TORRANCE, CA - Virco Mfg. (Nasdaq:VIRC), a manufacturer of contract school furniture, says cut its annual deficit by 54.8% in 2013, reducing its loss from $3.83 million in 2012 to $1.73 million in 2013.
Robert Virtue, president and CEO, said Virco was able to partially offset a 1.8% decline in annual sales to $155.92 million last year through cost-cutting measures, including several tied to reducing labor costs. "Despite continued softness and volatility in our core K-12 public school market, the structural changes we have made over the last two years allowed us to reduce our operating loss despite a reduction in sales," he said.
Since 2011, Virco has reduced its workforce from 1,045 to 700 employees; most are employed at its factory in Conway, AR, and assembly and warehousing facility in Torrance. To meet peak production demands, Virco now supplements its full-time workforce, most of them union members, with temporary workers in the summer. Virco said this is meant to be short-term strategy that will enable it to make a modest profit until the market for school furniture and equipment recovers.
In its Form K Annual Report filed April 28, Virco notes that while many U.S. furniture manufacturers have closed their domestic facilities over the past decade and begun importing from international sources, Virco "elected to significantly reduce its work force, but retain its domestic factory locations. In recent years, the Company believes that its domestic manufacturing capabilities have evolved into a significant strength. The Company has effectively used product selection, color selection, and dependable execution of delivery and installation to customers to enhance its market position. With increasing costs from international sources and increasing freight costs, our factories are cost-competitive for bulky educational furniture and equipment items."
Virco said it is maintaining its strategy to import "low-cube component parts" while "fabrication of bulky welded steel frames, wood tops, and larger molded-plastic components" are performed domestically. This allows it to take advantage of global pricing on some parts while being able to quickly fabricate custom parts and assemble to order to satisfy customer demands for shorter lead times. Its products include seating, desks, computer furniture and lab furniture.
"Domestic production of laminated wood tops and molded plastic enables the Company to market a color palette that cannot be matched in a short delivery window by imported finished goods. Domestic assembly allows the Company to use standard ATS components to assemble customer-specific product and color combinations shortly prior to delivery and installation."
Two weeks after issuing its final financial report for 2013, Virco announced that it was reconstituting its board of directors "into a smaller and nimbler structure." Reducing the board to five members also result in a savings of more than $250,000 a year.
As a result of trimming the board, six current directors tendered their resignations. Two of the seats were refilled by new independent directors, Robert Lind and Donald Rudkin. They join existing new independent director, Michael DiGregorio.
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