre-tax loss was primarily attributable to higher raw material and
freight costs. These costs have been addressed with
inflation-adjustment clauses in the Company’s public procurement
contracts, and Management believes that a return to traditional
operating margins is possible in the upcoming fiscal year 2023.
Income tax expense was $11.4 million for the 12 months ended
January 31, 2022, compared with income tax benefit of $0.7 million
for the same period of the prior fiscal year. Changes in income tax
were attributable to a non-cash valuation allowance against the
Company’s deferred tax assets, as will be described more thoroughly
in the Company’s Form 10-K filing for fiscal 2022.
Preliminary Financial Information
The financial results presented in this press release are
preliminary, estimated and unaudited, and reflect management’s
estimates based solely upon information available to management as
of the date of this press release and are subject to change upon
the completion of Virco’s financial closing procedures, final
adjustments and other developments, including audit and review by
its independent registered public accounting firm. During the
course of that process, Virco may identify items that would require
it to make adjustments, which may be material, to the information
in this press release. As a result, the preliminary unaudited
financial information included in this press release is
forward-looking information and is subject to risks and
uncertainties, including possible material adjustments to the
preliminary financial information and the other risks and
uncertainties described below under “Statement Concerning
Forward-Looking Information.” Accordingly, you should not place
undue reliance on these estimates, which should not be considered a
substitute for the financial information to be filed with the SEC
in Virco’s Annual Report on Form 10-K for the fiscal year ended
January 31, 2022 once it becomes available.
About Virco Mfg. Corporation
Founded in 1950, Virco Mfg. Corporation is the largest
manufacturer and supplier of moveable educational furniture and
equipment for the preschool through 12th grade market in the United
States. The Company manufactures a wide assortment of products,
including mobile tables, mobile storage equipment, desks, computer
furniture, chairs, activity tables, folding chairs and folding
tables. Along with serving customers in the education market -
which in addition to preschool through 12th grade public and
private schools includes: junior and community colleges; four-year
colleges and universities; trade, technical and vocational schools
- Virco is a furniture and equipment supplier for convention
centers and arenas; the hospitality industry with respect to
banquet and meeting facilities; government facilities at the
federal, state, county and municipal levels; and places of worship.
The Company also sells to wholesalers, distributors, traditional
retailers and catalog retailers that serve these same markets. With
operations entirely based in the United States, Virco designs,
manufactures, and ships its furniture and equipment from one
facility in Torrance, CA and three facilities in Conway, AR. More
information on the Company can be found at www.virco.com.
Contact:
Virco Mfg. Corporation
(310) 533-0474
Robert A. Virtue, Chairman and Chief Executive Officer
Doug Virtue, President
Robert Dose, Chief Financial Officer
Non-GAAP Financial Information
This press release includes a statement of shipments plus
unshipped backlog as of March 31, 2022 compared to the same date in
the prior fiscal years. Shipments represent the dollar amount of
net sales actually shipped during the period presented. Unshipped
backlog represents the dollar amount of net sales that we expect to
recognize in the future from sales orders that have been received
from customers in the ordinary course of business. The Company
considers shipments plus unshipped backlog a relevant and preferred
supplemental measure for production and delivery planning. However,
such measure has inherent limitations, is not required to be
uniformly applied or audited and other companies may use
methodologies to calculate similar measures that are not
comparable. Readers should be aware of these limitations and should
be cautious as to their use of such measure.
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 expected results of operation or financial condition
for the fourth quarter and full fiscal year ended January 31, 2022;
expected improvements in our financial performance in fiscal 2023
and in subsequent years; our market share, net sales and
profitability in future periods; the impact of the COVID-19
pandemic on our business, customers, competitors, supply chain and
workforce; the anticipated recovery of our customers from COVID-19
and re-opening of school districts; business strategies; our market
demand and product development; estimates of our unshipped backlog;
order rates and trends in seasonality; the value of our deferred
tax assets; economic conditions and patterns; the educational
furniture industry including the domestic market for classroom
furniture; state and municipal bond and/or tax funding; trends in
shipping costs; 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: uncertainties surrounding the
severity, duration and effects of the COVID-19 pandemic; changes in
general economic conditions generally; supply chain constraints
affecting raw materials, components, 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 the reports and material that we
file with the Securities and Exchange Commission, including our
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, 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 Consolidated Balance
Sheets
|
January 31, |
|
2022 |
|
|
2021 |
(In thousands, except share and par value
data) |
|
|
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash |
$ |
1,359 |
|
$ |
402 |
Trade accounts receivables
(net of allowance for doubtful accounts of $200 at January 31, 2022
and 2021) |
|
17,769 |
|
|
9,759 |
Other receivables |
|
118 |
|
|
26 |
Income tax receivable |
|
152 |
|
|
199 |
Inventories |
|
47,373 |
|
|
38,270 |
Prepaid expenses and other
current assets |
|
2,076 |
|
|
2,311 |
Total current assets |
|
68,847 |
|
|
50,967 |
Property, plant and
equipment |
|
|
|
Land |
|
3,731 |
|
|
3,731 |
Land improvements |
|
653 |
|
|
734 |
Buildings and building
improvements |
|
51,334 |
|
|
51,262 |
Machinery and equipment |
|
113,315 |
|
|
112,098 |
Leasehold improvements |
|
1,009 |
|
|
1,004 |
Total property, plant and
equipment |
|
170,042 |
|
|
168,829 |
Less accumulated depreciation
and amortization |
|
134,715 |
|
|
132,003 |
Net property, plant and
equipment |
|
35,327 |
|
|
36,826 |
Operating lease right-of-use
assets |
|
13,870 |
|
|
17,596 |
Deferred income tax assets,
net |
|
399 |
|
|
11,716 |
Other assets |
|
8,002 |
|
|
7,931 |
Total assets |
$ |
126,445 |
|
$ |
125,036 |
Virco Mfg. Corporation
Unaudited Consolidated Balance
Sheets
|
January 31, |
|
|
2022 |
|
|
|
2021 |
|
|
(In thousands, except share and par value
data) |
|
|
|
|
Liabilities |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
19,785 |
|
|
$ |
8,421 |
|
Accrued compensation and
employee benefits |
|
5,596 |
|
|
|
4,576 |
|
Current portion of long-term
debt |
|
340 |
|
|
|
887 |
|
Current portion operating
lease liability |
|
4,734 |
|
|
|
4,672 |
|
Other accrued liabilities |
|
5,829 |
|
|
|
3,550 |
|
Total current liabilities |
|
36,284 |
|
|
|
22,106 |
|
Non-current liabilities |
|
|
|
Accrued self-insurance |
|
965 |
|
|
|
935 |
|
Accrued retirement
benefits |
|
15,430 |
|
|
|
21,889 |
|
Income tax payable |
|
71 |
|
|
|
65 |
|
Long-term debt, less current
portion |
|
14,173 |
|
|
|
9,553 |
|
Operating lease liability,
less current portion |
|
11,437 |
|
|
|
15,619 |
|
Other long-term
liabilities |
|
639 |
|
|
|
682 |
|
Total non-current
liabilities |
|
42,715 |
|
|
|
48,743 |
|
Commitments and
contingencies |
|
|
|
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 16,102,023 shares in 2022
and 15,918,642 shares in 2021 |
|
161 |
|
|
|
159 |
|
Additional paid-in
capital |
|
120,492 |
|
|
|
119,655 |
|
Accumulated deficit |
|
(67,178 |
) |
|
|
(52,042 |
) |
Accumulated other
comprehensive loss |
|
(6,029 |
) |
|
|
(13,585 |
) |
Total stockholders’
equity |
|
47,446 |
|
|
|
54,187 |
|
Total liabilities and
stockholders’ equity |
$ |
126,445 |
|
|
$ |
125,036 |
|
Virco Mfg. Corporation
Unaudited Consolidated Statements of
Operations
|
Year ended January 31, |
|
|
2022 |
|
|
|
2021 |
|
|
(In thousands, except per share data) |
|
|
|
|
Net sales |
$ |
184,828 |
|
|
$ |
152,795 |
|
Costs of goods sold |
|
123,899 |
|
|
|
97,870 |
|
Gross profit |
|
60,929 |
|
|
|
54,925 |
|
Selling, general and
administrative expenses |
|
61,265 |
|
|
|
54,197 |
|
Gain on sale of property,
plant & equipment |
|
— |
|
|
|
(7 |
) |
Operating (loss) income |
|
(336 |
) |
|
|
735 |
|
Pension expense |
|
2,197 |
|
|
|
2,173 |
|
Interest expense, net |
|
1,195 |
|
|
|
1,538 |
|
Loss before income taxes |
|
(3,728 |
) |
|
|
(2,976 |
) |
Income tax expense
(benefit) |
|
11,408 |
|
|
|
(744 |
) |
Net loss |
$ |
(15,136 |
) |
|
$ |
(2,232 |
) |
|
|
|
|
Net loss per common
share: |
|
|
|
Basic |
$ |
(0.95 |
) |
|
$ |
(0.14 |
) |
Diluted |
$ |
(0.95 |
) |
|
$ |
(0.14 |
) |
Weighted average shares
outstanding: |
|
|
|
Basic |
|
15,954 |
|
|
|
15,759 |
|
Diluted |
|
15,954 |
|
|
|
15,759 |
|
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