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VIRCO MANUFACTURING COMPANY

Submitted to: Professor Harmon
(Faculty of Accounting), University of Bridgeport
Bridgeport, CT-06604

Submitted by: Bishnu Dangal
MBA with specialization in Accounting

5 December 2016

Table of Contents
TABLE OF CONTENTS………………………………………………………………………………………………………………1
1
...
2-3
a
...
2
b
...
2
c
...
Other Factors……………………………………………………………………………………………………………………3
2
...
4-6
a
...
Key Players…………………………………………………………………………………………………………………………4
c
...
4
d
...
Regulations………………………………………………………………………………………………………………………
...
SWOT Analysis…………………………………………………………………………………………………………………
...
Market Dynamics……………………………………………………………………………………………………………
...
COMPANY ANALYSIS…………………………………………………………………………………………………………
...
Business Model…………………………………………………………………………………………………………………
...
Vision and Mission……………………………………………………………………………………………………………
...
Products and Services………………………………………………………………………………………………………
...
Competitive Analysis…………………………………………………………………………………………………………
...
Culture………………………………………………………………………………………………………………………………
...
Challenges…………………………………………………………………………………………………………………………
...
FINANCIAL ANALYSIS……………………………………………………………………………………………………………9-16
a
...
9-12
b
...
12-14
c
...
15-16
d
...
16
5
...
17
REFERENCES………………………………………………………………………………………………………………………………
...
MACRO-ECONOMIC ANALYSIS
The macro economic factors affect the demand and supply of any company
...


GDP
There is significant contribution of manufacturing industries in the U
...
economy
...
1 trillion in Gross Domestic Product (i
...
12
...
S
...
Manufacturing industry is one of the
significant sectors based upon its contribution in the employment sector and the
total output sector
...
1 million indirect jobs in U
...

economy in 2013(Scott, 2015)
...


Inflation
Inflation could lead to the soaring price of raw materials for manufacturing
industries
...
S
...
6
percentage
...
4 percentage
...
Despite the rise in price the consumption
might not remain the same or it can even decline as the real purchasing power of
the consumers decline due to the inflation
...
The result
could lead to the increase in price of car
...


c
...
Fiscal policies control the flow of money in the economy in different
sectors like; household, manufacturing, and investment
...

These policies can affect the growth of the manufacturing industries
...

It can lead to the growth of the manufacturing industries and vice versa
...


Other factors other than economy(political)
There are other factors besides the economic factors such as political, social, and
technological factors
...
The
political situation in a country has direct impact on the industries
...


Social factors include customs, values and beliefs, norms, and tradition
...


Technological factors include invention of new technology and technological
development
...


3

2
...
Name of the industry
This paper is based on the analysis of manufacturing industries, and its contribution in
the economy
...
The products could be either intermediate goods or the finished products
...
Key Players
NASDAQ has listed various manufacturing industries under consumer durable sectors
...


c
...
S
...
In this
competitive global business era, manufacturing industries need to focus on reducing
the manufacturing costs, and enhance the sales volume
...
The growth trend of manufacturing industries
in U
...
is sluggish
...


d
...
Some of
the major standards required for manufacturing industries are;
ISO 9001
ISO 13845
IEC 61215
IEC 61646

4

e
...
The different
areas that a manufacturing industries should comply includes;
 Health, and Safety
 Fair competition
 Employment Laws
 Data security
 IT safety and security
 Export control
 Product safety
 Consumer protection

f
...


Strengths

Weaknesses

1
...
Taxes

2
...
New Markets

1
...
Venture Capital

2
...
Technological Problems

Figure: SWOT Analysis

5

g
...
They sell the products by the methods of bid
that includes state contracts, local buying groups, and consortium of school districts
...
COMPANY ANALYSIS
a
...
It’s business
model is developing high value on manufacturing, assembly line, and direct
distribution of products and services
...


b
...
It is
involved in providing the reliable furniture, movable tables, chairs, and storage
equipment to schools, churches, government facilities, and convention centre
...
Products and Services
The product line of Virco Manufacturing Corp
...
Competitive Analysis
Virco has an intense competition in the market based on distribution to sellers and
distribution to the end users
...
Besides, it has numerous competitors such as HNI, Sagus International LLC,
KI Inc, Scholarcraft, and ECR4kids
...

To cope with the price based competition, Virco has successfully reduced its
distribution cost by the means of direct distribution in the market
...
Culture
Virco has a fast pace work environment
...
The employees training
program, family-oriented culture, innovation for students, commitment to the
environment, and excellent compensation makes Virco a best place to work for
...


f
...
As Virco promotes the ‘Made in
America’ products so it is of greater challenge to maintain this pride in coming future
as the similar products can be supplied from third countries in cheap price
...
FINANCIAL ANALYSIS
a
...
At a glance, the income
statement of Virco looks increasing
...
Yet,
income statemen only comprises of income, expenses, and gains/losses and does not include
the cash in and cash out activities
...
Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
Retained Earnings
Treasury Stock
Capital Surplus
Other Stockholder Equity
Total Stockholder Equity
Net Tangible Assets

150
-69,140
116,633
-14,330
33,313
33,313

149
-73,690
116,348
-20,234
22,573
22,573

147
-74,540
115,978
-13,980
27,605
27,605
10

Balance sheet shows the financial position of a company
...
The company has made huge investment in the property, plants, and
equipment
...

Shareholders’ equity and the value of other tangible assets are in increasing trend
...
We need to analyse
the other ratio to find out the reality behind these figures
...


Cash Flow (in thousand)
Period Ending
Net Income

1/31/2016 1/31/2015 1/31/2014
4,549
849
-1,730

Operating Activities, Cash Flows Provided By or Used
In
Depreciation
6,770
Adjustments To Net Income
1,657
Changes In Accounts Receivables
554
Changes In Liabilities
2,784
Changes In Inventories
-8,275
Changes In Other Operating Activities
-532
7,507
Total Cash Flow From Operating Activities

5,691
374
-2,252
-5,294
1,376
915
1,659

5,757
1,428
432
-3,708
-2,364
-58
-243

Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures
Investments
Other Cash flows from Investing Activities
Total Cash Flows From Investing Activities

-3,314
-68
-3,382

-3,632
-6
-3,638

-129
1,271
1,142
-581

-116
4,195
4,079
198

-4,261
64
-4,197

Financing Activities, Cash Flows Provided By or Used
In
Dividends Paid
Sale Purchase of Stock
-206
Net Borrowings
-2,759
Other Cash Flows from Financing Activities
Total Cash Flows From Financing Activities
-2,965
Effect Of Exchange Rate Changes
345
Change In Cash and Cash Equivalents

11

Cash flow shows the total amount of money that flows in and out of the business
...
The inconsistency
in the cash flow of Virco makes the reliability of the company questionable
...
Ratio Analysis
By only looking at the financial statements we cannot draw any conclusion of a company
...
I have analysed few
ratios of the Virco in this paper for insight view of the company
...
55M

1/31/15
89,000

1/31/14
-1
...
60M 164
...
92M
Profit
2
...
52%

-1
...
The high cost of
sales has overshadowed the sales revenue
...


Gross Profit Margin Ratio
Gross Profit

1/31/16
59
...
40M

1/31/14
53
...
60M 164
...
92M
35
...
77% 34
...
However, there is
inconsistency in the growth trend
...

$34
...


Capital Expenditure Ratio
1/31/16 1/31/15

1/31/14

Capital Expenditure

4
...
31M

3
...
55M

849,000

-1
...
67% 390
...
94%

Expenditure

(Note: Capital Expenditure Ratio = Capital Expenditure/Net Income*100)
The figure shows that Virco makes huge investment on purchasing new equipment
...
Huge amounts of profit are spend on
capital expenditures like property, plants, and equipment
...
77M

38
...
64M

Current Liabilities

22
...
41M

22
...
05

1
...
75

(Note: Current Ratio = Current Assets/Current Liabilities)
The current ratio of Virco is in increasing trend
...
It represents the good financial health
of Virco
...
14

Earnings 6
...
69

1/31/14
-74
...
14%

The retained earnings of Virco looks highly inconsistent
...


Return on Invested Capital
1/31/16 1/31/15 1/31/14
Free Cash Flow

3
...
66M

Invested Capital

65
...
94M 59
...
93%

-2
...
88M

-6
...


Return on Equity
Net Income

1/31/16
4
...
73

Shareholders' Equity 33
...
57M 27
...
66%
3
...
27%

(Note: Return on Equity = Net Income/Shareholder’s Equity*100)
The shareholders of Virco might not be satisfied as the company could not maintain
consistent returns
...


14

c
...
00%

18
...
00%
16
...
00%
12
...
00%

8
...
34%

8
...
00%

4
...
00%

3
...
67%

3
...
67%

Virco Mfg
...
00%
0
...
67%
...
Yet, in comparison with its competitors, Virco is far
behind in the competition
...
00%
20
...
00%
10
...
38%

11
...
00%
13
...
21%

10
...
10%

Virco Mfg
...
00%

NAME OF THE COMPANY
ROE

Industry Average

15

The industry average for ROE is 11
...
Virco is slight above the industry average
...
But compared to HNI, there is a huge room for
improvement on ROE of Virco
...
00%
6
...
00%
4
...
48%

4
...
48%

6
...
00%

4
...
00%
1
...
48%

2
...
45%

0
...
Corporation
(VIRC)

Haverty Furnitures
Company (HVT-A)

HOFT

HNI

NAME OF THE COMPANY
Net Profit Margin

Industry Average

The industry average for Net profit margin is 4
...
Virco is far below the industry average
...


d
...

Despite the fact, its revenue has been steadily declining
...
SUMMARY
We can summarize the Virco’s performance in the industry, and its strategies as following;




The price/book value of Virco is comparatively low than its peer in the industry
...

Low net profit margin and low return on asset indicates that the strategy adopted by the
management is not effective
...




High capital investment nature of the company might bring positive result in the future
...
Robert
...
The Manufacturing Footprint and the Importance of
U
...
Manufacturing Jobs
...
epi
...
, (2014, July 4)
...
S
...
stern
...
edu/~adamodar/New_Home_Page/datafile/margin

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