10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 31, 2022

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	☒
		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 — 16,210,985 shares as of September 4, 2022.

TABLE OF CONTENTS

Part I. Financial Information		3
	Item 1. Financial Statements	3
	Unaudited condensed consolidated balance sheets - July 31, 2022, January 31, 2022 and July 31, 2021	3
	Unaudited condensed consolidated statements of income - Three months ended July 31, 2022 and 2021	5
	Unaudited condensed consolidated statements of operations - Six months ended July 31, 2022 and 2021	6
	Unaudited condensed consolidated statements of comprehensive income - Three months ended July 31, 2022 and 2021	7
	Unaudited condensed consolidated statements of comprehensive income - Six months ended July 31, 2022 and 2021	8
	Unaudited condensed consolidated statements of cash flows - Six months ended July 31, 2022 and 2021	9
	Unaudited condensed consolidated statements of changes in stockholders' equity - Three and six months ended July 31, 2022 and 2021	10
	Notes to unaudited condensed consolidated financial statements - July 31, 2022	12
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	24
	Item 4. Controls and Procedures	24
Part II. Other Information		25
	Item 1. Legal Proceedings	25
	Item 1A. Risk Factors	25
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25
	Item 3. Defaults Upon Senior Securities	25
	Item 4. Mine Safety Disclosures	25
	Item 5. Other Information	25
	Item 6. Exhibits	25
	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

2

PART I. Financial Information

Item 1. Financial Statements

Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

	7/31/2022		1/31/2022		7/31/2021
	(In thousands)
Assets
Current assets
Cash	$	2,179	$	1,359	$	641
Trade accounts receivables, net	44,286		17,769		34,400
Other receivables	95		118		51
Income tax receivable	111		152		124
Inventories	61,228		47,373		42,393
Prepaid expenses and other current assets	2,068		2,076		2,151
Total current assets	109,967		68,847		79,760
Non-current assets
Property, plant and equipment
Land	3,731		3,731		3,731
Land improvements	653		653		734
Buildings and building improvements	51,456		51,334		51,263
Machinery and equipment	115,029		113,315		112,544
Leasehold improvements	1,012		1,009		993
Total property, plant and equipment	171,881		170,042		169,265
Less accumulated depreciation and amortization	136,973		134,715		133,517
Net property, plant and equipment	34,908		35,327		35,748
Operating lease right-of-use assets	12,115		13,870		15,602
Deferred tax assets, net	488		399		10,840
Other assets, net	8,051		8,002		7,972
Total assets	$	165,529	$	126,445	$	149,922

See accompanying notes to unaudited condensed consolidated financial statements.

3

Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

	7/31/2022		1/31/2022		7/31/2021
	(In thousands, except share and par value data)
Liabilities
Current liabilities
Accounts payable	$	27,290	$	19,785	$	18,821
Accrued compensation and employee benefits	6,873		5,596		5,502
Current portion of long-term debt	22,736		340		5,526
Current portion operating lease liability	4,909		4,734		4,678
Other accrued liabilities	10,057		5,829		9,147
Total current liabilities	71,865		36,284		43,674
Non-current liabilities
Accrued self-insurance retention	1,436		965		1,374
Accrued pension expenses	15,238		15,430		19,000
Income tax payable	73		71		65
Long-term debt, less current portion	14,504		14,173		14,738
Operating lease liability, less current portion	9,241		11,437		13,429
Other long-term liabilities	667		639		685
Total non-current liabilities	41,159		42,715		49,291
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 16,210,985 shares at 7/31/2022 and 16,102,023 at 1/31/2022 and 7/31/2021	162		161		161
Additional paid-in capital	120,684		120,492		119,985
Accumulated deficit	(62,582)		(67,178)		(52,191)
Accumulated other comprehensive loss	(5,759)		(6,029)		(10,998)
Total stockholders’ equity	52,505		47,446		56,957
Total liabilities and stockholders’ equity	$	165,529	$	126,445	$	149,922

See accompanying notes to unaudited condensed consolidated financial statements.

4

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Income

	Three months ended
	7/31/2022		7/31/2021
	(In thousands, except per share data)
Net sales	$	82,797	$	59,022
Costs of goods sold	50,952		36,703
Gross profit	31,845		22,319
Selling, general and administrative expenses	20,671		16,251
Operating income	11,174		6,068
Unrealized loss on investment in trust account	305		—
Pension expense	196		724
Interest expense	698		359
Income before income taxes	9,975		4,985
Income tax expense	295		1,225
Net income	$	9,680	$	3,760
Net income per common share:
Basic	$	0.60	$	0.24
Diluted	$	0.60	$	0.24
Weighted average shares of common stock outstanding:
Basic	16,108		15,920
Diluted	16,108		15,929

See accompanying notes to unaudited condensed consolidated financial statements.

5

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Operations

	Six months ended
	7/31/2022		7/31/2021
	(In thousands, except per share data)
Net sales	$	114,881	$	87,389
Costs of goods sold	73,329		57,382
Gross profit	41,552		30,007
Selling, general and administrative expenses	35,122		28,234
Operating income	6,430		1,773
Unrealized loss on investment in trust account	305		—
Pension expense	391		1,230
Interest expense	1,125		652
Income (loss) before income taxes	4,609		(109)
Income tax expense	13		40
Net income (loss)	$	4,596	$	(149)
Net income (loss) per common share:
Basic	$	0.29	$	(0.01)
Diluted	$	0.29	$	(0.01)
Weighted average shares of common stock outstanding:
Basic	16,071		15,872
Diluted	16,071		15,872

See accompanying notes to unaudited condensed consolidated financial statements.

6

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Comprehensive Income

	Three months ended
	7/31/2022		7/31/2021
	(In thousands)
Net income	$	9,680	$	3,760
Other comprehensive income:
Pension adjustments (net of tax expense of $0 and $803 at July 31, 2022 and 2021, respectively)	135		2,260
Net comprehensive income	$	9,815	$	6,020

See accompanying notes to unaudited condensed consolidated financial statements.

7

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Comprehensive Income

	Six months ended
	7/31/2022		7/31/2021
	(In thousands)
Net income (loss)	$	4,596	$	(149)
Other comprehensive income:
Pension adjustments (net of tax expense of $0 and $919 at July 31, 2022 and 2021, respectively)	270		2,587
Net comprehensive income	$	4,866	$	2,438

See accompanying notes to unaudited condensed consolidated financial statements.

8

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

	Six months ended
	7/31/2022		7/31/2021
	(In thousands)
Operating activities
Net income (loss)	$	4,596	$	(149)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	2,259		2,289
Non-cash lease benefits	(265)		(192)
Provision for doubtful accounts	35		46
Amortization of debt issuance costs	69		—
Deferred income taxes	(89)		(42)
Stock-based compensation	406		506
Defined pension plan settlement	—		220
Amortization of net actuarial loss for pension plans	270		885
Non-cash unrealized loss on investment	305		—
Changes in operating assets and liabilities:
Trade accounts receivable	(26,552)		(24,687)
Other receivables	23		(25)
Inventories	(13,855)		(4,124)
Income taxes	43		75
Prepaid expenses and other current assets	(91)		9
Accounts payable and accrued liabilities	12,876		16,632
Net cash used in operating activities	(19,970)		(8,557)
Investing activities:
Capital expenditures	(1,524)		(963)
Purchases of marketable securities in trust accounts	(4,856)		—
Proceeds from sale of marketable securities in trust accounts	2,112		—
Proceeds for surrendering life insurance policies	2,744		110
Net cash used in investing activities	(1,524)		(853)
Financing activities:
Borrowing from long-term debt	28,352		14,865
Repayment of long-term debt	(5,625)		(5,040)
Payment on deferred financing costs	(200)		—
Tax withholding payments on share-based compensation	(213)		(176)
Net cash provided by financing activities	22,314		9,649
Net increase in cash	820		239
Cash at beginning of period	1,359		402
Cash at end of period	$	2,179	$	641

See accompanying notes to unaudited condensed consolidated financial statements.

9

Virco Mfg. Corporation

Unaudited Consolidated Statements of Changes in Stockholders' Equity

	Three-Month Period Ended July 31, 2022
	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 May 1, 2022	16,102,023	$	161	$	120,745	$	(72,262)	$	(5,894)	$	42,750
Net income	—	—		—		9,680		—		9,680
Cash dividends	—	—		—		—		—		—
Pension adjustments, net of tax effect of $0	—	—		—		—		135		135
Shares vested and others	108,962	1		(214)		—		—		(213)
Stock compensation expense	—	—		153		—		—		153
Balance at July 31, 2022	16,210,985	$	162	$	120,684	$	(62,582)	$	(5,759)	$	52,505

	Three-Month Period Ended July 31, 2021
	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 May 1, 2021	15,918,642	$	159	$	119,908	$	(55,951)	$	(13,258)	$	50,858
Net income	—	—		—		3,760		—		3,760
Cash dividends	—	—		—		—		—		—
Pension adjustments, net of tax effect of $803	—	—		—		—		2,260		2,260
Shares vested and others	183,381	2		(176)		—		—		(174)
Stock compensation expense	—	—		253		—		—		253
Balance at July 31, 2021	16,102,023	$	161	$	119,985	$	(52,191)	$	(10,998)	$	56,957

	Six-Month Period Ended July 31, 2022
	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, 2022	16,102,023	$	161	$	120,492	$	(67,178)	$	(6,029)	$	47,446
Net income	—	—		—		4,596		—		4,596
Cash dividends	—	—		—		—		—		—
Pension adjustments, net of tax effect of $0	—	—		—		—		270		270
Shares vested and others	108,962	1		(214)		—		—		(213)
Stock compensation expense	—	—		406		—		—		406
Balance at July 31, 2022	16,210,985	$	162	$	120,684	$	(62,582)	$	(5,759)	$	52,505

10

	Six-Month Period Ended July 31, 2021
	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, 2021	15,918,642	$	159	$	119,655	$	(52,042)	$	(13,585)	$	54,187
Net loss	—	—		—		(149)		—		(149)
Cash dividends	—	—		—		—		—		—
Pension adjustments, net of tax effect of $919	—	—		—		—		2,587		2,587
Shares vested and others	183,381	2		(176)		—		—		(174)
Stock compensation expense	—	—		506		—		—		506
Balance at July 31, 2021	16,102,023	$	161	$	119,985	$	(52,191)	$	(10,998)	$	56,957

See accompanying notes to unaudited condensed consolidated financial statements.

11

VIRCO MFG. CORPORATION

Notes to unaudited Condensed Consolidated Financial Statements

July 31, 2022

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, 2022 (“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 and six months ended July 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2023. The balance sheet at January 31, 2022 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.

Liquidity

The Company expects the impact of supply chain constraints and COVID-19 to continue to be a challenge for the foreseeable future and believes the economy will be adversely impacted for an indeterminate period, including the demand for its products and supply of materials and labor required to manufacture products. The extent of the impact will depend on numerous factors that are unknown, uncertain and cannot be reasonably predicted.

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. For the three and six months ended July 31, 2022, management believes that the traditional peak season has been and will continue to be impacted by economic conditions related to supply chain disruption and COVID 19, although not as severely as in the prior year. The Company continues to experience supply chain disruptions for raw materials. In addition, the Company's customers are experiencing supply chain disruption impacting the completion of new school construction and renovation.

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 and self-insurance; 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 July 31, 2022, including those resulting from the continuing impacts of the COVID-19 pandemic and supply chain disruption, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

Note 3. New Accounting Pronouncements

Recently Issued Accounting Updates

12

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 ASU 2019-10, will be for the fiscal year beginning 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.

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.

The Company generates revenue primarily by manufacturing and distributing products through resellers and direct-to-customers. 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.

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 records valuation adjustments for the excess cost of the inventory over its estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory are calculated using an estimated percentage applied to inventories based on a physical inspection of the product in connection with a physical inventory, a review of slow-moving products and component stage, inventory category, historical and forecasted consumption of sales, 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 material obsolescence expenses. If market conditions are less favorable than those anticipated by management, additional valuation adjustments 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 July 31, 2022, January 31, 2022 and July 31, 2021:

13

	7/31/2022		1/31/2022		7/31/2021
	(in thousands)
Finished goods	$	26,336	$	16,731	$	14,163
Work in process	19,138		14,732		14,061
Raw materials	15,754		15,910		14,169
Total inventories	$	61,228	$	47,373	$	42,393

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 quantitative information regarding our leases is as follows:

	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022			7/31/2021
	(in thousands, except lease term and discount rate)
Operating lease cost	$	1,288	$	1,283	$	2,615		$	2,520
Short-term lease cost	79		68		176			165
Sublease income	(10)		(10)		(20)			(20)
Variable lease cost	278		77		531			607
Total lease cost	$	1,635	$	1,418	$	3,302		$	3,272
Other operating leases information:
Cash paid for amounts included in the measurement of lease liabilities					$	2,880		$	2,712
Right-of-use assets obtained in exchange for new lease liabilities					$	398		$	165
Weighted-average remaining lease term (years)					2.7			3.6
Weighted-average discount rate					6.38		%	6.40		%

Minimum future lease payments for operating leases in effect as of July 31, 2022, are as follows:

14

	Operating Lease
For the year ending January 31,	(in thousands)
Remaining of 2023	$	2,829
2024	5,617
2025	5,615
2026	1,401
2027	—
Thereafter	—
Remaining balance of lease payments	$	15,462
Short-term lease liabilities	4,909
Long-term lease liabilities	9,241
Total lease liabilities	$	14,150
Difference between undiscounted cash flows and discounted cash flows	$	1,312

Note 7. Debt

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

	7/31/2022		1/31/2022		7/31/2021
	(in thousands)
Revolving credit line	$	32,502	$	9,551	$	14,857
Other	4,738		4,962		5,407
Total debt	37,240		14,513		20,264
Less current portion	22,736		340		5,526
Non-current portion	$	14,504	$	14,173	$	14,738

The Company and Virco Inc., its wholly-owned subsidiary (the “Borrowers”) have a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”). The Credit Agreement was amended numerous times since its origination in December 2011. On September 28, 2021, the Borrowers entered into an Amended and Restated Revolving Credit and Security Agreement (the “Restated Credit Agreement”) with PNC Bank, which amended and restated the prior Credit Agreement and effectively incorporated all of the prior amendments into an amended and restated form of agreement.

The Restated Credit Agreement permits the Company to issue dividends or make payments with respect to the Company’s capital stock in an aggregate amount up to $3,000,000 during any fiscal year, provided that no default shall have occurred or is continuing or would result from any such payment, and the Company must demonstrate pro forma compliance with a 12-month trailing fixed charge coverage ratio of not less than 1.20:1.00 as of the fiscal quarter immediately preceding the date of any such dividend or payment. The Restated Credit Agreement also requires the Company to maintain a minimum fixed charge coverage ratio, and contains numerous other covenants that limit under certain circumstances the ability of the Borrowers and their subsidiaries to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, sell assets outside of the ordinary course of business, enter into transactions with affiliates, or substantially change the general nature of the business of the Borrowers.

The other material terms of the Restated Credit Agreement are substantially the same as those of the original Credit Agreement, consisting of (i) a revolving line of credit with a Maximum Revolving Advance Amount of $65,000,000 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 through July of each year, minus undrawn amounts of letters of credit and reserves. The Restated

15

Credit Agreement is secured by substantially all of the Borrowers’ personal property and certain of the Borrowers’ real property. The Restated Credit Agreement is subject to certain prepayment penalties upon early termination of the Restated Credit Agreement. Prior to the maturity date, principal amounts outstanding under the Restated 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, including reduced borrowings under the revolving line to less than or equal $10,000,000 for a period of 30 consecutive days during the fourth quarter of each fiscal year. The Restated Credit Agreement also contains certain financial covenants, including a fixed charge coverage ratio and limits on capital expenditures.

The Company was in violation of its financial covenants under the Restated Credit Agreement as of January 31, 2022, due to an increase in the Company’s net loss primarily attributable to the effects of supply chain disruptions and labor shortages. On April 15, 2022, the Company entered into Amendment No. 2 to the Credit Agreement (“Amendment No. 2”), which implemented the following changes to the Credit Agreement and Revolving Credit Facility:

i.extended the final maturity date of the Revolving Credit Facility from March 19, 2023 to April 15, 2027;

ii.increased the borrowing limit from $65,000,000 to $70,000,000 in July 2022 and August 2022, and increased the borrowing limit from $40,000,000 to $45,000,000 in October 2022;

iii.waived the Company’s violation of the covenant to maintain a fixed charge coverage ratio of at least 1.00 for the period ended January 31, 2022;

iv.for the first and second quarters of fiscal year ending January 31, 2023, implemented a temporary year-to-date adjusted EBITDA covenant in lieu of testing the fixed charge coverage ratio covenant as of such quarters, with quarterly testing of the fixed charge coverage ratio to resume for the third fiscal quarter and thereafter;

v.permits a sale and leaseback transaction of the Company’s property at 1655 Amity Road and release of the lender’s pledge on the property, with the net proceeds to be used for a proposed share repurchase;

vi.retired LIBOR pricing on the Revolving Credit Facility and replaced with BSBY index, with pricing tiers and spreads to remain the same;

vii.extended the P-card, ACH Credit, and ACH debit facilities for an additional year beyond their current maturities; and

viii.Borrowers to pay a $250,000 extension fee and $75,000 waiver and amendment fee, with $200,000 due at closing and $125,000 due on the first anniversary of closing.

Based on the Company’s current projections, including COVID-19 related costs, raw material costs and its ability to introduce price increases, management believes it will maintain compliance with the financial covenants within Amendment No. 2, although there are uncertainties there within, such as raw material costs and supply chain challenges. The Company was in compliance with its debt covenants as of July 31, 2022.

In addition to the financial covenants, the Restated Credit Agreement provides for customary events of default, subject to certain cure periods and other limitations. Substantially all of the Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Restated Credit Agreement upon receipt by the Borrowers. Due to this automatic liquidating nature of the Restated 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.

The Company's revolving line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. Approximately $37,498,000 was available for borrowing as of July 31, 2022. The interest rate as of July 31, 2022 was 7.25%. The Company also incurs a fee on the unused portion of the revolving line of credit at a rate of 0.375%.

Management believes that the carrying value of debt approximated fair value at July 31, 2022, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

Note 8. Income Taxes

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. 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

16

differences become deductible. As a part of this evaluation, the Company assesses all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, the availability of tax carry backs, tax-planning strategies, and results of recent operations (including cumulative losses in recent years), to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets. The Company incurred operating losses for fiscal years ended January 31, 2022 and 2021 and when combined with operating results from fiscal year ended January 31, 2020, the Company had incurred a cumulative operating loss for the last three fiscal years. As a result, the Company identified objective and verifiable negative evidence in the form of cumulative losses in the U.S. and in certain state jurisdictions over the preceding twelve quarters ended January 31, 2022. While the Company has taken significant measures to return to profitability, and order rates at the beginning of the year are favorable, the short-term outlook for the school furniture market is challenging, particularly relating to ongoing supply chain difficulties. During the fourth quarter of the year ended January 31, 2022, based on this evaluation, and after considering future reversals of existing taxable temporary differences and the effects of seasonality on the Company’s business, the Company determined the realization of a majority of the net deferred tax assets no longer met the more likely than not criteria and a valuation allowance was recorded against the majority of the net deferred tax assets. Valuation allowances of $9,241,000, $11,412,000 and $1,144,000 as of July 31, 2022, January 31, 2022 and July 31, 2021, respectively, are needed for federal deferred tax assets and certain state net operating loss carryforwards to reduce the carrying amount of deferred tax assets to an amount that is more likely than not to be realized.

The Company has taken significant measures to return to profitability, order rates for the first six months of the year were favorable, and the second quarter and year-to-date results are showing significant improvement compared to the prior year. Despite these improvements the Company is still operating at a cumulative twelve quarter operating loss at July 31, 2022. If the current favorable trends in operating income continue through the balance of the year, the Company will utilize a material portion of the net operating losses and will re-evaluate the balance of the valuation allowance on a quarterly basis.

For the three months ended July 31, 2022 and 2021, the effective income tax rates were 3.0% and 24.6%, respectively. For the six months ended July 31, 2022 and 2021, the effective income tax rates were 0.3% and (36.7)%, respectively. The change in effective tax rates for the three and six months ended July 31, 2022, was primarily due to the recording of a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards which commenced in the fourth quarter of fiscal year ended January 31, 2022 and continued through the period ended July 31, 2022. The effective tax rate for the three and six months ended July 31, 2021 was primarily due to the change in forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets.

The January 31, 2017 and subsequent fiscal 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.

Note 9. Net Income (loss) per Share

	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022		7/31/2021
	(In thousands, except per share data)
Net income (loss)	$	9,680	$	3,760	$	4,596	$	(149)
Weighted average shares of common stock outstanding	16,108		15,920		16,071		15,872
Dilutive effect of common stock equivalents from equity incentive plans	—		9		—		—
Totals	16,108		15,929		16,071		15,872
Net income (loss) per share - basic	$	0.60	$	0.24	$	0.29	$	(0.01)
Net income (loss) per share - diluted (a)	$	0.60	$	0.24	$	0.29	$	(0.01)

(a) For periods ended July 31, 2022, there were 0 dilutive shares of common stock equivalent included in the computation of net income per share. For the six-month period ended July 31, 2021, approximately 1,500 shares of common stock equivalents were excluded in the computation of diluted net loss per share, as the effect would be anti-dilutive since the Company reported a net loss.

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Note 10. Stock-Based Compensation

Stock Incentive Plan

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

Under the 2019 Plan, the Company may grant an aggregate of up to 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 six-month period ended July 31, 2022, the Company granted 0 awards, vested 114,470 shares according to their terms and forfeited 0 shares under the 2019 Plan. As of July 31, 2022, there were approximately 608,435 shares available for future issuance under the 2019 Plan.

Under the 2011 Plan, the Company was originally allowed to grant an aggregate of up to 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. The 2011 Plan expired in 2021 and no new awards may be made under the 2011 Plan. During the six-month period ended July 31, 2022, the Company vested 119,200 shares according to their terms and forfeited 0 shares under the 2011 Plan.

During the three months ended July 31, 2022, 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 $37,000 and $116,000, respectively. During the three months ended July 31, 2021, 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 $55,000 and $198,000, respectively.

During the six months ended July 31, 2022, 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 $92,000 and $314,000, respectively. During the six months ended July 31, 2021, 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 $110,000 and $396,000, respectively.

As of July 31, 2022, there was $755,000 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

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 Annual Report on 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, 2022, benefit accruals under this plan were frozen since December 31, 2003.

The net periodic pension cost for the Pension Plan and the VIP Plan for the three and six months ended July 31, 2022 and 2021 were as follows:

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	Combined Employee Retirement Plans
	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022		7/31/2021
	(in thousands)
Service cost	$	—	$	—	$	—	$	—
Interest cost	299		280		597		561
Expected return on plan assets	(237)		(218)		(474)		(436)
Plan settlement	—		220		—		220
Amortization of prior service cost	—		—		—		—
Recognized net actuarial loss	134		442		268		885
Benefit cost	$	196	$	724	$	391	$	1,230

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 July 31, 2022 and 2021, the plan held 1,221,095 shares and 991,899 shares of Virco stock, respectively. For the three months ended July 31, 2022 and 2021, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $322,000 and $207,000 respectively. For the six months ended July 31, 2022 and 2021, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $652,000 and $391,000 respectively.

Note 12. Warranty Accrual

The Company provides a warranty against all substantial defects in material and workmanship. The standard warranty offered on products sold through January 31, 2013 is ten years. Effective February 1, 2014 the Company modified its warranty to a limited lifetime warranty. The warranty effective February 1, 2014 is not anticipated to have a significant effect on warranty expense. Effective January 1, 2017, the Company modified the standard warranty offered on products sold after January 1, 2017 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 and six months ended July 31, 2022 and 2021:

	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022		7/31/2021
	(in thousands)
Beginning balance	$	600	$	700	$	600	$	700
Provision	116		13		150		56
Costs incurred	(66)		(13)		(100)		(56)
Ending balance	$	650	$	700	$	650	$	700

Note 13. Contingencies

The Company has a self-insured retention for product losses up to $250,000 per occurrence, workers’ compensation liability losses up to $250,000 per occurrence, general liability losses up to $50,000 per occurrence and automobile liability losses up to $50,000 per occurrence. The Company has purchased insurance to cover losses in excess of the self-insurance retention or deductible 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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Note 14. Delivery Costs

For the three months ended July 31, 2022 and 2021, shipping and classroom delivery costs of approximately $7,129,000 and $5,112,000, respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

For the six months ended July 31, 2022 and 2021, shipping and classroom delivery costs of approximately $10,383,000 and $8,033,000, respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Note 15. Subsequent Events

None.

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

Results of Operations

Overview

The results of operations for the three-month and six-month periods ended July 31, 2022 and the comparable periods ended July 31, 2021 have been significantly impacted by economic conditions driven by the COVID-19 pandemic, global supply chain disruptions and global conflict. The impact of COVID-19 has been quite different during the current year compared to the prior year. Typically, the Company has an exceptionally seasonal annual cycle where approximately 50% of sales occur in the months of June, July and August. Orders received from customers follow a similar cycle, approximately 4-6 weeks preceding the selling season.

During the three-month and six-month periods ended July 31, 2021, the majority of our primary customers had either returned to full time classroom instruction or were planning for an imminent return. During this period, the Company received a large number of orders for immediate delivery in anticipation of the return to classroom instruction. Due to shortages of labor and raw materials, the Company was not able to deliver the ordered furniture during the traditional three months seasonal window in 2021, and both production and shipping activity extended through the fourth quarter ended January 31, 2022.

For the three-month and six-month periods ended July 31, 2022, management believes that the traditional seasonal cycle and the Company’s ability to service that seasonal cycle has substantially returned to normal. During the quarter ended April 30, 2022, the Company has experienced a 27.9% increase in orders, most of which were for summer of 2022 delivery. During the quarter ended July 31, 2022 the Company experienced a 4.1% increase in orders. Year to date the Company experienced a 14.3% increase in orders. In addition, the Company started the current fiscal year with an order backlog that was approximately $20 million greater than the prior year. This caused the Company’s backlog of unshipped orders when entering the traditional seasonal period at April 30, 2022 compared to April 30, 2021 to increase by nearly $36 million to $85.7 million compared to $49.7 million.

During the three-month and six-month periods ended July 31, 2021, the Company incurred severe price increases in the cost of raw materials. By example the cost of steel, depending on type, increased by 50% to 100% during the quarter. In addition to increased costs, the Company incurred shortages of domestically supplied materials including steel, plastic, resin, and wood. These cost increases continued through the end of the fiscal year ended January 31, 2022. During the three-month and six-month periods ended July 31, 2021, the Company incurred labor shortages and had severe difficulty hiring both permanent and temporary labor. The Company paid significant amounts of double-time wages to both factory and warehouse employees, which adversely affected financial results. In comparison, the three-month and six-month periods ended July 31, 2022 were characterized by continued high and moderately increasing raw material costs, but did not incur the same severe spike in raw material costs incurred in the prior year. The Company raised factory wages by nearly $3 per hour in the fourth quarter of fiscal year ended January 31, 2022. This increased factory direct labor and overhead expenses, but allowed the Company to hire and retain adequate quantities of permanent and temporary labor. Production levels for the six months ended July 31, 2022 increased by nearly 30% compared to the prior year. Increased levels of factory production and the related overhead absorption partially offset the effect of increased labor expenses.

Supply chain disruptions from international sources – primarily China – continue to adversely affect operations and the competitive landscape. In the six-month period ended July 31, 2021, obtaining materials from China was adversely affected by sharply increased freight costs and by severe disruptions in ocean freight at domestic ports. The Company experienced supply chain disruptions from domestic suppliers in addition to imported components. In the current six-month period ended July 31, 2022 the port congestion has improved moderately and ocean freight costs have not been as volatile as in the prior year, but China’s severe lockdowns of major cities due to COVID has adversely affected shipments from China to the United States. Because the Company has maintained its domestic factories, management believes that the Company will be less vulnerable to international supply chain disruption compared to competitors that source finished goods overseas, but the Company will still be affected by these international events.

Virco does not deliver furniture to new schools until the customer has an occupancy certificate. Supply chain disruptions in the construction industry which may delay the completion of new schools did not significantly impact sales volume during the quarter ended July 31, 2022, but may impact the timing of sales during the balance of the summer

The Russian invasion of Ukraine in February 2022 has caused oil and energy prices to spike, which can increase the cost of plastic and freight. The Company incurred increased freight rates, but because the Company increased selling prices at the

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beginning of the year, freight costs as a percentage of sales have been stable. In addition, approximately two thirds of the pig iron used in domestic steel production comes from Russia and Ukraine. During the quarter ended July 31, 2022 steel prices declined slightly, but remain high in comparison to the beginning of 2021.

As discussed in the Risk Factors section of the Company’s Form 10-K for the fiscal year ended January 31, 2022, the Company utilizes one nationwide contract to price a significant portion of our orders. This contract/price list determines selling prices for goods and services for periods of one year and occasionally longer. Due to the current volatile nature of commodity and energy prices in addition to general inflation, the Company has negotiated the ability to increase prices for orders received after July 1 of each contract year in addition to the January 1 price increase. There is typically several months' time lag between raising prices on orders and realizing the increase in sales revenue. Sales for the first quarter ended April 30, 2022 consisted substantially of orders received prior to the January 1, 2022 price increase. Sales for the second quarter ended July 31, 2022 and third quarter ending October 31, 2022 will substantially consist of orders received prior to the July 1, 2022 price increase.

Three Months Ended July 31, 2022

For the three months ended July 31, 2022, the Company earned pre-tax income of $9,975,000 on sales of $82,797,000 compared to a pre-tax income of $4,985,000 on sales of $59,022,000 in the prior year.

Sales increased by approximately $23,775,000 or 40.3%, compared to the same period in 2021. The increase was attributable to an increase in beginning of year sales backlog, increased first quarter orders, a price increase for orders received after January 1, and by the Company’s ability to service the traditional seasonal cycle.

Gross margin for the second quarter ended July 31, 2022 was 38.5% of sales compared to 37.8% in the prior year. In order to recover the increased cost of materials and labor incurred in the prior year, the Company raised prices for all orders received after January 1, 2022. The impact of the price increase did not fully affect sales for the first quarter, but was substantially realized for sales during the second quarter ended July 31, 2022.

Selling, general and administrative expenses for the three months ended July 31, 2022 increased by approximately $4,420,000 compared to the same period last year. The increase in selling, general and administrative expenses was attributable in part to increased variable freight and service expense and by increased variable selling expenses. In addition, the Company incurred increased legal expenses in the second quarter ended July 31, 2022 to enforce its intellectual property rights against a competitor in the school furniture market.

Interest expense increased by $339,000 for the three months ended July 31, 2022 compared to the same period last year. The increase was primarily attributable to an increase in the amount borrowed in 2022 to finance seasonal working capital and an increase in interest rate.

For the three months ended July 31, 2022 and 2021, the effective income tax rates were 3.0% and 24.6%, respectively. The lower effective tax rate in 2022 was due primarily to the recording of a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards which commenced in the fourth quarter of fiscal year ended January 31, 2022 and continued through the period ended July 31, 2022. Effective tax rate for the second quarter ended July 31, 2021 was primarily due to the change in forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets.

Six Months Ended July 31, 2022

For the six-month period ended July 31, 2022 the Company earned a pre-tax profit of $4,609,000 on sales of $114,881,000 compared to a pre-tax loss of $109,000 on sales of $87,389,000 in the prior year. Sales increased by approximately $27,492,000 or 31.5%. The increase was attributable to an increase in beginning of year sales backlog, increased first quarter orders, a price increase for orders received after January 1, and by the Company’s ability to service the traditional seasonal cycle.

Gross Margin for the first six months of fiscal 2023 was 36.2% of sales compared to 34.3% in the prior year. The margin was affected by a price increase at the beginning of fiscal 2023, offset in part by increased costs for raw materials and labor expenses.

Selling, general and administrative expenses for the six months ended July 31, 2022 increased compared to the same period last year but decreased as a percentage of sales. The increase in selling, general and administrative expenses was attributable to increased variable freight and service expenses, variable selling expenses, and by legal expenses to enforce its intellectual property rights against a competitor in the school furniture market.

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Interest expense increased by $473,000 for the six months ended July 31, 2022 compared to the same period last year. The increase was primarily attributable to an increase in the amount borrowed in 2022 to finance seasonal working capital and an increase in interest rate.

For the six months ended July 31, 2022 and 2021, the effective income tax rates were 0.3% and (36.7)%, respectively. The lower effective tax rate in 2022 was due primarily to the recording of a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards which commenced in the fourth quarter of fiscal year ended January 31, 2022 and continued through the period ended July 31, 2022. Effective tax rate for the second quarter ended July 31, 2021 was primarily due to the change in forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets.

Liquidity and Capital Resources

The market for education furniture is extremely seasonal and approximately 50% of the Company's annual sales volume is shipped in the months of June through August of each year. The Company traditionally manufactures large quantities of inventory during the first and second quarters of each fiscal year in anticipation of seasonally high summer shipments. In addition, the Company finances a large balance of accounts receivable during the peak season. As discussed above, in during the fiscal year ended January 31, 2022 the Company experienced severe supply chain disruptions and labor availability and delivered orders later in the year. In the current quarter ended July 31, 2022 the Company continued to experience supply chain challenges, but not to the same degree as in the prior year. The Company believes that traditional seasonal sales cycle has returned for the quarter ended July 31, 2022 and will continue through the third quarter ending October 31, 2022.

Inventory increased by $18,835,000 at July 31, 2022 compared to July 31, 2021. Approximately 30% of the increase in inventory was valuation related to increased material and labor costs and the other 70% was due to increased quantity. The increase in inventory was financed by increased borrowing under the Company’s line of credit with PNC Bank and increased vendor credit, which traditionally increases with increased purchases of materials.

Accrual basis capital expenditures for the six months ended July 31, 2022 were $1,839,000 compared to $1,210,000 for the same period last year. Capital expenditures are being financed through the Company's credit facility with PNC Bank and operating cash flow and restricted to not exceed $8,000,000 per year by covenant.

The Company was in violation of its financial covenants under the Restated Credit Agreement as of January 31, 2022, due to an increase in the Company’s net loss primarily attributable to the effects of supply chain disruptions and labor shortages. On April 15, 2022, the Company entered into Amendment No. 2 to the Revolving Credit and Security Agreement with PNC Bank, which implemented certain changes to the Company’s credit facility with PNC Bank, including the extension of the final maturity date of the facility to April 15, 2027 and increase in the borrowing limit from $65,000,000 to $70,000,000 in July and August 2022, and from $40,000,000 to $45,000,000 in October 2022. See Note 7. Debt of Notes to Unaudited Consolidated Financial Statements under Item 1 of this Quarterly Report on Form 10-Q

Based on the Company’s current projections, including COVID-19 related costs, raw material costs and its ability to introduce price increases, management believes it will maintain compliance with its financial covenants under Amendment No. 2, although risks and uncertainties remain, such as changing raw material costs and supply chain challenges. The Company was in compliance with its debt covenants as of July 31, 2022.

The Company believes that cash flows from operations, together with the Company's unused borrowing capacity with PNC Bank will be sufficient to fund the Company's debt service requirements, capital expenditures and working capital needs for the next twelve months.

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, 2022.

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Forward-Looking Statements

From time to time, including in this Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2022, 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, availability and cost of labor, demand for the Company's products, competitive conditions affecting selling prices and margins, capital costs and general economic conditions. Such risks and uncertainties are discussed in more detail in the Company's Form 10-K for the fiscal year ended January 31, 2022, including 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, and is therefore 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 July 31, 2022. 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.

24

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, 2022 (the “Form 10-K”), which was filed with the SEC on April 28, 2022. 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 and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number	Document
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.

25

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: September 13, 2022	By:	/s/ Robert E. Dose
		Robert E. Dose
		Vice President — Finance
		(Principal Financial Officer)

26

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: September 13, 2022	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: September 13, 2022	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 July 31, 2022, 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: September 13, 2022

/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.

XML

Cover Page - shares	6 Months Ended
	Jul. 31, 2022	Sep. 04, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jul. 31, 2022
Document Transition Report	false
Entity File Number	1-8777
Entity Registrant Name	VIRCO MFG. CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-1613718
Entity Address, Address Line One	2027 Harpers Way
Entity Address, City or Town	Torrance
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90501
City Area Code	310
Local Phone Number	533-0474
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	VIRC
Security Exchange Name	NASDAQ
Entity Central Index Key	0000751365
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		16,210,985
Current Fiscal Year End Date	--01-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 31, 2022	Jan. 31, 2022	Jul. 31, 2021
Current assets:
Cash	$ 2,179	$ 1,359	$ 641
Trade accounts receivables, net	44,286	17,769	34,400
Other receivables	95	118	51
Income tax receivable	111	152	124
Inventories	61,228	47,373	42,393
Prepaid expenses and other current assets	2,068	2,076	2,151
Total current assets	109,967	68,847	79,760
Property, plant and equipment:
Land	3,731	3,731	3,731
Land improvements	653	653	734
Buildings and building improvements	51,456	51,334	51,263
Machinery and equipment	115,029	113,315	112,544
Leasehold improvements	1,012	1,009	993
Total property, plant and equipment	171,881	170,042	169,265
Less accumulated depreciation and amortization	136,973	134,715	133,517
Net property, plant and equipment	34,908	35,327	35,748
Operating lease right-of-use assets	12,115	13,870	15,602
Deferred tax assets, net	488	399	10,840
Other assets, net	8,051	8,002	7,972
Total assets	165,529	126,445	149,922
Current liabilities:
Accounts payable	27,290	19,785	18,821
Accrued compensation and employee benefits	6,873	5,596	5,502
Current portion of long-term debt	22,736	340	5,526
Current portion operating lease liability	4,909	4,734	4,678
Other accrued liabilities	10,057	5,829	9,147
Total current liabilities	71,865	36,284	43,674
Non-current liabilities:
Accrued self-insurance retention	1,436	965	1,374
Accrued pension expenses	15,238	15,430	19,000
Income tax payable	73	71	65
Long-term debt, less current portion	14,504	14,173	14,738
Operating lease liability, less current portion	9,241	11,437	13,429
Other long-term liabilities	667	639	685
Total non-current liabilities	41,159	42,715	49,291
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 16,210,985 shares at 7/31/2022 and 16,102,023 at 1/31/2022 and 7/31/2021	162	161	161
Additional paid-in capital	120,684	120,492	119,985
Accumulated deficit	(62,582)	(67,178)	(52,191)
Accumulated other comprehensive loss	(5,759)	(6,029)	(10,998)
Total stockholders’ equity	52,505	47,446	56,957
Total liabilities and stockholders’ equity	$ 165,529	$ 126,445	$ 149,922

XML

Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jul. 31, 2022	Jan. 31, 2022	Jul. 31, 2021
Statement of Financial Position [Abstract]
Preferred stock, shares authorized (shares)	3,000,000	3,000,000	3,000,000
Preferred stock, par value (usd per share)	$ 0.01	$ 0.01	$ 0.01
Preferred stock, shares issued (shares)	0	0	0
Preferred stock, shares outstanding (shares)	0	0	0
Common stock, shares authorized (shares)	25,000,000	25,000,000	25,000,000
Common stock, par value (usd per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares issued (shares)	16,210,985	16,102,023	16,102,023
Common stock, shares outstanding (shares)	16,210,985	16,102,023	16,102,023

XML

Unaudited Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Income Statement [Abstract]
Net sales	$ 82,797	$ 59,022	$ 114,881	$ 87,389
Costs of goods sold	50,952	36,703	73,329	57,382
Gross profit	31,845	22,319	41,552	30,007
Selling, general and administrative expenses	20,671	16,251	35,122	28,234
Operating income	11,174	6,068	6,430	1,773
Unrealized loss on investment in trust account	305	0	305	0
Pension expense	196	724	391	1,230
Interest expense	698	359	1,125	652
Income (loss) before income taxes	9,975	4,985	4,609	(109)
Income tax expense	295	1,225	13	40
Net income (loss)	$ 9,680	$ 3,760	$ 4,596	$ (149)
Net income (loss) per common share:
Basic (usd per share)	$ 0.60	$ 0.24	$ 0.29	$ (0.01)
Diluted (usd per share)	$ 0.60	$ 0.24	$ 0.29	$ (0.01)
Weighted average shares of common stock outstanding:
Basic (shares)	16,108	15,920	16,071	15,872
Diluted (shares)	16,108	15,929	16,071	15,872

XML

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 9,680	$ 3,760	$ 4,596	$ (149)
Other comprehensive income:
Pension adjustments, net of tax effect	135	2,260	270	2,587
Net comprehensive income	$ 9,815	$ 6,020	$ 4,866	$ 2,438

XML

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Statement of Comprehensive Income [Abstract]
Pension adjustment, tax expense	$ 0	$ 803	$ 0	$ 919

XML

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021
Operating activities
Net income (loss)	$ 4,596	$ (149)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	2,259	2,289
Non-cash lease benefits	(265)	(192)
Provision for doubtful accounts	35	46
Amortization of debt issuance costs	69	0
Deferred income taxes	(89)	(42)
Stock-based compensation	406	506
Defined pension plan settlement	0	220
Amortization of net actuarial loss for pension plans	270	885
Non-cash unrealized loss on investment	305	0
Changes in operating assets and liabilities:
Trade accounts receivable	(26,552)	(24,687)
Other receivables	23	(25)
Inventories	(13,855)	(4,124)
Income taxes	43	75
Prepaid expenses and other current assets	(91)	9
Accounts payable and accrued liabilities	12,876	16,632
Net cash used in operating activities	(19,970)	(8,557)
Investing activities:
Capital expenditures	(1,524)	(963)
Purchases of marketable securities in trust accounts	(4,856)	0
Proceeds from sale of marketable securities in trust accounts	2,112	0
Proceeds for surrendering life insurance policies	2,744	110
Net cash used in investing activities	(1,524)	(853)
Financing activities:
Borrowing from long-term debt	28,352	14,865
Repayment of long-term debt	(5,625)	(5,040)
Payment on deferred financing costs	(200)	0
Tax withholding payments on share-based compensation	(213)	(176)
Net cash provided by financing activities	22,314	9,649
Net increase in cash	820	239
Cash at beginning of period	1,359	402
Cash at end of period	$ 2,179	$ 641

XML

Unaudited Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Beginning balance (shares) at Jan. 31, 2021		15,918,642
Beginning balance at Jan. 31, 2021	$ 54,187	$ 159	$ 119,655	$ (52,042)	$ (13,585)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(149)			(149)
Pension adjustments, net of tax effect	2,587				2,587
Shares vested and others (shares)		183,381
Shares vested and others	(174)	$ 2	(176)
Stock compensation expense	$ 506		506
Ending balance (shares) at Jul. 31, 2021	16,102,023	16,102,023
Ending balance at Jul. 31, 2021	$ 56,957	$ 161	119,985	(52,191)	(10,998)
Beginning balance (shares) at Apr. 30, 2021		15,918,642
Beginning balance at Apr. 30, 2021	50,858	$ 159	119,908	(55,951)	(13,258)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	3,760			3,760
Pension adjustments, net of tax effect	2,260				2,260
Shares vested and others (shares)		183,381
Shares vested and others	(174)	$ 2	(176)
Stock compensation expense	$ 253		253
Ending balance (shares) at Jul. 31, 2021	16,102,023	16,102,023
Ending balance at Jul. 31, 2021	$ 56,957	$ 161	119,985	(52,191)	(10,998)
Beginning balance (shares) at Jan. 31, 2022	16,102,023	16,102,023
Beginning balance at Jan. 31, 2022	$ 47,446	$ 161	120,492	(67,178)	(6,029)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	4,596			4,596
Pension adjustments, net of tax effect	270				270
Shares vested and others (shares)		108,962
Shares vested and others	(213)	$ 1	(214)
Stock compensation expense	$ 406		406
Ending balance (shares) at Jul. 31, 2022	16,210,985	16,210,985
Ending balance at Jul. 31, 2022	$ 52,505	$ 162	120,684	(62,582)	(5,759)
Beginning balance (shares) at Apr. 30, 2022		16,102,023
Beginning balance at Apr. 30, 2022	42,750	$ 161	120,745	(72,262)	(5,894)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	9,680			9,680
Pension adjustments, net of tax effect	135				135
Shares vested and others (shares)		108,962
Shares vested and others	(213)	$ 1	(214)
Stock compensation expense	$ 153		153
Ending balance (shares) at Jul. 31, 2022	16,210,985	16,210,985
Ending balance at Jul. 31, 2022	$ 52,505	$ 162	$ 120,684	$ (62,582)	$ (5,759)

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Unaudited Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Statement of Stockholders' Equity [Abstract]
Pension adjustments, tax	$ 0	$ 803	$ 0	$ 919

XML

Basis of Presentation

6 Months Ended

Jul. 31, 2022

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, 2022 (“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 and six months ended July 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2023. The balance sheet at January 31, 2022 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.

Liquidity

The Company expects the impact of supply chain constraints and COVID-19 to continue to be a challenge for the foreseeable future and believes the economy will be adversely impacted for an indeterminate period, including the demand for its products and supply of materials and labor required to manufacture products. The extent of the impact will depend on numerous factors that are unknown, uncertain and cannot be reasonably predicted.

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Seasonality and Management Use of Estimates	6 Months Ended
	Jul. 31, 2022
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. For the three and six months ended July 31, 2022, management believes that the traditional peak season has been and will continue to be impacted by economic conditions related to supply chain disruption and COVID 19, although not as severely as in the prior year. The Company continues to experience supply chain disruptions for raw materials. In addition, the Company's customers are experiencing supply chain disruption impacting the completion of new school construction and renovation.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 and self-insurance; 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 July 31, 2022, including those resulting from the continuing impacts of the COVID-19 pandemic and supply chain disruption, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

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New Accounting Pronouncements

6 Months Ended

Jul. 31, 2022

Accounting Standards Update and Change in Accounting Principle [Abstract]

New Accounting Pronouncements

New Accounting PronouncementsRecently Issued Accounting Updates

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 ASU 2019-10, will be for the fiscal year beginning 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.

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

XML

Revenue Recognition

6 Months Ended

Jul. 31, 2022

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 resellers and direct-to-customers. 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.

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Inventories

6 Months Ended

Jul. 31, 2022

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 records valuation adjustments for the excess cost of the inventory over its estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory are calculated using an estimated percentage applied to inventories based on a physical inspection of the product in connection with a physical inventory, a review of slow-moving products and component stage, inventory category, historical and forecasted consumption of sales, 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 material obsolescence expenses. If market conditions are less favorable than those anticipated by management, additional valuation adjustments 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 July 31, 2022, January 31, 2022 and July 31, 2021:

	7/31/2022		1/31/2022		7/31/2021
	(in thousands)
Finished goods	$	26,336	$	16,731	$	14,163
Work in process	19,138		14,732		14,061
Raw materials	15,754		15,910		14,169
Total inventories	$	61,228	$	47,373	$	42,393

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Leases

6 Months Ended

Jul. 31, 2022

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 quantitative information regarding our leases is as follows:

	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022			7/31/2021
	(in thousands, except lease term and discount rate)
Operating lease cost	$	1,288	$	1,283	$	2,615		$	2,520
Short-term lease cost	79		68		176			165
Sublease income	(10)		(10)		(20)			(20)
Variable lease cost	278		77		531			607
Total lease cost	$	1,635	$	1,418	$	3,302		$	3,272
Other operating leases information:
Cash paid for amounts included in the measurement of lease liabilities					$	2,880		$	2,712
Right-of-use assets obtained in exchange for new lease liabilities					$	398		$	165
Weighted-average remaining lease term (years)					2.7			3.6
Weighted-average discount rate					6.38		%	6.40		%

Minimum future lease payments for operating leases in effect as of July 31, 2022, are as follows:

	Operating Lease
For the year ending January 31,	(in thousands)
Remaining of 2023	$	2,829
2024	5,617
2025	5,615
2026	1,401
2027	—
Thereafter	—
Remaining balance of lease payments	$	15,462
Short-term lease liabilities	4,909
Long-term lease liabilities	9,241
Total lease liabilities	$	14,150
Difference between undiscounted cash flows and discounted cash flows	$	1,312

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Debt

6 Months Ended

Jul. 31, 2022

Debt Disclosure [Abstract]

Debt

Debt

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

	7/31/2022		1/31/2022		7/31/2021
	(in thousands)
Revolving credit line	$	32,502	$	9,551	$	14,857
Other	4,738		4,962		5,407
Total debt	37,240		14,513		20,264
Less current portion	22,736		340		5,526
Non-current portion	$	14,504	$	14,173	$	14,738

The Company and Virco Inc., its wholly-owned subsidiary (the “Borrowers”) have a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”). The Credit Agreement was amended numerous times since its origination in December 2011. On September 28, 2021, the Borrowers entered into an Amended and Restated Revolving Credit and Security Agreement (the “Restated Credit Agreement”) with PNC Bank, which amended and restated the prior Credit Agreement and effectively incorporated all of the prior amendments into an amended and restated form of agreement.

The Restated Credit Agreement permits the Company to issue dividends or make payments with respect to the Company’s capital stock in an aggregate amount up to $3,000,000 during any fiscal year, provided that no default shall have occurred or is continuing or would result from any such payment, and the Company must demonstrate pro forma compliance with a 12-month trailing fixed charge coverage ratio of not less than 1.20:1.00 as of the fiscal quarter immediately preceding the date of any such dividend or payment. The Restated Credit Agreement also requires the Company to maintain a minimum fixed charge coverage ratio, and contains numerous other covenants that limit under certain circumstances the ability of the Borrowers and their subsidiaries to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, sell assets outside of the ordinary course of business, enter into transactions with affiliates, or substantially change the general nature of the business of the Borrowers.

The other material terms of the Restated Credit Agreement are substantially the same as those of the original Credit Agreement, consisting of (i) a revolving line of credit with a Maximum Revolving Advance Amount of $65,000,000 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 through July of each year, minus undrawn amounts of letters of credit and reserves. The Restated

Credit Agreement is secured by substantially all of the Borrowers’ personal property and certain of the Borrowers’ real property. The Restated Credit Agreement is subject to certain prepayment penalties upon early termination of the Restated Credit Agreement. Prior to the maturity date, principal amounts outstanding under the Restated 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, including reduced borrowings under the revolving line to less than or equal $10,000,000 for a period of 30 consecutive days during the fourth quarter of each fiscal year. The Restated Credit Agreement also contains certain financial covenants, including a fixed charge coverage ratio and limits on capital expenditures.

The Company was in violation of its financial covenants under the Restated Credit Agreement as of January 31, 2022, due to an increase in the Company’s net loss primarily attributable to the effects of supply chain disruptions and labor shortages. On April 15, 2022, the Company entered into Amendment No. 2 to the Credit Agreement (“Amendment No. 2”), which implemented the following changes to the Credit Agreement and Revolving Credit Facility:

i.extended the final maturity date of the Revolving Credit Facility from March 19, 2023 to April 15, 2027;

ii.increased the borrowing limit from $65,000,000 to $70,000,000 in July 2022 and August 2022, and increased the borrowing limit from $40,000,000 to $45,000,000 in October 2022;

iii.waived the Company’s violation of the covenant to maintain a fixed charge coverage ratio of at least 1.00 for the period ended January 31, 2022;

iv.for the first and second quarters of fiscal year ending January 31, 2023, implemented a temporary year-to-date adjusted EBITDA covenant in lieu of testing the fixed charge coverage ratio covenant as of such quarters, with quarterly testing of the fixed charge coverage ratio to resume for the third fiscal quarter and thereafter;

v.permits a sale and leaseback transaction of the Company’s property at 1655 Amity Road and release of the lender’s pledge on the property, with the net proceeds to be used for a proposed share repurchase;

vi.retired LIBOR pricing on the Revolving Credit Facility and replaced with BSBY index, with pricing tiers and spreads to remain the same;

vii.extended the P-card, ACH Credit, and ACH debit facilities for an additional year beyond their current maturities; and

viii.Borrowers to pay a $250,000 extension fee and $75,000 waiver and amendment fee, with $200,000 due at closing and $125,000 due on the first anniversary of closing.

Based on the Company’s current projections, including COVID-19 related costs, raw material costs and its ability to introduce price increases, management believes it will maintain compliance with the financial covenants within Amendment No. 2, although there are uncertainties there within, such as raw material costs and supply chain challenges. The Company was in compliance with its debt covenants as of July 31, 2022.

In addition to the financial covenants, the Restated Credit Agreement provides for customary events of default, subject to certain cure periods and other limitations. Substantially all of the Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Restated Credit Agreement upon receipt by the Borrowers. Due to this automatic liquidating nature of the Restated 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.

The Company's revolving line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. Approximately $37,498,000 was available for borrowing as of July 31, 2022. The interest rate as of July 31, 2022 was 7.25%. The Company also incurs a fee on the unused portion of the revolving line of credit at a rate of 0.375%.

Management believes that the carrying value of debt approximated fair value at July 31, 2022, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

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Income Taxes

6 Months Ended

Jul. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income TaxesIn assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. 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. As a part of this evaluation, the Company assesses all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, the availability of tax carry backs, tax-planning strategies, and results of recent operations (including cumulative losses in recent years), to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets. The Company incurred operating losses for fiscal years ended January 31, 2022 and 2021 and when combined with operating results from fiscal year ended January 31, 2020, the Company had incurred a cumulative operating loss for the last three fiscal years. As a result, the Company identified objective and verifiable negative evidence in the form of cumulative losses in the U.S. and in certain state jurisdictions over the preceding twelve quarters ended January 31, 2022. While the Company has taken significant measures to return to profitability, and order rates at the beginning of the year are favorable, the short-term outlook for the school furniture market is challenging, particularly relating to ongoing supply chain difficulties. During the fourth quarter of the year ended January 31, 2022, based on this evaluation, and after considering future reversals of existing taxable temporary differences and the effects of seasonality on the Company’s business, the Company determined the realization of a majority of the net deferred tax assets no longer met the more likely than not criteria and a valuation allowance was recorded against the majority of the net deferred tax assets. Valuation allowances of $9,241,000, $11,412,000 and $1,144,000 as of July 31, 2022, January 31, 2022 and July 31, 2021, respectively, are needed for federal deferred tax assets and certain state net operating loss carryforwards to reduce the carrying amount of deferred tax assets to an amount that is more likely than not to be realized.

The Company has taken significant measures to return to profitability, order rates for the first six months of the year were favorable, and the second quarter and year-to-date results are showing significant improvement compared to the prior year. Despite these improvements the Company is still operating at a cumulative twelve quarter operating loss at July 31, 2022. If the current favorable trends in operating income continue through the balance of the year, the Company will utilize a material portion of the net operating losses and will re-evaluate the balance of the valuation allowance on a quarterly basis.

For the three months ended July 31, 2022 and 2021, the effective income tax rates were 3.0% and 24.6%, respectively. For the six months ended July 31, 2022 and 2021, the effective income tax rates were 0.3% and (36.7)%, respectively. The change in effective tax rates for the three and six months ended July 31, 2022, was primarily due to the recording of a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards which commenced in the fourth quarter of fiscal year ended January 31, 2022 and continued through the period ended July 31, 2022. The effective tax rate for the three and six months ended July 31, 2021 was primarily due to the change in forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets.

The January 31, 2017 and subsequent fiscal 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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Net loss per Share

6 Months Ended

Jul. 31, 2022

Earnings Per Share [Abstract]

Net income (loss) per Share

Net Income (loss) per Share

	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022		7/31/2021
	(In thousands, except per share data)
Net income (loss)	$	9,680	$	3,760	$	4,596	$	(149)
Weighted average shares of common stock outstanding	16,108		15,920		16,071		15,872
Dilutive effect of common stock equivalents from equity incentive plans	—		9		—		—
Totals	16,108		15,929		16,071		15,872
Net income (loss) per share - basic	$	0.60	$	0.24	$	0.29	$	(0.01)
Net income (loss) per share - diluted (a)	$	0.60	$	0.24	$	0.29	$	(0.01)

(a) For periods ended July 31, 2022, there were 0 dilutive shares of common stock equivalent included in the computation of net income per share. For the six-month period ended July 31, 2021, approximately 1,500 shares of common stock equivalents were excluded in the computation of diluted net loss per share, as the effect would be anti-dilutive since the Company reported a net loss.

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Stock-Based Compensation

6 Months Ended

Jul. 31, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Stock Incentive Plan

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

Under the 2019 Plan, the Company may grant an aggregate of up to 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 six-month period ended July 31, 2022, the Company granted 0 awards, vested 114,470 shares according to their terms and forfeited 0 shares under the 2019 Plan. As of July 31, 2022, there were approximately 608,435 shares available for future issuance under the 2019 Plan.

Under the 2011 Plan, the Company was originally allowed to grant an aggregate of up to 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. The 2011 Plan expired in 2021 and no new awards may be made under the 2011 Plan. During the six-month period ended July 31, 2022, the Company vested 119,200 shares according to their terms and forfeited 0 shares under the 2011 Plan.

During the three months ended July 31, 2022, 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 $37,000 and $116,000, respectively. During the three months ended July 31, 2021, 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 $55,000 and $198,000, respectively.

During the six months ended July 31, 2022, 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 $92,000 and $314,000, respectively. During the six months ended July 31, 2021, 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 $110,000 and $396,000, respectively.

As of July 31, 2022, there was $755,000 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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Retirement Plans

6 Months Ended

Jul. 31, 2022

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 Annual Report on 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, 2022, benefit accruals under this plan were frozen since December 31, 2003.

The net periodic pension cost for the Pension Plan and the VIP Plan for the three and six months ended July 31, 2022 and 2021 were as follows:

	Combined Employee Retirement Plans
	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022		7/31/2021
	(in thousands)
Service cost	$	—	$	—	$	—	$	—
Interest cost	299		280		597		561
Expected return on plan assets	(237)		(218)		(474)		(436)
Plan settlement	—		220		—		220
Amortization of prior service cost	—		—		—		—
Recognized net actuarial loss	134		442		268		885
Benefit cost	$	196	$	724	$	391	$	1,230

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 July 31, 2022 and 2021, the plan held 1,221,095 shares and 991,899 shares of Virco stock, respectively. For the three months ended July 31, 2022 and 2021, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $322,000 and $207,000 respectively. For the six months ended July 31, 2022 and 2021, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $652,000 and $391,000 respectively.

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Warranty Accrual

6 Months Ended

Jul. 31, 2022

Product Warranties Disclosures [Abstract]

Warranty Accrual

Warranty Accrual

The Company provides a warranty against all substantial defects in material and workmanship. The standard warranty offered on products sold through January 31, 2013 is ten years. Effective February 1, 2014 the Company modified its warranty to a limited lifetime warranty. The warranty effective February 1, 2014 is not anticipated to have a significant effect on warranty expense. Effective January 1, 2017, the Company modified the standard warranty offered on products sold after January 1, 2017 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 and six months ended July 31, 2022 and 2021:

	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022		7/31/2021
	(in thousands)
Beginning balance	$	600	$	700	$	600	$	700
Provision	116		13		150		56
Costs incurred	(66)		(13)		(100)		(56)
Ending balance	$	650	$	700	$	650	$	700

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Contingencies

6 Months Ended

Jul. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

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

6 Months Ended

Jul. 31, 2022

Other Income and Expenses [Abstract]

Delivery Costs

Delivery Costs

For the three months ended July 31, 2022 and 2021, shipping and classroom delivery costs of approximately $7,129,000 and $5,112,000, respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

For the six months ended July 31, 2022 and 2021, shipping and classroom delivery costs of approximately $10,383,000 and $8,033,000, respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

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Subsequent Events	6 Months Ended
	Jul. 31, 2022
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsNone.

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Inventories (Tables)

6 Months Ended

Jul. 31, 2022

Inventory Disclosure [Abstract]

Schedule of Inventory

The following table presents a breakdown of the Company’s inventories as of July 31, 2022, January 31, 2022 and July 31, 2021:

	7/31/2022		1/31/2022		7/31/2021
	(in thousands)
Finished goods	$	26,336	$	16,731	$	14,163
Work in process	19,138		14,732		14,061
Raw materials	15,754		15,910		14,169
Total inventories	$	61,228	$	47,373	$	42,393

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Leases (Tables)

6 Months Ended

Jul. 31, 2022

Leases [Abstract]

Quantitative Information of Leases

The quantitative information regarding our leases is as follows:

	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022			7/31/2021
	(in thousands, except lease term and discount rate)
Operating lease cost	$	1,288	$	1,283	$	2,615		$	2,520
Short-term lease cost	79		68		176			165
Sublease income	(10)		(10)		(20)			(20)
Variable lease cost	278		77		531			607
Total lease cost	$	1,635	$	1,418	$	3,302		$	3,272
Other operating leases information:
Cash paid for amounts included in the measurement of lease liabilities					$	2,880		$	2,712
Right-of-use assets obtained in exchange for new lease liabilities					$	398		$	165
Weighted-average remaining lease term (years)					2.7			3.6
Weighted-average discount rate					6.38		%	6.40		%

Schedule of Minimum Future Lease Payments

Minimum future lease payments for operating leases in effect as of July 31, 2022, are as follows:

	Operating Lease
For the year ending January 31,	(in thousands)
Remaining of 2023	$	2,829
2024	5,617
2025	5,615
2026	1,401
2027	—
Thereafter	—
Remaining balance of lease payments	$	15,462
Short-term lease liabilities	4,909
Long-term lease liabilities	9,241
Total lease liabilities	$	14,150
Difference between undiscounted cash flows and discounted cash flows	$	1,312

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Debt (Tables)

6 Months Ended

Jul. 31, 2022

Debt Disclosure [Abstract]

Outstanding balances of long-term debt

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

	7/31/2022		1/31/2022		7/31/2021
	(in thousands)
Revolving credit line	$	32,502	$	9,551	$	14,857
Other	4,738		4,962		5,407
Total debt	37,240		14,513		20,264
Less current portion	22,736		340		5,526
Non-current portion	$	14,504	$	14,173	$	14,738

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Net income (loss) per Share (Tables)

6 Months Ended

Jul. 31, 2022

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022		7/31/2021
	(In thousands, except per share data)
Net income (loss)	$	9,680	$	3,760	$	4,596	$	(149)
Weighted average shares of common stock outstanding	16,108		15,920		16,071		15,872
Dilutive effect of common stock equivalents from equity incentive plans	—		9		—		—
Totals	16,108		15,929		16,071		15,872
Net income (loss) per share - basic	$	0.60	$	0.24	$	0.29	$	(0.01)
Net income (loss) per share - diluted (a)	$	0.60	$	0.24	$	0.29	$	(0.01)

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Retirement Plans (Tables)

6 Months Ended

Jul. 31, 2022

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 and six months ended July 31, 2022 and 2021 were as follows:

	Combined Employee Retirement Plans
	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022		7/31/2021
	(in thousands)
Service cost	$	—	$	—	$	—	$	—
Interest cost	299		280		597		561
Expected return on plan assets	(237)		(218)		(474)		(436)
Plan settlement	—		220		—		220
Amortization of prior service cost	—		—		—		—
Recognized net actuarial loss	134		442		268		885
Benefit cost	$	196	$	724	$	391	$	1,230

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Warranty Accrual (Tables)

6 Months Ended

Jul. 31, 2022

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability

The following is a summary of the Company’s warranty-claim activity for the three and six months ended July 31, 2022 and 2021:

	Three Months Ended				Six Months Ended
	7/31/2022		7/31/2021		7/31/2022		7/31/2021
	(in thousands)
Beginning balance	$	600	$	700	$	600	$	700
Provision	116		13		150		56
Costs incurred	(66)		(13)		(100)		(56)
Ending balance	$	650	$	700	$	650	$	700

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Seasonality (Details)	6 Months Ended
	Jul. 31, 2022
Sales [Member]
Seasonality (Textual) [Abstract]
The market for educational furniture is marked by extreme seasonality	50.00%

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Inventories (Details) - USD ($) $ in Thousands	Jul. 31, 2022	Jan. 31, 2022	Jul. 31, 2021
Inventory Disclosure [Abstract]
Finished goods	$ 26,336	$ 16,731	$ 14,163
Work in process	19,138	14,732	14,061
Raw materials	15,754	15,910	14,169
Total inventories	$ 61,228	$ 47,373	$ 42,393

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Leases - ASC 842 Quantitative Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Leases [Abstract]
Operating lease cost	$ 1,288	$ 1,283	$ 2,615	$ 2,520
Short-term lease cost	79	68	176	165
Sublease income	(10)	(10)	(20)	(20)
Variable lease cost	278	77	531	607
Total lease cost	$ 1,635	$ 1,418	3,302	3,272
Cash paid for amounts included in the measurement of lease liabilities			2,880	2,712
Right-of-use assets obtained in exchange for new lease liabilities			$ 398	$ 165
Weighted-average remaining lease term (years)	2 years 8 months 12 days	3 years 7 months 6 days	2 years 8 months 12 days	3 years 7 months 6 days
Weighted-average discount rate	6.38%	6.40%	6.38%	6.40%

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Leases - ASC 842 Minimum Lease Payments (Details) - USD ($) $ in Thousands	Jul. 31, 2022	Jan. 31, 2022	Jul. 31, 2021
Leases [Abstract]
Remaining of 2023	$ 2,829
2024	5,617
2025	5,615
2026	1,401
2027	0
Thereafter	0
Remaining balance of lease payments	15,462
Short-term lease liabilities	4,909	$ 4,734	$ 4,678
Long-term lease liabilities	9,241	$ 11,437	$ 13,429
Total lease liabilities	14,150
Difference between undiscounted cash flows and discounted cash flows	$ 1,312

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Debt (Long-term Debt) (Details) - USD ($) $ in Thousands	Jul. 31, 2022	Jan. 31, 2022	Jul. 31, 2021
Debt Instrument [Line Items]
Long-term debt	$ 37,240	$ 14,513	$ 20,264
Less current portion	22,736	340	5,526
Non-current portion	14,504	14,173	14,738
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Long-term debt	32,502	9,551	14,857
Other Debt [Member]
Debt Instrument [Line Items]
Long-term debt	$ 4,738	$ 4,962	$ 5,407

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Debt (Narrative) (Details)	3 Months Ended	6 Months Ended
	Apr. 30, 2022 USD ($)	Jul. 31, 2022 USD ($)	Oct. 31, 2022 USD ($)	Sep. 30, 2022 USD ($)	Aug. 31, 2022 USD ($)	Apr. 15, 2022 USD ($)	Dec. 07, 2021	Sep. 28, 2021
Line of Credit Facility [Line Items]
Line of credit facility, maximum amount outstanding during period	$ 3,000,000
Line Of Credit Facility, Borrowing Capacity, Term	$ 15,000,000
Line of credit facility, period for reduced borrowings during fourth quarter of each fiscal year (consecutive days)	30 days
Unused portion fee rate		0.375%
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. 21 To Credit Facility [Member] | Consecutive Four Fiscal Quarters Ending July 31, 2020
Line of Credit Facility [Line Items]
Minimum fixed charge coverage ratio								1.2
Amended And Restated Revolving Credit And Security Agreement, Number 2
Line of Credit Facility [Line Items]
Extension fee						$ 250,000
Waiver and amendment fee						75,000
Extension fee and waiver and amendment fee due at closing						200,000
Extension fee and waiver and amendment fee due at first anniversary of closing						$ 125,000
Amended And Restated Revolving Credit And Security Agreement, Number 2 | Consecutive Four Fiscal Quarters Ending July 31, 2020
Line of Credit Facility [Line Items]
Minimum fixed charge coverage ratio							1.00
Revolving Credit Facility [Member] | Amended And Restated Revolving Credit And Security Agreement, Number 2
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity		$ 65,000,000
Revolving Credit Facility [Member] | Amended And Restated Revolving Credit And Security Agreement, Number 2 | Forecast
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity			$ 45,000,000	$ 40,000,000	$ 70,000,000
PNC [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Remaining borrowing capacity		$ 37,498,000
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] | 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
Alternate Base Rate Loans [Member]
Line of Credit Facility [Line Items]
Interest rate		7.25%

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021	Jan. 31, 2022
Income Tax Disclosure [Abstract]
Valuation allowance	$ 9,241	$ 1,144	$ 9,241	$ 1,144	$ 11,412
Effective tax rate	3.00%	24.60%	0.30%	(36.70%)

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Net income (loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Earnings Per Share [Abstract]
Net income (loss)	$ 9,680	$ 3,760	$ 4,596	$ (149)
Weighted average shares outstanding - basic (shares)	16,108,000	15,920,000	16,071,000	15,872,000
Net effect of dilutive share-based on the treasury stock method using average market price (shares)	0	9,000	0	0
Totals (shares)	16,108,000	15,929,000	16,071,000	15,872,000
Net income (loss) per share - basic (usd per share)	$ 0.60	$ 0.24	$ 0.29	$ (0.01)
Net income (loss) per share - diluted (usd per share)	$ 0.60	$ 0.24	$ 0.29	$ (0.01)
Antidilutive shares (shares)			0	1,500

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Stock-Based Compensation (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Cost of Goods Sold [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 37,000	$ 55,000	$ 92,000	$ 110,000
Selling, General and Administrative Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	116,000	$ 198,000	314,000	$ 396,000
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 755,000		$ 755,000
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		1,000,000
Granted in the period (shares)			0
Vested in period (shares)			114,470
Forfeited in period (shares)			0
Awards available for future issuance (shares)	608,435		608,435
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		2,000,000
Vested in period (shares)			119,200

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Retirement Plans (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Pension Plan [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Plan settlement	$ 0	$ 220	$ 0	$ 220
United States [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Minimum annual contributions per employee, percent			1.00%
Maximum annual contributions per employee, percent			75.00%
Number of common shares held	1,221,095	991,899	1,221,095	991,899
Contributions by employer	$ 322	$ 207	$ 652	$ 391

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Retirement Plans (Periodic Pension Cost) (Details) - Pension Plan [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Components of Net Cost
Service cost	$ 0	$ 0	$ 0	$ 0
Interest cost	299	280	597	561
Expected return on plan assets	(237)	(218)	(474)	(436)
Plan settlement	0	220	0	220
Amortization of prior service cost	0	0	0	0
Recognized net actuarial loss	134	442	268	885
Benefit cost	$ 196	$ 724	$ 391	$ 1,230

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Warranty (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Warranty claim activity
Beginning balance	$ 600	$ 700	$ 600	$ 700
Provision	116	13	150	56
Costs incurred	(66)	(13)	(100)	(56)
Ending balance	$ 650	$ 700	$ 650	$ 700
Maximum [Member]
Warranty [Line Items]
Product warranty period			10 years

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Contingencies (Details) - Maximum	Jul. 31, 2022 USD ($)
Product Liability [Member]
Loss Contingencies [Line Items]
Self insurance retention	$ 250,000
Workers compensation Liability Insurance [Member]
Loss Contingencies [Line Items]
Self insurance retention	250,000
General Liability Loss
Loss Contingencies [Line Items]
Self insurance retention	50,000
Automobile Liability Loss [Member]
Loss Contingencies [Line Items]
Self insurance retention	50,000
Loss Liability [Member]
Loss Contingencies [Line Items]
Self insurance retention	$ 30,000,000

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Delivery Costs (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jul. 31, 2022	Jul. 31, 2021	Jul. 31, 2022	Jul. 31, 2021
Other Income and Expenses [Abstract]
Shipping and classroom delivery costs	$ 7,129,000	$ 5,112,000	$ 10,383,000	$ 8,033,000