|FOR IMMEDIATE RELEASE
||Robert A. Virtue, President
Douglas A. Virtue, Executive Vice President
Robert E. Dose, Chief Financial Officer
Virco Mfg. Corporation
Virco Announces Cash Dividend and Preliminary Fourth Quarter Update on Financial Condition
Torrance, California February 13, 2009 Virco Mfg. Corporation (NASDAQ: VIRC) today announced
the declaration of a cash dividend and provided a preliminary fourth quarter update on its
financial condition in the following letter to stockholders from Robert A. Virtue, President and
I am pleased to announce a quarterly cash dividend of $.025 per share, payable March 9 to
stockholders of record on February 23. In keeping with our practice, we reviewed our current
financial position and estimated future cash requirements before deciding to declare this dividend.
In light of the current recession, and given the relatively long window between our fiscal year-end
of January 31, 2009 and our anticipated Form 10K filing in April, we have also decided to provide
stockholders with a preliminary update on our current financial condition. We do not anticipate
making reports like this on a regular basis, and although it provides a high-level overview of our
condition, we caution against using it as guidance. All markets remain extremely volatile and
despite our present strong position, unforeseen events beyond our control could cause our condition
to change quickly.
Four major elements of our business balance sheet, order rates, operating costs and customer
relationships remain gratifyingly stable despite the recession. In the case of our balance
sheet, we ended the year free of bank debt for the first time in over 20 years. Inventories are
more than $10,000,000 lower versus last year. Accounts receivable are comparable with last year
and accounts payable are down proportionately with inventory levels. Our 20-year relationship with
Wells Fargo Bank continues to be strong and although our seasonal revolver will have the same
$65,000,000 peak availability in 2009, we dont expect to need all of it unless some unusual
opportunities present themselves.
Order rates are down, but on a year-over-year basis they havent deteriorated appreciably since
mid-summer. Shipments for fiscal 2008 were down approximately 7-8% from 2007. Incoming orders for
the full year were down approximately 8-9%. In the fourth quarter, which captures our entire order
flow since the economy entered its serious downturn last October, incoming orders were down 10-11%.
The backlog itself was up approximately 8-9% at year-end.
Operating costs are appropriately matched to current order rates and we do not anticipate the need
for layoffs. We had the foresight early last year to begin letting natural attrition reduce the
size of our workforce. Between January 2008 and January 2009, 99 employees left the Company and
were not replaced. As a result we are leanly staffed, even at current reduced levels of demand.
Given our present inventory position and conservative estimates of peak season demand for 2009, we
expect to initiate voluntary overtime in our Conway, Arkansas and Torrance, California plants
sometime in early March. We continue to view our highly experienced and flexible workforce as our
most valuable corporate asset. If conditions do worsen, and in the spirit of fully balanced
corporate social responsibility, we will first pursue additional cost saving measures that do not
include either layoffs or restructuring charges.
Were also making every effort to support our educational customers and resale partners as they
attempt to balance their own books during this difficult period. One way were doing that is with
competitive pricing on our many national and regional contracts. Another is by continuing to offer
reliable delivery and field service on quality products that have long, sustainable service lives.
Finally, we continue to develop new products that make better use of raw material and energy
inputs, and new services like our Take-Back Program that help educators recycle their furniture
when it reaches the end of its service life.
Weve been asked about possible favorable impacts of the proposed stimulus package on our business.
The plans weve seen include funds for new school construction, which could take one or more years
to generate furniture orders; and renovations, which could yield orders for this year. We support
the stimulus package and believe its the right solution for the nations schools and the broader
economy. We have the liquidity and available production capacity to respond to almost any
conceivable amount of additional demand. But we havent built our short-term plans around it, and
no matter how quickly its approved and implemented, it isnt likely to affect the first half of
2009. For these reasons we believe a cautious approach that protects our balance sheet and cash
flows is appropriate through at least mid-year. After that point we should have a better idea of
how the stimulus package will affect state and local funding, which continue to be the source for
most of our volume.
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: new business strategies; the cost and availability of steel and other raw materials; the
costs of utilities and freight; the continuing impact of our Assemble-to-Ship and Equipment for
Educators programs on earnings; market demand and acceptance of new products;