VIRCO MFG CORPORATION
For the period ended Oct 31, 2024. Filed Dec 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Oct 31, 2024 · Filed Dec 9, 2024
VIRC$6.20+3.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-07-31; filed 2024-09-09.
0001628280-24-039826
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-10-31; filed 2024-12-09.
0001628280-24-050392
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 35 previous paragraphs and 38 current paragraphs.
15 unchanged; 18 reworded; 5 added; 2 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
The Company has benefited from a large series of disaster recovery orders that were received at the end of the prior fiscal year and the first quarter of the current year. Collectively, these orders resulted in approximately $9 million of additional revenue that was recognized in the first quarter of the current year compared to the same quarter in the prior year. The new orders positively affected the Company’s traditional seasonal cycle this fiscal year, with positive impacts on production, overhead absorption, accounts receivable, collections, and reductions in inventory, as well as lower borrowings to support that inventory. An additional $4 million and $6 million of disaster recovery orders were delivered in the second and third quarters of the current year, respectively, resulting in similar positive impacts. The Company believes that it will receive additional orders for this project in the fourth quarter, and that the project will be substantially complete by the end of the current fiscal year. The Company further believes that the timing and related positive impacts of this project are unusual and that more typical seasonal and financial patterns are likely to return after this project concludes.
Current report
The Company does not typically deliver furniture to new schools until the customer has an occupancy certificate. Supply chain disruptions in the construction industry, which may delay the completion of new schools, did not significantly impact sales volume during the quarter ended October 31, 2024, despite portions of the United States experiencing hurricanes and other severe weather conditions. As a consequence of these tragic weather conditions, the Company may benefit from future orders as the schools are rebuilt.
Current report
Recent elections and the shift in political power nationally may cause some uncertainty regarding future funding for school furniture, although Management estimates that more than 80% of school funding and virtually all new bond funded construction and refurbishment derive from state and local budgets, which are less dependent on federal funding sources. The two largest states for the Company’s revenue are California and Florida. In addition, because the Company has maintained and invested in its domestic factories and experienced workforce, Management believes that the Company may be less vulnerable to current and potential future tariffs and supply chain disruptions than many other suppliers of education furniture, although the Company is sensitive to the price of steel and imports a number of raw materials and components from international suppliers, primarily China.
Current report
Nine Months Ended October 31, 2024
Current report
On November 22, 2024, the Company executed Amendment No. 5 to the Restated Credit Agreement, with an effective date of October 31, 2024. See Note 7.
Removed paragraphs (2)
Previous report
The Company has received and filled a large series of orders funded by the United States Department of Education that were shipped during the first quarter of 2024 rather than during the traditional peak of June through August. Approximately $9 million of the first quarter's increase in sales compared to the same quarter in the prior year were attributable to these orders. The Company shipped approximately $4.0 million related to this order in the second quarter. The Company believes that it will receive and deliver additional related orders during the third and fourth quarters of the current year. These orders materially and positively impacted first and second quarter comparisons to the same periods in the prior year. In addition to impacting the relative portion of revenue recognized in the first and second quarters, quarterly fluctuations in inventory, accounts receivable, and operating cash flows were positively impacted.
Previous report
Six Months Ended July 31, 2024
Reworded paragraphs (18)
Previous wording
The market for educational furniture is marked by extreme seasonality. Typically, the Company has highly seasonal annual cycle where approximately 50% of sales occur in June, July and August. Orders received from customers follow a similar seasonal cycle, with the bulk of orders arriving approximately 4-6 weeks preceding the selling season.
Current wording
The market for educational furniture is marked by extreme seasonality. Typically, the Company has a highly seasonal annual cycle where approximately 50% of sales occur in June, July and August. Orders received from customers follow a similar seasonal cycle, with the bulk of orders arriving approximately 4-6 weeks preceding the delivery season.
Previous wording
With the exception of this one event for the six-month period ended July 31, 2024, management believes that the traditional seasonal cycle and the Company’s ability to service that seasonal cycle has returned to normal. During the three-month period ended April 30, 2024, the Company experienced a 7.6% increase in orders compared to the same period last year. During the three-month period ended July 31, 2024, the Company experienced a 5.3% increase in orders compared to the same period last year. For the six-month period ended July 31, 2024 the Company experienced a 6.4% increase in orders compared to the same period last year.
Current wording
With the exception of the disaster recovery project for the nine-month period ended October 31, 2024, management believes that the traditional seasonal cycle for school furniture and equipment has largely returned to its pre-pandemic summer peak. Management further believes that the Company’s ability to service that seasonal cycle has returned to normal. During the three-month period ended October 31, 2024, the Company experienced approximately 13% decrease in orders compared to the same period last year. For the nine-month period ended October 31, 2024, the Company experienced approximately 2% increase in orders compared to the same period last year.
Previous wording
Due to improved delivery performance in the year ended January 31, 2024 compared to the same period last year, the Company began the current year with a sales order backlog that was approximately $10 million less than the same period last year. The combination of a smaller beginning backlog and an increase in sales for the first six months resulted in a reduced sales order backlog at July 31, 2024 compared to the same period in the prior year despite an increase in sales orders for the current year. Order backlog at July 31, 2024 declined to approximately $61.3 million compared to $74.0 million in the prior year.
Current wording
Due to improved delivery performance in the year ended January 31, 2024 compared to the same period last year, the Company began the current year with a sales order backlog that was approximately $10 million less than the same period last year. The combination of a smaller beginning backlog and more timely deliveries for the first nine months resulted in a reduced sales order backlog at October 31, 2024 compared to the same period in the prior year, despite an increase in sales orders for the current year. Order backlog at October 31, 2024 declined to approximately $25.0 million compared to $42.6 million in the prior year.
Previous wording
The combination of materially improved profitability in the last six months of the prior year and first six months of fiscal 2025 along with muted seasonality due to the order discussed above contributed to material changes in the Company’s balance sheet at July 31, 2024 compared to the same period last year. As a result of after-tax profits earned during the last 12 months, the Company has approximately $25.5 million of additional stockholders’ equity on July 31, 2024 compared to the same date last year, including reductions in equity for cash dividends paid in both the first and second quarters and stock repurchases during the first quarter. Because the Company shipped a larger than typical portion of deliveries in the first quarter, the Company shipped inventory earlier in the year and did not have as much seasonal inventory at July 31, 2024 compared to the same period last year. Finally, because the year-to-date increase in revenue was primarily in the first quarter, and receivables were collected more efficiently in the second quarter, accounts receivable decreased by approximately $12.5 million compared to the same date last year. The combination of these events resulted in the Company having increased cash and no borrowings under its line of credit on July 31, 2024 compared to borrowing of approximately $42.0 million under its line of credit at July 31, 2023. Management believes that this is the first time in the 74-year history of the Company that it has had no bank debt at the end of the second quarter.
Current wording
The combination of materially improved profitability in the last six months of the prior year and first nine months of fiscal 2025 along with muted seasonality due to the project discussed above contributed to material changes in the Company’s balance sheet at October 31, 2024 compared to the same period last year. As a result of after-tax profits earned during this period, the Company has approximately $22.1 million of additional stockholders’ equity on October 31, 2024 compared to the same date last year, including reductions in equity for cash dividends paid in each of the first three quarters and stock repurchases during the first quarter. Because the Company shipped a larger than typical portion of deliveries in the first quarter, the Company shipped inventory earlier in the year and did not have as much seasonal inventory at October 31, 2024 compared to the same period last year. Finally, because the year-to-date increase in revenue was primarily in the first quarter, and receivables were collected more efficiently in the second and third quarters, accounts receivable decreased by approximately $4.9 million compared to the same date last year. The combination of these events resulted in the Company having $38.9 million of cash and no borrowings under its line of credit on October 31, 2024 compared to cash of $4.9 million and borrowing of approximately $3.7 million under its line of credit at October 31, 2023.
Previous wording
For the three months ended July 31, 2024, the Company earned pre-tax income of $22.1 million on sales of $108.4 million compared to a pre-tax income of $20.3 million on sales of 107.3 million in the prior year.
Current wording
For the three months ended October 31, 2024, the Company earned net income of $8.4 million on sales of $82.6 million compared to net income of $10.2 million on sales of $84.3 million in the prior year.
Previous wording
Sales for the second quarter increased by approximately $1.1 million or 1.0% compared to the same period prior year. The increase was affected by the timing of shipments, as the Company delivered a larger than expected portion of sales orders in the first quarter ended April 30, 2024.
Current wording
Sales for the third quarter decreased by approximately $1.6 million or 1.9% compared to the same period prior year. The decrease was affected by the timing of shipments, as the Company delivered a larger than expected portion of sales orders in the first quarter ended April 30, 2024.
Previous wording
Gross margin for the second quarter ended July 31, 2024 was 46.3% compared to 45.3% in the prior year. The increase in margin was attributable to relatively stable commodity costs, increased levels of production, and product mix.
Current wording
Gross margin for the third quarter ended October 31, 2024 was 44.4% compared to 45.4% in the prior year. The decrease in margin was attributable to slightly increased levels of overhead expense relative to sales.
Previous wording
Selling, general and administrative expenses for the three months ended July 31, 2024 increased by approximately $1.0 million and by 0.7% of sales compared to the same period last year. The increase was attributable to increased variable selling and service expenses.
Current wording
Selling, general and administrative expenses for the three months ended October 31, 2024 increased by approximately $2.1 million and increased to 30.9% of sales compared to 27.9% in the same period last year. The increase was attributable to increased freight and selling expenses.
Previous wording
Interest expense decreased by $0.8 million for the three months ended July 31, 2024 compared to the same period last year. The decrease was primarily attributable to a decrease in the amount borrowed in 2024 to finance seasonal working capital.
Current wording
Net interest income was $24,000 for the three months ended October 31, 2024 compared to net interest expense of $765,000 for the same period last year. The decrease was primarily attributable to a decrease in the amount borrowed in 2024 to finance seasonal working capital.
Previous wording
For the three months ended July 31, 2024 and 2023, the effective income tax rates were 23.7% and 23.6%, respectively.
Current wording
For the three months ended October 31, 2024 and 2023, the effective income tax rates were 25.5% and 24.5%, respectively.
Previous wording
For the six-month period ended July 31, 2024 the Company earned a pre-tax profit of $24.9 million on sales of $155.2 million compared to a pre-tax profit of $18.4 million on sales of $142.3 million in the prior year. Sales increased by approximately $12.9 million or 9.1% compared to the same period in the prior year. The increase was attributable to an increase in volume and product mix.
Current wording
For the nine-month period ended October 31, 2024 the Company earned net income of $27.4 million on sales of $237.8 million compared to net income of $24.3 million on sales of $226.5 million in the prior year. Sales increased by approximately $11.3 million or 5.0% compared to the same period in the prior year. The increase was attributable to an increase in volume and product mix.
Previous wording
Gross Margin for the first six months ended July 31, 2024 was 45.5% compared to 43.4% in the prior year. The margin was affected by increased production levels combined with relatively stable costs for raw materials.
Current wording
Gross Margin for the first nine months ended October 31, 2024 was 45.1% compared to 44.1% in the prior year. The margin was affected by increased production levels combined with relatively stable costs for raw materials.
Previous wording
Selling, general and administrative expenses for the six months ended July 31, 2024 increased by approximately $3.9 million compared to the same period last year and increased by 0.1% as a percentage of sales. The increase in selling, general and administrative expenses was attributable to increased variable selling and service expenses.
Current wording
Selling, general and administrative expenses for the nine months ended October 31, 2024 increased by approximately $5.9 million and increased to 30.0% of sales compared to 28.9% in the same period last year . The increase in selling, general and administrative expenses was attributable to increased variable selling and service expenses.
Previous wording
Interest expense decreased by $1.3 million for the six months ended July 31, 2024 compared to the same period last year. The decrease was primarily attributable to an decrease in the amount borrowed in 2024 to finance seasonal working capital.
Current wording
Net interest expense was $506,000 and $2,560,000 for the nine months ended October 31, 2024 and 2023, respectively. The decrease was primarily attributable to a decrease in the amount borrowed in 2024 to finance seasonal working capital.
Previous wording
For the six months ended July 31, 2024 and 2023, the effective income tax rates were 23.9% and 23.6%, respectively.
Current wording
For the nine months ended October 31, 2024 and 2023, the effective income tax rates were 24.4% and 24.0%, respectively.
Previous wording
Accounts Receivable decreased by $12.5 million at July 31, 2024 compared to the same period last year. The decrease is attributable to earlier than normal shipments (as discussed above under “Overview”) and improved collections.
Current wording
Accounts Receivable decreased by $4.9 million at October 31, 2024 compared to the same period last year. The decrease is attributable to earlier than normal shipments (as discussed above under “Overview”) and improved collections.
Previous wording
Inventory decreased by $13.3 million at July 31, 2024 compared to July 31, 2023. The decrease is primarily attributable to increased shipments during the early part of the year and inventory management in response to the order backlog at July 31, 2024.
Current wording
Inventory decreased by $10.0 million at October 31, 2024 compared to October 31, 2023. The decrease is primarily attributable to increased shipments during the early part of the year and inventory management in response to the order backlog at October 31, 2024.
Previous wording
Accrual basis capital expenditures for the six months ended July 31, 2024 were $3.1 million compared to $3.2 million for the same period last year. Capital expenditures are being financed through the Company's credit facility with PNC Bank and operating cash flow and restricted to not exceed $8.0 million per year by covenant.
Current wording
Accrual basis capital expenditures for the nine months ended October 31, 2024 were $5.4 million compared to $4.1 million for the same period last year. Capital expenditures are being financed through the Company's credit facility with PNC Bank and operating cash flow and restricted to not exceed $8.0 million per year by covenant.