EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact:
Robert A. Virtue, President
Douglas A. Virtue, Executive Vice President
Robert E. Dose, Chief Financial Officer
Virco Mfg. Corporation
(310) 533-0474
Virco(R) Announces Third Quarter Results
Torrance, California, December 15, 2003 - Virco Mfg. Corporation(R) (AMEX: VIR)
today released its third quarter results in the following letter to shareholders
from Robert A. Virtue, President and CEO:
October 31, 2003 marked the end of the worst third quarter in our history, a
quarter in which sales declined 23% and we incurred a net loss (including
operations and restructuring) of $7,675,000. Here are the numbers:
Three Months Ended Nine Months Ended
10/31/2003 10/31/2002 10/31/2003 10/31/2002
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(in thousands, except per share data)
Sales $ 65,802 $ 85,022 $ 162,843 $ 209,354
Cost of Sales 46,937 53,805 112,601 132,849
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Gross Margin 18,865 31,217 50,242 76,505
Selling, General & Administrative 21,951 25,899 60,785 67,707
Separation Costs 4,589 - 12,377 -
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(Loss)/Income before Taxes (7,675) 5,318 (22,920) 8,798
Income Tax Expense/(Benefit) - 2,074 (2,946) 3,431
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Net (Loss)/Income $ (7,675) $ 3,244 $ (19,974) $ 5,367
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Net (Loss)/Income per share(a) $ (0.59) $ 0.24 $ (1.52) $ 0.40
Weighted average shares outstanding(a) 13,099 13,457 13,107 13,493
(a) For fiscal year 2003, net loss per share was calculated based on basic
shares outstanding at October 31, 2003, due to the anti-dilutive effect on the
inclusion of common stock equivalent shares.
10/31/2003 01/31/2003
---------- ----------
Current Assets $ 57,229 $ 66,068
Non-Current Assets 80,721 88,728
Current Liabilities 53,529 27,320
Non-Current Liabilities 22,354 44,702
Stockholders' Equity 62,067 82,774
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Although the classroom furniture market suffers periodic downturns, its general
character since World War II has been stable. Nothing in our experience prepared
us for a collapse of this magnitude or suddenness. Despite workforce reductions
of 40% executed in the midst of our summer delivery season, we were unable to
downsize quickly enough to offset the impact of the revenue decline on our
income statement.
Given the magnitude of this year's loss, it's worth restating what we said in
our second quarter report: by using voluntary separation packages first and then
resorting to mandatory layoffs, we achieved two-for-one savings in ongoing
operations versus restructuring costs. Our annual payroll alone has been reduced
by over $22,000,000, compared to separation charges of $12,400,000.
We were able to control our liquidity. Careful management of inventories and a
favorable balance between depreciation and capital expenditures brought net
borrowings to within $5,000,000 of last year's third quarter figure. Net
proceeds of $5,500,000 from the sale of our former Los Angeles factory
subsequent to the close of the quarter resulted in net borrowings of
approximately $22,000,000 on December 15. This figure is approximately
$3,000,000 less than last year at the same date and we expect to finish 2003
with less bank debt than we started with.
Our financial partner Wells Fargo has been very supportive of both our
restructuring and growth initiatives. As in the second quarter we violated
several of our loan covenants, but Wells has again waived these while working to
create a hybrid revolving credit facility that combines elements of asset based
and cash flow structures. We expect to have a new agreement in place within 30
days, at which time we will issue a press release explaining its relevant
details. The new agreement is being carefully structured to provide adequate
liquidity for 2004.
We have reported previously on the split character of classroom furniture
purchases during this recession. Bond funded projects continue to be strong,
while day-to-day replacements supported by operating budgets are weak. This
pattern has continued through the second half of 2003, but the good news is that
our Furniture Focus program is allowing us to capture a higher proportion of the
bond-funded turnkey projects. New states where we completed Furniture Focus
installations in 2003 were California, Arizona, Oregon, Washington, Iowa, and
Illinois. Projects in the specification phase for 2004 are up threefold compared
to 2003, partly due to expansion into other states and partly due to an increase
in the number of districts seeking these services.
Obviously the question on shareholders' minds is: "When will Virco turn around?"
We've adjusted our cost structure dramatically to the point where we anticipate
profitable operations at about $200,000,000 in annual revenue, but we cannot yet
predict if the bottom has been reached in terms of demand. If it hasn't, and if
orders fall further from this year's levels, we may have to endure another year
of breakeven or slightly unprofitable operations. We expect any upturn in
business to generate positive leverage on results.
As with prior recessions we expect to emerge stronger relative to other
classroom furniture makers, most of whom are private and therefore aren't
reporting their struggles during this difficult period. We have a complete new
line of mid-priced ergonomic furniture for the classroom that will be unveiled
at NEOCON next June, and another in the works specifically
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designed to take advantage of ATS. These new products will add to the pricing
and specification power we already have with our Furniture Focus packages, which
promise to be a growing part of our revenue stream. We remain focused on these
opportunities and look forward to a restoration of appropriate funding for the
nation's public and private schools.
This news release contains "forward-looking statements" as defined by the
Private Securities Litigation Reform Act of 1995. These statements include, but
are not limited to, statements regarding: new business strategies, our ability
to continue to control costs and inventory levels, the potential impact of our
Assemble-to-Ship program on earnings, market demand, pricing and seasonality.
Forward-looking statements are based on current expectations and beliefs about
future events or circumstances, and you should not place undue reliance on these
statements. Such statements involve known and unknown risks, uncertainties,
assumptions and other factors, many of which are out of our control and
difficult to forecast, that may cause actual results to differ materially from
those which are anticipated. Such factors include, but are not limited to,
changes in general economic conditions, the markets for school and office
furniture generally and specifically in areas and with customers with which we
conduct our principal business activities, customer confidence, and competition.
See our Annual Report on Form-10K for year ended January 31, 2002, and other
materials filed with the Securities and Exchange Commission for further
description of these and other risks and uncertainties applicable to our
business. We assume no, and hereby disclaim any, obligation to update any of our
forward-looking statements. We nonetheless reserve the right to make such
updates from time to time by press release, periodic reports or other methods of
public disclosure without the need for specific reference to this press release.
No such update shall be deemed to indicate that other statements which are not
addressed by such an update remain correct or create an obligation to provide
any other updates.
END OF FILING
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