1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 FORM 10-Q For Quarter Ended July 31, 1995 Commission File Number 1-8777 ----------------------- ---------------- VIRCO MFG. CORPORATION ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 95-1613718 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2027 Harpers Way, Torrance, CA 90501 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 533-0474 ------------------ No change ------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of each of the issuer's classes of common stock, as of August 30, 1995. Common Stock 5,369,359 Shares* * Adjusted for Stock Dividend declared August 15, 1995, date of record September 18, 1995, payable October 18, 1995.
2 VIRCO MFG. CORPORATION AND SUBSIDIARIES INDEX Part I. Financial Information Item 1. Financial Statements (unaudited) Condensed consolidated balance sheets - July 31, 1995 and January 31, 1995. Condensed consolidated statements of income - Three months ended July 31, 1995 and 1994. Condensed consolidated statements of income - Six months ended July 31, 1995 and 1994. Condensed consolidated statements of cash flows - Three months ended July 31, 1995 and 1994. Condensed consolidated statements of cash flows - Six months ended July 31, 1995 and 1994. Notes to condensed consolidated financial statements - July 31, 1995. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Item 4. Submission of matters to a vote of Security Holders. Item 6. Exhibits and Reports on Form 8-K Signatures
3 PART 1 Item 1. Financial Statements VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited (Note 1) (Dollar Amounts in Thousands) <TABLE> <CAPTION> ASSETS 7/31/95 1/31/95 ------ --------- --------- <S> <C> <C> Current Assets Cash $ 2,142 $ 585 Accounts and Notes Receivable 34,267 27,468 Less Allowance for Doubtful Accounts (326) (100) -------- -------- Net Accounts and Notes Receivable 33,941 27,368 Income Taxes Receivable 241 -- Inventories (Note 2) Finished Goods 30,006 21,689 Work in Process 9,158 6,113 Raw Materials and Supplies 11,632 11,418 -------- -------- Total Inventories 50,796 39,220 Prepaid Expenses and Deferred Income Tax 3,301 2,659 -------- -------- Total Current Assets 90,421 69,832 Restricted Short-term Investment 1,598 8,937 Property, Plant & Equipment Cost 70,744 65,727 Less Accumulated Depreciation (36,206) (34,409) -------- -------- Net Property, Plant & Equipment 34,538 31,318 Other Assets 5,472 4,921 -------- -------- $132,029 $115,008 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed financial statements.
4 VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited (Note 1) (Dollar Amounts in Thousands) <TABLE> <CAPTION> LIABILITIES AND SHAREHOLDERS' EQUITY 7/31/95 1/31/95 ------------------------------------ ------- ------- <S> <C> <C> Current Liabilities Checks Released But Not Yet Cleared Bank $ 4,111 $ 2,898 Accounts Payable 16,056 11,768 Income Taxes Payable -- 1,372 Current Maturities on Long-Term Debt 873 874 Other Current Liabilities 9,951 10,140 -------- -------- Total Current Liabilities 30,991 27,052 Non-current Liabilities Long Term Debt (Less Current Portion) 45,408 32,577 Other Non-Current Liabilities 4,851 4,851 -------- -------- Total Non-Current Liabilities 50,259 37,428 Deferred Income Taxes 62 62 Shareholders' Equity Preferred Stock: Authorized 3,000,000 Shares, $.01 Par Value; None Issued or Outstanding -- -- Common Stock: Authorized 10,000,000 Shares, $.01 Par Value; 5,390,948 Shares issued at 7/31/95 and 1/31/95 49 49 Additional Paid-In Capital 36,992 36,992 Retained Earnings 13,985 13,787 Less treasury stock at cost (30,389 Shares) (234) (234) Loan to ESOP Trust (75) (128) -------- -------- Total Shareholders' Equity 50,717 50,466 -------- -------- $132,029 $115,008 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed financial statements.
5 VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited (Note 1) (Dollar Amounts in Thousands) <TABLE> <CAPTION> 3 Months Ended -------------- 7/31/95 7/31/94 --------- --------- <S> <C> <C> Net Sales $ 66,197 $ 60,268 Cost of Goods Sold 48,644 44,027 --------- --------- Gross Profit 17,553 16,241 Shipping, Selling, General and Administrative Expense 13,607 12,665 Provision for Doubtful Accounts 152 176 Interest Expense 985 685 --------- --------- 14,744 13,526 --------- --------- Income/(Loss) Before Taxes on Income 2,809 2,715 Taxes on Income/(Loss) (1,096) (1,059) --------- --------- Net Income $ 1,713 $ 1,656 ========= ========= Earnings (Loss) Per Share: Net Earnings/(Loss) Per Share: $ .32 $ .31 ========= ========= Weighted Average Shares Outstanding (Adjusted for 10% Stock Dividend Declared August 15, 1995.) 5,414,237 5,405,291 ========= ========= Dividend Declared Cash (Per Share) -- -- ========= ========= Stock -- -- ========= ========= </TABLE> The accompanying notes are an integral part of these condensed financial statements.
6 VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited (Note 1) (Dollar Amounts in Thousands) <TABLE> <CAPTION> 6 Months Ended -------------- 7/31/95 7/31/94 --------- --------- <S> <C> <C> Net Sales $ 103,122 $ 96,682 Cost of Goods Sold 76,112 71,890 --------- --------- Gross Profit 27,010 24,792 Shipping, Selling, General and Administrative Expense 24,662 22,625 Provision for Doubtful Accounts 262 283 Interest Expense 1,761 1,182 --------- --------- 26,685 24,090 --------- --------- Income (Loss) Before Taxes on Income 325 702 Taxes on Income (127) (274) --------- --------- Net Income $ 198 $ 428 ========= ========= Earnings (Loss) Per Share: Net Earnings (Loss) Per Share $ .04 $ .08 ========= ========= Weighted Average Shares Outstanding (Adjusted for 10% Stock Dividend Declared August 15, 1995.) 5,412,748 5,401,737 ========= ========= Dividend Declared Cash (Per Share) -- -- ========= ========= Stock -- -- ========= ========= </TABLE> The accompanying notes are an integral part of these condensed financial statements.
7 VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited (Note 1) (Dollar Amounts in Thousands) <TABLE> <CAPTION> 3 Months Ended -------------- 7/31/95 7/31/94 -------- -------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) $ 1,713 $ 1,656 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,245 975 Provision for doubtful accounts 61 150 (Gain) Loss on sales of fixed assets 61 (12) Change in Assets and Liabilities: Accounts and Notes Receivable (10,814) (11,394) Inventories 179 2,060 Income Taxes Receivable/Payable 1,030 934 Prepaid Expenses and Deposits 862 (626) Other Assets 390 (95) Accounts Payable and Accrued Expenses 3,964 4,045 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES (1,309) (2,307) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (2,316) (1,803) Proceeds from Sale of Assets -- 12 Purchase of Life Insurance (631) (530) Restricted Short Term Investments 2,091 -- -------- -------- NET CASH USED IN INVESTING ACTIVITIES (856) (2,321) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Long-term Debt 4,473 5,751 Reduction of Long-term Debt (270) (44) Purchase of Treasury Stock -- -- Issuance/Reduction of ESOP Loan (57) 100 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 4,146 5,807 -------- -------- NET CHANGE IN CASH 1,981 1,179 CASH AT BEGINNING OF QUARTER 161 327 -------- -------- CASH AT END OF QUARTER $ 2,142 $ 1,506 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed financial statements.
8 VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited (Note 1) (Dollar Amounts in Thousands) <TABLE> <CAPTION> 6 Months Ended -------------- 7/31/95 7/31/94 -------- -------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) $ 198 $ 428 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,289 1,882 Provision for doubtful accounts 161 247 (Gain) Loss on sales of fixed assets 61 (12) Change in Assets and Liabilities: Accounts and Notes Receivable (6,733) (1,962) Inventories (11,576) (5,123) Income Taxes Receivable/Payable (1,613) (1,465) Prepaid Expenses and Deposits (642) (762) Other Assets 1,272 (53) Accounts Payable and Accrued Expenses 4,099 4,302 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES (12,484) (2,518) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (5,570) (2,996) Proceeds from Sale of Assets -- 12 Purchase of Life Insurance (610) 426 Restricted Short Term Investments 7,339 -- -------- -------- NET CASH USED IN INVESTING ACTIVITIES 1,159 (2,558) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Long-term Debt 13,209 8,044 Reduction of Long-term Debt (380) (1,995) Purchase of Treasury Stock -- -- Issuance/Reduction of ESOP Loan 53 150 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 12,882 6,199 -------- -------- NET CHANGE IN CASH 1,557 1,123 CASH AT BEGINNING OF QUARTER 585 383 -------- -------- CASH AT END OF QUARTER $ 2,142 $ 1,506 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed financial statements.
9 VIRCO MFG. CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995 and July 31, 1994 Note 1: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended July 31, 1995 are not necessarily indicative of the results that may be expected for the year ended January 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiaries' annual report on Form 10-K for the year ended January 31, 1995. Note 2. Inventory Year end financial statements reflect inventories verified by physical counts with the material content valued by the LIFO method. At this interim date, there has been no physical verification and the precise adjustment to LIFO values has not been calculated. Note 3. Income Taxes The Company adopted the provisions of SFAS No. 109 effective February 1, 1993. Income taxes for the three and six months periods ended July 31, 1995 were computed using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management.
10 VIRCO MFG. CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations: For the second quarter of 1995, the Company earned a net profit of $1,713,000 on sales of $66,197,000 compared to a net profit of $1,656,000 on sales of $60,268,000 in the same period last year. The second quarter results are consistent with Virco's seasonal business cycle which produces diminished first quarter sales followed by strong shipments of educational products in the second and third quarters. Sales backlog at July 31, 1995 is approximately the same as in the prior year. Second quarter results reflect an increase in material costs accompanied by lagging increases in selling prices. Below the line spending was affected by increased interest expense incurred to finance capital investments as well as increased inventory and receivables. Distribution costs decreased over the prior year due to the closure of four distribution centers in November of 1994. The net result of these events was a $57,000 increase in net income. During the second quarter, the Company entered into an agreement to lease the former Los Angeles, CA manufacturing facility under a 15 year lease. With the lease of this former manufacturing plant, the 1994 lease of the Torrance, CA distribution facility, and the final installation of various new machines in the new Torrance, CA location, the Company has substantially executed the restructuring of the West Coast manufacturing and distribution operations. Financial Condition: As a result of seasonally high sales activity, accounts receivable increased by $6,700,000 compared to January 31, 1995. In anticipation of strong third quarter educational deliveries, inventory at July 31, 1995 increased by $11,600,000 compared to January 31, 1994. Increases in receivables and inventory were financed through increased borrowings under our revolving line of credit with Wells Fargo Bank. Proceeds from the issuance of an industrial revenue bond were held in trust and reflected as restricted short term investments on the July 31, 1995 and January 31, 1995 balance sheets. The Company withdrew $7,339,000 from the trust during the first six months of 1995 to fund capital improvements made at the new Torrance facility during the fourth quarter of 1994 and the first two quarters of 1995. In addition, the capital spending at the Torrance facility was supplemented by leasing approximately $1,750,000 of machinery from General Electric Capital Corporation during the second quarter of 1995. The Company does not anticipate leasing any additional manufacturing equipment in the near term.
11 PART II VIRCO MFG. CORPORATION SUBSIDIARIES Other Information Item 4. Submission of matters to a vote of Security Holders The following is a description of matters submitted to a vote of registrant's stockholders at the Annual Meeting of Stockholders held June 20, 1995: Election of three directors whose term expire in 1998. <TABLE> <CAPTION> Votes For --------- <S> <C> George W. Ott 4,147,689 John H. Stafford 4,147,896 Douglas A. Virtue 4,148,702 </TABLE> Item 6. Exhibits and Reports on Form 8-K. None
12 VIRCO MFG. CORPORATION AND SUBSIDIARIES Exhibit (11) - Statement Re: Computation of Earnings Per Share <TABLE> <CAPTION> Three Months Ended Six Months Ended July 31 July 31 ------------------ ---------------- 1995 1994 1995 1994 ---- ---- ---- ---- <S> <C> <C> <C> <C> Primary: Average Shares Outstanding 5,360,559 5,360,559 5,360,559 5,360,559 Net effect of dilutive stock options - based on the treasury stock method using average market price 53,678 44,732 52,189 41,178 --------- --------- --------- --------- Totals 5,414,237 5,405,291 5,412,748 5,401,737 ========= ========= ========= ========= Net Income 1,713,000 1,656,000 198,000 428,000 ========= ========= ========= ========= Per Share Amount .32 .31 .04 .08 ========= ========= ========= ========= </TABLE> Weighted average shares outstanding are adjusted for 10% stock dividend declared October 15, 1995.
13 VIRCO MFG. CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VIRCO MFG. CORPORATION Date: 9/1/95 By: /s/ James R. Braam ----------------- -------------------------------- James R. Braam Vice President - Finance Date: 9/1/95 By: /s/ Robert E. Dose ----------------- -------------------------------- Robert E. Dose Corporate Controller