Virco Reports First Quarter Results
Virco Announces First Quarter Results, Impacts and Responses to COVID-19
Early Season Business Activity Down 12-15%
Order Rates and Deliveries Stabilize in Early June
Balance Sheet and Cash Availability Remain Strong
June 12, 2020 - Torrance, California - Virco Mfg. Corporation today announced financial results and COVID-19 Impacts for the First Quarter ended April 30, 2020, in the following letter to Shareholders:
The effective early end to the 2019-2020 school year in March due to COVID-19 had a severe negative impact on the traditional order and delivery cycle for school furniture. As educators and administrators left campuses and district offices, order activity at this normally busy time of year slowed dramatically. As a result, revenue for the first quarter ended April 30, 2020 declined 35% from the prior year period, from $26,893,000 to $17,599,000. The Company reduced factory output proportionately but other than two brief closures of its Torrance, California, facility, was able to continue operations building key components and shipping those few orders that could be accepted under the terms of local health orders. Other variable cost activities were similarly reduced but not stopped completely. Selling continued remotely as did customer service and administrative functions. This balance between current demand levels and anticipated higher levels after reopening moderated the net loss for the seasonally light first quarter, which nonetheless was up 53% from the prior year to ($4,698,000) from ($3,067,000).
Management’s preferred forward-looking metric of “shipments plus the unshipped backlog,” a non-GAAP measure that has traditionally been an accurate tool for production and delivery planning, was down 16% for the 2021 fiscal year through the end of May compared to 2020. However, due to the high quality of orders in the backlog, the gross profit on this metric was down by a lesser amount during this period. As of this writing Management is hopeful that preliminary signs of a return to “normal” late-spring activity levels will be maintained and accelerate as educators and administrators begin preparations for the next school term. However, especially this year when so much is unpredictable, Management cautions investors not to rely on these observations or treat these figures as guidance.
Despite the obvious slowdown due to COVID-19, key balance sheet items remain in good shape. Inventories have been reduced proportionately while still maintaining 100% in-stock status for orders likely to ship in June. Accounts payable and borrowings under the Company’s seasonal revolver are also down proportionately. Cash availability is slightly better than last year. As reported above, gross profit on the backlog is roughly comparable with last year, and given a return to more normal early-summer business levels, Management anticipates a traditionally busy summer delivery season.