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 APRIL 30, 1996 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 June 2, 1996. Common Stock 5,369,360 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 - April 30, 1996 and January 31, 1996. Condensed consolidated statements of income - Three months ended April 30, 1996 and 1995. Condensed consolidated statements of cash flows - Three months ended April 30, 1996 and 1995. Notes to condensed consolidated financial statements - April 30, 1996. 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 2
3 PART 1 <TABLE> <CAPTION> Item 1. Financial Statements -------------------- VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited (Note 1) (Dollar Amounts in Thousands) ASSETS 4/30/96 1/31/96 ------ --------- --------- <S> <C> <C> Current Assets Cash $ 310 $ 661 Accounts and Notes Receivable 23,227 28,102 Less Allowance for Doubtful Accounts (240) (100) --------- --------- Net Accounts and Notes Receivable 22,987 28,002 Income Taxes Receivable 1,125 197 Inventories (Note 2) Finished Goods 30,352 22,585 Work in Process 7,322 6,949 Raw Materials and Supplies 10,894 13,486 --------- --------- Total Inventories 48,568 43,020 Prepaid Expenses and Deferred Income Tax 2,955 2,742 --------- --------- Total Current Assets 75,945 74,622 Restricted Short-term Investment 797 1,272 Property, Plant & Equipment Cost 75,673 73,693 Less Accumulated Depreciation (38,191) (36,738) --------- --------- Net Property, Plant & Equipment 37,482 36,955 Other Assets 6,939 6,376 --------- --------- $ 121,163 $ 119,225 ========= ========= </TABLE> The accompanying notes are an integral part of these condensed financial statements. 3
4 VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited (Note 1) <TABLE> <CAPTION> (Dollar Amounts in Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY 4/30/96 1/31/96 ------------------------------------ --------- --------- <S> <C> <C> Current Liabilities Checks Released But Not Yet Cleared Bank $ 2,067 $ 3,545 Accounts Payable 7,533 10,199 Income Taxes Payable -- -- Current Maturities on Long-Term Debt 924 924 Other Current Liabilities 9,239 8,634 --------- --------- Total Current Liabilities 19,763 23,302 Non-current Liabilities Long Term Debt (Less Current Portion) 42,833 35,909 Other Non-Current Liabilities 3,991 3,991 --------- --------- Total Non-Current Liabilities 46,824 39,900 Deferred Income Taxes 562 562 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; 5,391,749 Shares issued at 4/30/96 and 1/31/96 54 54 Additional Paid-In Capital 42,055 42,055 Retained Earnings 12,278 13,717 Less treasury stock at cost (22,389 Shares) (172) (172) Loan to ESOP Trust (201) (193) --------- --------- Total Shareholders' Equity 54,014 55,461 --------- --------- $ 121,163 $ 119,225 ========= ========= </TABLE> The accompanying notes are an integral part of these condensed financial statements. 4
5 VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited (Note 1) <TABLE> <CAPTION> (Dollar Amounts in Thousands) 3 Months Ended -------------- 4/30/96 4/30/95 ----------- ----------- <S> <C> <C> Net Sales $ 36,745 $ 36,925 Cost of Goods Sold 27,366 27,468 ----------- ----------- Gross Profit 9,379 9,457 Shipping, Selling, General and Administrative Expense 10,888 11,055 Provision for Doubtful Accounts 110 110 Interest Expense 740 776 ----------- ----------- 11,738 11,941 ----------- ----------- Income/(Loss) Before Taxes on Income (2,359) (2,484) Taxes on Income/(Loss) (920) (969) ----------- ----------- Net Income/(Loss) $ (1,439) $ (1,515) =========== =========== Earnings/(Loss) Per Share (.27) (.28) =========== =========== Weighted Average Shares Outstanding (Adjusted for 10% Stock Dividends Declared August 15, 1995.) 5,369,360 5,360,560 =========== =========== Dividend Declared Cash (Per Share) -- -- =========== =========== Stock -- -- =========== =========== </TABLE> The accompanying notes are an integral part of these condensed financial statements. 5
6 VIRCO MFG. CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited (Note 1) <TABLE> <CAPTION> (Dollar Amounts in Thousands) 3 Months Ended -------------- 4/30/96 4/30/95 ------- -------- <S> <C> <C> Cash Flows From Operating Activities Net Income (Loss) $(1,439) $ (1,515) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,468 1,044 Provision for doubtful accounts 110 100 (Gain)/Loss on sales of fixed assets -- -- Change in assets and liabilities: Accounts and notes receivable 4,905 4,081 Inventories (5,548) (11,755) Prepaid expenses and deposits (213) (1,504) Income taxes receivable/payable (928) (2,643) Other assets 17 882 Accounts payable and accrued expenses (3,539) 135 ------- -------- Net Cash Provided By Operating Activities (5,167) (11,175) Cash Flows From Investing Activities Capital expenditures (1,995) (3,254) Proceeds from sale of assets -- -- Net investment in life insurance (580) 21 Restricted short term investments 475 5,248 ------- -------- Net Cash Used in Investing Activities (2,100) 2,015 Cash Flows From Financing Activities Issuance of long-term debt 7,148 8,736 Repayment of long-term debt (225) (110) Loans to ESOP (7) 110 ------- -------- Net Cash Provided by Financing Activities 6,916 8,736 Net Change in Cash (351) (424) Cash at Beginning of Quarter 661 585 ------- -------- Cash at End of Quarter $ 310 $ 161 ======= ======== </TABLE> The accompanying notes are an integral part of these condensed financial statements. 6
7 VIRCO MFG. CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1996 and April 30, 1995 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 month period ended April 30, 1996 are not necessarily indicative of the results that may be expected for the year ended January 31, 1997. 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, 1996. 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 Statement of Financial Accounting Standards (SFAS) No 109 effective February 1, 1993. Income taxes for the three month period ended April 30, 1996 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. 7
8 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 8
9 VIRCO MFG. CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations: For the first quarter of 1996, the Company incurred a net loss from continuing operations of $1,439,000 on sales of $36,745,000 compared to a net loss from continuing operations of $1,515,000 on sales of $36,925,000 in the same period last year. The first quarter results are consistent with Virco's seasonal business cycle which produces diminished first quarter sales. The decrease in net loss is attributable to decreases in selling and marketing expense, offset by a small increase in manufacturing cost due to reduced levels of production at the Mexico manufacturing facility. In May the Company signed a letter of intent with Crown 2000 International for the sale of the wholly owned Mexico manufacturing facility. In this letter of intent, Virco and Crown 2000 have stipulated that they will promptly negotiate a definitive sales agreement. The sale is intended to close in August 1996 and is not expected to have a material adverse effect in operating results. Net assets of the Mexico operation were $4,944,000 and $6,386,000 at April 30, 1996 and January 31, 1996 respectively. Financial Condition: As a result of seasonally low deliveries in the first quarter, accounts receivable decreased by approximately $3,550,000. In anticipation of strong summer deliveries, inventory was increased by nearly $5,550,000. The increase in inventory was financed through the credit facility with Wells Fargo Bank. Proceeds from the 1994 issuance of an industrial revenue bond are held in trust and reflected as restricted short term investments on the January 31, 1996 balance sheet. In the first quarter, the Company withdrew $475,000 from the trust to fund capital improvements which were made at the west coast facility during the fourth quarter of 1995. This facility is now complete and operating at anticipated levels of production. 9
10 VIRCO MFG. CORPORATION AND SUBSIDIARIES Exhibit (11) - Statement Re: Computation of Earnings Per Share <TABLE> <CAPTION> Three Months Ended ------------------ April 30 -------- 1996 1995 ---- ---- <S> <C> <C> Primary: Average Shares Outstanding 5,369,360 5,360,560 Net effect of dilutive stock options - based on the treasury stock method using average market price -- -- ---------- ---------- Totals 5,369,360 5,360,560 ========== ========== Net Loss 1,439,000 1,515,000 ========== ========== Per Share Amount (.27) (.28) ========== ========== </TABLE> Weighted average shares outstanding are adjusted for 10% stock dividend declared August 15, 1995. 10
11 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