Virco Mfg Corporation 10-Q for FY2021 Q2

Virco Mfg Corporation (VIRC)

10-Q 2020-09-14 For: 2020-07-31

Added on April 11, 2026

About this 10-Q

Virco Mfg Corporation filed this 10-Q on September 14, 2020, covering the quarter ended July 31, 2020 (FY2021 Q2).

Headline figures

Quarter ended July 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $59.29M; down 15.7% from $70.36M a year earlier
Net income: $3.55M; down 39.4% from net income of $5.87M a year earlier
Diluted EPS: $0.23; down 39.5% from $0.38 a year earlier

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Delaware						95-1613718
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

2027 Harpers Way, Torrance, CA						90501
(Address of Principal Executive Offices)						(Zip Code)


Part I. Financial Information			3
	Item 1. Financial Statements	3
	Unaudited condensed consolidated balance sheets - July 31, 2020, January 31, 2020 and July 31, 2019	3
	Unaudited condensed consolidated statements of income - Three months ended July 31, 2020 and 2019	5
	Unaudited condensed consolidated statements of (loss) income - Six months ended July 31, 2020 and 2019	6
	Unaudited condensed consolidated statements of comprehensive income - Three months ended July 31, 2020 and 2019	7
	Unaudited condensed consolidated statements of comprehensive (loss) income - Six months ended July 31, 2020 and 2019	8
	Unaudited condensed consolidated statements of cash flows - Six months ended July 31, 2020 and 2019	9
	Unaudited condensed consolidated statements of changes in equity and accumulated other comprehensive income (loss) - Three and Six months ended July 31, 2020 and 2019	10
	Notes to unaudited condensed consolidated financial statements - July 31, 2020	12
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	24
	Item 4. Controls and Procedures	25
Part II. Other Information			26
	Item 1. Legal Proceedings	26
	Item 1A. Risk Factors	26
	Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	26
	Item 3. Defaults Upon Senior Securities	26
	Item 4. Mine Safety Disclosures	26
	Item 5. Other Information	26
	Item 6. Exhibits	26
	EX-3.3
	EX 10.27
	EX-31.1
	EX-31.2
	EX-32.1
	EX-101 INSTANCE DOCUMENT
	EX-101 SCHEMA DOCUMENT
	EX-101 CALCULATION LINKBASE DOCUMENT
	EX-101 LABELS LINKBASE DOCUMENT
	EX-101 PRESENTATION LINKBASE DOCUMENT


	7/31/2020			1/31/2020		7/31/2019
			(In thousands)

Assets
Current assets
Cash	$	878		$	1,150	$	877
Trade accounts receivables, net	32,688			11,762		41,105
Other receivables	60			57		397
Income tax receivable	535			298		340
Inventories	49,444			43,329		59,017
Prepaid expenses and other current assets	2,174			1,746		2,359
Total current assets	85,779			58,342		104,095
Non-current assets
Property, plant and equipment
Land	3,731			3,731		3,731
Land improvements	734			717		688
Buildings and building improvements	51,182			51,200		51,192
Machinery and equipment	111,710			110,610		109,540
Leasehold improvements	1,086			990		970
Total property, plant and equipment	168,443			167,248		166,121
Less accumulated depreciation and amortization	129,596			127,351		125,250
Net property, plant and equipment	38,847			39,897		40,871
Operating lease right-of-use assets	19,551			21,325		22,924
Deferred tax assets, net	11,222			11,230		7,816
Other assets, net	7,970			8,198		8,256
Total assets	$	163,369		$	138,992	$	183,962


	7/31/2020		1/31/2020		7/31/2019
	(In thousands, except share and par value data)

Liabilities
Current liabilities
Accounts payable	$	16,764	$	10,587	$	18,634
Accrued compensation and employee benefits	5,595		6,392		5,322
Current portion of long-term debt	18,387		878		35,457
Current portion operating lease liability	4,581		3,654		3,275
Other accrued liabilities	6,417		3,607		6,871
Total current liabilities	51,744		25,118		69,559
Non-current liabilities
Accrued self-insurance retention	1,494		1,410		1,686
Accrued pension expenses	21,419		21,310		13,951
Income tax payable	71		70		55
Long-term debt, less current portion	15,407		15,818		16,291
Operating lease liability, less current portion	17,798		19,787		21,598
Other long-term liabilities	704		661		557
Total non-current liabilities	56,893		59,056		54,138
Commitments and contingencies (Notes 6, 7 and 13)
Stockholders’ equity
Preferred stock:
Authorized 3,000,000 shares, $0.01 par value; none issued or outstanding	—		—		—
Common stock:
Authorized 25,000,000 shares, $0.01 par value; issued and outstanding 15,918,642 shares at 7/31/2020 and 15,713,549 at 1/31/2020 and 7/31/2019	159		157		157
Additional paid-in capital	119,149		118,782		118,282
Accumulated deficit	(50,955)		(49,810)		(49,392)
Accumulated other comprehensive loss	(13,621)		(14,311)		(8,782)
Total stockholders’ equity	54,732		54,818		60,265
Total liabilities and stockholders’ equity	$	163,369	$	138,992	$	183,962


	Three months ended
	7/31/2020		7/31/2019
	(In thousands, except per share data)
Net sales	$	59,285	$	70,359
Costs of goods sold	36,082		41,620
Gross profit	23,203		28,739
Selling, general and administrative expenses	15,488		18,557
Loss on sale of property, plant & equipment	—		3
Operating income	7,715		10,179
Pension expense	542		188
Interest expense	494		907
Income before income taxes	6,679		9,084
Income tax expense	3,126		3,217
Net income	$	3,553	$	5,867


Net income per common share:
Basic	$	0.23	$	0.38
Diluted	$	0.23	$	0.38
Weighted average shares of common stock outstanding:
Basic	15,733		15,561
Diluted	15,746		15,568


ý			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


¨			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


VIRCO MFG. CORPORATION (Exact Name of Registrant as Specified in its Charter)


	Six months ended
	7/31/2020		7/31/2019
	(In thousands, except per share data)
Net sales	$	76,884	$	97,252
Costs of goods sold	48,777		59,429
Gross profit	28,107		37,823
Selling, general and administrative expenses	27,419		31,238
Loss on sale of property, plant & equipment	—		3
Operating income	688		6,582
Pension expense	1,084		376
Interest expense	898		1,607
(Loss) income before income taxes	(1,294)		4,599
Income tax (benefit) expense	(149)		1,799
Net (loss) income	$	(1,145)	$	2,800

Net (loss) income per common share:
Basic	$	(0.07)	$	0.18
Diluted (a)	$	(0.07)	$	0.18
Weighted average shares of common stock outstanding:
Basic	15,694		15,524
Diluted (a)	15,694		15,529


	Three months ended
	7/31//2020		7/31/2019
	(In thousands)

Net income	$	3,553	$	5,867
Other comprehensive income:
Pension adjustments (net of tax expense of $120 and $45 at July 31, 2020 and 2019, respectively)	345		130
Net comprehensive income	$	3,898	$	5,997


	Three-Month Period Ended July 31, 2020
	Common Stock
In thousands, except share data	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholder's Equity
Balance at May 1, 2020	15,713,549	$	157	$	119,036	$	(54,508)	$	(13,966)	$	50,719
Net income	—	—		—		3,553		—		3,553
Cash dividends	—	—		—		—		—		—
Pension adjustments, net of tax effect of $120	—	—		—		—		345		345
Shares vested and others	205,093	2		(139)		—		—		(137)
Stock compensation expense	—	—		252		—		—		252
Balance at July 31, 2020	15,918,642	$	159	$	119,149	$	(50,955)	$	(13,621)	$	54,732



	Three-Month Period Ended July 31, 2019
	Common Stock
In thousands, except share data	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholder's Equity
Balance at May 1, 2019	15,541,956	$	155	$	118,292	$	(55,259)	$	(8,912)	$	54,276
Net income	—	—		—		5,867		—		5,867
Cash dividends	—	—		—		—		—		—
Pension adjustments, net of tax effect of $45	—	—		—		—		130		130
Shares vested and others	171,593	2		(247)		—		—		(245)
Stock compensation expense	—	—		237		—		—		237
Balance at July 31, 2019	15,713,549	$	157	$	118,282	$	(49,392)	$	(8,782)	$	60,265



	Six-Month Period Ended July 31, 2020
	Common Stock
In thousands, except share data	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholder's Equity
Balance at February 1, 2020	15,713,549	$	157	$	118,782	$	(49,810)	$	(14,311)	$	54,818
Net loss	—	—		—		$	(1,145)	—		(1,145)
Cash dividends	—	—		—		—		—		—
Pension adjustments, net of tax effect of $240	—	—		—		—		690		690
Shares vested and others	205,093	2		(139)		—		—		(137)
Stock compensation expense	—	—		506		—		—		506
Balance at July 31, 2020	15,918,642	$	159	$	119,149	$	(50,955)	$	(13,621)	$	54,732


	Six-Month Period Ended July 31, 2019
	Common Stock
In thousands, except share data	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholder's Equity
Balance at February 1, 2019	15,541,956	$	155	$	118,106	$	(52,192)	$	(9,042)	$	57,027
Net income	—	—		—		$	2,800	—		2,800
Cash dividends	—	—		—		—		—		—
Pension adjustments, net of tax effect of $91	—	—		—		—		260		260
Shares vested and others	171,593	2		(247)		—		—		(245)
Stock compensation expense	—	—		423		—		—		423
Balance at July 31, 2019	15,713,549	$	157	$	118,282	$	(49,392)	$	(8,782)	$	60,265


	Three-Months Ended							Six-Months Ended
	7/31/2020		7/31/2019		7/31/2020			7/31/2019
	(in thousands, except lease term and discount rate)
Operating lease cost	$	1,472	$	1,320	$	2,912		$	2,700
Short-term lease cost	124		82		160			136
Short-term sublease income	(10)		(20)		(20)			(30)
Variable lease cost (1)	(85)		61		370			509
Total lease cost	$	1,501	$	1,443	$	3,422		$	3,315

Other operating leases information:
Cash paid for amounts included in the measurement of lease liabilities					$	2,201		$	2,611
Right-of-use assets obtained in exchange for new lease liabilities					$	398		$	1,036
Weighted-average remaining lease term (years)					4.5			5.4
Weighted-average discount rate					6.4		%	6.38		%


FORM 10-Q


	7/31/2020		1/31/2020		7/31/2019
	(in thousands)

Finished goods	$	23,065	$	15,401	$	27,464
WIP	15,430		15,957		17,989
Raw materials	10,949		11,971		13,564
Total inventories	$	49,444	$	43,329	$	59,017


	Operating Lease
	(in thousands)
Remaining of 2021	$	2,942
2022	5,757
2023	5,323
2024	5,225
2025	5,370
Thereafter	1,350
Remaining balance of lease payments	$	25,967

Short-term lease liabilities	$	4,581
Long-term lease liabilities	17,798
Total lease liabilities	$	22,379

Difference between undiscounted cash flows and discounted cash flows	$	3,588


	Three Months Ended						Six Months Ended
	7/31/2020		7/31/2019		7/31/2020		7/31/2019
	(in thousands)
Beginning balance	$	800	$	700	$	800	$	700
Provision	(17)		245		43		316
Costs incurred	(33)		(145)		(93)		(216)
Ending balance	$	750	$	800	$	750	$	800


	Combined Employee Retirement Plans
	Three Months Ended						Six Months Ended
	7/31/2020		7/31/2019		7/31/2020		7/31/2019
	(in thousands)
Service cost	$	—	$	—	$	—	$	—
Interest cost	301		355		602		710
Expected return on plan assets	(224)		(343)		(448)		(686)
Plan settlement	—		—		—		—
Amortization of prior service cost	—		—		—		—
Recognized net actuarial loss	465		176		930		352
Benefit cost	$	542	$	188	$	1,084	$	376


Exhibit Number			Document
3.3			Third Amended and Restated Bylaws of the Company dated June 9, 2020 (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q filed with the SEC on June 12, 2020)
10.3.20			Twenty-First Amendment to Revolving Credit and Security Agreement, by and among Virco Mfg. Corporation and Virco, Inc., as borrowers, and PNC Bank, National Association, as the lender and administrative agent.
31.1			Certification of Robert A. Virtue, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Robert E. Dose, Vice President, Finance, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


	VIRCO MFG. CORPORATION
Date: September 14, 2020	By:	/s/ Robert E. Dose
		Robert E. Dose
		Vice President — Finance
		(Principal Financial Officer)


Level	Applicable Trigger Period	Domestic Rate Loans			Eurodollar Rate Loans
		Revolving Advances	Equipment Loans	Revolving Advances	Equipment Loans
I	during the Seasonal Overadvance Period (as defined in Section 2.1(a)(iii))	1.75	1.25	2.75	2.25
II	at all other times	1.25	1.25	2.25	2.25


			/s/ Robert A. Virtue
			Robert A. Virtue
Date: September 14, 2020			Chief Executive Officer and Chairman of the Board (Principal Executive Officer)