Virco Mfg. Corporation (VIRC) today announced results for its first fiscal quarter ended April 30, 2018.
Revenue for the first three months ended April 30, 2018 declined 3% from $23,235,000 to $22,569,000. The Company’s preferred early-season indicator of overall demand — actual YTD shipments through May plus the unshipped backlog — increased 13% compared to the prior year. Management believes this combined measurement taken one month after the quarter end is deep enough into the order entry cycle to be reflective of the year’s trajectory. Management has found it helpful for evaluating overall business activity in the highly seasonal market for school furniture. As always, investors are cautioned not to assume that these positive early trends will continue for the full year.
Due to the modest reduction in early-season shipments as well as advanced preparations for what management believes will be a further intensification of summer deliveries, the net loss for the first quarter increased to $3,572,000 from $2,211,000 last year. Due to a modest price increase during the first quarter, margins appear to have stabilized for orders received during the quarter. This price increase has offset most or all of the cost pressures that have been building over the past several quarters. In particular, the Company is experiencing higher costs for steel, transportation, and related delivery services.
With student enrollment in public schools growing annually only in the low single digits, the Company’s recent revenue growth exceeding this rate may be due to a combination of factors, including gains in market share; faster-than-average new school construction rates (and purchases of new furniture) in the West and South; attempts by school administrators to accelerate refurbishment of older schools and equipment; and/or a generally more favorable funding environment for public schools. Management also cautions that such growth may not continue should one or more of these factors prove unsustainable. Nonetheless, a new “steady-state” does appear to have been established following several years of declining demand for public school furniture that began with the Great Recession in 2008.
Commenting on these developments, Virco CEO and Chairman Robert A. Virtue said: “We’re seeing good early indicators this spring for continued growth above the underlying growth rate in student enrollment in U.S. public schools. While we can’t guarantee this will continue, we’re encouraged by the strength of the market and our possible gains in market share.”
President Doug Virtue elaborated: “While Virco is known primarily as a manufacturer and supplier of school furniture and equipment, we are actively exploring new markets and new channels of outreach and distribution to diversify the customers we can serve with our U.S. factories and employees. Speaking of employees, this spring we celebrated the anniversaries of Virco employees with more than five years of service. In all, we recognized 519 employees out of a total of 805. Of these, 316 — or almost 40% -- had more than twenty years of service. The collective knowledge and experience of these employees can’t be overstated. We are extremely fortunate to have such a dedicated team making and delivering furniture for American and International schools. We look forward to finding new markets where these skills and experience can support additional growth.”