Virco Mfg. Corporation Reports Third Quarter Revenue Grew 11.7%
December 14 2018 - 9:30AM
Virco Mfg. Corporation today announced results for its third
quarter and first nine months ended October 31, 2018.
Global economic trends combined with market-specific timing
generated mixed results for Virco’s third quarter ended October 31,
2018. At the global level, supply-chain uncertainties and higher
transportation costs had negative impacts on the Company’s
operating margins. At a more local level, continued
intensification of seasonality and favorable year-over-year impacts
from tax law changes resulted in higher late-season revenue and
improved net earnings. On balance, results and prospects are
sufficiently strong that Virco’s Board of Directors declared a
fifth consecutive quarterly cash dividend of $0.015 per share
payable on January 10, 2019 to shareholders of record as of
December 27, 2018.
A surge of late summer orders boosted third quarter revenue
11.7% to $76,809,000 from $68,794,000. Despite healthy demand
for the Company’s products, higher raw material and transportation
costs neutralized these revenue gains, with operating earnings for
the quarter virtually flat at $4,665,000 this year versus
$4,684,000 last year. Net earnings for the quarter were
favorably impacted by changes in tax law, which last year had a
proportionately negative impact on reported results. As with
last year, Management cautions investors to focus more on operating
income as a gauge of performance because of its independence from
fluctuations in tax law. Nevertheless, net income for the
quarter was up 16.2% to $2,932,000 from $2,524,000.
Through nine months, revenue is up 5.8% to $174,180,000 from
$164,665,000 last year. Operating income through nine months
is down 13.6% due primarily to higher input and service
costs. Through nine months, net income is down 9.5% to
$4,835,000 from $5,341,000.
Public school operating budgets are typically finalized in early
July. As purchasing patterns come to mirror this budget cycle
more closely, seasonality seems likely to intensify. This
places financial, operating, and customer service pressures on all
suppliers to public schools, including Virco. Management continues
to believe its U.S.-based manufacturing strategy offers the best
flexibility in this increasingly compressed order-to-cash
environment.
Furthermore, as the financial calculus of global sourcing models
continues to evolve, Management believes its U.S. factories will
become relatively more competitive, allowing for appropriate price
increases that may return margins to more historic levels.
Here are the numbers for the third quarter and first nine
months:
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
10/31/2018 |
|
10/31/2017 |
|
10/31/2018 |
|
10/31/2017 |
|
|
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
76,809 |
|
$ |
68,794 |
|
$ |
174,180 |
|
$ |
164,665 |
Cost of sales |
|
|
50,379 |
|
|
44,327 |
|
|
112,933 |
|
|
105,088 |
Gross profit |
|
|
26,430 |
|
|
24,467 |
|
|
61,247 |
|
|
59,577 |
Selling, general administrative & other expense |
|
|
21,765 |
|
|
19,783 |
|
|
52,755 |
|
|
49,752 |
Operating income |
|
|
4,665 |
|
|
4,684 |
|
|
8,492 |
|
|
9,825 |
Interest expense, net |
|
|
630 |
|
|
456 |
|
|
1,898 |
|
|
1,280 |
Income before income taxes |
|
|
4,035 |
|
|
4,228 |
|
|
6,594 |
|
|
8,545 |
Income tax expense |
|
|
1,103 |
|
|
1,704 |
|
|
1,759 |
|
|
3,204 |
Net income |
|
$ |
2,932 |
|
$ |
2,524 |
|
$ |
4,835 |
|
$ |
5,341 |
|
|
|
|
|
|
|
|
|
Dividend declared: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
0.015 |
|
$ |
- |
|
$ |
0.045 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
Net income per share - basic |
|
$ |
0.19 |
|
$ |
0.16 |
|
$ |
0.31 |
|
$ |
0.35 |
Net income per share - diluted |
|
$ |
0.19 |
|
$ |
0.16 |
|
$ |
0.31 |
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
|
15,486 |
|
|
15,317 |
|
|
15,399 |
|
|
15,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - diluted |
|
|
15,582 |
|
|
15,483 |
|
|
15,491 |
|
|
15,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/31/2018 |
|
1/31/2018 |
|
10/31/2017 |
Current assets |
|
|
|
$ |
71,476 |
|
$ |
55,713 |
|
$ |
60,827 |
Non-current assets |
|
|
|
|
59,050 |
|
|
60,910 |
|
|
64,818 |
Current liabilities |
|
|
|
|
34,361 |
|
|
27,723 |
|
|
28,054 |
Non-current liabilities |
|
|
|
|
32,881 |
|
|
30,188 |
|
|
32,017 |
Stockholders' equity |
|
|
|
|
63,284 |
|
|
58,712 |
|
|
65,574 |
Virco Chairman and CEO Robert Virtue commented on this year’s
performance: “I’m very proud of the way our people performed this
summer. They faced many uncertainties but stayed focused on
their core mission: making and delivering the best furniture and
equipment for America’s public schools. As input and
transportation costs increased, our people responded with even
greater care and better efficiency. On balance, it was a good
summer despite the challenges. As we adjust to the changes we
observed this year, I’m optimistic that we can do even better next
summer.”
Virco President Doug Virtue agreed: “Our operating model
embraces seasonality as the key constraint in our industry.
Incoming orders now peak either in June or July. Shipments
peak in July. The order-to-delivery cycle is about six
weeks-that’s less than the average sailing time for a container
ship coming from Asia to America. While seasonality presents
us with obvious challenges, we’ve been able to convert those
challenges into competitive advantage.”
Contact:
Virco Mfg. Corporation (310) 533-0474Robert A. Virtue, Chairman
and Chief Executive OfficerDoug Virtue, PresidentRobert Dose, Chief
Financial Officer
This news release contains “forward-looking statements” as
defined by the Private Securities Reform Act of 1995. These
statements include, but are not limited to, statements
regarding: 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; the impact of tariffs on
our supply chain and the likelihood and impact of new tariffs
on imports; trends in shipping and fuel 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, 2018, Quarterly
Reports on Form 10-Q, and other material that we file 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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