Virco(VIRC) - 2023 Q2 - Quarterly Report

Financial Performance - For the three months ended July 31, 2022, the company reported a pre-tax income of $9,975,000 on sales of $82,797,000, a significant increase from a pre-tax income of $4,985,000 on sales of $59,022,000 in the prior year, representing a sales increase of approximately 40.3%[95][96] - For the six-month period ended July 31, 2022, the company earned a pre-tax profit of $4,609,000 on sales of $114,881,000, a significant improvement from a pre-tax loss of $109,000 on sales of $87,389,000 in the prior year, reflecting a sales increase of approximately 31.5%[101] Orders and Backlog - The company experienced a 14.3% increase in orders year-to-date, with a backlog of unshipped orders increasing by nearly $36 million to $85.7 million compared to $49.7 million the previous year[89] Gross Margin and Expenses - Gross margin for the second quarter ended July 31, 2022, was 38.5% of sales, up from 37.8% in the prior year, driven by price increases implemented to recover increased costs[97] - Selling, general and administrative expenses for the three months ended July 31, 2022, increased by approximately $4,420,000 compared to the same period last year, attributed to increased variable freight and service expenses[98] Interest and Tax - Interest expense increased by $339,000 for the three months ended July 31, 2022, primarily due to an increase in the amount borrowed to finance seasonal working capital[99] - The effective income tax rate for the three months ended July 31, 2022, was 3.0%, a decrease from 24.6% in the prior year, primarily due to the recording of a valuation allowance for deferred tax assets[100] Inventory and Financing - The company’s inventory increased by $18,835,000 at July 31, 2022, with approximately 30% of the increase related to valuation from increased material and labor costs[107] - The company entered into an amendment to its credit facility, increasing the borrowing limit from $65 million to $70 million, which will support its operational needs[109] Cash Flow and Funding - The company believes that cash flows from operations, along with unused borrowing capacity, will be sufficient to fund its debt service requirements and working capital needs for the next twelve months[110]