<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, 2000 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 December 1, 2000.
Common Stock 11,344,694 Shares*
* Adjusted for 10% stock dividend declared August 15, 2000, date of record
September 7, 2000, payable September 29, 2000.
<PAGE> 2
VIRCO MFG. CORPORATION
INDEX
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - October 31, 2000 and
January 31, 2000
Condensed consolidated statements of income - Three months
ended October 31, 2000 and 1999
Condensed consolidated statements of income - Nine months
ended October 31, 2000 and 1999
Condensed consolidated statements of cash flows - Nine months
ended October 31, 2000 and 1999
Notes to condensed consolidated financial statements -
October 31, 2000
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Part II. Other Information
Item 4. Submission of matters to a vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit (11) - Statement re: Computation of Earnings Per Share
Signatures
2
<PAGE> 3
PART I
Item 1. Financial Statements
VIRCO MFG. CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited (Note 1)
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS 10/31/2000 1/31/2000
------ ---------- ---------
<S> <C> <C>
Current assets
Cash $ 359 $ 1,072
Accounts and notes receivable 45,238 27,584
Less allowance for doubtful accounts (429) (200)
--------- ---------
Net accounts and notes receivable 44,809 27,384
Inventories (Note 2)
Finished goods 27,546 35,795
Work in process 10,706 9,260
Raw materials and supplies 12,911 12,003
--------- ---------
Total inventories 51,163 57,058
Income taxes receivable -- 1,753
Prepaid expenses and deferred income tax 2,050 2,659
--------- ---------
Total current assets 98,381 89,926
Property, plant & equipment
Cost 149,784 136,315
Less accumulated depreciation (55,534) (48,378)
--------- ---------
Net property, plant & equipment 94,250 87,937
Other assets 13,025 13,000
--------- ---------
Total assets $ 205,656 $ 190,863
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
VIRCO MFG. CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited (Note 1)
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY 10/31/2000 1/31/2000
------------------------------------ ---------- ---------
<S> <C> <C>
Current liabilities
Checks released but not yet cleared bank $ 4,798 $ 4,786
Accounts payable 11,152 19,749
Accrued compensation and employee benefits 8,784 10,333
Current maturities on long-term debt 2,049 1,998
Income tax payable 2,283 --
Other current liabilities 4,836 1,637
--------- ---------
Total current liabilities 33,902 38,503
Non-current liabilities
Long term debt (less current portion) 54,711 46,027
Other non-current liabilities 8,306 7,968
--------- ---------
Total non-current liabilities 63,017 53,995
Deferred income taxes 4,531 4,531
Stockholders' equity
Preferred stock:
Authorized 3,000,000 shares, $.01 par value; none issued or outstanding
--------- ---------
Common stock:
Authorized 25,000,000 shares, $.01 par value; 11,992,244 issued at
10/31/2000 and 10,952,350 shares issued at 1/31/2000
120 110
Additional paid-in capital 97,416 84,635
Retained earnings 18,459 20,242
Less treasury stock at cost (660,786 shares at 10/31/2000 and 621,874
shares at 1/31/2000) (11,125) (10,692)
Less unearned ESOP shares (244) (41)
Less accumulated comprehensive loss (420) (420)
--------- ---------
Total stockholders' equity 104,206 93,834
--------- ---------
Total liabilities and stockholders' equity $ 205,656 $ 190,863
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
VIRCO MFG. CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited (Note 1)
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
10/31/2000 10/31/1999
---------- ----------
<S> <C> <C>
Net sales $ 95,866 $ 93,895
Cost of goods sold 67,550 60,212
-------- --------
Gross profit 28,316 33,683
Selling, general and administrative and other 23,978 22,661
Provision for doubtful accounts (52) --
Interest expense 1,491 506
Other income (4,052) --
-------- --------
21,365 23,167
Income before income taxes 6,951 10,516
Income taxes 2,711 4,102
-------- --------
Net income $ 4,240 $ 6,414
======== ========
Earnings per share $ .37 $ .56
Earnings per share - assuming dilution $ .37 $ .55
Weighted average shares outstanding (a) 11,335 11,446
Weighted average shares outstanding - assuming dilution (a) 11,487 11,658
Dividend per share
Cash (a) $ .02 $ .02
Stock 10% 10%
</TABLE>
(a) Adjusted for 10% stock dividend declared August 15, 2000.
See notes to condensed consolidated financial statements.
5
<PAGE> 6
VIRCO MFG. CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited (Note 1)
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
10/31/2000 10/31/1999
---------- ----------
<S> <C> <C>
Net sales $ 241,041 $ 219,598
Cost of goods sold 166,475 144,086
--------- ---------
Gross profit 74,566 75,512
Selling, general and administrative and other 63,066 55,322
Provision for doubtful accounts 217 381
Interest expense 4,257 1,815
Gain on sale of real estate (7,945) --
Other income (4,052) --
--------- ---------
55,543 57,518
Income before income taxes 19,023 17,994
Income taxes 7,419 7,018
--------- ---------
Net income $ 11,604 $ 10,976
========= =========
Earnings per share $ 1.02 $ .95
Earnings per share - assuming dilution $ 1.01 $ .94
Weighted average shares outstanding (a) 11,360 11,523
Weighted average shares outstanding - assuming dilution (a) 11,501 11,738
Dividend per share
Cash (a) $ .06 $ .05
Stock 10% 10%
</TABLE>
(a) Adjusted for 10% stock dividend declared August 15, 2000.
See notes to condensed consolidated financial statements.
6
<PAGE> 7
VIRCO MFG. CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (Note 1)
<TABLE>
<CAPTION>
(Dollar amounts in thousands) Nine Months Ended
-------------------------
10/31/2000 10/31/1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 11,604 $ 10,976
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation 9,838 7,198
Provision for doubtful accounts 217 381
(Gain)Loss on sales of fixed assets (7,950) 175
Change in assets and liabilities:
Accounts and notes receivable (17,642) (18,762)
Inventories 5,895 3,631
Prepaid expenses and deposits 609 253
Income taxes receivable/payable 4,036 2,371
Accounts payable and accrued expenses (6,608) 3,952
-------- --------
Net cash (used in) provided by operating activities (1) 10,175
Cash flows from investing activities
Capital expenditures (18,331) (26,343)
Proceeds from sale of fixed assets 10,130 41
Net investment in life insurance (14) (1,046)
-------- --------
Net cash used in investing activities (8,215) (27,348)
Cash flows from financing activities
Issuance of long-term debt 10,252 24,563
Repayment of long-term debt (1,517) (1,690)
Payment of cash dividend (608) (592)
Purchase of treasury stock (433) (3,741)
Issuance of common stock 12 31
Loans to ESOP (203) 54
-------- --------
Net cash provided by financing activities 7,503 18,625
Net change in cash (713) 1,452
Cash at beginning of period 1,072 1,086
-------- --------
Cash at end of period $ 359 $ 2,538
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE> 8
VIRCO MFG. CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2000 and October 31, 1999
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-month period ended
October 31, 2000 are not necessarily indicative of the results that
may be expected for the year ended January 31, 2001. The balance sheet
at January 31, 2000 has been derived from the audited financial
statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. For further information, refer to the
consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended January
31, 2000.
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, 2000. Management
continually monitors production costs, material costs and inventory
levels to determine that interim inventories are fairly stated.
Note 3. Income Taxes
Income taxes for the nine months ended October 31, 2000 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.
Note 4. Significant Accounting Policies
The weighted average number of shares used in the computation of
diluted net income per share was 11,487,000 and 11,658,000 for the
quarter ended October 31, 2000 and October 31, 1999, respectively. The
weighted average number of shares used in the computation of diluted
net income per share was 11,501,000 and 11,738,000 for the nine months
ended October 31, 2000 and October 31, 1999, respectively. Per share
and weighted-average share amounts for the three months and nine
months ended October 31, 1999 have been restated to reflect a 10%
stock dividend payable on September 29, 2000 to stockholders of record
as of September 7, 2000.
Comprehensive income includes net income and minimum pension liability
adjustments. Comprehensive income was $4,240,000 and $6,414,000 for
the quarter ended October 31, 2000 and October 31, 1999, respectively.
Comprehensive income was $11,604,000 and $10,976,000 for the nine
months ended October 31, 2000 and October 31, 1999, respectively.
8
<PAGE> 9
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards (SFAS) 133, "Accounting for Derivative
Instruments and for Hedging Activities, as amended by SFAS No. 138
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities-an Amendment of FASB Statement 133." SFAS 133, as amended,
requires derivatives to be recorded on the balance sheet at fair value
and establishes special accounting for the following three types of
hedges: hedges of changes in the fair value of assets, liabilities or
firm commitments (referred to as fair value hedges); hedges of the
variable cash flows of forecasted transactions (cash flow hedges); and
hedges of foreign currency exposures of net investments in foreign
operations. The accounting treatment and criteria for each of the
three types of hedges is unique. Changes in fair value of derivatives
that do not meet the criteria of one of these three categories of
hedges would be included in income. The Company does not believe that
adopting this standard will have a material effect on its financial
position, results of operations and cash flows. Currently, the Company
does not anticipate adopting this standard before February 1, 2001,
the required effective date.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial
Statements, which summarizes the SEC Staff's views on applying certain
generally accepted accounting principles to revenue recognition in
financial statements. Additionally, the Company is considering the
effect of Emerging Issues Task Force (EITF) No. 00-10, Accounting for
Shipping and Handling Fees and Costs, which addresses in a sale
transaction for goods, how the seller should classify amounts billed
and incurred for shipping and handling in the income statement and the
composition or types of costs that would be required to be classified
as costs of goods sold. The Company does not believe that these
pronouncements will have a material effect on its revenue recognition
policies or on net income. The Company plans to make any required
reclassifications of amounts billed and incurred for shipping and
handling in the fourth quarter of the fiscal year ending January 31,
2001.
Note 5. Gain on Sale of Real Estate
On April 25, 2000, the Company finalized the sale of its Torrance,
California, warehouse. The Company received $9,385,000 in cash and
recorded a $7,945,000 pre-tax gain on disposition during the quarter
ended April 30, 2000.
Note 6. Amendment to Credit Facility
On July 1, 2000, the credit facility with Wells Fargo Bank was
expanded to $90,000,000 from $80,000,000. The maximum principal amount
available under this note was reduced by $10,000,000 on September 30,
2000 and shall be reduced automatically on January 1, 2001 and
January 1, 2002, by the amount of $10,000,000.
Note 7. Other Income
In October 2000, the Company entered into a confidential settlement of
a dispute involving past services related to the installation of
non-manufacturing equipment for which it received a final cash payment
in November 2000. This payment is a non-recurring amount unrelated to
the Company's ongoing operations. In the third quarter October 31,
2000, the Company recognized $4,052,000 in other income from this
settlement.
Note 8. Subsequent Event
9
<PAGE> 10
Subsequent to the quarter ended October 31, 2000, the Company embarked
on a program to consolidate many of the functions currently performed
by its Conway and Torrance divisions. Beginning in the fourth quarter
of 2000 and continuing through 2001, the Company will be consolidating
the staffs and activities of its division accounting, engineering,
purchasing, customer service, and human resources departments. At the
same time, the Company will be converting the Torrance and Conway
divisions to cost centers instead of profit centers. The consolidation
involves the immediate layoff of approximately 140 employees at both
divisions. The cost of severance packages associated with the layoff,
which will be recorded in the fourth quarter of this year ending
January 31, 2001, is expected to be approximately $750,000 to
$1,000,000.
10
<PAGE> 11
VIRCO MFG. CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations:
For the third quarter ended October 31, 2000, the Company earned net income of
$4,240,000 on sales of $95,866,000 compared to net income of $6,414,000 on sales
of $93,895,000 in the same period last year. Earnings were $.37 per share
compared to $.55 per share in the same period last year, after giving effect to
the 10% stock dividend declared August 15, 2000. For the nine months ended
October 31, 2000, the Company earned net income of $11,604,000 on sales of
$241,041,000 compared to net income of $10,976,000 on sales of $219,598,000 in
the same period last year. Earnings were $1.01 per share compared to $.94 per
share in the same period last year, after giving effect to the 10% stock
dividend declared August 15, 2000.
Sales for the third quarter and year to date 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. Sales
for the third quarter increased slightly compared to the same period last year.
Backlog at October 31, 2000 was slightly lower compared to the same time last
year. Approximately 94% of the increase in sales for the three months ended
October 31, 2000 were from educational sales and the balance from commercial
sales. The increase in education sales was attributable to the Company pursuing
an aggressive pricing policy during the bidding season of late 1999/early 2000
with the intention of filling up our new factory capacity. Revenues for the year
have increased 9.8%, but unit prices in 17 of our top 20 product lines, which
together represent over 87% of our total sales, actually registered lower
average prices than in 1999.
Gross profit for the third quarter ended October 31, 2000, as a percentage of
sales, decreased by 6.3% compared to the same period last year. Gross profit for
the nine months ended October 31, 2000, as a percentage of sales, decreased by
3.5% compared to the same period last year. In addition to the reduction in
selling prices described above, the Company incurred increases in material
prices for steel, key plastic resins and packaging. Finally, when the rate of
growth in sales slowed down during the third quarter, the Company reduced levels
of production in the factories, incurring unfavorable manufacturing variances.
The Company is taking immediate action to correct both the pricing and cost
issues, but given the seasonal nature of our business, we expect the fourth
quarter to continue the current negative trend.
Selling, general and administrative expense for the third quarter ended October
31, 2000 increased by $1,265,000 as compared to the same period last year. For
the nine months ended October 31, 2000, selling, general and administrative
expense increased by $7,580,000 as compared to the same period last year. The
increase for the third quarter and for the nine months ended October 31, 2000
was attributable to increased shipping and warehousing costs, increased
depreciation expense, increased retirement expense and offset slightly by
decreased product liability costs and decreased professional and contract
services. The Company also incurred additional costs such as increased customer
service representatives and installation staff in order to provide enhanced
levels of customer service and on-time delivery.
Interest expense increased by $985,000 for the quarter ended October 31, 2000 as
compared to the same period last year. For the nine months ended October 31,
2000, interest expense increased by $2,442,000 as compared to the same period
last year. The increase in interest expense was attributable to a higher average
borrowing balance as a result of increased capital spending on the Conway,
Arkansas facility, increased capital investment on the SAP Enterprise Resource
Planning System and increased cash used to build inventory for summer delivery.
11
<PAGE> 12
Other income increased by $4,052,000 for quarter and the nine months ended
October 31, 2000 as compared to the same period last year. The increase was
attributable to the Company entered into a confidential settlement of a dispute
involving past services related to the installation of non-manufacturing
equipment for which the Company received a final cash payment in November 2000.
This payment is a non-recurring amount unrelated to the Company's ongoing
operations.
Financial Condition:
As a result of seasonally high shipments and a settlement of a dispute discussed
above, accounts and notes receivable increased by approximately $17,642,000 and
inventory decreased by $5,895,000 compared to year-end.
Capital spending for the nine months ended October 31, 2000 was $18,331,000
compared to $26,343,000 for the same period last year. For the nine months ended
October 31, 2000, capital investments included machinery and equipment and
construction of the second 400,000 sq. ft. segment of the 800,000 sq. ft.
warehouse and distribution facility in Conway, Arkansas. As discussed in the
Company's 1999 annual report, construction on the first 400,000 sq. ft. segment
began in March 1999 and was completed and fully operational in December 1999.
The second 400,000 sq. ft. segment is in operation as of July 31, 2000. Higher
capital spending for the same period in last year was primarily related to the
Conway, Arkansas facility expansion and SAP project. The Company believes that
its investments in infrastructure and information systems will ultimately
deliver improved operating efficiency. For further discussions on these two
projects, please refer to the Company's 1999 annual report. These capital
investments and the ongoing capital expenditures are being financed through
credit facilities established with Wells Fargo Bank, the sale of real estate,
and operating cash flow. On July 1, 2000, the credit facility with Wells Fargo
Bank was expanded to $90,000,000 from $80,000,000. The maximum principal amount
available under this note was reduced by $10,000,000 on September 30, 2000 and
shall be reduced automatically on January 1, 2001 and January 1, 2002, by the
amount of $10,000,000. At October 31, 2000, the Company has approximately
$28,407,000 available under its credit facility with Wells Fargo Bank.
The Company has reached the end of its current cycle of heavy capital
investments. For the next three to five years, depending on sales volume and
market conditions, we expect capital investments to be no greater than
depreciation expense. Next year this figure will be even lower, probably in the
range of $6,000,000 to $8,000,000. This will free cash flow from operations
which will be used to pay down debt associated with our new Conway facility.
The Company is also pursuing the sale of three other facilities no longer
necessary for operations: our original factory in Los Angeles, California,
which has been held as a rental property, and our former woodshop and
compression molding plants in Conway, Arkansas, which have been used as
warehouses. The combined appraised value of these properties is approximately
$9,000,000. Proceeds from these sales will be used to pay down long-term debt.
Net cash (used in) provided by operating activities for the nine months ended
October 31, 2000 was ($1,000) compared to $10,175,000 for the same period last
year. The decrease of $10,176,000 in cash provided by operating activities was
primarily due to increases in inventory levels, as well as the reduction of
accounts payable and accrued expenses partly offset by increased tax payable
primarily due to the gain from the sale of the Torrance warehouse during the
first quarter ended April 30, 2000.
Issuance of long term debt was $10,252,000 for the nine months ended October 31,
2000 as compared to $24,563,000 for the same period last year. The reduction of
$14,311,000 is primarily attributable to the cash proceeds received as a result
of sale of Torrance warehouse, reduction in capital expenditures and reduction
of treasury stock purchase activities offset by a reduction in cash provided by
operating activities. Long term debt was $63,017,000 as of October 31, 2000
compared to $53,995,000 as of January 31, 2000.
12
<PAGE> 13
In April 1998, the Board of Directors approved a stock buyback program giving
authorization to buy back up to $5,000,000 of common stock. The amount
authorized was subsequently increased to $14,000,000. As of October 31, 2000,
the Company has repurchased approximately 630,000 shares at a cost of
approximately $11,000,000 since the inception of this program in April 1998. For
the nine months ended October 31, 2000, the Company repurchased approximately
$433,000 of treasury stock as compared to $3,741,000 for the same period last
year. The Company intends to continue buying back shares of common stock as long
as the Company believes the shares are undervalued and operating cash flows and
borrowing capacity under the Wells Fargo line allow.
On August 15, 2000, the Company's Board of Directors authorized a 10% stock
dividend payable on September 29, 2000 to stockholders on record as of September
7, 2000. In the same meeting, the Board also authorized a $0.02 per share cash
dividend payable on October 31, 2000 to stockholders on record as of October 13,
2000. For the nine months ended October 31, 2000, the Company paid $608,000 in
cash dividends as compared to $592,000 for the same period last year.
The Company believes that cash flows from operations, together with the
Company's unused borrowing capacity with Wells Fargo Bank will be sufficient to
fund the Company's debt service requirements, capital expenditures and working
capital needs.
Year 2000 Compliance
As of the date of this report, the Company has experienced no significant
problems related to the Year 2000 issue. After extensive system verification and
testing, all computerized information and process control systems are operating
normally. The performance of critical customers and suppliers continues without
notable change. Production and business activities are normal at all locations.
The Company continues to monitor the status of its operations, suppliers and
distribution channels to ensure no significant interruptions.
Forward-Looking Statements
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing, including those contained
herein. Such forward-looking statements may be included in, without limitation,
reports to stockholders, press releases; oral statements made with the approval
of an authorized executive officer of the Company and filings with the
Securities and Exchange Commission. The words or phrases "anticipates,"
"expects," "will continue," "estimates," "projects," or similar expressions are
intended to identify "forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The results contemplated by
the Company's forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to vary materially from
anticipated results, including without limitation, material costs, availability
and cost of labor, demand for the Company's products, and competitive conditions
affecting selling prices and margins, capital costs and general economic
conditions. Such risks and uncertainties are discussed in more detail in the
Company's Annual Report on Form 10-K for the year ended January 31, 2000.
The Company's forward-looking statements represent its judgment only on the
dates such statements were made. By making any forward-looking statements, the
Company assumes no duty to update them to reflect new, changed or unanticipated
events or circumstances.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
13
<PAGE> 14
On February 22, 2000, the Company entered into an interest rate swap agreement
with Wells Fargo Bank. The initial notional swap amount is $30,000,000 for the
period February 22, 2000 through February 29, 2001. The notional swap amount
then decreases to $20,000,000 until the end of the swap agreement, March 3,
2003. The swap agreement is in consideration for a fixed rate at 7.23% plus a
fluctuating margin of 1.25% to 1.50%.
As of October 31, 2000, the Company has borrowed $48,990,000 under its Wells
Fargo credit facility, of which $30,000,000 is subject to the interest rate swap
agreement as described above and the remaining contain variable interest rates.
Accordingly, a 100 basis point upward fluctuation in the lender's base rate
would cause the Company to incur additional interest charges of approximately
$117,000 per fiscal quarter and $387,000 for the nine months ended October 31,
2000. The Company would benefit from a similar interest savings if the base rate
were to fluctuate downward by a like amount.
14
<PAGE> 15
PART II
VIRCO MFG. CORPORATION
Other Information
Item 4. Submission of matters to a vote of Security Holders
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit (11) - Statement re: Computation of Earnings Per Share
15
<PAGE> 16
VIRCO MFG. CORPORATION
Exhibit (11) - Statement re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
31-Oct 31-Oct
---------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Diluted earnings per share
Weighted average shares outstanding 11,335,000 11,446,000 11,360,000 11,523,000
Net effect of dilutive stock options - based
on the treasury stock method using average
market price 152,000 212,000 141,000 215,000
----------- ----------- ------------ -----------
Totals 11,487,000 11,658,000 11,501,000 11,738,000
=========== =========== ============ ===========
Net income $ 4,240,000 $ 6,414,000 $ 11,604,000 $10,976,000
=========== =========== ============ ===========
Per share amount $ 0.37 $ 0.55 $ 1.01 $ 0.94
=========== =========== ============ ===========
</TABLE>
Weighted average shares outstanding for the three months and nine months ended
October 31, 1999 were adjusted for 10% stock dividend declared August 15, 2000.
16
<PAGE> 17
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: December 8, 2000 By: /s/ Robert E. Dose
-------------------- -----------------------------------
Robert E. Dose
Vice President - Finance
Date: December 8, 2000 By: /s/ Bassey Yau
--------------------- -----------------------------------
Bassey Yau
Corporate Controller
17
