10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 30, 2020

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from        to        

Commission File number 1-8777

VIRCO MFG. CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Delaware	95-1613718
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
2027 Harpers Way, Torrance, CA	90501
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (310) 533-0474

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value per share	VIRC	The Nasdaq Stock Market LLC

 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	ý	Smaller reporting company	ý
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

The number of shares outstanding for each of the registrant’s classes of common stock, as of the latest practicable date:

Common Stock, $.01 par value — 15,713,549 shares as of June 8, 2020.

TABLE OF CONTENTS

Part I. Financial Information		3
	Item 1. Financial Statements	3
	Unaudited condensed consolidated balance sheets - April 30, 2020, January 31, 2020 and April 30, 2019	3
	Unaudited condensed consolidated statements of operations - Three months ended April 30, 2020 and 2019	5
	Unaudited condensed consolidated statements of comprehensive loss - Three months ended April 30, 2020 and 2019	6
	Unaudited condensed consolidated statements of cash flows - Three months ended April 30, 2020 and 2019	7
	Unaudited condensed consolidated statements of changes in equity and accumulated other comprehensive income (loss) - Three months ended April 30, 2020 and 2019	8
	Notes to unaudited condensed consolidated financial statements - April 30, 2020	9
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	20
	Item 4. Controls and Procedures	20
Part II. Other Information		21
	Item 1. Legal Proceedings	21
	Item 1A. Risk Factors	21
	Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	21
	Item 3. Defaults Upon Senior Securities	21
	Item 4. Mine Safety Disclosures	21
	Item 5. Other Information	21
	Item 6. Exhibits	22
	EX-3.3
	EX-31.1
	EX-31.2
	EX-32.1
	EX-101 INSTANCE DOCUMENT
	EX-101 SCHEMA DOCUMENT
	EX-101 CALCULATION LINKBASE DOCUMENT
	EX-101 LABELS LINKBASE DOCUMENT
	EX-101 PRESENTATION LINKBASE DOCUMENT

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PART I. Financial Information

Item 1. Financial Statements

Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

	4/30/2020		1/31/2020		4/30/2019
	(In thousands)
Assets
Current assets
Cash	$	327	$	1,150	$	553
Trade accounts receivables, net	7,564		11,762		12,375
Other receivables	57		57		64
Income tax receivable	469		298		263
Inventories	58,190		43,329		63,511
Prepaid expenses and other current assets	2,413		1,746		2,532
Total current assets	69,020		58,342		79,298
Non-current assets
Property, plant and equipment
Land	3,731		3,731		3,731
Land improvements	734		717		688
Buildings and building improvements	51,159		51,200		51,176
Machinery and equipment	111,250		110,610		109,087
Leasehold improvements	1,072		990		830
Total property, plant and equipment	167,946		167,248		165,512
Less accumulated depreciation and amortization	128,520		127,351		124,159
Net property, plant and equipment	39,426		39,897		41,353
Operating lease right-of-use assets	20,487		21,325		23,295
Deferred tax assets, net	14,481		11,230		11,086
Other assets, net	8,078		8,198		8,276
Total assets	$	151,492	$	138,992	$	163,308

See accompanying notes to unaudited condensed consolidated financial statements.

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Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

	4/30/2020			1/31/2020			4/30/2019
	(In thousands, except share and par value data)
Liabilities
Current liabilities
Accounts payable	$	16,656		$	10,587		$	16,354
Accrued compensation and employee benefits	5,979			6,392			4,631
Current portion of long-term debt	10,618			878			24,226
Current portion operating lease liability	4,527			3,654			2,939
Other accrued liabilities	4,606			3,607			5,552
Total current liabilities	42,386			25,118			53,702
Non-current liabilities
Accrued self-insurance retention	1,802			1,410			1,773
Accrued pension expenses	21,365			21,310			14,218
Income tax payable	74			70			55
Long-term debt, less current portion	15,630			15,818			16,508
Operating lease liability, less current portion	18,854			19,787			22,221
Other long-term liabilities	662			661			555
Total non-current liabilities	58,387			59,056			55,330
Commitments and contingencies (Notes 6, 7 and 13)
Stockholders’ equity
Preferred stock:
Authorized 3,000,000 shares, $0.01 par value; none issued or outstanding	—			—			—
Common stock:
Authorized 25,000,000 shares, $0.01 par value; issued and outstanding 15,713,549 shares at 4/30/2020 and 1/31/2020 and 15,541,956 at 4/30/2019	157			157			155
Additional paid-in capital	119,036			118,782			118,292
Accumulated deficit	(54,508		)	(49,810		)	(55,259		)
Accumulated other comprehensive loss	(13,966		)	(14,311		)	(8,912		)
Total stockholders’ equity	50,719			54,818			54,276
Total liabilities and stockholders’ equity	$	151,492		$	138,992		$	163,308

See accompanying notes to unaudited condensed consolidated financial statements.

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Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Operations

	Three months ended
	4/30/2020			4/30/2019
	(In thousands, except per share data)
Net sales	$	17,599		$	26,893
Costs of goods sold	12,695			17,809
Gross profit	4,904			9,084
Selling, general and administrative expenses	11,931			12,681
Loss (gain) on sale of property, plant & equipment	—			—
Operating loss	(7,027		)	(3,597		)
Pension expense	542			188
Interest expense	404			700
Loss before income taxes	(7,973		)	(4,485		)
Income tax benefits	(3,275		)	(1,418		)
Net loss	$	(4,698	)	$	(3,067	)
Net loss per common share:
Basic	$	(0.30	)	$	(0.20	)
Diluted (a)	(0.30		)	(0.20		)
Weighted average shares of common stock outstanding:
Basic	15,654			15,486
Diluted (a)	15,654			15,486

(a) Net loss per common share was calculated based on basic shares outstanding due to the anti-dilutive effect on the inclusion of common stock equivalent shares.

See accompanying notes to unaudited condensed consolidated financial statements.

5

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Comprehensive Loss

	Three months ended
	4/30/2020			4/30/2019
	(In thousands)
Net loss	$	(4,698	)	$	(3,067	)
Other comprehensive income:
Pension adjustments (net of tax expense of $120 and $46 at April 30, 2020 and 2019, respectively)	345			130
Net comprehensive loss	$	(4,353	)	$	(2,937	)

See accompanying notes to unaudited condensed consolidated financial statements.

6

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

	Three months ended
	4/30/2020			4/30/2019
	(In thousands)
Operating activities
Net loss	$	(4,698	)	$	(3,067	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,393			1,452
Non-cash lease expense	778			89
Provision for doubtful accounts	15			15
Loss (gain) on sale of property, plant and equipment	—			—
Deferred income taxes	(3,251		)	(1,488		)
Stock-based compensation	254			186
Defined pension plan settlement	—			—
Amortization of net actuarial loss for pension plans	345			130
Changes in operating assets and liabilities:
Trade accounts receivable	4,183			863
Other receivables	—			(24		)
Inventories	(14,861		)	(16,222		)
Income taxes	(167		)	(77		)
Prepaid expenses and other current assets	(546		)	(709		)
Accounts payable and accrued liabilities	6,668			566
Net cash used in operating activities	(9,887		)	(18,286		)
Investing activities:
Capital expenditures	(488		)	(1,219		)
Proceeds from sale of property, plant and equipment	—			—
Net cash used in investing activities	(488		)	(1,219		)
Financing activities:
Borrowing from long-term debt	11,413			19,564
Repayment of long-term debt	(1,861		)	(244		)
Payment on deferred financing costs	—			—
Tax withholding payments on share-based compensation	—			—
Cash dividends paid	—			—
Net cash provided by financing activities	9,552			19,320
Net decrease in cash	(823		)	(185		)
Cash at beginning of period	1,150			738
Cash at end of period	$	327		$	553

See accompanying notes to unaudited condensed consolidated financial statements.

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Virco Mfg. Corporation

Unaudited Consolidated Statements of Changes in Equity and Accumulated Other Comprehensive Income (Loss)

	Three-Month Period Ended April 30, 2020
	Common Stock
In thousands, except share data	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholder's Equity
Balance at February 1, 2020	15,713,549	$	157	$	118,782	$	(49,810	)	$	(14,311	)	$	54,818
Net loss	—	—		—		(4,698		)	—			(4,698		)
Cash dividends	—	—		—		—			—			—
Pension adjustments, net of tax effect of $120	—	—		—		—			345			345
Shares vested and others	—	—		—		—			—			—
Stock compensation expense	—	—		254		—			—			254
Balance at April 30, 2020	15,713,549	$	157	$	119,036	$	(54,508	)	$	(13,966	)	$	50,719

	Three-Month Period Ended April 30, 2019
	Common Stock
In thousands, except share data	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholder's Equity
Balance at February 1, 2019	15,541,956	$	155	$	118,106	$	(52,192	)	$	(9,042	)	$	57,027
Net loss	—	—		—		(3,067		)	—			(3,067		)
Cash dividends	—	—		—		—			—			—
Pension adjustments, net of tax effect of $46	—	—		—		—			130			130
Shares vested and others	—	—		—		—			—			—
Stock compensation expense	—	—		186		—			—			186
Balance at April 30, 2019	15,541,956	$	155	$	118,292	$	(55,259	)	$	(8,912	)	$	54,276

See accompanying notes to unaudited condensed consolidated financial statements.

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VIRCO MFG. CORPORATION

Notes to unaudited Condensed Consolidated Financial Statements

April 30, 2020

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 (“Form 10-K”).  In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended April 30, 2020, are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2021. The balance sheet at January 31, 2020, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. All references to the “Company” refer to Virco Mfg. Corporation and its subsidiaries.

Note 2. Seasonality and Management Use of Estimates

The market for educational furniture is marked by extreme seasonality, with approximately 50% of the Company’s total sales typically occurring from June to August each year, the Company’s peak season. Hence, the Company typically builds and carries significant amounts of inventory during and in anticipation of this peak summer season to facilitate the rapid delivery requirements of customers in the educational market. This requires a large up-front investment in inventory, labor, storage and related costs as inventory is built in anticipation of peak sales during the summer months. As the capital required for this build-up generally exceeds cash available from operations, the Company has generally relied on third-party bank financing to meet cash flow requirements during the build-up period immediately preceding the peak season. In addition, the Company typically is faced with a large balance of accounts receivable during the peak season. This occurs for two primary reasons. First, accounts receivable balances typically increase during the peak season as shipments of products increase. Second, many customers during this period are educational institutions and government entities, which tend to pay accounts receivable slower than commercial customers.

The Company’s working capital requirements during and in anticipation of the peak summer season require management to make estimates and judgments that affect assets, liabilities, revenues and expenses, and related contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to market demand, labor costs and stocking inventory. Significant estimates made by management include, but are not limited to, valuation of inventory; deferred tax assets and liabilities; useful lives of property, plant and equipment; liabilities under pension, warranty, self-insurance and environmental claims; and the accounts receivable allowance for doubtful accounts. Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after April 30, 2020, including those resulting from the impacts of the COVID-19 pandemic, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

Note 3. New Accounting Pronouncements

Recently Adopted Accounting Updates

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This update simplifies various aspects related to accounting for income taxes, removes certain exceptions to the general principles in ASC 740, and clarifies and amends existing guidance to improve consistent application.  The Company adopted this ASU as of February 1, 2020 and the adoption of this standard did not have a material effect on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which modifies the disclosure requirements of fair value measurements in Topic 820, Fair Value Measurement. For public companies the ASU removes disclosure requirements for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU modifies the disclosure requirements

9

for investments in certain entities that calculate net asset value and clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. The ASU adds the disclosure requirement for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted this ASU as of February 1, 2020 and the adoption of this standard did not have a material effect on our condensed consolidated financial statements.

Recently Issued Accounting Updates

In August 2018, the FASB issued Accounting Standards Update No. 2018-14 (ASU 2018-14), Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. The Company is currently evaluating the effect the standard will have on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss impairment methodology for measuring and recognizing credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  The adoption date, as modified by the recently issued ASU 2019-10 discussed below, will be for the fiscal year ending after December 15, 2022 and interim periods therein. The Company is currently evaluating the effect the standard will have on the consolidated financial statements and related disclosures.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates.  ASU 2019-10 moves the effective date for certain previously issued amendments to later dates, depending on the filing status of the respective entity.  Specifically, due to the amendment and the Company’s status as a smaller reporting company, the new effective dates for relevant previously issued amendments not yet adopted by the Company relate to ASU 2016-13 as described above.

Other recently issued accounting updates are not expected to have a material impact on the Company’s consolidated financial statements.

Note 4. Revenue Recognition

The Company manufactures, markets and distributes a wide variety of school and office furniture to wholesalers, distributors, educational institutions and governmental entities. Revenue is recorded for promised goods or services when control is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

The Company's sales generally involve a single performance obligation to deliver goods pursuant to customer purchase orders.  Prices for our products are based on published price lists and customer agreements. The Company has determined that the performance obligations are satisfied at a point in time when the Company completes delivery per the customer contract. The majority of sales are free on board ("FOB") destination where the destination is specified per the customer contract and may include delivering the furniture into the classroom, school site or warehouse. Sales of furniture that are sold FOB factory are typically made to resellers of our product who in turn provide logistics to the ultimate customer. Once a product has been delivered per the shipping terms, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset. The Company considers control to have transferred upon shipment or delivery in accordance with shipping terms because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.

Sales are recorded net of discounts, sales incentives and rebates, sales taxes and estimated returns and allowances. The Company offers sales incentives and discounts through various regional and national programs to our customers. These programs include product rebates, product returns allowances and trade promotions. Variable consideration for these programs is estimated in the transaction price at contract inception based on current sales levels and historical experience using the expected value method, subject to constraint.

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The Company generates revenue primarily by manufacturing and distributing products through direct-to-customers and resellers. Control transfers to both resellers and direct customers at a point in time when the delivery process is complete as determined by the corresponding shipping terms. Therefore, we do not consider them to be meaningfully different revenue streams given similarities in the nature of the products, performance obligation and distribution processes. Sales are predominately in the United States and to a similar class of customer. We do not manage or evaluate the business based on product line or any other discernable category.

For product produced by and sourced from third parties, management has determined that it is the principal in all cases, since it (i) bears primary responsibility for fulfilling the promise to the customer; (ii) bears inventory risk before and/or after the good or service is transferred to the customer; and (iii) has discretion in establishing the price for the sale of good or service to the customer.

Note 5. Inventories

Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or net realizable value and includes material, labor and factory overhead. The Company maintains valuation allowances for estimated slow-moving and obsolete inventory to reflect the difference between the cost of inventory and the estimated net realizable value. Valuation allowances for slow-moving and obsolete inventory are determined through a physical inspection of the product in connection with a physical inventory, a review of slow-moving product and consideration of active marketing programs. The market for education furniture is traditionally driven by value, not style, and the Company has not typically incurred significant obsolescence expenses. If market conditions are less favorable than those anticipated by management, additional valuation allowances may be required. Due to reductions in sales volume in the past years, the Company’s manufacturing facilities are operating at reduced levels of capacity. The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation.

The following table presents a breakdown of the Company’s inventories as of April 30, 2020, January 31, 2020 and April 30, 2019:

	4/30/2020		1/31/2020		4/30/2019
	(in thousands)
Finished goods	$	27,348	$	15,401	$	26,546
WIP	19,159		15,957		24,009
Raw materials	11,683		11,971		12,956
Total inventories	$	58,190	$	43,329	$	63,511

Note 6. Leases

The Company has operating leases on real property, equipment, and automobiles that expire at various dates. The Company determines if an arrangement is a lease at inception and assesses classification of the lease at commencement. All of the Company’s leases are classified as operating leases, as a lessee. The Company uses the implicit rate when readily determinable, or the incremental borrowing rate. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments using company specific credit spreads. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for our operating leases is recognized on a straight-line basis over the lease term.

The Company has an operating lease for its corporate office, manufacturing and distribution facility located in Torrance, CA, currently with a remaining lease term through April 30, 2025. The Company leases equipment under a 5-year operating lease arrangement. The Company has the option of buying the assets at the end of the lease period at a price that does not result in the Company being reasonably certain of exercising the option. In addition, the Company leases trucks, automobiles, and forklifts under operating leases that include certain fleet management and maintenance services. Certain of the leases contain renewal or purchase options and require payment for property taxes and insurance. Tenant improvements are capitalized and depreciated over the remaining life of the applicable lease, and related tenant allowances are recorded as a reduction to the ROU asset.

In accordance with ASC 842, quantitative information regarding our leases is as follows:

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	Three-Months Ended
	4/30/2020			4/30/2019
	(in thousands)
Operating lease cost	$	1,440		$	1,380
Short-term lease cost	36			54
Short-term sublease income	(10		)	(10		)
Variable lease cost (1)	455			448
Total lease cost	$	1,921		$	1,872
Other operating leases information:
Cash paid for amounts included in the measurement of lease liabilities	$	662,000		$	1,291,000
Right-of-use assets obtained in exchange for new lease liabilities	$	270,000		394,000
Weighted-average remaining lease term (years)	4.7			5.7
Weighted-average discount rate	6.4		%	6.4		%

(1) Subsequent to the issuance of the Company’s condensed consolidated financial statements as of April 30, 2019, management identified an immaterial correction related to the disclosure of certain variable lease payments. Variable lease expense for the three-months ended April 30, 2019 did not previously include $448,000 of variable lease payments for property taxes, insurance and common area maintenance related to triple net leases. Management corrected the disclosure related to variable lease expense in the table above for the three-months ended April 30, 2019 and, except for this change, the correction had no impact upon the Company’s condensed consolidated financial statements

Minimum future lease payments for operating leases in effect as of April 30, 2020, are as follows:

	Operating Lease
	(in thousands)
Remaining of 2021	$	4,414
2022	5,708
2023	5,275
2024	5,214
2025	5,370
Thereafter	1,350
Remaining balance of lease payments	$	27,331
Short-term lease liabilities	$	4,527
Long-term lease liabilities	18,854
Total lease liabilities	$	23,381
Difference between undiscounted cash flows and discounted cash flows	$	3,950

Note 7. Debt

Outstanding balances for the Company’s long-term debt were as follows:

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	4/30/2020		1/31/2020		4/30/2019
	(in thousands)
Revolving credit line	$	19,740	$	9,969	$	33,354
Other	6,508		6,727		7,380
Total debt	$	26,248	$	16,696	$	40,734
Less current portion	10,618		878		24,226
Non-current portion	$	15,630	$	15,818	$	16,508

The Company has a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”). The Credit Agreement has been amended twenty times since it’s origination in 2011 through fiscal 2019, which, among other things, extended the maturity date of the Credit Agreement for three years until March 19, 2023.

The Credit Agreement is an asset-based line of credit that is subject to a borrowing base limitation and generally provides for advances of up to 85% of eligible accounts receivable, plus a percentage equal to the lesser of 60% of the value of eligible inventory or 85% of the liquidation value of eligible inventory, plus $15,000,000 from January 1 through July of each year, minus undrawn amounts of letters of credit and reserves. The Credit Agreement is secured by substantially all of the Company's, as defined, personal property and certain of the Company's real property. The principal amount outstanding under the Credit Agreement and any accrued and unpaid interest is due no later than March 19, 2023, and the Credit Agreement is subject to certain prepayment penalties upon earlier termination of the Credit Agreement. Prior to the maturity date, principal amounts outstanding under the Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments and certain other conditions.

The Credit Agreement bears interest, at the Borrowers' option, at either the Alternate Base Rate (as defined in the Credit Agreement) or the Eurodollar Currency Rate (as defined in the Credit Agreement), in each case plus an applicable margin. The applicable margin for Alternate Base Rate loans is a percentage within a range of 0.75% to 1.25%, and the applicable margin for Eurodollar Currency Rate loans is a percentage within a range of 1.75% to 2.25%, in each case based on the EBITDA of the Borrower's at the end of each fiscal quarter and may be increased at PNC's option by 2.0% during the continuance of an event of default. Accrued interest with respect to principal amounts outstanding under the Credit Agreement is payable in arrears on a monthly basis for Alternative Base Rate loans, and at the end of the applicable interest period but at most every three months for Eurodollar Currency Rate loans. The interest rate at April 30, 2020 was 4.50%.

In March 2019, the Company entered into Amendment No. 19 which, among other things, (i) increased the Maximum Revolving Advance Amount to $65,000,000 with seasonal adjustments to the credit limit and subject to borrowing base limitations, (ii) increased seasonal advance to $15,000,000 from January to July of each year, (iii) increased equipment loan to $2,000,000, (iv) reduced borrowings under the line to less than or equal to $10,000,000 for a period of 30 consecutive days during the fourth quarter of each fiscal year. In April 2019, the Company entered into Amendment No. 20 which, among other things, waived the covenant violation for the fourth quarter of fiscal 2019, amended the minimum EBITDA covenant and the fixed charge coverage ratio for fiscal 2020, and eliminated the Company’s ability to pay dividends or repurchase stock during fiscal 2020. For fiscal year beginning February 1st, 2020, the covenant for the fixed charge coverage ratio is 1.10 to 1.00 for each consecutive four fiscal quarter period of Borrowers ending thereafter. The Company was in compliance with its financial covenants as of April 30, 2020.

To date the impact of COVID-19 on liquidity has been to moderate the seasonal increase in accounts receivable and production of inventory for summer delivery. Both the increase in accounts receivable and inventory are traditionally financed through the Company’s line of credit with PNC Bank. Reductions in receivables and inventory were substantially offset by a reduction in borrowing under the line with PNC Bank.

Events of default (subject to certain cure periods and other limitations) under the Credit Agreement include, but are not limited to, (i) non-payment of principal, interest or other amounts due under the Credit Agreement, (ii) the violation of terms, covenants, representations or warranties in the Credit Agreement or related loan documents, (iii) any event of default under agreements governing certain indebtedness of the Borrowers and certain defaults by the Borrowers under other agreements that would materially adversely affect the Borrowers, (iv) certain events of bankruptcy, insolvency or liquidation involving the Borrowers, (v) judgments or judicial actions against the Borrowers in excess of $250,000, subject to certain conditions, (vi) the failure of the Company to comply with Pension Benefit Plans (as defined in the Credit Agreement), (vii) the invalidity of loan

13

documents pertaining to the Credit Agreement, (viii) a change of control of the Borrowers and (ix) the interruption of operations of any of the Borrowers' manufacturing facilities for five consecutive days during the peak season or 15 consecutive days during any other time, subject to certain conditions.

Pursuant to the Credit Agreement, substantially all of the Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Credit Agreement upon receipt by the Borrowers. Due to this automatic liquidating nature of the Credit Agreement, if the Borrowers breach any covenant, violate any representation or warranty or suffer a deterioration in their ability to borrow pursuant to the borrowing base calculation, the Borrowers may not have access to cash liquidity unless provided by PNC at its discretion. In addition, certain of the covenants and representations and warranties set forth in the Credit Agreement contain limited or no materiality thresholds, and many of the representations and warranties must be true and correct in all material respects upon each borrowing, which the Borrowers expect to occur on an ongoing basis. There can be no assurance that the Borrowers will be able to comply with all such covenants and be able to continue to make such representations and warranties on an ongoing basis.

The Company's line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. Approximately $12,343,000 was available for borrowing as of April 30, 2020.

Management believes that the carrying value of debt approximated fair value at April 30, 2020 and 2019, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

Note 8. Income Taxes

The Company recognizes deferred income taxes under the asset and liability method of accounting for income taxes in accordance with the provisions of ASC No. 740, Accounting for Income Taxes. Deferred income taxes are recognized for differences between the financial statement and tax basis of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, the Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible.  The Company maintains a partial valuation allowance of $1,075,000, $1,183,000 and $1,907,000 as of April 30, 2020, January 31, 2020 and April 30, 2019 to reduce against certain state deferred tax assets that the Company does not believe it is more-likely-than-not to realize.

On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act modified the limitation for business interest expense deduction and the new limitation has increased from30 to 50 percentof adjusted taxable income. Historically deferred taxes related to interest expense limitation were fully offset by a valuation allowance. The Company performed an analysis of the impact of the CARES Act and calculated a tax benefit of approximately

$200,000 which was driven by the release of the valuation allowance related to the business interest limitation.

The January 31, 2016 and subsequent years remain open for examination by the IRS and state tax authorities. The Company is not currently under any state examination. The Company is currently under IRS examination for its fiscal year ended January 31, 2016 Federal tax return.

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Note 9. Net loss per Share

	Three Months Ended
	4/30/2020			4/30/2019
	(In thousands, except per share data)
Net loss	$	(4,698	)	$	(3,067	)
Weighted average shares of common stock outstanding	15,654			15,486
Net effect of dilutive shares - based on the treasury stock method using average market price	—			—
Totals	15,654			15,486
Net loss per share - basic	$	(0.30	)	$	(0.20	)
Net loss per share - diluted (a)	$	(0.30	)	$	(0.20	)

(a) All exercisable and non-exercisable restricted stock awards and/or units were not included in the computation of diluted net loss per share at April 30, 2020 and 2019, because their inclusion would have been anti-dilutive. The number of stock awards and/or units outstanding, which met this anti-dilutive criterion for the three months ended April 30, 2020 and 2019, was 75,000 and 180,000, respectively.

Note 10. Stock-Based Compensation

Stock Incentive Plan

The Company's two stock plans are the 2019 Employee Stock Incentive Plan (the “2019 Plan”) and the 2011 Employee Incentive Stock Plan (the “2011 Plan”).

Under the 2019 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards. Restricted stock units and awards granted under the 2019 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock units or awards and related compensation expense as the difference between the market value of the units or awards on the date of grant less the exercise price of the units or awards granted. During the three-month periods ended April 30, 2020, the Company granted 0 awards, vested 0 shares according to their terms and forfeited 0 shares under the 2019 Plan. As of April 30, 2020, there were approximately 772,000 shares available for future issuance under the 2019 Plan.

Under the 2011 Plan, the Company may grant an aggregate of 2,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards. Restricted stock units and awards granted under the 2011 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock units or awards and related compensation expense as the difference between the market value of the units or awards on the date of grant less the exercise price of the units or awards granted. During the three-month periods ended April 30, 2020, the Company granted 0 restricted awards to non-employee directors and 0 units to its employees; vested 0 stock awards and 0 units according to their terms and forfeited 0 stock units under the 2011 Plan. As of April 30, 2020, there were approximately 32,892 shares available for future issuance under the 2011 Plan.

During the three months ended April 30, 2020, stock-based compensation expense related to restricted stock units and awards recognized in cost of goods sold and selling, general and administrative expenses was $63,000 and 191,000, respectively. During the three months ended April 30, 2019, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $59,000 and 127,000, respectively.

As of April 30, 2020, there was $2,435,000 of unrecognized compensation expense related to unvested restricted stock units and/or awards, which is expected to be recognized over a weighted average period of approximately 2 years.

Note 11. Retirement Plans

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The Company and its subsidiaries cover certain employees under a noncontributory defined benefit retirement plan, entitled the Virco Employees’ Retirement Plan (the “Pension Plan”). As more fully described in the Form 10-K, benefit accruals under the Employees Retirement Plan were frozen effective December 31, 2003. There is no service cost incurred under this plan.

The Company also provides a supplementary retirement plan for certain key employees, the VIP Retirement Plan (the “VIP Plan”). As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2019, benefit accruals under this plan were frozen since December 31, 2003. There is no service cost incurred under this plan.

The net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2020 and 2019 were as follows:

	Combined Employee Retirement Plans
	Three Months Ended
	4/30/2020			4/30/2019
	(in thousands)
Service cost	$	—		$	—
Interest cost	301			355
Expected return on plan assets	(224		)	(343		)
Plan settlement	—			—
Amortization of prior service cost	—			—
Recognized net actuarial loss	465			176
Benefit cost	$	542		$	188

401(k) Retirement Plan

The Company’s retirement plan, which covers all U.S. employees, allows participants to defer from 1% to 75% of their eligible compensation through a 401(k)-retirement program. The plan includes Virco stock as one of the investment options. At April 30, 2020 and 2019, the plan held 763,586 shares and 673,964 shares of Virco stock, respectively. For the three months ended April 30, 2020 and 2019, the compensation costs incurred for employer match was $210,000 and $187,000, respectively.

Note 12. Warranty Accrual

The Company provides an assurance type warranty against all substantial defects in material and workmanship. The standard warranty offered on products sold after January 1, 2017 was modified to provide specific warranty periods by product component, with no warranty period longer than ten years. The Company’s warranty is not a guarantee of service life, which depends upon events outside the Company’s control and may be different from the warranty period. The Company accrues an estimate of its exposure to warranty claims based upon both product sales data and an analysis of actual warranty claims incurred.

The following is a summary of the Company’s warranty-claim activity for the three months ended April 30, 2020 and 2019:

	Three Months Ended
	4/30/2020			4/30/2019
	(in thousands)
Beginning balance	$	800		$	700
Provision	60			71
Costs incurred	(60		)	(71		)
Ending balance	$	800		$	700

Note 13. Contingencies

The Company has a self-insured retention for product and general liability losses up to $250,000 per occurrence, workers’ compensation liability losses up to $250,000 per occurrence and for automobile liability losses up to $50,000 per occurrence. The Company has purchased insurance to cover losses in excess of the retention up to a limit of $30,000,000. The Company

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has obtained an actuarial estimate of its total expected future losses for liability claims and recorded a liability equal to the net present value.

The Company and its subsidiaries are defendants in various legal proceedings resulting from operations in the normal course of business. It is the opinion of management, in consultation with legal counsel, that the ultimate outcome of all such matters will not materially affect the Company’s financial position, results of operations or cash flows.

Note 14. Delivery Costs

For the quarter ended April 30, 2020 and 2019, shipping and classroom delivery costs of approximately $2,078,000 and $2,761,000, respectively, were included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Note 15. COVID-19

On March 11, 2020, the World Health Organization declared the current coronavirus (COVID-19) outbreak to be a global pandemic.  In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restriction on social and commercial activity to promote social distancing in an effort to slow the spread of the illness.  The Company has been operating its manufacturing and distribution facilities on a voluntary basis to give employees the flexibility to remain at home with children who are out of school or for other personal reasons as they deem necessary.  Office employees and others who can work from home continue to do so.  Appropriate measures are being taken to protect the health of employees performing essential on-site operations.

The Company’s Conway, Arkansas facilities, which represent approximately two thirds of the Company’s production and distribution capacity, has been fully operational for this period of time.  In accordance with State of California and local orders that include guidance on the definition and responsibilities of “essential businesses,” the Company has been operating its Torrance facility.  During May, the Company closed its Torrance facility for several days before and after Memorial Day to perform comprehensive cleaning of production and office areas.  Management estimates that the Torrance facility is currently staffed at approximately 50% of its normal level.

The impacts of COVID-19 are expected to continue to be a challenge for the foreseeable future. The Company believes the economy will be adversely impacted for an indeterminate period, including the demand for our products. Consequently, the Company believes that it may report lower sales and earnings than would otherwise have been expected for the remainder of fiscal year 2021.  The extent of the impact will depend on numerous factors that are unknown, uncertain and cannot be predicted.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Three Months Ended April 30, 2020

Results of operations for the three months ended April 30, 2020 have been significantly impacted by economic conditions driven by the COVID-19 epidemic. The majority of our primary customers, the K-12 public school systems, closed school campuses and initiated remote learning on or about March 15, 2020. Subsequent to that date there have been significant impacts on the Companies business operations. Selling activities have been significantly impacted. Our direct sales force, one of the Companies distinct competitive advantages, have been unable to make in person sales calls and has been required to call on customers using telephonic or other electronic methods. Our primary customers, educators and district business officials are typically working remotely. Orders of furniture were impacted, but the severity of the impact varied by funding source. Transactional orders, which are typically smaller, sometimes made through internet and other resellers, and are frequently for more immediate delivery, fell sharply. Project orders; typically larger, frequently requiring project management and full-service, characterized by a longer selling process - typically months in advance of the order - remained strong. Funding sources for project orders are frequently bond funded, precluding funding from being diverted to alternative expenditures. Delivery of furniture to customers has been adversely impacted. Customers deferred deliveries of furniture during the initial school closures. This caused a reduction in first quarter shipments, but because orders were stable, our backlog of orders at April 30, 2020 was approximately $8,324,000 greater than the prior year.

The current condition of the K-12 education market is one of significant disruption. The vast majority of schools closed on or about March 15, 2020. The vast majority of schools are remaining closed for the balance of the school year, with the current academic year being completed remotely. Public schools are expected to begin the next school year under normal or slightly accelerated schedules, but the balance of on-site versus remote learning has not been determined. The Company’s business has been intensely seasonal, but the seasonal curve has been extremely stable for many years. The current COVID-19 affected conditions are having an impact on the seasonal nature of our business, and also on the competitive landscape of suppliers of furniture for schools. The Company is operating both manufacturing and distribution facilities, utilizing all reasonable methods to protect the health of our employees. Activity levels in the facilities has been moderated to reflect the level of business activity. At this time, the Company has not incurred significant disruptions in its supply chain that had a material impact on operations. The Company believes that some competitors may fail to successfully deliver furniture to customers this summer. Resellers of furniture may be less likely to commit to large inventories of unsold furniture sourced from China. The China supply chain is more challenged than in prior years, both by these uncertain times as well as the impact of tariffs imposed in recent years. Management believes that while the market for school furniture may decline in the fiscal year ending January 31, 2021, there are meaningful opportunities to take market share without having to do so through pricing tactics.

For the three months ended April 30, 2020, the Company incurred a pre-tax loss of $7,973,000 on net sales of $17,599,000 compared to a pre-tax loss of $4,485,000 on net sales of $26,893,000 in the same period in 2019. Net sales for the three months ended April 30, 2020 decreased by $9,294,000, a 34.6% decrease, compared to the same period last year. Net sales decreased largely due to the impact of COVID-19 as described above. The decrease in sales was substantially all volume related with the volume decline very slightly offset by an increase in selling prices.

Order rates for the first quarter decreased by approximately 2.1% compared to the prior year period. Because orders declined slightly while deliveries were delayed due to COVID-19, order backlog at April 30, 2020 increased by approximately 21.2%. Backlog at April 30, 2020 was $47,578,000 compared to $39,254,000 at April 30, 2019.

Gross margin for the three months ended April 30, 2020 decreased as a percentage of sales to 27.9% in the current quarter compared to 33.8% in the prior quarter. Last year the Company reduced the level of standard product produced to inventory for summer delivery and prioritized product targeted to specific customer project orders. This tactic enabled the Company to achieve improved levels of on-time delivery and customer satisfaction during the summer in the prior year. For the current year, the Company is more aggressively pursuing the same tactic. Production and the related investment in inventory were delayed to receipt of specific orders, and production of standard product, which more often supplies transactional orders, was reduced. Our production strategy combined with a cautious approach to building inventory in this current economic environment caused factory production levels to decline by approximately 20% for the first quarter of fiscal 2021 compared to the prior year. The reduced production levels adversely impacted factory efficiency.

Selling, general and administrative expenses decreased by approximately $750,000 compared to the prior year but increased as a percentage of sales. The decrease in spending is attributable to variable selling and service costs.

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Interest expense decreased for the quarter ended April 30, 2020 compared to the same period last year. The Company has borrowed less money to finance accounts receivable and production of inventory in anticipation of increased summer shipping activity.

Income tax benefit for the quarter ended April 30, 2020 increased compared to the prior year. The effective tax rate for the first quarter of 2021 was 41.1% compared to 31.6% for the same period last year.

Liquidity and Capital Resources

The impact of COVID-19 on liquidity has been to moderate the seasonal increase in accounts receivable and production of inventory for summer delivery. Both the increase in accounts receivable and inventory are traditionally financed through the Company’s line of credit with PNC Bank. Reductions in receivables and inventory were substantially offset by a reduction in borrowing under the line. Net cash used in operating activities for the three months ended April 30, 2020 was $9,887,000 compared to $18,286,000 for the same period last year. The reduction was attributable to reduced inventory and accounts receivable in addition to an increase in accounts payable

Accounts receivable were lower at April 30, 2020 than at April 30, 2019 due to decreased sales during the quarter. Due to the seasonal nature of our business, the Company traditionally builds large quantities of inventory during the first quarter of each fiscal year in anticipation of seasonally high summer shipments. During the first quarter ended April 30, 2020, the Company increased inventory by approximately $14.9 million compared to January 31, 2020, approximately $1.4 million less than what was added in the first quarter of the prior year. Because the Company started the year with less inventory, and produced less, inventory levels at April 30, 2020 were approximately $5.3 million less than at the same date last year. The increase in inventory during the first quarter of this year was financed through the Company's credit facility with PNC Bank, National Association ("PNC").

Borrowing under the Company's revolving line of credit with PNC at April 30, 2020 is approximately $13.6 million lower compared to the same quarter last year. The decrease in borrowing is primarily attributable to decreased accounts receivable and decreased levels of inventory. Accrual basis capital expenditures were $922,000 for the three months ended April 30, 2020 compared to $884,000 for the same period last year.  Capital expenditures are being financed through the Company's credit facility with PNC.

The Company believes that cash flows from operations, together with the Company's unused borrowing capacity under its revolving line of credit with PNC will be sufficient to fund the Company's debt service requirements, capital expenditures and working capital needs for at least the next twelve months and that it will be in compliance with debt covenants during that same period. However, we are not able to estimate the full impact of the COVID-19 outbreak on our financial condition and results of operations given the inherent uncertainty as to when the COVID-19 pandemic will end, and businesses and schools will begin operations. Approximately $12,343,000 was available for borrowing as of April 30, 2020.

Off Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

The Company's critical accounting policies are outlined in its Annual Report on Form 10-K for the fiscal year ended January 31, 2020.  There have been no significant changes in the quarter ended April 30, 2020. New Accounting Pronouncements in the Notes to unaudited Condensed Consolidated Financial Statements in Item 1 to this Quarterly Report on Form 10-Q.

Forward-Looking Statements

From time to time, including in this Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2020, the Company or its representatives have made and may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in, without limitation, reports to stockholders, press releases, oral statements made with the approval of an authorized executive officer of the Company and filings with the Securities and Exchange Commission ("SEC"). The words or phrases “anticipates,” “expects,” “will continue,” “believes,” “estimates,” “projects,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The results contemplated by the Company's forward-looking statements are subject to certain risks and uncertainties that could cause actual results to vary materially from anticipated results, including without limitation, availability of funding for educational institutions, availability and cost of materials, especially steel, availability and cost of labor, demand for the Company's products, competitive conditions affecting selling prices and margins, capital costs and general economic

19

conditions. Such risks and uncertainties are discussed in more detail in the Company's Form 10-K for the fiscal year ended January 31, 2020 under the caption "Risk Factors".

The Company's forward-looking statements represent its judgment only on the dates such statements were made. By making any forward-looking statements, the Company assumes no duty to update them to reflect new, changed or unanticipated events or circumstances.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act as of our second quarter of fiscal 2020 and are not required to provide the information under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its Principal Executive Officer along with its Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of April 30, 2020. Based upon the foregoing, the Company's Principal Executive Officer along with the Company's Principal Financial Officer concluded that the Company's disclosure controls and procedures as of such date were effective to ensure that the information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Company management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, Company management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its Principal Executive Officer along with its Principal Financial Officer, of the effectiveness of the design and operation of disclosure controls and procedures. Based upon the foregoing, the Company's Principal Executive Officer along with the Company's Principal Financial Officer concluded that the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

There have been no changes in the Company's internal control over financial reporting during the fiscal quarter covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

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PART II — Other Information

Virco Mfg. Corporation

Item 1. Legal Proceedings

The Company is a party to various legal actions arising in the ordinary course of business which, in the opinion of the Company, are not material in that management either expects that the Company will be successful on the merits of the pending cases or that any liabilities resulting from such cases will be substantially covered by insurance. While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to these actions, management believes that the aggregate amount of such liabilities will not be material to the results of operations, financial position, or cash flows of the Company.

Item 1A. Risk Factors

You should carefully consider and evaluate the information in this Quarterly Report and the risk factors set forth under the caption “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020 (the “Form 10-K”), which was filed with the SEC on April 30, 2020. The risk factors associated with our business have not materially changed compared to the risk factors disclosed in the Form 10-K.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On June 9, 2020, the Board of Directors of the Company approved and adopted amendments to the Company’s Bylaws to help facilitate the conduct of a virtual annual meeting of stockholders in 2020 as a result of the COVID-19 pandemic. The Bylaws, as amended and restated, clarify that stockholder meetings may be held by means of remote communications.  The Third Amended and Restated Bylaws provide, among other things:

• that stockholder meetings may be held solely by means of remote communications;

• that the presence of a stockholder “in person” at a stockholder meeting includes presence by remote communication, if applicable; and

• that the list of stockholders entitled to vote at a stockholder meeting may also be provided on a reasonably accessible electronic network.

This description of the amendments to the Bylaws is not complete and is qualified in its entirety by reference to the text of the Third Amended and Restated Bylaws, a copy of which is filed as Exhibit 3.3 to this Quarterly Report on Form 10-Q and incorporated by reference herein.

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Item 6. Exhibits

Exhibit Number	Document
3.3	Third Amended and Restated Bylaws of the Company dated June 9, 2020.
31.1	Certification of Robert A. Virtue, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Robert E. Dose, Vice President, Finance, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101.INS — XBRL Instance Document.

Exhibit 101.SCH — XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.LAB — XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VIRCO MFG. CORPORATION
Date: June 12, 2020	By:	/s/ Robert E. Dose
		Robert E. Dose
		Vice President — Finance
		(Principal Financial Officer)

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EX-3.3

Exhibit 3.3

VIRCO MFG. CORPORATION

THIRD AMENDED AND RESTATED BYLAWS

(as amended and restated through June 9, 2020)

Article I - STOCKHOLDERS

Section 1.01Annual Meeting.

(a)    An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within 13 months of the last annual meeting of stockholders. The Board of Directors may, in its sole discretion, determine that any annual or special meeting of stockholders shall not be held at any place, but may instead be held by means of remote communication in a manner authorized by law.

(b)    To be properly brought before an annual meeting of stockholders, nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders at an annual meeting of stockholders must be either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the annual meeting by or at the direction of the President, the Chairman of the Board of Directors or by vote of a majority of the full Board of Directors, or (iii) otherwise brought before the annual meeting by any stockholder of the Corporation who is a stockholder of record on the date of the giving of the notice provided for in the following paragraph (c), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 1.01.

(c)    For nominations or other business to be properly brought before an annual meeting by a stockholder under this Section 1.01, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such business must be a proper subject for stockholder action under the Delaware General Corporation Law (“DGCL”). To be timely, a stockholder’s notice must be delivered to the Secretary at the principal executive offices of the Corporation not less than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is advanced by more than 40 days or delayed by more than 40 days from such anniversary date, then notice by the stockholder to be timely must be delivered not later than the close of business on the later of the 120th day prior to the annual meeting or the 10th day following the day on which the date of the meeting is publicly announced. Such stockholder’s notice must set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owners, if any, on whose behalf the nomination or proposal is made, (A) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (B) the number of shares of the Corporation which are owned (beneficially or of record) by such stockholder and such beneficial owner, (C) a description of all arrangements or understandings between such stockholder and such beneficial owner and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder and of such beneficial owner in such business, and (D) a representation that such stockholder or its agent or designee intends to appear in person (including by remote communication, if applicable) or by proxy at the annual meeting to bring such business before the meeting.

(d)    Notwithstanding anything in this Section 1.01 to the contrary, if the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement specifying the size of the increased Board of Directors made by the Corporation at least 120 days prior to the first anniversary of the preceding year’s annual meeting, then a stockholder’s notice required by this Section 1.01 will also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

(e)    Only such business may be conducted at a special meeting of stockholders as has been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who is a stockholder of record at the time of giving the notice required by this Section 1.01, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.01. Nominations by stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder’s notice required by this Section 1.01 is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 120th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.

(f)    Only those persons who are nominated in accordance with the procedures set forth in this Section 1.01 will be eligible for election as directors at any meeting of stockholders. Only business brought before the meeting in accordance with the procedures set forth in this Section 1.01 may be conducted at a meeting of stockholders. The chairman of the meeting has the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 1.01 and, if any proposed nomination or business is not in compliance with this Section 1.01, to declare that such defective proposal shall be disregarded.

(g)    For purposes of this Section 1.01, “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act.

(h)    Notwithstanding the foregoing provisions of this Section 1.01, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.01. Nothing in this Section 1.01 shall be deemed to remove any obligation of stockholders to comply with the requirements of Rule 14a-8 under the Exchange Act with respect to proposals requested to be included in the Corporation’s proxy statement pursuant to said Rule 14a-8.

Section 1.02Special Meetings.

(a)    Special meetings of the stockholders, other than those required by statute, may be called at any time as set forth in the Certificate of Incorporation of the Corporation.

(b)    Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of record of the Corporation who is a stockholder of record at the time of giving of notice provided for in this paragraph, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in Section 1.01. Nominations by stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder’s notice required by paragraph (c) of Section 1.01 shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 120th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.

(c)    Notwithstanding the foregoing provisions of this Section 1.02, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 1.02. Nothing in this Section 1.02 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 1.03Notice of Meetings. Notice of the place, if any, date, and time of all meetings of the stockholders, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given, not less than 10 nor more than 60 days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the DGCL or the Certificate of Incorporation of the Corporation). When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken;

provided, however, that if the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, notice of the place, if any, date, and time of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

Section 1.04Quorum. At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person (including by remote communication, if applicable) or represented by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. Where a separate vote by a class or classes or series is required, a majority of the shares of such class or classes or series present in person (including by remote communication, if applicable) or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter. If a quorum shall fail to attend any meeting, the chairman of the meeting may adjourn the meeting to another place, if any, date, or time.

Section 1.05Organization. Such person as the Board of Directors may have designated or, in the absence of such a person, the Chairman of the Board or, in his or her absence, the President of the Corporation or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person (including by remote communication, if applicable) or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the Corporation, the secretary of the meeting shall be such person as the chairman of the meeting appoints.

Section 1.06Conduct of Business. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her in order. The chairman shall have the power to adjourn the meeting to another place, if any, date and time. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.

Section 1.07Proxies and Voting. At any meeting of the stockholders, every stockholder entitled to vote may vote in person (including by remote communication, if applicable) or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

The Corporation may, and to the extent required by law, shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. Every vote taken by ballots shall be counted by a duly appointed inspector or inspectors.

All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast affirmatively or negatively.

Section 1.08Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any such stockholder for a period of at least 10 days prior to the meeting in the manner provided by law.

The stock list shall also be open to the examination of any stockholder during the whole time of the meeting as provided by law. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. If the meeting is to be held solely by means of remote communication, then such list shall be open to the inspection of any stockholder during the whole time of the meeting on a reasonably accessible electronic network.

Article II - BOARD OF DIRECTORS

Section 2.01Number of Directors. The authorized number of directors of the Corporation shall be five, and such authorized number shall not be changed except by a Bylaw or amendment thereof duly adopted by the stockholders in accordance with the Certificate of Incorporation or by a majority of the Whole Board amending this Section 2.01. For purposes of these Bylaws, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.

Section 2.02Newly Created Directorships and Vacancies. Subject to the rights of the holders of any series of preferred stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise required by law or by resolution of the Board of Directors, be filled only by a majority vote of the directors then in office, though less than a quorum (and not by stockholders), and directors so chosen shall serve for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires or until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors shall shorten the term of any incumbent director.

Section 2.03Regular Meetings. Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required.

Section 2.04Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or by a majority of the Whole Board and shall be held at such place, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given to each director by whom it is not waived by mailing written notice not less than two days before the meeting or by telephone or by telegraphing or telexing or by facsimile or electronic transmission of the same not less than 24 hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.

The Board of Directors may postpone or reschedule any previously scheduled special meeting.

Section 2.05Quorum. At any meeting of the Board of Directors, a majority of the total number of the Whole Board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.

Section 2.06Participation in Meetings By Conference Telephone. Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board of Directors or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.

Section 2.07Conduct of Business. At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board of Directors may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. Action may be taken by the Board of Directors without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 2.08Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of the directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or paid a stated salary or paid other compensation as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed compensation for attending committee meetings.

Article III - COMMITTEES

Section 3.01Committees of the Board of Directors. The Board of Directors may from time to time designate committees of the Board of Directors, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board of Directors and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee.

In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

Section 3.02Conduct of Business. Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law.

Adequate provision shall be made for notice to members of all meetings; one-third of the members shall constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Article IV - OFFICERS

Section 4.01Generally. The officers of the Corporation shall consist of a Chairman of the Board, a President, one or more Vice Presidents, a Secretary, a Treasurer and such other officers as may from time to time be appointed by the Board of Directors. Officers shall be elected annually by the Board of Directors. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. The salaries of officers elected by the Board of Directors shall be fixed from time to time by the Board of Directors or by such officers as may be designated by resolution of the Board of Directors.

Section 4.02Chairman of the Board. The Chairman of the Board shall be the chief executive officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, he or she shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of chief executive or which are delegated to him or her by the Board of Directors. He or she shall have power to sign all stock certificates, contracts and other instruments of the Corporation that are authorized and shall have general supervision and direction of all of the other officers, employees and agents of the Corporation.

Section 4.03President. The President shall be the chief operating officer of the Corporation. He or she shall have general responsibility for the management and control of the operations of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of chief operating officer or which are delegated to him or her by the Board of Directors. Subject to the direction of the Board of Directors and the Chairman of the Board, the President shall have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision of all of the other officers (other than the Chairman of the Board or any Vice Chairman), employees and agents of the Corporation.

Section 4.04Vice President. Each Vice President shall have such powers and duties as may be delegated to him or her by the Board of Directors. One Vice President shall be designated by the Board of Directors to perform the duties and exercise the powers of the President in the event of the President’s absence or disability.

Section 4.05Treasurer and Chief Financial Officer. The Treasurer shall be the Chief Financial Officer of the Corporation and shall have the responsibility for maintaining the financial records of the Corporation. He or she shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions and of the financial condition of the Corporation. The Treasurer shall also perform such other duties as the Board of Directors may from time to time prescribe.

Section 4.06Secretary. The Secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board of Directors. He or she shall have charge of the corporate books and shall perform such other duties as the Board of Directors may from time to time prescribe.

Section 4.07Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.

Section 4.08Removal. Any officer of the Corporation may be removed at any time, with or without cause, by the Board of Directors.

Section 4.09Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the President or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person (including by remote communication, if applicable) or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other Corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other Corporation.

Article V - STOCK

Section 5.01Certificates of Stock. The shares of stock of the Corporation shall be represented by certificates, uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock, or a combination of both. To the extent that shares are represented by certificates, such certificates whenever authorized by the Board of Directors, shall be in such form as shall be approved by the Board of Directors. The certificates representing shares of stock of each class shall be signed by, or in the name of, the Corporation by the President or a Vice-President, and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation, and sealed with the seal of the Corporation, which may be a facsimile thereof. Any or all such signatures may be by facsimile.

Section 5.02Transfers of Stock. Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 5.04, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.

Section 5.03Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may, except as otherwise required by law, fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than 60 nor less than 10 days before the date of any meeting of stockholders, nor more than 60 days prior to the time for such other action as hereinbefore described; provided, however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 5.04Lost, Stolen or Destroyed Certificates. In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.

Section 5.05Regulations. The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.

Article VI - NOTICES

Section 6.01Notices. If mailed, notice to stockholders shall be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.

Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the DGCL.

Section 6.02Waivers. A written waiver of any notice, signed by a stockholder or director, or waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be

deemed equivalent to the notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance at any meeting shall constitute waiver of notice except attendance for the sole purpose of objecting to the timeliness of notice.

Article VII - MISCELLANEOUS

Section 7.01Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

Section 7.02Corporate Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.

Section 7.03Reliance upon Books, Reports and Records. Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

Section 7.04Fiscal Year. The fiscal year of the Corporation shall be as fixed by the Board of Directors.

Section 7.05Time Periods. In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

Article VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 8.01Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer or trustee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or trustee or in any other capacity while serving as a director, officer or trustee, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in Section 8.03 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

Section 8.02Right to Advancement of Expenses. In addition to the right to indemnification conferred in Section 8.01, an indemnitee shall also have the right to be paid by the Corporation the expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the DGCL requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section 8.02 or otherwise.

Section 8.03Right of Indemnitee to Bring Suit. If a claim under Section 8.01 or 8.02 is not paid in full by the Corporation within 60 days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (a) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VIII or otherwise shall be on the Corporation.

Section 8.04Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Article VIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation’s Certificate of Incorporation, Bylaws, agreement, vote of stockholders or directors or otherwise.

Section 8.05Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Section 8.06Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VIII with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

Section 8.07Nature of Rights. The rights conferred upon indemnitees in this Article VIII shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the indemnitee’s heirs, executors and administrators. Any amendment, alteration or repeal of this Article VIII that adversely affects any right of an indemnitee or its successors shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.

Article IX - AMENDMENTS

In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized to adopt, amend and repeal these Bylaws subject to the power of the holders of capital stock of the Corporation to adopt, amend or repeal the Bylaws; provided, however, that, with respect to the power of holders of capital stock to adopt, amend and repeal Bylaws of the Corporation, notwithstanding any other provision of these Bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock of the Corporation required by law, these Bylaws or any preferred stock, the affirmative vote of the holders of at least 75% of the voting power of all of the then-outstanding shares entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of these Bylaws.

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Robert A. Virtue, certify that:

1. I have reviewed this Form 10-Q of Virco Mfg. Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Robert A. Virtue
	Robert A. Virtue
Date: June 12, 2020	Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Robert E. Dose, certify that:

1. I have reviewed this Form 10-Q of Virco Mfg. Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Robert E. Dose
	Robert E. Dose
Date: June 12, 2020	Vice President — Finance, Secretary and Treasurer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of Virco Mfg. Corporation (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his own knowledge:

• The Quarterly Report of the Company on Form 10-Q for the period ended April 30, 2020, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

• The information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: June 12, 2020

/s/ Robert A. Virtue

Robert A. Virtue

Chief Executive Officer and Chairman of the Board

(Principal Executive Officer)

/s/ Robert E. Dose

Robert E. Dose

Vice President — Finance, Secretary and Treasurer

(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to Virco Mfg. Corporation and will be retained by Virco Mfg. Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

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Retirement Plans (Tables)

3 Months Ended

Apr. 30, 2020

Retirement Benefits [Abstract]

Schedule of Defined Benefit Plans Disclosures

The net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2020 and 2019 were as follows:

	Combined Employee Retirement Plans
	Three Months Ended
	4/30/2020			4/30/2019
	(in thousands)
Service cost	$	—		$	—
Interest cost	301			355
Expected return on plan assets	(224		)	(343		)
Plan settlement	—			—
Amortization of prior service cost	—			—
Recognized net actuarial loss	465			176
Benefit cost	$	542		$	188

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Inventories (Tables)

3 Months Ended

Apr. 30, 2020

Inventory Disclosure [Abstract]

Schedule of Inventory

The following table presents a breakdown of the Company’s inventories as of April 30, 2020, January 31, 2020 and April 30, 2019:

	4/30/2020		1/31/2020		4/30/2019
	(in thousands)
Finished goods	$	27,348	$	15,401	$	26,546
WIP	19,159		15,957		24,009
Raw materials	11,683		11,971		12,956
Total inventories	$	58,190	$	43,329	$	63,511

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Warranty Accrual

3 Months Ended

Apr. 30, 2020

Product Warranties Disclosures [Abstract]

Warranty Accrual

Warranty Accrual

The Company provides an assurance type warranty against all substantial defects in material and workmanship. The standard warranty offered on products sold after January 1, 2017 was modified to provide specific warranty periods by product component, with no warranty period longer than ten years. The Company’s warranty is not a guarantee of service life, which depends upon events outside the Company’s control and may be different from the warranty period. The Company accrues an estimate of its exposure to warranty claims based upon both product sales data and an analysis of actual warranty claims incurred.

The following is a summary of the Company’s warranty-claim activity for the three months ended April 30, 2020 and 2019:

	Three Months Ended
	4/30/2020			4/30/2019
	(in thousands)
Beginning balance	$	800		$	700
Provision	60			71
Costs incurred	(60		)	(71		)
Ending balance	$	800		$	700

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Stock-Based Compensation (Details) - USD ($)	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Cost of Goods Sold [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 63,000	$ 59,000
Selling, General and Administrative Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	191,000	$ 127,000
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 2,435,000
Unrecognized compensation expense, weighted average period to be recognized	2 years
Restricted Stock Units (RSUs) [Member] | 2019 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards authorized (shares)	1,000,000
Granted in the period (shares)	0
Vested in period (shares)	0
Forfeited in period (shares)	0
Awards available for future issuance (shares)	772,000
Restricted Stock Units (RSUs) [Member] | 2011 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards authorized (shares)	2,000,000
Granted in the period (shares)	0
Vested in period (shares)	0
Forfeited in period (shares)	0
Awards available for future issuance (shares)	32,892
Director [Member] | Restricted Stock Awards [Member] | 2011 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted in the period (shares)	0
Vested in period (shares)	0

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Contingencies (Details) - Maximum [Member]	Apr. 30, 2020 USD ($)
Loss Liability [Member]
Loss Contingencies [Line Items]
Self insurance retention	$ 30,000,000
Automobile Liability Loss [Member]
Loss Contingencies [Line Items]
Self insurance retention	50,000
Workers compensation Liability Insurance [Member]
Loss Contingencies [Line Items]
Self insurance retention	250,000
Product and General Liability Insurance [Member]
Loss Contingencies [Line Items]
Self insurance retention	$ 250,000

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Warranty Accrual (Tables)

3 Months Ended

Apr. 30, 2020

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability

The following is a summary of the Company’s warranty-claim activity for the three months ended April 30, 2020 and 2019:

	Three Months Ended
	4/30/2020			4/30/2019
	(in thousands)
Beginning balance	$	800		$	700
Provision	60			71
Costs incurred	(60		)	(71		)
Ending balance	$	800		$	700

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Leases - ASC 842 Quantitative Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Lessee, Lease, Description [Line Items]
Operating lease cost	$ 1,440	$ 1,380
Short-term lease cost	36	54
Short-term sublease income	(10)	(10)
Variable lease cost	455	448
Total lease cost	1,921	1,872
Cash paid for amounts included in the measurement of lease liabilities	662	1,291
Right-of-use assets obtained in exchange for new lease liabilities	$ 270	$ 394
Weighted-average remaining lease term (years)	4 years 8 months 23 days	5 years 8 months 13 days
Weighted-average discount rate	6.40%	6.40%
Immaterial Correction to Variable Lease Cost [Member]
Lessee, Lease, Description [Line Items]
Variable lease cost		$ 448

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Income Taxes (Details) - USD ($) $ in Thousands		2 Months Ended
	Mar. 27, 2020	Mar. 26, 2020	Apr. 30, 2020	Jan. 31, 2020	Apr. 30, 2019
Income Tax Disclosure [Abstract]
Valuation allowance			$ 1,075	$ 1,183	$ 1,907
Limitation for business interest expense deduction as a percentage of adjusted taxable income	50.00%	30.00%
Income tax benefit from the CARES Act	$ 200

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Condensed Consolidated Statements of Cash Flows Unaudited - USD ($) $ in Thousands	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Operating activities
Net income (loss)	$ (4,698)	$ (3,067)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,393	1,452
Non-cash lease expense	778	89
Provision for doubtful accounts	15	15
Loss (gain) on sale of property, plant and equipment	0	0
Deferred income taxes	(3,251)	(1,488)
Stock-based compensation	254	186
Defined pension plan settlement	0	0
Amortization of net actuarial loss for pension plans	345	130
Changes in operating assets and liabilities:
Trade accounts receivable	4,183	863
Other receivables	0	(24)
Inventories	(14,861)	(16,222)
Income taxes	(167)	(77)
Prepaid expenses and other current assets	(546)	(709)
Accounts payable and accrued liabilities	6,668	566
Net cash used in operating activities	(9,887)	(18,286)
Investing activities:
Capital expenditures	(488)	(1,219)
Proceeds from sale of property, plant and equipment	0	0
Net cash used in investing activities	(488)	(1,219)
Financing activities:
Borrowing from long-term debt	11,413	19,564
Repayment of long-term debt	(1,861)	(244)
Payment on deferred financing costs	0	0
Tax withholding payments on share-based compensation	0	0
Cash dividends paid	0	0
Net cash provided by financing activities	9,552	19,320
Net decrease in cash	(823)	(185)
Cash at beginning of year	1,150	738
Cash at end of year	$ 327	$ 553

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Income Taxes

3 Months Ended

Apr. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company recognizes deferred income taxes under the asset and liability method of accounting for income taxes in accordance with the provisions of ASC No. 740, Accounting for Income Taxes. Deferred income taxes are recognized for differences between the financial statement and tax basis of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, the Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible.  The Company maintains a partial valuation allowance of $1,075,000, $1,183,000 and $1,907,000 as of April 30, 2020, January 31, 2020 and April 30, 2019 to reduce against certain state deferred tax assets that the Company does not believe it is more-likely-than-not to realize.

On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act modified the limitation for business interest expense deduction and the new limitation has increased from30 to 50 percentof adjusted taxable income. Historically deferred taxes related to interest expense limitation were fully offset by a valuation allowance. The Company performed an analysis of the impact of the CARES Act and calculated a tax benefit of approximately

$200,000 which was driven by the release of the valuation allowance related to the business interest limitation.

The January 31, 2016 and subsequent years remain open for examination by the IRS and state tax authorities. The Company is not currently under any state examination. The Company is currently under IRS examination for its fiscal year ended January 31, 2016 Federal tax return.

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Revenue Recognition

3 Months Ended

Apr. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

The Company manufactures, markets and distributes a wide variety of school and office furniture to wholesalers, distributors, educational institutions and governmental entities. Revenue is recorded for promised goods or services when control is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

The Company's sales generally involve a single performance obligation to deliver goods pursuant to customer purchase orders.  Prices for our products are based on published price lists and customer agreements. The Company has determined that the performance obligations are satisfied at a point in time when the Company completes delivery per the customer contract. The majority of sales are free on board ("FOB") destination where the destination is specified per the customer contract and may include delivering the furniture into the classroom, school site or warehouse. Sales of furniture that are sold FOB factory are typically made to resellers of our product who in turn provide logistics to the ultimate customer. Once a product has been delivered per the shipping terms, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset. The Company considers control to have transferred upon shipment or delivery in accordance with shipping terms because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.

Sales are recorded net of discounts, sales incentives and rebates, sales taxes and estimated returns and allowances. The Company offers sales incentives and discounts through various regional and national programs to our customers. These programs include product rebates, product returns allowances and trade promotions. Variable consideration for these programs is estimated in the transaction price at contract inception based on current sales levels and historical experience using the expected value method, subject to constraint.

The Company generates revenue primarily by manufacturing and distributing products through direct-to-customers and resellers. Control transfers to both resellers and direct customers at a point in time when the delivery process is complete as determined by the corresponding shipping terms. Therefore, we do not consider them to be meaningfully different revenue streams given similarities in the nature of the products, performance obligation and distribution processes. Sales are predominately in the United States and to a similar class of customer. We do not manage or evaluate the business based on product line or any other discernable category.

For product produced by and sourced from third parties, management has determined that it is the principal in all cases, since it (i) bears primary responsibility for fulfilling the promise to the customer; (ii) bears inventory risk before and/or after the good or service is transferred to the customer; and (iii) has discretion in establishing the price for the sale of good or service to the customer.

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Condensed Consolidated Statements of Comprehensive Income (Loss) Unaudited - USD ($) $ in Thousands	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (4,698)	$ (3,067)
Other comprehensive income:
Pension adjustments (net of tax expense of $120 and $46 at April 30, 2020 and 2019, respectively)	345	130
Comprehensive income (loss)	$ (4,353)	$ (2,937)

XML

Document and Entity Information - shares	3 Months Ended
	Apr. 30, 2020	Jun. 08, 2020
Document and Entity Information [Abstract]
Entity Registrant Name	VIRCO MFG CORPORATION
Entity Central Index Key	0000751365
Document Type	10-Q
Document Period End Date	Apr. 30, 2020
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--01-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		15,713,549
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Current Reporting Status	Yes

XML

Net Income (Loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Earnings Per Share [Abstract]
Net income (loss)	$ (4,698)	$ (3,067)
Weighted average shares outstanding (shares)	15,654,000	15,486,000
Net effect of dilutive share-based on the treasury stock method using average market price (shares)	0	0
Totals (shares)	15,654,000	15,486,000
Net income (loss) per share - basic (usd per share)	$ (0.30)	$ (0.20)
Net income (loss) per share - diluted (usd per share)	$ (0.30)	$ (0.20)
Antidilutive stock options (shares)	75,000	180,000

XML

Seasonality (Details)	3 Months Ended
	Apr. 30, 2020
Sales [Member]
Seasonality (Textual) [Abstract]
The market for educational furniture is marked by extreme seasonality	50.00%

XML

Leases - ASC 842 Minimum Lease Payments (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Jan. 31, 2020	Apr. 30, 2019
Leases [Abstract]
Remaining of 2021	$ 4,414
2022	5,708
2023	5,275
2024	5,214
2025	5,370
Thereafter	1,350
Remaining balance of lease payments	27,331
Short-term lease liabilities	4,527	$ 3,654	$ 2,939
Long-term lease liabilities	18,854	$ 19,787	$ 22,221
Total lease liabilities	23,381
Difference between undiscounted cash flows and discounted cash flows	$ 3,950

XML

Condensed Consolidated Statements of Income Unaudited - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Income Statement [Abstract]
Net sales	$ 17,599	$ 26,893
Costs of goods sold	12,695	17,809
Gross profit	4,904	9,084
Selling, general and administrative expenses	11,931	12,681
Gain on sale of property, plant & equipment	0	0
Operating loss	(7,027)	(3,597)
Pension expense	542	188
Interest expense	404	700
Income (loss) before income taxes	(7,973)	(4,485)
Income tax (benefit) expense	(3,275)	(1,418)
Net income (loss)	$ (4,698)	$ (3,067)
Net income (loss) per common share:
Basic (usd per share)	$ (0.30)	$ (0.20)
Diluted (usd per share)	$ (0.30)	$ (0.20)
Weighted average shares outstanding:
Basic (shares)	15,654	15,486
Diluted (shares)	15,654	15,486

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Debt

3 Months Ended

Apr. 30, 2020

Debt Disclosure [Abstract]

Debt

Debt

Outstanding balances for the Company’s long-term debt were as follows:

	4/30/2020		1/31/2020		4/30/2019
	(in thousands)
Revolving credit line	$	19,740	$	9,969	$	33,354
Other	6,508		6,727		7,380
Total debt	$	26,248	$	16,696	$	40,734
Less current portion	10,618		878		24,226
Non-current portion	$	15,630	$	15,818	$	16,508

The Company has a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”). The Credit Agreement has been amended twenty times since it’s origination in 2011 through fiscal 2019, which, among other things, extended the maturity date of the Credit Agreement for three years until March 19, 2023.

The Credit Agreement is an asset-based line of credit that is subject to a borrowing base limitation and generally provides for advances of up to 85% of eligible accounts receivable, plus a percentage equal to the lesser of 60% of the value of eligible inventory or 85% of the liquidation value of eligible inventory, plus $15,000,000 from January 1 through July of each year, minus undrawn amounts of letters of credit and reserves. The Credit Agreement is secured by substantially all of the Company's, as defined, personal property and certain of the Company's real property. The principal amount outstanding under the Credit Agreement and any accrued and unpaid interest is due no later than March 19, 2023, and the Credit Agreement is subject to certain prepayment penalties upon earlier termination of the Credit Agreement. Prior to the maturity date, principal amounts outstanding under the Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments and certain other conditions.

The Credit Agreement bears interest, at the Borrowers' option, at either the Alternate Base Rate (as defined in the Credit Agreement) or the Eurodollar Currency Rate (as defined in the Credit Agreement), in each case plus an applicable margin. The applicable margin for Alternate Base Rate loans is a percentage within a range of 0.75% to 1.25%, and the applicable margin for Eurodollar Currency Rate loans is a percentage within a range of 1.75% to 2.25%, in each case based on the EBITDA of the Borrower's at the end of each fiscal quarter and may be increased at PNC's option by 2.0% during the continuance of an event of default. Accrued interest with respect to principal amounts outstanding under the Credit Agreement is payable in arrears on a monthly basis for Alternative Base Rate loans, and at the end of the applicable interest period but at most every three months for Eurodollar Currency Rate loans. The interest rate at April 30, 2020 was 4.50%.

In March 2019, the Company entered into Amendment No. 19 which, among other things, (i) increased the Maximum Revolving Advance Amount to $65,000,000 with seasonal adjustments to the credit limit and subject to borrowing base limitations, (ii) increased seasonal advance to $15,000,000 from January to July of each year, (iii) increased equipment loan to $2,000,000, (iv) reduced borrowings under the line to less than or equal to $10,000,000 for a period of 30 consecutive days during the fourth quarter of each fiscal year. In April 2019, the Company entered into Amendment No. 20 which, among other things, waived the covenant violation for the fourth quarter of fiscal 2019, amended the minimum EBITDA covenant and the fixed charge coverage ratio for fiscal 2020, and eliminated the Company’s ability to pay dividends or repurchase stock during fiscal 2020. For fiscal year beginning February 1st, 2020, the covenant for the fixed charge coverage ratio is 1.10 to 1.00 for each consecutive four fiscal quarter period of Borrowers ending thereafter. The Company was in compliance with its financial covenants as of April 30, 2020.

To date the impact of COVID-19 on liquidity has been to moderate the seasonal increase in accounts receivable and production of inventory for summer delivery. Both the increase in accounts receivable and inventory are traditionally financed through the Company’s line of credit with PNC Bank. Reductions in receivables and inventory were substantially offset by a reduction in borrowing under the line with PNC Bank.

Events of default (subject to certain cure periods and other limitations) under the Credit Agreement include, but are not limited to, (i) non-payment of principal, interest or other amounts due under the Credit Agreement, (ii) the violation of terms, covenants, representations or warranties in the Credit Agreement or related loan documents, (iii) any event of default under agreements governing certain indebtedness of the Borrowers and certain defaults by the Borrowers under other agreements that would materially adversely affect the Borrowers, (iv) certain events of bankruptcy, insolvency or liquidation involving the Borrowers, (v) judgments or judicial actions against the Borrowers in excess of $250,000, subject to certain conditions, (vi) the failure of the Company to comply with Pension Benefit Plans (as defined in the Credit Agreement), (vii) the invalidity of loan documents pertaining to the Credit Agreement, (viii) a change of control of the Borrowers and (ix) the interruption of operations of any of the Borrowers' manufacturing facilities for five consecutive days during the peak season or 15 consecutive days during any other time, subject to certain conditions.

Pursuant to the Credit Agreement, substantially all of the Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Credit Agreement upon receipt by the Borrowers. Due to this automatic liquidating nature of the Credit Agreement, if the Borrowers breach any covenant, violate any representation or warranty or suffer a deterioration in their ability to borrow pursuant to the borrowing base calculation, the Borrowers may not have access to cash liquidity unless provided by PNC at its discretion. In addition, certain of the covenants and representations and warranties set forth in the Credit Agreement contain limited or no materiality thresholds, and many of the representations and warranties must be true and correct in all material respects upon each borrowing, which the Borrowers expect to occur on an ongoing basis. There can be no assurance that the Borrowers will be able to comply with all such covenants and be able to continue to make such representations and warranties on an ongoing basis.

The Company's line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. Approximately $12,343,000 was available for borrowing as of April 30, 2020.

Management believes that the carrying value of debt approximated fair value at April 30, 2020 and 2019, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

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Unaudited Consolidated Statements of Changes in Equity and Accumulated Other Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Statement of Stockholders' Equity [Abstract]
Pension adjustments, tax	$ 120	$ 46

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New Accounting Standards

3 Months Ended

Apr. 30, 2020

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

Recently Adopted Accounting Updates

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This update simplifies various aspects related to accounting for income taxes, removes certain exceptions to the general principles in ASC 740, and clarifies and amends existing guidance to improve consistent application.  The Company adopted this ASU as of February 1, 2020 and the adoption of this standard did not have a material effect on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which modifies the disclosure requirements of fair value measurements in Topic 820, Fair Value Measurement. For public companies the ASU removes disclosure requirements for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU modifies the disclosure requirements for investments in certain entities that calculate net asset value and clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. The ASU adds the disclosure requirement for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted this ASU as of February 1, 2020 and the adoption of this standard did not have a material effect on our condensed consolidated financial statements.

Recently Issued Accounting Updates

In August 2018, the FASB issued Accounting Standards Update No. 2018-14 (ASU 2018-14), Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. The Company is currently evaluating the effect the standard will have on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss impairment methodology for measuring and recognizing credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  The adoption date, as modified by the recently issued ASU 2019-10 discussed below, will be for the fiscal year ending after December 15, 2022 and interim periods therein. The Company is currently evaluating the effect the standard will have on the consolidated financial statements and related disclosures.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates.  ASU 2019-10 moves the effective date for certain previously issued amendments to later dates, depending on the filing status of the respective entity.  Specifically, due to the amendment and the Company’s status as a smaller reporting company, the new effective dates for relevant previously issued amendments not yet adopted by the Company relate to ASU 2016-13 as described above.

Other recently issued accounting updates are not expected to have a material impact on the Company’s consolidated financial statements.

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COVID-19

3 Months Ended

Apr. 30, 2020

Subsequent Events [Abstract]

COVID-19

COVID-19

On March 11, 2020, the World Health Organization declared the current coronavirus (COVID-19) outbreak to be a global pandemic.  In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restriction on social and commercial activity to promote social distancing in an effort to slow the spread of the illness.  The Company has been operating its manufacturing and distribution facilities on a voluntary basis to give employees the flexibility to remain at home with children who are out of school or for other personal reasons as they deem necessary.  Office employees and others who can work from home continue to do so.  Appropriate measures are being taken to protect the health of employees performing essential on-site operations.

The Company’s Conway, Arkansas facilities, which represent approximately two thirds of the Company’s production and distribution capacity, has been fully operational for this period of time.  In accordance with State of California and local orders that include guidance on the definition and responsibilities of “essential businesses,” the Company has been operating its Torrance facility.  During May, the Company closed its Torrance facility for several days before and after Memorial Day to perform comprehensive cleaning of production and office areas.  Management estimates that the Torrance facility is currently staffed at approximately 50% of its normal level.

The impacts of COVID-19 are expected to continue to be a challenge for the foreseeable future. The Company believes the economy will be adversely impacted for an indeterminate period, including the demand for our products. Consequently, the Company believes that it may report lower sales and earnings than would otherwise have been expected for the remainder of fiscal year 2021.  The extent of the impact will depend on numerous factors that are unknown, uncertain and cannot be predicted.

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Retirement Plans

3 Months Ended

Apr. 30, 2020

Retirement Benefits [Abstract]

Retirement Plans

Retirement Plans

The Company and its subsidiaries cover certain employees under a noncontributory defined benefit retirement plan, entitled the Virco Employees’ Retirement Plan (the “Pension Plan”). As more fully described in the Form 10-K, benefit accruals under the Employees Retirement Plan were frozen effective December 31, 2003. There is no service cost incurred under this plan.

The Company also provides a supplementary retirement plan for certain key employees, the VIP Retirement Plan (the “VIP Plan”). As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2019, benefit accruals under this plan were frozen since December 31, 2003. There is no service cost incurred under this plan.

The net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2020 and 2019 were as follows:

	Combined Employee Retirement Plans
	Three Months Ended
	4/30/2020			4/30/2019
	(in thousands)
Service cost	$	—		$	—
Interest cost	301			355
Expected return on plan assets	(224		)	(343		)
Plan settlement	—			—
Amortization of prior service cost	—			—
Recognized net actuarial loss	465			176
Benefit cost	$	542		$	188

401(k) Retirement Plan

The Company’s retirement plan, which covers all U.S. employees, allows participants to defer from 1% to 75% of their eligible compensation through a 401(k)-retirement program. The plan includes Virco stock as one of the investment options. At April 30, 2020 and 2019, the plan held 763,586 shares and 673,964 shares of Virco stock, respectively. For the three months ended April 30, 2020 and 2019, the compensation costs incurred for employer match was $210,000 and $187,000, respectively.

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Net Income (Loss) per Share (Tables)

3 Months Ended

Apr. 30, 2020

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended
	4/30/2020			4/30/2019
	(In thousands, except per share data)
Net loss	$	(4,698	)	$	(3,067	)
Weighted average shares of common stock outstanding	15,654			15,486
Net effect of dilutive shares - based on the treasury stock method using average market price	—			—
Totals	15,654			15,486
Net loss per share - basic	$	(0.30	)	$	(0.20	)
Net loss per share - diluted (a)	$	(0.30	)	$	(0.20	)

(a) All exercisable and non-exercisable restricted stock awards and/or units were not included in the computation of diluted net loss per share at April 30, 2020 and 2019, because their inclusion would have been anti-dilutive. The number of stock awards and/or units outstanding, which met this anti-dilutive criterion for the three months ended April 30, 2020 and 2019, was 75,000 and 180,000, respectively.

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Retirement Plans (Narrative) (Details) - United States [Member] - USD ($)	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Maximum annual contributions per employee, percent	75.00%
Number of common shares held	763,586	673,964
Contributions by employer	$ 210,000	$ 187,000
Minimum [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Annual contributions per employee, percent	1.00%

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Delivery Costs (Details) - USD ($)	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Other Income and Expenses [Abstract]
Shipping and classroom delivery costs	$ 2,078,000	$ 2,761,000

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Net Income (Loss) per Share

3 Months Ended

Apr. 30, 2020

Earnings Per Share [Abstract]

Net Income (Loss) per Share

Net loss per Share

	Three Months Ended
	4/30/2020			4/30/2019
	(In thousands, except per share data)
Net loss	$	(4,698	)	$	(3,067	)
Weighted average shares of common stock outstanding	15,654			15,486
Net effect of dilutive shares - based on the treasury stock method using average market price	—			—
Totals	15,654			15,486
Net loss per share - basic	$	(0.30	)	$	(0.20	)
Net loss per share - diluted (a)	$	(0.30	)	$	(0.20	)

(a) All exercisable and non-exercisable restricted stock awards and/or units were not included in the computation of diluted net loss per share at April 30, 2020 and 2019, because their inclusion would have been anti-dilutive. The number of stock awards and/or units outstanding, which met this anti-dilutive criterion for the three months ended April 30, 2020 and 2019, was 75,000 and 180,000, respectively.

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Condensed Consolidated Statements of Comprehensive Income (Loss) Unaudited (Parentheticals) - USD ($) $ in Thousands	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Statement of Comprehensive Income [Abstract]
Pension adjustments, tax	$ 120	$ 46

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 30, 2020	Jan. 31, 2020	Apr. 30, 2019
Current assets:
Cash	$ 327	$ 1,150	$ 553
Trade accounts receivables, net	7,564	11,762	12,375
Other receivables	57	57	64
Income tax receivable	469	298	263
Inventories	58,190	43,329	63,511
Prepaid expenses and other current assets	2,413	1,746	2,532
Total current assets	69,020	58,342	79,298
Property, plant and equipment:
Land	3,731	3,731	3,731
Land improvements	734	717	688
Buildings and building improvements	51,159	51,200	51,176
Machinery and equipment	111,250	110,610	109,087
Leasehold improvements	1,072	990	830
Total property, plant and equipment	167,946	167,248	165,512
Less accumulated depreciation and amortization	128,520	127,351	124,159
Net property, plant and equipment	39,426	39,897	41,353
Operating lease right-of-use assets	20,487	21,325	23,295
Deferred tax assets, net	14,481	11,230	11,086
Other assets, net	8,078	8,198	8,276
Total assets	151,492	138,992	163,308
Current liabilities:
Accounts payable	16,656	10,587	16,354
Accrued compensation and employee benefits	5,979	6,392	4,631
Current portion of long-term debt	10,618	878	24,226
Current portion operating lease liability	4,527	3,654	2,939
Other accrued liabilities	4,606	3,607	5,552
Total current liabilities	42,386	25,118	53,702
Non-current liabilities:
Accrued self-insurance retention	1,802	1,410	1,773
Accrued pension expenses	21,365	21,310	14,218
Income tax payable	74	70	55
Long-term debt, less current portion	15,630	15,818	16,508
Operating lease liability, less current portion	18,854	19,787	22,221
Other long-term liabilities	662	661	555
Total non-current liabilities	58,387	59,056	55,330
Commitments and contingencies (Notes 6, 7 and 13)
Preferred stock:
Authorized 3,000,000 shares, $0.01 par value; none issued or outstanding	0	0	0
Common stock:
Authorized 25,000,000 shares, $0.01 par value; issued and outstanding 15,713,549 shares at 4/30/2020 and 1/31/2020 and 15,541,956 at 4/30/2019	157	157	155
Additional paid-in capital	119,036	118,782	118,292
Accumulated deficit	(54,508)	(49,810)	(55,259)
Accumulated other comprehensive loss	(13,966)	(14,311)	(8,912)
Total stockholders’ equity	50,719	54,818	54,276
Total liabilities and stockholders’ equity	$ 151,492	$ 138,992	$ 163,308

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Inventories

3 Months Ended

Apr. 30, 2020

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or net realizable value and includes material, labor and factory overhead. The Company maintains valuation allowances for estimated slow-moving and obsolete inventory to reflect the difference between the cost of inventory and the estimated net realizable value. Valuation allowances for slow-moving and obsolete inventory are determined through a physical inspection of the product in connection with a physical inventory, a review of slow-moving product and consideration of active marketing programs. The market for education furniture is traditionally driven by value, not style, and the Company has not typically incurred significant obsolescence expenses. If market conditions are less favorable than those anticipated by management, additional valuation allowances may be required. Due to reductions in sales volume in the past years, the Company’s manufacturing facilities are operating at reduced levels of capacity. The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation.

The following table presents a breakdown of the Company’s inventories as of April 30, 2020, January 31, 2020 and April 30, 2019:

	4/30/2020		1/31/2020		4/30/2019
	(in thousands)
Finished goods	$	27,348	$	15,401	$	26,546
WIP	19,159		15,957		24,009
Raw materials	11,683		11,971		12,956
Total inventories	$	58,190	$	43,329	$	63,511

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Basis of Presentation

3 Months Ended

Apr. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 (“Form 10-K”).  In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended April 30, 2020, are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2021. The balance sheet at January 31, 2020, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. All references to the “Company” refer to Virco Mfg. Corporation and its subsidiaries.

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Leases - Narrative (Details)	Apr. 30, 2020
Manufacturing and Distribution Facility in Torrance, CA [Member]
Lessee, Lease, Description [Line Items]
Operating lease period (in years)	5 years

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Debt (Narrative) (Details)	1 Months Ended	3 Months Ended
	Mar. 31, 2019 USD ($)	Apr. 30, 2020 USD ($)	Apr. 30, 2019
Line of Credit Facility [Line Items]
Line Of Credit Facility, Borrowing Capacity, Term		$ 15,000,000
Revolving credit facility bears interest increased		2.00%
Interest rate		4.50%
Judgments or judicial actions against the borrowers in excess		$ 250,000
Inventory [Member]
Line of Credit Facility [Line Items]
Revolving credit facility borrowing base limitation		60.00%
Inventories [Member]
Line of Credit Facility [Line Items]
Revolving credit facility borrowing base limitation		85.00%
Maximum [Member] | Accounts receivable [Member]
Line of Credit Facility [Line Items]
Revolving credit facility borrowing base limitation		85.00%
Amendment No. 20 To Credit Facility [Member]
Line of Credit Facility [Line Items]
Maximum fixed charge coverage ratio			1.10
PNC [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Remaining borrowing capacity		$ 12,343,000
PNC [Member] | Revolving Credit Facility [Member] | Amendment No. 19 to Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	$ 65,000,000
PNC [Member] | Seasonal Advance [Member] | Amendment No. 19 to Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	15,000,000
PNC [Member] | Equipment Loan [Member] | Amendment No. 19 to Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	10,000,000
Line of credit facility, Equipment financing	$ 2,000,000
Line of credit facility, period for reduced borrowings during fourth quarter of each fiscal year (consecutive days)	30 days
Eurodollar [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Revolving credit facility bears interest range of		1.75%
Eurodollar [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Revolving credit facility bears interest range of		2.25%
Alternate Base Rate Loans [Member] | London Interbank Offered Rate LIBOR [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Revolving credit facility bears interest range of		0.75%
Alternate Base Rate Loans [Member] | London Interbank Offered Rate LIBOR [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Revolving credit facility bears interest range of		1.25%

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Leases (Tables)

3 Months Ended

Apr. 30, 2020

Leases [Abstract]

Quantitative Information of Leases

In accordance with ASC 842, quantitative information regarding our leases is as follows:

	Three-Months Ended
	4/30/2020			4/30/2019
	(in thousands)
Operating lease cost	$	1,440		$	1,380
Short-term lease cost	36			54
Short-term sublease income	(10		)	(10		)
Variable lease cost (1)	455			448
Total lease cost	$	1,921		$	1,872
Other operating leases information:
Cash paid for amounts included in the measurement of lease liabilities	$	662,000		$	1,291,000
Right-of-use assets obtained in exchange for new lease liabilities	$	270,000		394,000
Weighted-average remaining lease term (years)	4.7			5.7
Weighted-average discount rate	6.4		%	6.4		%

(1) Subsequent to the issuance of the Company’s condensed consolidated financial statements as of April 30, 2019, management identified an immaterial correction related to the disclosure of certain variable lease payments. Variable lease expense for the three-months ended April 30, 2019 did not previously include $448,000

Schedule of Minimum Future Lease Payments

Minimum future lease payments for operating leases in effect as of April 30, 2020, are as follows:

	Operating Lease
	(in thousands)
Remaining of 2021	$	4,414
2022	5,708
2023	5,275
2024	5,214
2025	5,370
Thereafter	1,350
Remaining balance of lease payments	$	27,331
Short-term lease liabilities	$	4,527
Long-term lease liabilities	18,854
Total lease liabilities	$	23,381
Difference between undiscounted cash flows and discounted cash flows	$	3,950

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Contingencies

3 Months Ended

Apr. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

The Company has a self-insured retention for product and general liability losses up to $250,000 per occurrence, workers’ compensation liability losses up to $250,000 per occurrence and for automobile liability losses up to $50,000 per occurrence. The Company has purchased insurance to cover losses in excess of the retention up to a limit of $30,000,000. The Company has obtained an actuarial estimate of its total expected future losses for liability claims and recorded a liability equal to the net present value.

The Company and its subsidiaries are defendants in various legal proceedings resulting from operations in the normal course of business. It is the opinion of management, in consultation with legal counsel, that the ultimate outcome of all such matters will not materially affect the Company’s financial position, results of operations or cash flows.

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Warranty (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Warranty claim activity
Beginning balance	$ 800	$ 700
Provision	60	71
Costs incurred	(60)	(71)
Ending balance	$ 800	$ 700
Maximum [Member]
Warranty [Line Items]
Product warranty period	10 years

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Debt (Tables)

3 Months Ended

Apr. 30, 2020

Debt Disclosure [Abstract]

Outstanding balances of long-term debt

Outstanding balances for the Company’s long-term debt were as follows:

	4/30/2020		1/31/2020		4/30/2019
	(in thousands)
Revolving credit line	$	19,740	$	9,969	$	33,354
Other	6,508		6,727		7,380
Total debt	$	26,248	$	16,696	$	40,734
Less current portion	10,618		878		24,226
Non-current portion	$	15,630	$	15,818	$	16,508

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Delivery Costs

3 Months Ended

Apr. 30, 2020

Other Income and Expenses [Abstract]

Delivery Costs

Delivery Costs

For the quarter ended April 30, 2020 and 2019, shipping and classroom delivery costs of approximately $2,078,000 and $2,761,000, respectively, were included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

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Retirement Plans (Periodic Pension Cost) (Details) - Pension Plan [Member] - USD ($) $ in Thousands	3 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Components of Net Cost
Service cost	$ 0	$ 0
Interest cost	301	355
Expected return on plan assets	(224)	(343)
Plan settlement	0	0
Amortization of prior service cost	0	0
Recognized net actuarial loss	465	176
Benefit cost	$ 542	$ 188

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COVID-19 (Details)	Jun. 12, 2020
Subsequent Event [Member]
Subsequent Event [Line Items]
Current staffing level at Torrance facility (percent)	50.00%

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Leases

3 Months Ended

Apr. 30, 2020

Leases [Abstract]

Leases

Leases

The Company has operating leases on real property, equipment, and automobiles that expire at various dates. The Company determines if an arrangement is a lease at inception and assesses classification of the lease at commencement. All of the Company’s leases are classified as operating leases, as a lessee. The Company uses the implicit rate when readily determinable, or the incremental borrowing rate. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments using company specific credit spreads. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for our operating leases is recognized on a straight-line basis over the lease term.

The Company has an operating lease for its corporate office, manufacturing and distribution facility located in Torrance, CA, currently with a remaining lease term through April 30, 2025. The Company leases equipment under a 5-year operating lease arrangement. The Company has the option of buying the assets at the end of the lease period at a price that does not result in the Company being reasonably certain of exercising the option. In addition, the Company leases trucks, automobiles, and forklifts under operating leases that include certain fleet management and maintenance services. Certain of the leases contain renewal or purchase options and require payment for property taxes and insurance. Tenant improvements are capitalized and depreciated over the remaining life of the applicable lease, and related tenant allowances are recorded as a reduction to the ROU asset.

In accordance with ASC 842, quantitative information regarding our leases is as follows:

	Three-Months Ended
	4/30/2020			4/30/2019
	(in thousands)
Operating lease cost	$	1,440		$	1,380
Short-term lease cost	36			54
Short-term sublease income	(10		)	(10		)
Variable lease cost (1)	455			448
Total lease cost	$	1,921		$	1,872
Other operating leases information:
Cash paid for amounts included in the measurement of lease liabilities	$	662,000		$	1,291,000
Right-of-use assets obtained in exchange for new lease liabilities	$	270,000		394,000
Weighted-average remaining lease term (years)	4.7			5.7
Weighted-average discount rate	6.4		%	6.4		%

(1) Subsequent to the issuance of the Company’s condensed consolidated financial statements as of April 30, 2019, management identified an immaterial correction related to the disclosure of certain variable lease payments. Variable lease expense for the three-months ended April 30, 2019 did not previously include $448,000 of variable lease payments for property taxes, insurance and common area maintenance related to triple net leases. Management corrected the disclosure related to variable lease expense in the table above for the three-months ended April 30, 2019 and, except for this change, the correction had no impact upon the Company’s condensed consolidated financial statements

Minimum future lease payments for operating leases in effect as of April 30, 2020, are as follows:

	Operating Lease
	(in thousands)
Remaining of 2021	$	4,414
2022	5,708
2023	5,275
2024	5,214
2025	5,370
Thereafter	1,350
Remaining balance of lease payments	$	27,331
Short-term lease liabilities	$	4,527
Long-term lease liabilities	18,854
Total lease liabilities	$	23,381
Difference between undiscounted cash flows and discounted cash flows	$	3,950

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Seasonality and Management Use of Estimates

3 Months Ended

Apr. 30, 2020

Seasonality [Abstract]

Seasonality and Management Use of Estimates

The market for educational furniture is marked by extreme seasonality, with approximately 50% of the Company’s total sales typically occurring from June to August each year, the Company’s peak season. Hence, the Company typically builds and carries significant amounts of inventory during and in anticipation of this peak summer season to facilitate the rapid delivery requirements of customers in the educational market. This requires a large up-front investment in inventory, labor, storage and related costs as inventory is built in anticipation of peak sales during the summer months. As the capital required for this build-up generally exceeds cash available from operations, the Company has generally relied on third-party bank financing to meet cash flow requirements during the build-up period immediately preceding the peak season. In addition, the Company typically is faced with a large balance of accounts receivable during the peak season. This occurs for two primary reasons. First, accounts receivable balances typically increase during the peak season as shipments of products increase. Second, many customers during this period are educational institutions and government entities, which tend to pay accounts receivable slower than commercial customers.

The Company’s working capital requirements during and in anticipation of the peak summer season require management to make estimates and judgments that affect assets, liabilities, revenues and expenses, and related contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to market demand, labor costs and stocking inventory. Significant estimates made by management include, but are not limited to, valuation of inventory; deferred tax assets and liabilities; useful lives of property, plant and equipment; liabilities under pension, warranty, self-insurance and environmental claims; and the accounts receivable allowance for doubtful accounts. Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after April 30, 2020, including those resulting from the impacts of the COVID-19 pandemic, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

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Unaudited Consolidated Statements of Changes in Equity and Accumulated Other Comprehensive Income (Loss) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Beginning balance (shares) at Jan. 31, 2019		15,541,956
Beginning balance at Jan. 31, 2019	$ 57,027	$ 155	$ 118,106	$ (52,192)	$ (9,042)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(3,067)			(3,067)
Cash dividends	0			0
Pension adjustments, net of tax effect	130				130
Shares vested and others (shares)		0
Shares vested and others	0	$ 0	0
Stock compensation expense	$ 186		186
Ending balance (shares) at Apr. 30, 2019	15,541,956	15,541,956
Ending balance at Apr. 30, 2019	$ 54,276	$ 155	118,292	(55,259)	(8,912)
Beginning balance (shares) at Jan. 31, 2020	15,713,549	15,713,549
Beginning balance at Jan. 31, 2020	$ 54,818	$ 157	118,782	(49,810)	(14,311)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(4,698)			(4,698)
Cash dividends	0			0
Pension adjustments, net of tax effect	345				345
Shares vested and others (shares)		0
Shares vested and others	0	$ 0	0
Stock compensation expense	$ 254		254
Ending balance (shares) at Apr. 30, 2020	15,713,549	15,713,549
Ending balance at Apr. 30, 2020	$ 50,719	$ 157	$ 119,036	$ (54,508)	$ (13,966)

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Stock-Based Compensation

3 Months Ended

Apr. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Stock Incentive Plan

The Company's two stock plans are the 2019 Employee Stock Incentive Plan (the “2019 Plan”) and the 2011 Employee Incentive Stock Plan (the “2011 Plan”).

Under the 2019 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards. Restricted stock units and awards granted under the 2019 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock units or awards and related compensation expense as the difference between the market value of the units or awards on the date of grant less the exercise price of the units or awards granted. During the three-month periods ended April 30, 2020, the Company granted 0 awards, vested 0 shares according to their terms and forfeited 0 shares under the 2019 Plan. As of April 30, 2020, there were approximately 772,000 shares available for future issuance under the 2019 Plan.

Under the 2011 Plan, the Company may grant an aggregate of 2,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards. Restricted stock units and awards granted under the 2011 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock units or awards and related compensation expense as the difference between the market value of the units or awards on the date of grant less the exercise price of the units or awards granted. During the three-month periods ended April 30, 2020, the Company granted 0 restricted awards to non-employee directors and 0 units to its employees; vested 0 stock awards and 0 units according to their terms and forfeited 0 stock units under the 2011 Plan. As of April 30, 2020, there were approximately 32,892 shares available for future issuance under the 2011 Plan.

During the three months ended April 30, 2020, stock-based compensation expense related to restricted stock units and awards recognized in cost of goods sold and selling, general and administrative expenses was $63,000 and 191,000, respectively. During the three months ended April 30, 2019, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $59,000 and 127,000, respectively.

As of April 30, 2020, there was $2,435,000 of unrecognized compensation expense related to unvested restricted stock units and/or awards, which is expected to be recognized over a weighted average period of approximately 2 years.

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Apr. 30, 2020	Jan. 31, 2020	Apr. 30, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value (usd per share)	$ 0.01	$ 0.01	$ 0.01
Preferred stock, shares authorized (shares)	3,000,000	3,000,000	3,000,000
Preferred stock, shares issued (shares)	0	0	0
Preferred stock, shares outstanding (shares)	0	0	0
Common stock, par value (usd per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	25,000,000	25,000,000	25,000,000
Common stock, shares issued (shares)	15,713,549	15,713,549	15,541,956
Common stock, shares outstanding (shares)	15,713,549	15,713,549	15,541,956

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Inventories (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Jan. 31, 2020	Apr. 30, 2019
Inventory Disclosure [Abstract]
Finished goods	$ 27,348	$ 15,401	$ 26,546
WIP	19,159	15,957	24,009
Raw materials	11,683	11,971	12,956
Total inventories	$ 58,190	$ 43,329	$ 63,511

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Debt (Long-term Debt) (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Jan. 31, 2020	Apr. 30, 2019
Debt Instrument [Line Items]
Long-term debt	$ 26,248	$ 16,696	$ 40,734
Less current portion	10,618	878	24,226
Non-current portion	15,630	15,818	16,508
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Long-term debt	19,740	9,969	33,354
Other Debt [Member]
Debt Instrument [Line Items]
Long-term debt	$ 6,508	$ 6,727	$ 7,380