Virco Manufacturing Corporation

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Virco Manufacturing Corporation

2027 Harpers Way
Torrance, California 90501
(310) 533-0474
Fax: (310) 538-0114

Public Company
Employees: 2,550
Sales: $224 million (1995)
Stock Exchanges: American
SICs: 2531 Public Building & Related Furniture; 2522 Office Furniture Except Wood

Virco Manufacturing Corporation is the countrys largest producer of furniture for the classroom, with a market share of approximately 50 percent. Virco is also engaged in the manufacture of chairs, folding tables, computer-support furniture, wood and steel office furniture, and juvenile furniture. Vircos products can be found in meeting rooms, schools, restaurants, hotels, government facilities, convention centers, or military installations throughout the United States. A fully integrated company, all furniture fabrication, welding, assembling, and shipping is done by Virco.

Early History

Virco was founded by two brothers named Julian and Philip Virtue. The Virtue boys had dropped out of high school in the early 1920s and had at first found work at the S and M Lamp Company in Los Angeles. Industrious and ambitious young men, however, Julian and Philip began conducting experiments with chrome plating in the backyard of their family home in their spare time. Together they successfully chrome plated furniture at first for friends and family and then for local businesses. Soon they quit their jobs at the lamp works in order to focus on starting their own chrome-plating company.

In August 1926, their U.S. Plating Company opened for business. Owned and operated by the Virtue brothers, the company grew rapidly during the late 1920s. By the end of the decade business was so good that the owners moved from a small shack in their own backyard to a plant near downtown Los Angeles. Within a short time, the business also outgrew this facility, and the company once again relocated to a larger factory on West Century Boulevard.

Unlike most U.S. businesses, the U.S. Plating Company continued to grow during the Great Depression of the 1930s. While many firms went bankrupt due to an overextended line of credit, and others failed because of diminishing customers, the operation run by the Virtue brothers found a niche specializing in providing custom nickel plating for other furniture manufacturers. Julian recognized, however, that it would not only be advantageous, but more lucrative, for the company to begin manufacturing furniture on its own. Although Philip was initially reluctant to take such a large risk at the height of the Depression, with the possibility of losing their standing customers, he was finally convinced by his brothers enthusiasm and long-standing business acumen. By the mid-1930s, the company was making furniture for beauty parlors, producing upholstered tubular steel chrome-plated chairs for business offices, and dinette sets for restaurants and family dining rooms. Revenues continued to increase and, as the country began to pull itself out of the economic hardships, the company garnered for itself a reputation as one of the best run businesses in the city of Los Angeles.

The company continued to grow during the Second World War. When America entered the conflict in December 1941, the U.S. military was almost wholly unprepared to engage in a war both in Europe and the Pacific. Although preparations to train, feed, house, transport, and arm millions of soldiers for both theaters began immediately, it was many months before America was ready to fight the enemy. One of the most pressing needs of all was furniture. The Navy needed furniture for its dining halls and sleeping quarters on all its ships, and the Army and Marine Corps needed bunkbeds for its barracks throughout military installations across the United States. From southern California to Georgia, the U.S. Plating Company supplied the armed services with thousands upon thousands of bunkbeds. A steady demand from the military during the course of the war dramatically increased the companys revenues.

The Postwar Years and a New Company

The years after World War II seemed very promising for the U.S. Plating Company. Revenues continued to increase because of sustaining contracts with the United States government to supply furniture for military installations. In addition, the company added corporate accounts to its growing list of furniture clients in the Los Angeles metropolitan area. Yet suddenly, and without explanation, at the height of U.S. Plating Companys success, Julian Virtue left the firm. Some speculated that the brothers had fought, but neither Philip nor Julian ever mentioned such a disagreement.

Whatever the reason for his departure from U.S. Plating Company, Julian Virtue was determined to establish his own business. In 1950, after having left the firm, he formed the Virco Manufacturing Company. Not wanting to start completely from scratch, Julian Virtue decided to purchase an existing business, the Slauson Aircraft Company. Virtue had become acquainted with Slauson Aircraft during the war when that company had been manufacturing cartridge casings for the Army and Marines. After the war had ended and the entire industrial base of the United States had reverted to a peacetime economy, management at Slauson had made the decision to produce furniture for primary and secondary schools. When Julian acquired the company in 1950, Slauson Aircrafts sole client was the Los Angeles School Board, an important contract in the school furniture industry.

Not content to manufacture school furniture exclusively, largely due to the fact that the sale of school furniture was dictated by the seasonal scheduling of each academic year, Virtue initiated an aggressive and comprehensive diversification program. The companys product line soon expanded to include such items as folding chairs and folding tables, which quickly brought in ever-increasing revenues. At the same time, in concert with his diversification program, Virtue decided to expand the companys markets to include not only the greater Los Angeles metropolitan area but customers throughout the entire country. Within a very brief period of time, Virco had established a nationwide distribution network for its product line. Still, its founder was not quite satisfied with the companys sales volume. In 1954 he acquired Dunn Furniture Company in Conway, Arkansas, which significantly enhanced Vircos ability to manufacture its product line in both the eastern and southern regions of the United States, while at the same time reducing its shipping and freight costs to better serve its growing customer list.

During this time, Julian Virtues son, Robert, began working for the company during summer vacations and school holidays while in high school and college. Robert was dedicated to assisting his father in managing the company. After graduating from the University of California in 1954 and serving two years in the U.S. Navy, the younger Virtue returned to the firm and starting working on a full-time basis. Like his father in many respects, particularly in his ambition, Robert Virtue soon worked his way up the management ladder by learning all the necessary ingredients of the companys success, including marketing, strategic planning, accounting, operations, and management.

By the beginning of the 1960s, Robert Virtue had become an essential part of his fathers management team at Virco. The father and son leadership duo led the company into ever-expanding markets for its educational furniture, including large regions in the Southern part of the United States. By the time Virco was taken public in 1964, and listed its stock in the over-the-counter market, sales hot shot up dramatically. Yet high labor costs and intense competition within the furniture industry, especially in office and educational furniture, reduced the companys profit margins during the late years of the decade. In order to remain competitive, the father and son team had to think of a way for Virco to lower its costs, while simultaneously increase its market share in office and educational furniture.

Expansion and Acquisition in the 1970s and 1980s

Julian and Robert Virtue decided to open a plant in San Luis, Mexico, directly across the border from Yuma, Arizona. Opened amid much fanfare in 1971, the new facility not only significantly decreased Vircos labor costs while providing jobs to Mexican workers. Planned, constructed, and operated according to the twin plant or maquiladora concept, as it is called in Spanish, the endeavor was jointly sponsored by the United States and Mexican federal governments. The terms of agreement allowed American companies to build and operate manufacturing facilities in Mexico, paying native employees a fair wage, and then importing either finished products or fabricated parts on a duty-free basis. The maquiladora employees performed labor-intensive tasks which not only enabled Virco to retain its competitive pricing edge in markets throughout the United States, but also helped to substantially increase the companys profitability and drive up its price per share on the stock market. By the end of the decade, Virco had grown large enough to gain listing on the American Stock Exchange.

During the 1980s, Virco implemented a strategic plan to increase the manufacturing capacity of plants in California, Arkansas, and Mexico. At the companys headquarters in Torrance, California, management concentrated on expanding its production per day of a wide variety of chairs and educational furniture. At the Dunn Furniture plant in Conway, Arkansas, management decided not only to improve its manufacturing capacity, but to transform the facility into a major packing and distribution center. Vircos plant in San Luis, Mexico, was also thriving, and additional improvements to the facility allowed the company to hire a total of nearly 1,200 maquiladora workers.

In addition to these operational improvements, in 1984 Virco purchased a large plant owned by the Haywood-Wakefield Corporation in Newport, Tennessee. An old, well-established manufacturer of traditional furniture line products, Haywood-Wakefield had fallen on hard times and gone out of business. Julian Virtue, now retired but still active on a day-today basis and serving as chairman emeritus to his son Roberts position as president and chief executive officer, had known of the demise of Haywood-Wakefield through his extensive network of contacts within the furniture industry. In providing his son Robert with advice, Julian Virtue suggested that Virco acquire a part of the manufacturing facilities Haywood-Wakefield had put up for sale. The extensive plant at Newport significantly increased Vircos production capacity, and the facility began to manufacture melamine plastic chair seats and backs almost immediately. Employment at the plant rose quickly, to approximately 200 workers, and soon the Newport operation was sending its products to Los Angeles and Conway, Arkansas, for final assembly.

The 1990s and Beyond

During the early 1990s, Virco continued growing in an increasingly competitive market. Net sales from all its products increased from $191 million in 1992 to $205 million in 1993, with educational sales representing 53 percent of corporate revenues. Management attributed its success to an aggressive pricing strategy combined with the improvement of on-time delivery of customer orders. During the same time, the company moved its western region operations into a larger manufacturing and warehousing facility in Torrance, California, allowing a significant reduction in materials handling and distribution expenses. This consolidation involved a discontinuation of two facilities in the greater Los Angeles area. Also during the same period, Vircos manufacturing facility in Conway, Arkansas, was expanded twice, specifically to increase the companys capacity to produce hard plastic components for various lines of its furniture. In February 1993, Vircos San Luis, Mexico, manufacturing operation was damaged by fire. Although the damage was minor, and repairs were completed not long afterward, management at the company decided in 1995 to put the facility up for sale in order to improve its profit margins while reducing operating expenses.

In 1995, Virco reported net sales of $224 million. The company introduced a new line of computer furniture that became very popular, as well as a new product line of lightweight tables and chairs. Sales of educational furniture continued to increase, and Vircos domination of the market seemed a foregone conclusion for the near future. Although the company moved from selling its shares on the over-the-counter market to the American Stock Exchange in 1977, the Virtue family still retained a major interest and consequently continues to manage the company in the mid-1990s.

Principal Subsidiaries

Virsan SA de CV.

Principal Divisions

Torrance Division; Conway Division.

Further Reading

Allegrezza, Ray, Home Work: Convergence of Living And Office Space Brings Innovative New Furniture, Home Furnishing Network, May 6, 1996, p. 18.

Allegrezza, Ray, Rx for Little Guys: Adapt or Perish, Home Furnishing Network, June 24, 1996, p. 15.

Finegan, Robert, California Furniture, The Craft and the Artistry, Los Angeles: Windsor Publications, Inc., 1986.

Hill, Dawn, Neat Work Habits, Home Furnishing Network, May 6, 1996, pp. 20-23.

More Gainers Than Decliners, Home Furnishing Network, March 21, 1996, pp. 12-17.

OBrian, Bridget, Insiders Snap Up Furniture Firms Stock, The Wall Street Journal, August 28, 1996, p. C1(E).

White Elephant to the Rescue, Business Month, September 1990, p. 80.

Thomas Derdak