Virco Mfg. Corporation (VIRC) today announced improved results for its fiscal year ended January 31, 2017.
Virco Mfg. Corporation today reported higher revenue and operating income for the fourth quarter and year ended January 31, 2017. For the seasonally light fourth quarter of November through January, revenue was up 20% from $19,494,000 to $23,441,000. For the full year, revenue increased $4,822,000 to $173,417,000 from $168,595,000. After a slow start last year, order rates continued to accelerate all the way through winter. This higher order rate appears to be continuing into the early spring of this year, resulting in a proportionately higher backlog heading into the peak summer delivery season. Management will comment on this development in June when it provides its traditional first quarter assessment of market trends and conditions.
The previously announced reversal of an allowance against potentially unrealizable deferred tax benefits contributed a non-cash improvement of 17,962,000 to reported net income, boosting net income for the full year to $22,760,000 vs. $4,549,000 last year. The decision to reverse this allowance reflects management’s opinion that a return to consistently profitable operations makes it more likely than not these benefits will be realized in the future. From an operating standpoint, operations have now been successfully rebalanced to match current market demand. Because this was done without closing plants or selling assets, management further believes the Company will enjoy favorable operating leverage should current growth trends continue.
Some of this favorable leverage was recognized in FYE 2017, as the Company was able to provide meaningful wage and salary increases to its employees for the first time in seven years. This investment in our loyal and highly skilled American workforce was completely paid for by improved operating efficiencies. Selling prices to customers were not raised during the course of the year. Despite absorbing these well-deserved payroll increases, operating income remained stable compared to the prior year.
As global sourcing continues to evolve toward closer proximity to end users, this favorable momentum may continue as the Company’s U.S. factories further extend their cost, quality, and service advantages over models based on outsourcing.
Commenting on this year’s results, Chairman and CEO Robert Virtue said:
“It’s gratifying to see our public school customers returning to more stable funding. This means that conditions are finally beginning to improve in the communities where schools are located, and that bodes well for our business and the country as a whole.”
President Doug Virtue concurred:
“We have long believed there is an unbreakable link between good jobs, healthy families, and students fully prepared to become the next generation of leaders. We’re proud to have multiple generations of employees leading our business. The example we’ve set by keeping our U.S. factories open and globally competitive is entirely appropriate for a company that was founded to support America’s public schools.
“With momentum favorable and looking to continue, it appears that our patience and frugality may finally translate into favorable operating leverage. For products like ours that are bulky and highly seasonal, we think our vertically integrated domestic facilities offer significant cost and service advantages. We thank our skilled employees for their many contributions and our loyal shareholders for supporting this very long term strategy. It allowed us to keep manufacturing jobs here in the U.S. It also allowed us to supply America’s public schools with locally-made furniture—confirming that American factories can not only compete but win in a global environment.”