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 October 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 December 8, 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 - October 31, 1995 and January 31, 1995. Condensed consolidated statements of income - Three months ended October 31, 1995 and 1994. Condensed consolidated statements of income - Nine months ended October 31, 1995 and 1994. Condensed consolidated statements of cash flows - Three months ended October 31, 1995 and 1994. Condensed consolidated statements of cash flows - Nine months ended October 31, 1995 and 1994. Notes to condensed consolidated financial statements - October 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 10/31/95 1/31/95 ------ -------- ------- <S> <C> <C> Current Assets Cash $ 444 $ 585 Accounts and Notes Receivable 35,129 27,468 Less Allowance for Doubtful Accounts (603) (100) -------- -------- Net Accounts and Notes Receivable 34,526 27,368 Income Taxes Receivable - - Inventories (Note 2) Finished Goods 18,667 21,689 Work in Process 7,404 6,113 Raw Materials and Supplies 9,808 11,418 -------- -------- Total Inventories 35,879 39,220 Prepaid Expenses and Deferred Income Tax 3,321 2,659 -------- -------- Total Current Assets 74,170 69,832 Restricted Short-term Investment 1,612 8,937 Property, Plant & Equipment Cost 73,020 65,727 Less Accumulated Depreciation (37,871) (34,409) -------- -------- Net Property, Plant & Equipment 35,149 31,318 Other Assets 6,517 4,921 -------- -------- $117,448 $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 10/31/95 1/31/95 ------------------------------------ -------- ------- <S> <C> <C> Current Liabilities Checks Released But Not Yet Cleared Bank $ 3,465 $ 2,898 Accounts Payable 9,821 11,768 Income Taxes Payable 1,370 1,372 Current Maturities on Long-Term Debt 873 874 Other Current Liabilities 9,522 10,140 ------- ------- Total Current Liabilities 25,051 27,052 Non-current Liabilities Long Term Debt (Less Current Portion) 34,215 32,577 Other Non-Current Liabilities 4,851 4,851 ------- ------- Total Non-Current Liabilities 39,066 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; 5,391,748 Shares issued at 7/31/95 and 5,382,948 at 1/31/95 54 49 Additional Paid-In Capital 42,056 36,992 Retained Earnings 11,453 13,787 Less treasury stock at cost (22,389 Shares) (172) (234) Loan to ESOP Trust (122) (128) -------- -------- Total Shareholders' Equity 53,269 50,466 -------- -------- $117,448 $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 -------------- 10/31/95 10/31/94 -------- -------- <S> <C> <C> Net Sales $ 74,613 $ 69,014 Cost of Goods Sold 55,433 50,015 --------- --------- Gross Profit 19,180 18,999 Shipping, Selling, General and Administrative Expense 13,505 13,234 Interest Expense 903 667 Provision for Doubtful Accounts 267 202 --------- --------- 14,675 14,103 --------- --------- Income (Loss) Before Taxes on Income 4,505 4,896 Taxes on Income (1,757) (1,910) --------- --------- Net Income $ 2,748 $ 2,986 ========= ========= Earnings (Loss) Per Share: $ .51 $ .55 - -------------------------- ========= ========= Net Earnings (Loss) Per Share Weighted Average Shares Outstanding (Adjusted for 10% Stock Dividends Declared August 15, 1995. 5,437,801 5,418,772 ========= ========= Dividend Declared .04 .04 ========= ========= Cash (Per Share) .10% 10% ========= ========= 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> 9 Months Ended -------------- 10/31/95 10/31/94 -------- -------- <S> <C> <C> Net Sales $ 177,735 $ 165,696 Cost of Goods Sold 131,545 121,905 --------- --------- Gross Profit 46,190 43,791 Shipping, Selling, General and Administrative Expense 38,167 35,859 Provision for Doubtful Accounts 2,664 1,849 Interest Expense 529 485 --------- --------- 41,360 38,193 --------- --------- Income/(Loss) Before Taxes on Income 4,830 5,598 Taxes on Income/(Loss) (1,884) (2,184) --------- --------- Net Income $ 2,946 $ 3,414 ========= ========= Earnings (Loss) Per Share: - -------------------------- Net Earnings/(Loss) Per Share: $ .54 $ .55 ========= ========= Weighted Average Shares Outstanding (Adjusted for 10% Stock Dividend Declared August 15, 1995.) 5,421,548 5,409,473 ========= ========= Dividend Declared Cash (Per Share) .04 .04 ========= ========= Stock 10% 10% ========= ========= </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 -------------- 10/31/95 10/31/94 -------- -------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) $ 2,748 $ 2,986 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,666 1,396 Provision for doubtful accounts 276 248 (Gain) Loss on sales of fixed assets 5 - Change in Assets and Liabilities: Accounts and Notes Receivable (861) (558) Inventories 14,917 8,740 Income Taxes Receivable/Payable 1,611 1,546 Prepaid Expenses and Deposits (20) 620 Other Assets (595) (28) Accounts Payable and Accrued Expenses (6,664) 1,145 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 13,083 16,095 CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (2,282) (5,523) Proceeds from Sale of Assets 0 0 Purchase of Life Insurance (1,096) (4) Restricted Short Term Investments (14) - -------- -------- NET CASH USED IN INVESTING ACTIVITIES (3,392) (5,527) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Long-term Debt 0 0 Reduction of Long-term Debt (11,193) (11,323) Sale of Treasury Stock 66 - Issuance/Reduction of ESOP Loan (47) (264) Cash Dividend (215) (194) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES (11,389) (11,781) -------- -------- NET CHANGE IN CASH (1,698) (1,213) CASH AT BEGINNING OF QUARTER 2,142 1,506 -------- -------- CASH AT END OF QUARTER $ 444 $ 293 ======== ======== </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> 9 Months Ended -------------- 10/31/95 7/31/94 -------- ------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) $ 2,946 $ 3,414 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,955 3,278 Provision for doubtful accounts 437 495 (Gain) Loss on sales of fixed assets 66 (12) Change in Assets and Liabilities: Accounts and Notes Receivable (7,594) (2,520) Inventories 3,341 3,617 Income Taxes Receivable/Payable (2) 81 Prepaid Expenses and Deposits (662) (142) Other Assets 677 (81) Accounts Payable and Accrued Expenses (2,565) 5,447 ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 599 13,577 CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (7,852) (8,519) Proceeds from Sale of Assets - 12 Purchase of Life Insurance (1,706) 422 Restricted Short Term Investments 7,325 - ------- ------- NET CASH USED IN INVESTING ACTIVITIES (2,233) (8,085) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Long-term Debt 2,297 0 Reduction of Long-term Debt (661) (5,274) Sale of Treasury Stock 66 (114) Issuance/Reduction of ESOP Loan 6 - Cash Dividend (215) (194) ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,493 (5,582) ------- ------- NET CHANGE IN CASH (141) (90) CASH AT BEGINNING OF QUARTER 585 383 ------- ------- CASH AT END OF QUARTER $ 444 $ 293 ======= ======= </TABLE> The accompanying notes are an integral part of these condensed financial statements.
9 VIRCO MFG. CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS October 31, 1995 and October 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 nine month periods ended October 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 nine months periods ended October 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 (b) Results of Operations: For the third quarter of 1995, the company earned a net profit of $2,748,000 on sales of $74,613,000 compared to a net profit of $2,986,000 on sales of $69,014,000 in the same period last year. For the nine months ended October 31, 1995, the company earned a net profit of $2,946,000 on sales of $177,735,000 compared to a net profit of $3,414,000 on sales of $165,696,000 in the prior year. The year to date results are consistent with Virco's seasonal business cycle, which produces diminished first quarter sales followed by strong second and third quarter deliveries of educational furniture. Increased shipments during 1995 are attributable to improvement in both the educational and commercial business segments. Increased levels of inventory carried going into the second and third quarters facilitated increased sales volume as well as allowed for earlier shipment and improved on time delivery. Sales backlog at the end of the third quarter is slightly less than the prior year. Third quarter results reflect an increase in material costs accompanied by lagging increases in selling prices. The increase in the material component of the production costs were offset, in part, by a reduction in overhead spending as a percentage of sales. This reduction in overhead spending was attained despite start up costs incurred at the new Torrance, CA manufacturing facility. Distribution costs, which are capitalized into inventory and expensed to cost of sales, decreased from the prior year due to the closure of four distribution facilities in November 1994. Below the line spending was affected by increased interest expense incurred to finance capital investments as well as the increased levels of inventory. Finally, the Company has accepted a $500,000 settlement for damages incurred when a nearby manufacturing facility contaminated the ground water at our Southern Pines, North Carolina manufacturing facility, which is being marketed for sale. The Company is continuing to assess the rest of its manufacturing and distribution facilities for opportunities to reduce costs and streamline operations. As part of this process the Company's Board of Directors has authorized management to investigate the sale of the manufacturing plant located in San Luis, Mexico. At this time, no definitive plans have been made regarding this facility. Financial Condition: Our credit agreement with Wells Fargo Bank, which expires on October 1, 1996, was amended to extend the expiration date to October 1, 1997. The amended line of credit will continue to provide loans at the Wells Fargo prime interest rate, but also allows the Company the option to borrow under 30, 60, and 90 day fixed term rates at LIBOR plus 1.75%. The amended line provides the Company with a $49,500,000 line of credit with a letter of credit subfeature. The old line provided separate cash and letter of credit lines of $40,500,000 and $9,000,000 respectively. As of October 31, 1995 we had $18,575,000 available under the terms of the line of credit. As a result of seasonally high third quarter deliveries, receivables increased compared to January 31, 1995. Inventory decreased by more than $3,000,000 from January 31, 1995 due to seasonally high third quarter sales. Capital expenditures, which have been usually high during late 1994 and the first nine months of 1995 due to the new Torrance facility, should return to a more normal level of activity.
11 PART II VIRCO MFG. CORPORATION SUBSIDIARIES Other Information Item 4. Submission of matters to a vote of Security Holders None 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 Nine Months Ended ------------------ ------------------ October 31 October 31 ---------- ----------- 1995 1994 1995 1994 ---- ---- ---- ---- <S> <C> <C> <C> <C> Primary: Average Shares Outstanding 5,369,359 5,360,559 5,369,359 5,360,559 Net effect of dilutive stock options - based on the treasury stock method using average market price. 68,442 58,213 52,189 48,914 --------- --------- --------- --------- Totals 5,437,801 5,418,772 5,421,548 5,409,473 ========= ========= ========= ========= Net Income 2,748,000 2,986,000 2,946,000 3,414,000 ========= ========= ========= ========= Per Share Amount .51 .55 .54 .63 ========= ========= ========= ========= </TABLE> Weighted average shares outstanding are adjusted for 10% stock dividend declared August 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: By: ----------------------- --------------------------------- James R. Braam Vice President - Finance Date: By: ----------------------- --------------------------------- Robert E. Dose Corporate Controller