<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FORM 10-Q
For Quarter Ended October 31, 1996 Commission File Number 1-8777
VIRCO MFG. CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-1613718
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2027 Harpers Way, Torrance, CA 90501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 533-0474
No change
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of
common stock, as of November 22, 1996.
Common Stock 5,906,296 Shares*
* Adjusted for Stock Dividend declared August 20, 1996, date of record
September 18, 1996, payable October 16, 1996.
<PAGE> 2
VIRCO MFG. CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - October 31, 1996 and
January 31, 1996.
Condensed consolidated statements of income - Three months
ended October 31, 1996 and 1995.
Condensed consolidated statements of income - Nine months
ended October 31, 1996 and 1995.
Condensed consolidated statements of cash flows - Three months
ended October 31, 1996 and 1995.
Condensed consolidated statements of cash flows - Nine months
ended October 31, 1996 and 1995.
Notes to condensed consolidated financial statements - October
31, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
Item 4. Submission of matters to a vote of Security Holders.
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE> 3
PART 1
<TABLE>
<CAPTION>
Item 1. Financial Statements
VIRCO MFG. CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited (Note 1)
(Dollar Amounts in Thousands)
ASSETS 10/31/96 1/31/96
------ -------- -------
<S> <C> <C>
Current Assets
Cash $ 43 $ 661
Accounts and Notes Receivable 35,489 28,102
Less Allowance for Doubtful Accounts (678) (100)
--------- ---------
Net Accounts and Notes Receivable 34,811 28,002
Income Taxes Receivable - 197
Inventories (Note 2)
Finished Goods 17,724 22,585
Work in Process 6,340 6,949
Raw Materials and Supplies 9,337 13,486
--------- ---------
Total Inventories 33,401 43,020
Prepaid Expenses and Deferred Income Tax 3,086 2,742
--------- ---------
Total Current Assets 71,341 74,622
Restricted Short-term Investment 652 1,272
Property, Plant & Equipment
Cost 78,741 73,693
Less Accumulated Depreciation (41,322) (36,738)
--------- ---------
Net Property, Plant & Equipment 37,419 36,955
Other Assets 6,988 6,376
--------- ---------
$ 116,400 $ 119,225
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE> 4
VIRCO MFG. CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited (Note 1)
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY 10/31/96 1/31/96
------------------------------------ -------- -------
<S> <C> <C>
Current Liabilities
Checks Released But Not Yet Cleared Bank $ 3,447 $ 3,545
Accounts Payable 10,912 10,199
Income Taxes Payable 2,282 -
Current Maturities on Long Term Debt 924 924
Other Current Liabilities 13,001 8,634
--------- ---------
Total Current Liabilities 30,566 23,302
Non-Current Liabilities
Long Term Debt (Less Current Portion) 19,698 35,909
Other Non-Current Liabilities 3,991 3,991
--------- ---------
Total Non-Current Liabilities 23,689 39,900
Deferred Income Taxes 562 562
Shareholders' Equity
Preferred Stock:
Authorized 3,000,000 Shares, $.01 Par Value; None
Issued or Outstanding - -
Common Stock:
Authorized 10,000,000 Shares, $.01 Par Value;
5,928,685 Shares issued at 10/31/96 and 1/31/96 59 54
Additional Paid-In Capital 50,104 42,055
Retained Earnings 12,078 13,717
Less Treasury Stock at cost (22,389 Shares) (172) (172)
Unearned ESOP Shares (486) (193)
--------- ---------
Total Shareholders' Equity 61,583 55,461
--------- ---------
$ 116,400 $ 119,225
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE> 5
VIRCO MFG. CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited (Note 1)
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands)
3 Months Ended
--------------
10/31/96 10/31/95
-------- --------
<S> <C> <C>
Net Sales $ 79,834 $ 74,613
Cost of Goods Sold 54,802 55,433
--------- ---------
Gross Profit 25,032 19,180
Shipping, Selling, General and Administrative Expense 16,085 13,505
Interest Expense 626 903
Provision for Doubtful Accounts 241 267
--------- ---------
16,952 14,675
--------- ---------
Income Before Taxes on Income 8,080 4,505
Taxes on Income (2,983) (1,757)
--------- ---------
Net Income $ 5,097 $ 2,748
========= =========
Earnings Per Share:
Net Earnings Per Share $ 0.85 $ 0.46
========= =========
Weighted Average Shares Outstanding
(Adjusted for 10% Stock Dividends Declared August 20,
1996.
6,012,875 5,981,582
========= =========
Dividend Declared .10 .04
========= =========
Cash (Per Share) .10% 10%
========= =========
Stock
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE> 6
VIRCO MFG. CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited (Note 1)
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands)
9 Months Ended
--------------
10/31/96 10/31/95
-------- --------
<S> <C> <C>
Net Sales $ 189,117 $ 177,735
Cost of Goods Sold 133,600 131,545
--------- ---------
Gross Profit 55,517 46,190
Shipping, Selling, General and Administrative Expense 41,485 38,167
Provision for Doubtful Accounts 567 529
Interest Expense 2,255 2,664
--------- ---------
44,307 41,360
--------- ---------
Income before Taxes on Income 11,210 4,830
Taxes on Income (4,204) (1,884)
--------- ---------
Net Income $ 7,006 $ 2,946
========= =========
Earnings Per Share:
Net Earnings Per Share: $ 1.17 $ 0.49
========= =========
Weighted Average Shares Outstanding
(Adjusted for 10% Stock Dividend
Declared August 20, 1996.) 5,994,727 5,970,368
========= =========
Dividend Declared
Cash (Per Share) .10 .04
========= =========
Stock 10% 10%
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE> 7
VIRCO MFG. CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (Note 1)
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands) 3 Months Ended
--------------
10/31/96 10/31/95
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 5,097 $ 2,748
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 2,123 1,666
Provision for Doubtful Accounts 305 276
Loss on Sale of Fixed Assets 0 5
Change in Assets and Liabilities:
Accounts and Notes Receivable 3,448 (861)
Inventories 10,856 14,917
Income Taxes Receivable/Payable 1,376 1,611
Prepaid Expenses and Deposits 53 (20)
Other Assets 2 (595)
Accounts Payable and Accrued Expenses 5,303 (6,664)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,563 13,083
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (1,968) (2,282)
Purchase of Life Insurance (65) (1,096)
Restricted Short Term Investments (8) (14)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (2,041) (3,392)
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction of Long-term Debt (26,855) (11,193)
Sale of Treasury Stock 0 66
Issuance of ESOP Loan (285) (47)
Cash Dividend (591) (215)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (27,731) (11,389)
--------- ---------
NET CHANGE IN CASH (1,209) (1,698)
CASH AT BEGINNING OF QUARTER 1,252 2,142
--------- ---------
CASH AT END OF QUARTER $ 43 $ 444
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE> 8
VIRCO MFG. CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (Note 1)
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands) 9 Months Ended
--------------
10/31/96 10/31/95
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 7,006 $ 2,946
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 5,053 3,955
Provision for Doubtful Accounts 567 437
Loss on Sale of Fixed Assets 0 66
Change in Assets and Liabilities:
Accounts and Notes Receivable (7,202) (7,594)
Inventories 9,619 3,341
Income Taxes Receivable/Payable 2,479 (2)
Prepaid Expenses and Deposits (344) (662)
Other Assets 53 677
Accounts Payable and Accrued Expenses 4,982 (2,565)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 22,213 599
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (5,691) (7,852)
Purchase of Life Insurance (665) (1,706)
Restricted Short Term Investments 620 7,325
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (5,736) (2,233)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Long-term Debt 0 2,297
Reduction of Long-term Debt (16,211) (661)
Sale of Treasury Stock 0 66
(Issuance) Reduction of ESOP Loan (293) 6
Cash Dividend (591) (215)
---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (17,095) 1,493
---------- ----------
NET CHANGE IN CASH (618) (141)
CASH AT BEGINNING OF YEAR 661 585
---------- ----------
CASH AT END OF QUARTER $ 43 $ 444
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE> 9
VIRCO MFG. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996 and October 31, 1995
Note 1: The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and nine month
periods ended October 31, 1996 are not necessarily indicative of
the results that may be expected for the year ended January 31,
1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Registrant
Company and Subsidiaries' annual report on Form 10-K for the year
ended January 31, 1996.
Note 2. Inventory
Year end financial statements reflect inventories verified by
physical counts with the material content valued by the LIFO
method. At this interim date, there has been no physical
verification of inventory quantities. Cost of sales is recorded at
current cost. The effect of penetrating LIFO layers is not
recorded at interim dates unless the reduction in inventory is
expected to be permanent. No such adjustment has been made for the
period ended October 31, 1996. Management continually monitors
production costs, material costs and inventory levels to determine
that interim inventories are fairly stated.
Note 3. Income Taxes
The Company adopted the provisions of SFAS No. 109 effective
February 1, 1993. Income taxes for the three and nine months
periods ended October 31, 1996 were computed using the effective
tax rate estimated to be applicable for the full fiscal year,
which is subject to ongoing review and evaluation by management.
<PAGE> 10
VIRCO MFG. CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(a) Results of Operations:
For the third quarter of 1996, the Company earned a net profit of
$5,097,000 on sales of $79,834,000 compared to a net profit of
$2,748,000 on sales of $74,613,000 in the same period last year. For
the nine months ended October 31, 1996, the Company earned a net profit
of $7,006,000 on sales of $189,117,000 compared to a net profit of
$2,946,000 on sales of $177,735,000 in the prior year.
The third quarter and year to date results are consistent with Virco's
seasonal business cycle, which produces diminished first quarter sales
followed by strong second and third quarter deliveries of educational
furniture. Third quarter results reflected primarily the same positive
factors as those which contributed to the record second quarter. The
improved earnings reflect more stable raw material prices, continued
improvement in production efficiencies, and continued focus on products
offering greater profit potential. Prior year third quarter and year to
date results were characterized by increasing material costs
accompanied by lagging increases in selling prices. Prior year to date
results also reflect production costs associated with the start up of
the new Torrance manufacturing facility in the second quarter of 1995.
Sales backlog at the end of the third quarter is slightly below the
level at same date last year.
The Company has signed a letter of intent to dispose of its Virsan
manufacturing facility in San Luis Rio Colorado, Sonora, Mexico to a
U.S. based company pending conclusion of a definitive agreement by the
two parties. The overall terms would have no material impact on the
Company's earnings for 1996 or beyond. Earlier negotiations with Crown
2000 to sell this facility were discontinued due to lack of progress in
developing a definitive purchase agreement.
(b) Financial Condition:
Our credit agreement with Wells Fargo Bank expires on October 1, 1997.
Virco has received a written commitment from Wells Fargo to amend this
agreement to extend the expiration date to October 1, 1999. The amended
line of credit will continue to provide loans at the Wells Fargo prime
interest rate as well as allow the Company the option to borrow under
30, 60, and 90 day fixed term rates at LIBOR plus 1.75%. The amended
line will continue to provide the Company with a $49,500,000 line of
credit with a letter of credit subfeature. The primary change in the
new line is that Wells Fargo will extend their commitment for a three
year period instead of a two year period under the prior agreement. The
new agreement also includes modifications to the loan covenants, none
of which will impact our operations or ability to pay dividends. As of
October 31, 1996, we had $35,866,000 available under the terms of the
line of credit. Finally, we have arranged with General Electric Capital
Corporation to lease up to $3,000,000 of equipment under operating
leases. These leases will be used as necessary to obtain capital
equipment at our Torrance manufacturing facility, where capital
improvements are restricted under the terms of the Industrial Revenue
Bond through the fall of 1997.
As a result of seasonally high third quarter deliveries, receivables
increased by $7,000,000 compared to January 31, 1996. Inventory
decreased by more than $9,000,000 from January 31, 1996 due to
seasonally high third quarter sales. With the completion of the
Torrance manufacturing facility in 1995, capital expenditures have
returned to a more normal level. Borrowings have decreased
significantly compared to January 31, 1996 due to the $7,000,000 of
profits, the reduction in inventory, increase in accrued liabilities.
<PAGE> 11
PART II
VIRCO MFG. CORPORATION SUBSIDIARIES
Other Information
Item 4. Submission of matters to a vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K.
None
<PAGE> 12
VIRCO MFG. CORPORATION AND SUBSIDIARIES
Exhibit (11) - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
October 31 October 31
---------- ----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Average Shares Outstanding 5,906,296 5,906,296 5,906,296 5,906,296
Net effect of dilutive stock options - based on
the treasury stock method using average market
price. 106,579 75,286 88,431 64,072
--------- --------- --------- ---------
Totals 6,012,875 5,981,582 5,994,727 5,970,368
========= ========= ========= =========
Net Income 5,097,000 2,748,000 7,006,000 2,946,000
========= ========= ========= =========
Per Share Amount .85 .46 1.17 .49
========= ========= ========= =========
</TABLE>
Weighted average shares outstanding are adjusted for 10% stock dividend declared
August 20, 1996.
<PAGE> 13
VIRCO MFG. CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
VIRCO MFG. CORPORATION
Date: By:
------------------- ------------------------------------
James R. Braam
Vice President - Finance
Date: By:
------------------- ------------------------------------
Robert E. Dose
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
THE COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED BALANCE
SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> JUL-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 43
<SECURITIES> 0
<RECEIVABLES> 35,489
<ALLOWANCES> (678)
<INVENTORY> 33,401
<CURRENT-ASSETS> 71,341
<PP&E> 78,741
<DEPRECIATION> 41,322
<TOTAL-ASSETS> 116,400
<CURRENT-LIABILITIES> 30,566
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 61,524
<TOTAL-LIABILITY-AND-EQUITY> 116,400
<SALES> 79,834
<TOTAL-REVENUES> 79,834
<CGS> 54,802
<TOTAL-COSTS> 54,802
<OTHER-EXPENSES> 16,952
<LOSS-PROVISION> 241
<INTEREST-EXPENSE> 626
<INCOME-PRETAX> 8,080
<INCOME-TAX> 2,983
<INCOME-CONTINUING> 5,097
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,097
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0
</TABLE>
