Virco Mfg. Corporation designs produces and distributes quality furniture for the contract and education markets worldwide. Examples of facilities served by Virco include public and private schools colleges and universities convention centers federal and state institutions churches and other businesses. They also sell to wholesalers distributors retailers and catalog retailers. In order to divide the workload into manageable amounts Virco has divided the sales force into two groups: Education and Commercial. Virco Manufacturing Corp. has a market cap of $50.8 million; its shares were traded at around $3.57 with a P/E ratio of 51 and P/S ratio of 0.2. The dividend yield of Virco Manufacturing Corp. stocks is 2.8%.
Highlight of Business Operations:For the three months ended April 30, 2009, the Company incurred a pre-tax loss of $4,887,000 on net sales of $27,049,000 compared to a pre-tax loss of $4,547,000 on net sales of $29,194,000 in the same period last year.
As a result of seasonally lower shipments in the three months ended April 30, 2009 compared to the three months ended January 31, 2009 and the three months ended April 30, 2008, accounts and notes receivable were reduced at April 30, 2009 compared to January 31, 2009 and April 30, 2008. The Company traditionally builds large quantities of inventory during the first quarter of each fiscal year in anticipation of seasonally high summer shipments. For the current fiscal quarter, the Company increased inventory by approximately $16,000,000 compared to January 31, 2009 and reduced inventory by approximately $14,000,000 compared to April 30, 2008. The increase in inventory during the first quarter of 2009 compared the January 31, 2009 was financed through the Companys credit facility with Wells Fargo Bank. The decrease in inventory compared to April 30, 2008 is due to a combination of several components. First, the Company has decreased its inventory of raw materials and products purchased for resale. Second, the Company has produced fewer semi-finished ATS components. Third, in response to the current economic conditions, the Company reduced the variety of SKUs in its stocking program and is focusing on a quick ship program of core product lines that can be shipped during the summer with very short lead times.
At April 30, 2009, accounts payable and accrued liabilities are comparable to April 30, 2008. Borrowings under the Companys revolving line of credit with Wells Fargo Bank decreased by approximately $13 million compared to the April 30, 2008, primarily due to reduced levels of inventory and receivables. Other long term liabilities for the three months ended April 30, 2009 were comparable to January 31, 2009. The Company has established a goal of limiting capital spending to less than $5,000,000 for fiscal year 2009, which is slightly less than the Companys anticipated depreciation expense. Capital spending for the three months ended April 30, 2009, was $1,071,000 compared to $860,000 for the same period last year. Capital expenditures are being financed through the Companys credit facility established with Wells Fargo Bank and operating cash flow.
Net cash used in operating activities for the three months ended April 30, 2009 was $17,586,000 compared to $24,763,000 for the same period last year. The decrease in cash used was primarily attributable to a decrease in the amount of inventory added to stock in the first quarter. In addition, during the current quarter, accounts payable and accrued liabilities remained stable. In the first quarter of 2008 the Company used operating cash to reduce accounts payable.
Effective as of March 27, 2009, the Company entered into Amendment No. 2 to the Credit Agreement (Amendment No. 2), dated as of March 12, 2008, with Wells Fargo and a related Revolving Line of Credit Note. The Credit Agreement, as amended by Amendment No. 1 and Amendment No. 2, provides the Company with a secured revolving line of credit (the Revolving Credit) of up to $65,000,000, with seasonal adjustments to the credit limit and additional asset-based borrowing-base limitations thereto, and includes a sub-limit of up to $10,000,000 (subject to asset-based borrowing-base limitations) for the issuance of letters of credit. The Revolving Credit is secured by the maintenance by Wells Fargo of a first priority perfected security interest in certain of the personal and real property of the Company and its subsidiaries.
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