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Virco Announces Second Quarter Results

TORRANCE, Calif., Sept. 10, 2010 (GLOBE NEWSWIRE) -- Virco Mfg. Corporation (Nasdaq:VIRC) today announced second quarter results in the following letter to stockholders from Robert A. Virtue, President and CEO:

Despite the worst recession in our 60-year corporate history, we made solid progress this summer in building market share among our core K-12 educational customers both nationally and internationally.   Against an overall backdrop of double-digit declines in school construction starts and renovations, our revenue in the second quarter slipped only 3% from the second quarter of 2009 and 4.4% in the six months ended July 31, 2010, compared to the corresponding period in 2009. We have, however, experienced intense price competition as suppliers to our market struggle to generate sufficient revenue to cover operating expenses. In response, we aggressively lowered our own prices, resulting in lower gross and net margins for the second quarter and first half of the year. We expect prices to remain low for the balance of the year and perhaps well into next year.

As we warned in our first quarter report, until the private sector recovers fully and begins pumping tax receipts into state and local coffers, we believe spending for new schools and new school furniture will remain below the levels of a few years ago. The continuing slow recovery of the private sector and consequent slow recovery of tax receipts is what causes us to remain cautious about the near term. As we also previously communicated, we view this as an opportune time to provide excellent quality products and support to our educational customers and thus distance ourselves from competitors who may be less willing or able to commit to the intense seasonality and related logistical and financial challenges of this market.

Here are our results for the second quarter and the first six months ended July 31, 2010, and the comparable period last year:
  Three Months Ended Six Months Ended
  7/31/2010 7/31/2009 7/31/2010 7/31/2009
  (In thousands, except share data) (In thousands, except share data)
Net sales  $ 72,363  $ 74,623  $ 97,223  $ 101,672
Cost of sales  49,391  48,847  67,980  67,596
Gross profit  22,972  25,776  29,243  34,076
Selling, general administrative & other expense  17,994  18,683  30,759   31,870
Income (loss) before income taxes  4,978  7,093  (1,516)  2,206
Income tax expense (benefits)  941  3,047  (472)  1,147
Net income (loss)  $ 4,037  $ 4,046  $ (1,044)  $ 1,059
Cash dividend declared  $ 0.05  $ 0.05  $ 0.05  $  0.05
Net income (loss) per share - basic (a)  $ 0.28  $ 0.29  $ (0.07)  $ 0.07
Net income (loss) per share - diluted  0.28  0.29  (0.07)  0.07
Weighted average shares outstanding - basic (a)  14,168  14,151  14,162  14,170
Weighted average shares outstanding - diluted   14,174  14,154  14,162  14,170
(a) Net loss per share was calculated based on basic shares outstanding due to the anti-dilutive effect on the inclusion of common stock equivalent shares.
    7/31/2010 1/31/2010 7/31/2009
Current assets   $ 90,013 $ 56,906 $ 89,559
Non-current assets   60,245 61,194 59,614
Current liabilities   55,010 22,926 47,671
Non-current liabilities   32,143 30,236 35,049
Stockholders' equity   63,105 64,938 66,453

Because this recession has lasted so long, traditional year-over-year comparisons are beginning to lose some of their relevance. Looking back two years gives a better perspective on the difference between what some are calling the "new normal" and the pre-recession "old normal." The second quarter of 2008 was the last quarter when public schools were operating on pre-recession budgets, so for us it provides a more representational baseline for comparing results of the second quarter of 2010. Compared to the second quarter of 2008, revenue for the second quarter of 2010 declined by 9.8% and gross profit declined by 11.3% with gross profit levels for the second quarter of 2008 being negatively impacted by a spike in raw material and gasoline prices. Compared to the first six months of 2008, revenue for the first six months of 2010 declined by 9.3% and gross profit declined by 17.5%. While these declines are relatively modest compared to other segments of the institutional furniture market, some of which are down 30-40% over the same period, we remain cautious because of the potential for further declines in our market as the lag in private sector tax contributions works its way through publicly-funded institutions.

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