Virco Mfg. Corporation — financial distress indicators
Financial-health summary
Virco Mfg. Corporation's reported numbers place it in the 'Watch' financial-health band (distress score 38/100). The main indicators are operating profit does not cover interest, very high leverage and steep revenue decline. Independently, the Ohlson accounting model puts its 1-year failure probability at 37% and the market-implied (Merton) default probability is 0.0%. In its favour: operating cash flow is positive over the latest 12 months.
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Interest coverage (EBIT / interest) is 0.27×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
Total debt is 7.5× EBITDA.
Debt above ~6× EBITDA is deep sub-investment-grade territory; refinancing becomes difficult when rates or earnings move against the company.
Revenue changed -25% year over year.
Falling sales reduce cash available for debt service.
Operating margin fell from 12% to 2% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Operating cash flow is positive over the latest 12 months.
- Strong current ratio (2.71).
📰 Recent news scan
- Virco Manufacturing Corporation VIRC Stock Forecast & Price Target - Yahoo! Finance CanadaGoogle News · 2026-10-05
- (VIRC) Movement as an Input in Quant Signal Sets - Stock Traders DailyGoogle News · 2026-10-04
- Virco Manufacturing (NASDAQ:VIRC) Share Price Breaks Above 200-Day Moving Average - What's Next? - MarketBeatGoogle News · 2026-10-01
- Virco (VIRC) insider lifts stake to 897,408 shares - Stock TitanGoogle News · 2026-09-15
- VIRC: Virco Manufacturing Corp. Latest Stock Price, Analysis, News and Trading Ideas - StocktwitsGoogle News · 2026-09-08
- Insider Purchase: Executive Vice President of $VIRC Buys 11,678 Shares | VIRC Stock News - Quiver QuantitativeGoogle News · 2026-04-15
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Virco Mfg. Corporation's financial-health indicators show?
As of 2026-10-08, Virco Mfg. Corporation's public financial data places it in the 'Watch' band with a distress score of 38/100, driven by operating profit does not cover interest, very high leverage and steep revenue decline. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Virco Mfg. Corporation's financial distress score?
38/100 ('Watch'). Ohlson O-score -0.53 (model 1-year failure probability 37%). Merton distance-to-default 3.68 σ (model default probability 0.0%).
What works in Virco Mfg. Corporation's favour?
Operating cash flow is positive over the latest 12 months. Strong current ratio (2.71).
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
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Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.