Virco Mfg. Corporation today announced results for its fiscal quarter and first six months ended July 31, 2019:
Operating income grew 15% in the fiscal second quarter to $10,179,000 this year versus $8,855,000 last year despite a 6% revenue decline in net sales, to $70,359,000 versus $74,802,000 during the same period last year. Through six months, operating income grew 50% from to $6,582,000 this year versus $4,387,000 last year. The Company’s business is highly seasonal, often resulting in operating losses in the first and fourth quarters offset by operating income in the second and third quarters, when deliveries of school furniture peak ahead of the start of the next school year.
Looking forward, Management’s preferred indicator of overall business activity: “Year-to-date Shipments + Unshipped Backlog” is down 10.5% to $148,009,000 this year versus $165,347,000 last year. When combined with the actual 6% decline in shipments for the second quarter, Management believes business activity may be slowing. Although the Company does not provide forward-looking guidance, Management does make use of indicators like these to adjust factory output and inventory levels.
Results through six months are beginning to reflect the positive impacts of several initiatives undertaken by Management to address the increasingly compressed summer delivery season, which traditionally extended beyond Labor Day but now usually concludes by the second week in August. First, sales prices were appropriately adjusted to compensate for higher raw material costs and the tariff impacts on smaller, imported components.
Second, the Company invested in additional service, logistics, and project management capabilities to improve order fulfillment and on-time deliveries. These investments resulted in significantly higher levels of customer satisfaction as well as shipping a higher proportion of the total backlog during this year’s busy summer delivery season. Management continues to believe that its “fully infrastructured” domestic facilities and highly experienced employees provide better control of inventories-and related financing-than models dependent on multiple suppliers and extended supply chains.
Here are the numbers for the second quarter and six months ended July 31, 2019:
Commenting on these events, Virco Chairman and CEO Robert Virtue said: “This was a very rewarding summer. We achieved high levels of customer satisfaction with complete, on-time deliveries that were the best in memory, and customers compensated us fairly for the quality of product and service we provided. We have an experienced corps of workers in all areas of operations, sales, and distribution. As they have many times in the past, they rallied this summer to deliver the range of products and services demanded by progressive educators.”
Virco President Doug Virtue elaborated: “With the uncertainties now confronting extended supply chains, we are fortunate to rely instead on our globally competitive domestic factories and distribution centers. Perhaps most importantly, we are grateful to have retained and even added to the expert workforce required to maximize these capital assets. We are now free to make future investments in new products and market development initiatives, having already established a firm operating foundation with our domestic footprint of over 2,000,000 square feet.”