Virco Mfg. Corporation (NASDAQ:VIRC), a notable player in the public building and related furniture industry, has entered into a significant lease agreement, extending its occupancy of a substantial property in Torrance, California. The arrangement, disclosed in a recent SEC filing, secures the company's tenancy for an additional 65 months, with the option for a five-year extension.
On Monday, Virco solidified its commitment to its 560,000 square foot office, manufacturing, and warehouse space by signing a new lease with Starboard Distribution Center, LLC. This agreement spans from May 1, 2025, to September 30, 2030, demonstrating the company's long-term planning for its operational infrastructure.
According to the filing, the lease terms include a five-month rent abatement beginning May 1, 2025. Following this initial period, the monthly base rent is set at $726,700 starting October 1, 2025, through April 30, 2026. The rent will then increase by 3.5% annually. Additionally, Virco will receive a tenant improvement allowance of up to $1.677 million, allowing for potential enhancements and modifications to the facility.
The lease also stipulates that the landlord retains the right to terminate the agreement should standard events of default occur. This clause is a common provision in commercial real estate contracts, offering protection to the property owner.
The financial obligations created by this lease are detailed in the same SEC filing, underscoring the company's strategic approach to managing its physical assets and financial commitments. The full text of the lease agreement has been included as an exhibit to the Form 8-K, providing transparency to investors and stakeholders regarding the terms of the deal.
In other recent news, Virco Mfg. Corporation reported favorable results in its first quarter, with shipments rising by 33.7% and net income reaching $2.1 million, a significant improvement from the $1.4 million loss in the same period last year. The company's gross margin also increased to 43.5% from 37.8%, attributed to higher factory output and stable raw material costs. Further, the Board of Virco declared a quarterly dividend of $0.02 per share and completed the first round of open market share repurchases, totaling $1.5 million, with an additional $3.5 million authorized for future repurchases.
Virco recently held its 2024 Annual Meeting of Stockholders, where stockholders elected three Class II directors and ratified the appointment of Moss Adams LLP as the company's independent registered public accounting firm for the fiscal year ending January 31, 2025. In addition, the company reported a 37.4% decrease in current liabilities and a 41.3% reduction in long-term liabilities, with total stockholder's equity increasing by 37.3% to $91.6 million.
Among these recent developments, Virco is considering potential acquisitions to expand its capabilities. However, management advises caution regarding the use of "Shipments plus Backlog", a non-GAAP metric, for forecasting purposes. As the company continues to evaluate its growth strategies, these developments underscore Virco's commitment to its financial health and shareholder value.
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