Virco Mfg. Corporation Tuesday reported its financial results for the third fiscal quarter ended October 31, 2020. Net sales and earnings continue to be negatively impacted by economic conditions driven by the COVID-19 pandemic. Net sales for the third quarter were $56,741,000, a 15.3% decline from last year’s $66,998,000. Through nine months, net sales were $133,625,000 versus $164,250,000 last year, a decline of 18.6%. Operating income for the third quarter declined by 8.5% compared to the prior year, although net income for the quarter improved 15.1% to $4,480,000 or $0.28 per diluted share from $3,892,000 or $0.25 per diluted share, reflecting the positive impact of operational expense controls and favorable tax benefits.
Through summer, the Company noted a meaningful shift in demand toward individual student desks and chairs that could be more easily distanced within existing facilities. Given the flexibility of the Company’s domestic factories, shifting production to these traditional products was relatively efficient. Those efficiencies have contributed to the steady improvement in the trend of operating income even as top-line revenue remains depressed. Management notes that the Company’s vertical business model has afforded the Company some degree of stability and control during the COVID pandemic in several key areas, including overall customer experience, cash flow, product quality, and balance sheet metrics such as inventory, accounts payable and receivable. The Company’s continued availability of seasonal debt financing has also provided important flexibility to manage borrowing costs and inventory build during this period of limited visibility on future orders. The Company has conservatively managed its buildup of inventory this year, which has decreased by $6,035,000 at October 31, 2020 compared to the prior year. This reduction has enabled the Company to completely pay down its revolving line of credit with PNC Bank as of October 31, 2020.
Virco Chairman and CEO Robert Virtue was hopeful that recent positive trends would continue: “This has been a tough year in many areas, including predictions for the future. Still, I’m reassured by the growing recognition that in-person schooling is critical for students, families, and society in general. From our founding in 1950 we have been strongly dedicated to the idea of public education. As schools recover from this year’s uncertainties, we hope to use our strength and financial resilience to support their return to full operations.”