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8-K - FORM 8-K - VIRCO MFG CORPORATION | v59738e8vk.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
|
Contact: | |||
Robert A. Virtue, President | ||||
Douglas A. Virtue, Executive Vice President | ||||
Robert E. Dose, Vice President Finance | ||||
Virco Mfg. Corporation | ||||
(310) 533-0474 | ||||
Virco Announces First Quarter Results |
Torrance, California June 9, 2011 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 summers anticipated business activity.
Longer term, underlying demographic trends remain as favorable as at any time since the early
1960s. 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.
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.
End of filing