Reflecting what may be a further intensification of seasonality in its core market of public school furniture, fixtures and equipment, Virco reported essentially flat operating results on a 10% decline in 1st quarter revenue for the period ended April 30, 2016. In this traditionally slow period ahead of peak summer deliveries, shipments were $20,827,000 compared to $23,048,000 last year. Despite this decline, the Company’s preferred early-season measure of business activity-actual YTD shipments plus the unshipped summer backlog-increased over 13% from $46,826,000 last year to $53,055,000 this year.
Continued operating efficiencies buffered the impact of this heightened seasonality, yielding an operating loss of ($2,845,000) compared to ($2,841,000) last year. As shipments normalize heading into summer, Management is hopeful these efficiencies will translate into better operating results for the crucial peak-season delivery cycle.
Virco Chairman and CEO Robert Virtue commented on the intensifying seasonality highlighted by these early season numbers: “One of the essential challenges in our industry is responding to seasonality. Because most of our shipments can only be received when schools are out of session and students aren’t in the classroom, summer is our busiest shipping season. As schools across the country have shifted to progressively earlier start dates-now August as compared to post-Labor Day a decade ago-our window for deliveries has narrowed. This narrowing has occurred at both ends of summer. For this reason, when we see good strength on incoming orders-even if that strength is offset by a slow start to actual shipments-we gain confidence for the overall trend. At this time of year, the scale of our backlog is significantly bigger than actual shipments. So, by combining these two numbers, we sample a bigger data set and get a more accurate picture of demand. Given the moderate increase in this year’s figure, we’re cautiously optimistic that summer results will continue to show improvement.”
Virco President Doug Virtue elaborated on these trends: “Since the Great Recession, seasonality and volatility have both increased in our market. Despite the challenges posed by these trends, we’ve tried to turn them into competitive opportunities. Our domestic factories and direct customer relationships give us a unique ability to support educators as they navigate their own increasingly complex funding environment. We’re actually looking forward to a busy and rewarding summer as public schools across most regions of the country continue to upgrade and refurbish their facilities. Our inventories are robust and appropriately balanced as we head into the crucial two quarters of FYE 2017, and our factories are operating at historically high levels of efficiency.”