FORM |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
(Exact Name of Registrant as Specified in its Charter) |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||||||||
ý | Smaller reporting company | |||||||||||||||||||
Emerging growth company |
Item 3. Defaults Upon Senior Securities | ||||||||
Item 4. Mine Safety Disclosures | ||||||||
Item 5. Other Information | ||||||||
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 |
4/30/2023 | 1/31/2023 | 4/30/2022 | |||||||||||||||
(In thousands) | |||||||||||||||||
Assets | |||||||||||||||||
Current assets | |||||||||||||||||
Cash | $ | $ | $ | ||||||||||||||
Trade accounts receivables, net | |||||||||||||||||
Other receivables | |||||||||||||||||
Income tax receivable | |||||||||||||||||
Inventories | |||||||||||||||||
Prepaid expenses and other current assets | |||||||||||||||||
Total current assets | |||||||||||||||||
Non-current assets | |||||||||||||||||
Property, plant and equipment | |||||||||||||||||
Land | |||||||||||||||||
Land improvements | |||||||||||||||||
Buildings and building improvements | |||||||||||||||||
Machinery and equipment | |||||||||||||||||
Leasehold improvements | |||||||||||||||||
Total property, plant and equipment | |||||||||||||||||
Less accumulated depreciation and amortization | |||||||||||||||||
Net property, plant and equipment | |||||||||||||||||
Operating lease right-of-use assets | |||||||||||||||||
Deferred tax assets, net | |||||||||||||||||
Other assets, net | |||||||||||||||||
Total assets | $ | $ | $ |
4/30/2023 | 1/31/2023 | 4/30/2022 | |||||||||||||||
(In thousands, except share and par value data) | |||||||||||||||||
Liabilities | |||||||||||||||||
Current liabilities | |||||||||||||||||
Accounts payable | $ | $ | $ | ||||||||||||||
Accrued compensation and employee benefits | |||||||||||||||||
Current portion of long-term debt | |||||||||||||||||
Current portion operating lease liability | |||||||||||||||||
Other accrued liabilities | |||||||||||||||||
Total current liabilities | |||||||||||||||||
Non-current liabilities | |||||||||||||||||
Accrued self-insurance retention | |||||||||||||||||
Accrued pension expenses | |||||||||||||||||
Income tax payable | |||||||||||||||||
Long-term debt, less current portion | |||||||||||||||||
Operating lease liability, less current portion | |||||||||||||||||
Other long-term liabilities | |||||||||||||||||
Total non-current liabilities | |||||||||||||||||
Commitments and contingencies (Notes 6, 7 and 13) | |||||||||||||||||
Stockholders’ equity | |||||||||||||||||
Preferred stock: | |||||||||||||||||
Authorized | |||||||||||||||||
Common stock: | |||||||||||||||||
Authorized | |||||||||||||||||
Additional paid-in capital | |||||||||||||||||
Accumulated deficit | ( | ( | ( | ||||||||||||||
Accumulated other comprehensive loss | ( | ( | ( | ||||||||||||||
Total stockholders’ equity | |||||||||||||||||
Total liabilities and stockholders’ equity | $ | $ | $ |
Three months ended | |||||||||||
4/30/2023 | 4/30/2022 | ||||||||||
(In thousands, except per share data) | |||||||||||
Net sales | $ | $ | |||||||||
Costs of goods sold | |||||||||||
Gross profit | |||||||||||
Selling, general and administrative expenses | |||||||||||
Operating loss | ( | ( | |||||||||
Unrealized gain on investment in trust account | ( | ||||||||||
Pension expense | |||||||||||
Interest expense | |||||||||||
Loss before income taxes | ( | ( | |||||||||
Income tax benefit | ( | ( | |||||||||
Net loss | $ | ( | $ | ( | |||||||
Net loss per common share: | |||||||||||
Basic | $ | ( | $ | ( | |||||||
Diluted | $ | ( | $ | ( | |||||||
Weighted average shares of common stock outstanding: | |||||||||||
Basic | |||||||||||
Diluted |
Three months ended | |||||||||||
4/30/2023 | 4/30/2022 | ||||||||||
(In thousands) | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Other comprehensive income: | |||||||||||
Pension adjustments (net of tax expense of $ | |||||||||||
Net comprehensive loss | $ | ( | $ | ( |
Three months ended | |||||||||||
4/30/2023 | 4/30/2022 | ||||||||||
(In thousands) | |||||||||||
Operating activities | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Non-cash lease benefits | ( | ( | |||||||||
Provision for doubtful accounts | |||||||||||
Amortization of debt issuance costs | |||||||||||
Deferred income taxes | ( | ( | |||||||||
Stock-based compensation | |||||||||||
Amortization of net actuarial loss for pension plans | |||||||||||
Non-cash unrealized gain on investment | ( | ||||||||||
Changes in operating assets and liabilities: | |||||||||||
Trade accounts receivable | |||||||||||
Other receivables | |||||||||||
Inventories | ( | ( | |||||||||
Income taxes | ( | ||||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Accounts payable and accrued liabilities | ( | ||||||||||
Net cash used in operating activities | ( | ( | |||||||||
Investing activities: | |||||||||||
Capital expenditures | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Financing activities: | |||||||||||
Borrowing from long-term debt | |||||||||||
Repayment of long-term debt | ( | ( | |||||||||
Payment on deferred financing costs | ( | ( | |||||||||
Net cash provided by financing activities | |||||||||||
Net decrease in cash | ( | ( | |||||||||
Cash at beginning of period | |||||||||||
Cash at end of period | $ | $ |
Three-Month Period Ended April 30, 2023 | ||||||||||||||||||||||||||||||||||||||
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, 2023 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Cash dividends | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Pension adjustments, net of tax effect of $ | — | — | — | — | ||||||||||||||||||||||||||||||||||
Shares vested and others | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance at April 30, 2023 | $ | $ | $ | ( | $ | ( | $ |
Three-Month Period Ended April 30, 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 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Cash dividends | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Pension adjustments, net of tax effect of $ | — | — | — | — | ||||||||||||||||||||||||||||||||||
Shares vested and others | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance at April 30, 2022 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
4/30/2023 | 1/31/2023 | 4/30/2022 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Finished goods | $ | $ | $ | |||||||||||||||||
Work in process | ||||||||||||||||||||
Raw materials | ||||||||||||||||||||
Total inventories | $ | $ | $ |
Three Months Ended | ||||||||||||||
4/30/2023 | 4/30/2022 | |||||||||||||
(in thousands, except lease term and discount rate) | ||||||||||||||
Operating lease cost | $ | $ | ||||||||||||
Short-term lease cost | ||||||||||||||
Sublease income | ( | ( | ||||||||||||
Variable lease cost | ||||||||||||||
Total lease cost | $ | $ | ||||||||||||
Other operating leases information: | ||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||||||||
Right-of-use assets obtained in exchange for new lease liabilities | $ | $ | ||||||||||||
Weighted-average remaining lease term (years) | ||||||||||||||
Weighted-average discount rate | % | % |
Operating Lease | |||||
For the year ending January 31, | (in thousands) | ||||
Remaining of 2024 | $ | ||||
2025 | |||||
2026 | |||||
2027 | |||||
2028 | |||||
Thereafter | |||||
Remaining balance of lease payments | $ | ||||
Short-term lease liabilities | $ | ||||
Long-term lease liabilities | |||||
Total lease liabilities | $ | ||||
Difference between undiscounted cash flows and discounted cash flows | $ |
4/30/2023 | 1/31/2023 | 4/30/2022 | |||||||||||||||
(in thousands) | |||||||||||||||||
Revolving credit line | $ | $ | $ | ||||||||||||||
Other | |||||||||||||||||
Total debt | |||||||||||||||||
Less current portion | |||||||||||||||||
Non-current portion | $ | $ | $ |
Three Months Ended | |||||||||||
4/30/2023 | 4/30/2022 | ||||||||||
(In thousands, except per share data) | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Weighted average shares of common stock outstanding | |||||||||||
Dilutive effect of common stock equivalents from equity incentive plans (a) | |||||||||||
Totals | |||||||||||
Net loss per share - basic | $ | ( | $ | ( | |||||||
Net loss per share - diluted | $ | ( | $ | ( |
Three Months Ended | ||||||||||||||
4/30/2023 | 4/30/2022 | |||||||||||||
(in thousands) | ||||||||||||||
Cost of goods sold | $ | $ | ||||||||||||
Selling, general and administrative expenses | ||||||||||||||
Total stock-based compensation expense | $ | $ | ||||||||||||
Three Months Ended | |||||||||||
4/30/2023 | 4/30/2022 | ||||||||||
(in thousands) | |||||||||||
Service cost | $ | $ | |||||||||
Interest cost | |||||||||||
Expected return on plan assets | ( | ( | |||||||||
Plan settlement | |||||||||||
Amortization of prior service cost | |||||||||||
Recognized net actuarial loss | |||||||||||
Benefit cost | $ | $ |
Three Months Ended | |||||||||||
4/30/2023 | 4/30/2022 | ||||||||||
(in thousands) | |||||||||||
Beginning balance | $ | $ | |||||||||
Provision | |||||||||||
Costs incurred | ( | ( | |||||||||
Ending balance | $ | $ |
Exhibit Number | Document | ||||
31.1 | |||||
31.2 | |||||
32.1 |
VIRCO MFG. CORPORATION | ||||||||
Date: June 12, 2023 | By: | /s/ Robert E. Dose | ||||||
Robert E. Dose | ||||||||
Vice President — Finance | ||||||||
(Principal Financial Officer) |
/s/ Robert A. Virtue | |||||
Robert A. Virtue | |||||
Date: June 12, 2023 | Chief Executive Officer and Chairman of the Board (Principal Executive Officer) |
/s/ Robert E. Dose | |||||
Robert E. Dose | |||||
Date: June 12, 2023 | Vice President — Finance, Secretary and Treasurer (Principal Financial Officer) |
/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) |
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Apr. 30, 2023 |
Jan. 31, 2023 |
Apr. 30, 2022 |
---|---|---|---|
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 | 16,210,985 | 16,102,023 |
Common stock, shares outstanding (shares) | 16,210,985 | 16,210,985 | 16,102,023 |
Unaudited Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
|
Income Statement [Abstract] | ||
Net sales | $ 34,943 | $ 32,084 |
Costs of goods sold | 21,741 | 22,377 |
Gross profit | 13,202 | 9,707 |
Selling, general and administrative expenses | 14,514 | 14,451 |
Operating loss | (1,312) | (4,744) |
Unrealized gain (loss) on investment in trust account | (299) | 0 |
Pension expense | 161 | 195 |
Interest expense | 712 | 427 |
Loss before income taxes | (1,886) | (5,366) |
Income tax benefit | (444) | (282) |
Net loss | $ (1,442) | $ (5,084) |
Net loss per common share: | ||
Basic (usd per share) | $ (0.09) | $ (0.32) |
Diluted (usd per share) | $ (0.09) | $ (0.32) |
Weighted average shares of common stock outstanding: | ||
Basic (shares) | 16,211 | 16,033 |
Diluted (shares) | 16,211 | 16,033 |
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
|
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (1,442) | $ (5,084) |
Other comprehensive income: | ||
Pension adjustments, net of tax effect | 0 | 135 |
Net comprehensive loss | $ (1,442) | $ (4,949) |
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
|
Statement of Comprehensive Income [Abstract] | ||
Pension adjustment, tax expense | $ 0 | $ 0 |
Unaudited Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
|
Statement of Stockholders' Equity [Abstract] | ||
Pension adjustments, tax | $ 0 | $ 0 |
Basis of Presentation |
3 Months Ended |
---|---|
Apr. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of PresentationThe 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, 2023 (“Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended April 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2024. The balance sheet at January 31, 2023 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. |
Seasonality and Management Use of Estimates |
3 Months Ended |
---|---|
Apr. 30, 2023 | |
Seasonality [Abstract] | |
Seasonality and Management Use of Estimates | Seasonality and Management Use of EstimatesThe 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 an overall higher accounts receivable balance 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. Historically Virco ships approximately 50% of its annual revenue in the months of June, July, and August. In fiscal 2022, the seasonal peak was distorted due to severe supply chain interruptions, labor shortages, and COVID-19 related employee absences and the Company delivered less than 40% of sales during June, July, and August. In fiscal year ended January 31, 2023, the Company started to return to the traditional seasonality and delivered approximately 47% of annual sales in June, July, and August. 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. |
New Accounting Pronouncements |
3 Months Ended |
---|---|
Apr. 30, 2023 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
New Accounting Pronouncements | The Company evaluates all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB") for consideration of their applicability to our condensed consolidated financial statements. We have assessed all ASUs issued but not yet adopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a material impact. |
Revenue Recognition |
3 Months Ended |
---|---|
Apr. 30, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Revenue RecognitionThe 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 |
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Apr. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventory is valued at the lower of cost or net realizable value (determined on a first-in, first-out basis) 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. The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation. Inventory increased by $19,343,000 at April 30, 2023 compared to April 30, 2022. The entire increase in inventory was attributable to increased quantity. The cost and valuation of inventory was stable. The quantity of inventory was increased in response to a material increase in unshipped sales orders (backlog). The majority of the backlog is scheduled for delivery during the traditional seasonal peak from June through August. 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. The following table presents a breakdown of the Company’s inventories as of April 30, 2023, January 31, 2023 and April 30, 2022:
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases The Company has operating leases on real property, equipment, and automobiles, expiring at various dates through 2026. 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. Pursuant to ASC 842 - Leases, the Company uses the implicit rate when readily determinable, or the incremental borrowing rate. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments using Company specific credit spreads. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for our operating leases is recognized on a straight-line basis over the lease term. The Company has an operating lease for its corporate office, manufacturing and distribution facility located in Torrance, CA, currently with a remaining lease term through April 2025. The Company's lease terms include options to extend or terminate the lease only when it is reasonably certain that we exercise that option. The Company leases equipment under a 5-year operating lease arrangement. The Company has the option of buying the assets at the end of the lease period at a price that does not result in the Company being reasonably certain of exercising the option. In addition, the Company leases trucks and automobiles under operating leases that include certain fleet management and maintenance services. Certain of the leases contain renewal or purchase options and require payment for property taxes and insurance. The Company records lease expense on a straight-line basis based on the contractual lease payments. In accordance with ASC 842, the Company recognizes the present value of the future lease commitments as an operating lease liability, and a corresponding right-of-use asset (“ROU asset”), net of tenant allowances. Tenant improvements and related tenant allowances are recorded as a reduction to the ROU asset. The Company elected to account for leases with an original term of 12 months or less that do not contain a purchase option as short-term leases. Additionally, certain of the leases provide for variable payment for property taxes, insurance, and common area maintenance payments among others. The Company recognizes variable lease expenses for these leases in the period incurred. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The quantitative information regarding our leases is as follows:
Minimum future lease payments for operating leases in effect as of April 30, 2023, are as follows:
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Outstanding balances for the Company’s long-term debt were as follows:
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 $3.0 million 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. In connection with the Restated Credit Agreement, the Company also agreed to pay to PNC Bank a non-refundable fee of $50,000. 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 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 $65.0 million 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 $15.0 million from January through July of each year, minus undrawn amounts of letters of credit and reserves and (ii) an equipment loan of $2.0 million. 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 $10.0 million 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 covenants requiring a minimum fixed charge coverage ratio and limits on capital expenditures. The Company was in compliance with its debt covenants as of April 30, 2023. The Company's revolving line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. Approximately $16.6 million was available for borrowing as of April 30, 2023. The interest rate range for outstanding loan balances during the quarter ended April 30, 2023 was 7.65% to 9.75%. The Company also incurs a fee on the unused portion of the revolving line of credit at a rate of 0.375%. In addition to the outstanding debt balance of $30.1 million on the Company's revolving credit line, the Company also carries a mortgage on a manufacturing building in Conway Arkansas. The original note was dated August 2017 for $5.8 million, at a fixed rate of 4% per year and 20 years term. The outstanding amount under this note was $4.6 million as of April 30, 2023. On May 19, 2023, the Company entered into Amendment No. 3 to Amended and Restated Revolving Credit and Security Agreement (“Amendment No. 3”) with PNC, with an effective date of May 5, 2023. Amendment No. 3 amended the Restated Credit Agreement and the secured revolving line of credit provided to the Company under the revolving credit facility to reflect the following material changes: i.Maximum size of the PNC line of credit has been increased to $72.5 million during the months of June through August of 2023, to provide additional availability for the Company’s forecast through the 2023 peak borrowing period; ii.Increase in the total inventory sublimit under the Credit Agreement to $35.0 million and increase in the Assemble-to-ship (ATS) inventory sublimit to $15.0 million during the months of May through August of 2023; iii.The Company agreed to pay an amendment fee of $50,000, which is 0.67% on the incremental line increase of $7.5 million; and iv.Increase in the Applicable Margin (as defined in the Credit Agreement) of 25 basis points. Management believes that the carrying value of debt approximated fair value at April 30, 2023, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.
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Income Taxes |
3 Months Ended |
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Apr. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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 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, to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets. Valuation allowances of $575,000, $864,000 and $10,099,000 as of April 30, 2023, January 31, 2023 and April 30, 2022, 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. For the three months ended April 30, 2023 and 2022, the effective income tax rates were 23.5% and 5.3%, respectively. The change in effective tax rates for the three months ended April 30, 2023 was primarily due to the change in forecasted mix of income before federal and state income taxes and estimated permanent differences. The effective tax rate for the three months ended April 30, 2022 was primarily due to the recording of a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards. The January 31, 2018 and subsequent fiscal years remain open for examination by the IRS and state tax authorities. The Company is not currently under any state examination.
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Net loss per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) per Share | Net Loss per Share Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding. The following table sets forth the computation of basic net loss per share:
(a) At April 30, 2023 and 2022, approximately 85,000 and 169,000 shares of common stock equivalents were excluded from 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 |
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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”). The 2011 Plan expired in 2021 and no new award may be made under 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 three-month period ended April 30, 2023, the Company granted 0 awards, vested 0 shares according to their terms and forfeited 0 shares under the 2019 Plan. As of April 30, 2023, there were approximately 608,435 shares available for future issuance under the 2019 Plan. The following table summarizes the stock-based compensation expense related to restricted stock awards recognized in the Company's statement of operations for the three months ended April 30, 2023 and 2022:
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Retirement Plans |
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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, 2023, benefit accruals under the VIP Plan were frozen since December 31, 2003. There is no service cost incurred under the VIP Plan. The following table summarizes the net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2023 and 2022:
401(k) Retirement Plan The Company’s retirement plan, which covers all U.S. employees, allows participants to defer from 1% to 75% of their eligible compensation through a 401(k)-retirement program. The plan includes Virco stock as one of the investment options. At April 30, 2023 and 2022, the plan held 1,320,482 shares and 1,165,985 shares of Virco stock, respectively. For the three months ended April 30, 2023 and 2022, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $403,000 and $330,000 respectively.
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Warranty Accrual |
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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 months ended April 30, 2023 and 2022:
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Contingencies |
3 Months Ended |
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Apr. 30, 2023 | |
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 |
3 Months Ended |
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Apr. 30, 2023 | |
Other Income and Expenses [Abstract] | |
Delivery Costs | Delivery CostsFor the three months ended April 30, 2023 and 2022, shipping and classroom delivery costs of approximately $3,343,000 and $3,254,000, respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. |
Subsequent Events |
3 Months Ended |
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Apr. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsOn May 19, 2023, the Company executed Amendment No. 3 to the Restated Credit Agreement, with an effective date of May 5, 2023. See Note 7. |
Inventories (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | The following table presents a breakdown of the Company’s inventories as of April 30, 2023, January 31, 2023 and April 30, 2022:
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Leases (Tables) |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quantitative Information of Leases | The quantitative information regarding our leases is as follows:
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Schedule of Minimum Future Lease Payments | Minimum future lease payments for operating leases in effect as of April 30, 2023, are as follows:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding balances of long-term debt | Outstanding balances for the Company’s long-term debt were as follows:
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Net income (loss) per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted |
(a) At April 30, 2023 and 2022, approximately 85,000 and 169,000 shares of common stock equivalents were excluded from 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 (Tables) |
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Apr. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | The following table summarizes the stock-based compensation expense related to restricted stock awards recognized in the Company's statement of operations for the three months ended April 30, 2023 and 2022:
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Retirement Plans (Tables) |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Defined Benefit Plans Disclosures | he net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2023 and 2022:
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Warranty Accrual (Tables) |
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Apr. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Product Warranty Liability | The following is a summary of the Company’s warranty-claim activity for the three months ended April 30, 2023 and 2022:
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Seasonality (Details) |
3 Months Ended | 12 Months Ended | |
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Apr. 30, 2023 |
Jan. 31, 2023 |
Jan. 31, 2022 |
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Sales [Member] | |||
Seasonality (Textual) [Abstract] | |||
The market for educational furniture is marked by extreme seasonality | 50.00% | 47.00% | 40.00% |
Inventories (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Apr. 30, 2023 |
Jan. 31, 2023 |
Apr. 30, 2022 |
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Inventory Disclosure [Abstract] | |||
Increase In Inventories | $ 19,343 | ||
Finished goods | 34,370 | $ 25,740 | $ 29,919 |
Work in process | 32,918 | 25,303 | 21,719 |
Raw materials | 18,352 | 16,363 | 14,659 |
Total inventories | $ 85,640 | $ 67,406 | $ 66,297 |
Leases - ASC 842 Quantitative Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
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Leases [Abstract] | ||
Operating lease cost | $ 1,269 | $ 1,327 |
Short-term lease cost | 108 | 97 |
Sublease income | (10) | (10) |
Variable lease cost | 261 | 253 |
Total lease cost | 1,628 | 1,667 |
Cash paid for amounts included in the measurement of lease liabilities | 1,433 | 1,454 |
Right-of-use assets obtained in exchange for new lease liabilities | $ 292 | $ 98 |
Weighted-average remaining lease term (years) | 2 years 2 months 12 days | 2 years 10 months 24 days |
Weighted-average discount rate | 6.33% | 6.38% |
Leases - ASC 842 Minimum Lease Payments (Details) - USD ($) $ in Thousands |
Apr. 30, 2023 |
Jan. 31, 2023 |
Apr. 30, 2022 |
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Leases [Abstract] | |||
Remaining of 2024 | $ 4,344 | ||
2025 | 5,794 | ||
2026 | 1,536 | ||
2027 | 2 | ||
2028 | 0 | ||
Thereafter | 0 | ||
Remaining balance of lease payments | 11,676 | ||
Short-term lease liabilities | 5,271 | $ 5,082 | $ 4,769 |
Long-term lease liabilities | 5,648 | $ 6,796 | $ 10,297 |
Total lease liabilities | 10,919 | ||
Difference between undiscounted cash flows and discounted cash flows | $ 757 |
Debt (Long-term Debt) (Details) - USD ($) $ in Thousands |
Apr. 30, 2023 |
Jan. 31, 2023 |
Apr. 30, 2022 |
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Debt Instrument [Line Items] | |||
Long-term debt | $ 34,685 | $ 21,744 | $ 33,469 |
Less current portion | 20,362 | 7,360 | 18,905 |
Non-current portion | 14,323 | 14,384 | 14,564 |
Revolving Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | 30,121 | 17,122 | 28,674 |
Other Debt [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 4,564 | $ 4,622 | $ 4,795 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
Jan. 31, 2023 |
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Income Tax Disclosure [Abstract] | |||
Valuation allowance | $ 575 | $ 10,099 | $ 864 |
Effective tax rate | 23.50% | 5.30% |
Net income (loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
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Earnings Per Share [Abstract] | ||
Net loss | $ (1,442) | $ (5,084) |
Weighted average shares outstanding - basic (shares) | 16,211 | 16,033 |
Net effect of dilutive share-based on the treasury stock method using average market price (shares) | 0 | 0 |
Totals (shares) | 16,211 | 16,033 |
Net income (loss) per share - basic (usd per share) | $ (0.09) | $ (0.32) |
Net income (loss) per share - diluted (usd per share) | $ (0.09) | $ (0.32) |
Incremental common shares excluded to dilutive effect | 85 | 169 |
Retirement Plans (Periodic Pension Cost) (Details) - Pension Plan [Member] - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
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Components of Net Cost | ||
Service cost | $ 0 | $ 0 |
Interest cost | 360 | 298 |
Expected return on plan assets | (199) | (237) |
Plan settlement | 0 | 0 |
Amortization of prior service cost | 0 | 0 |
Recognized net actuarial loss | 0 | 134 |
Benefit cost | $ 161 | $ 195 |
Retirement Plans (Narrative) (Details) - United States [Member] - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
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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 | 1,320,482 | 1,165,985 |
Contributions by employer | $ 403 | $ 330 |
Warranty (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
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Warranty claim activity | ||
Beginning balance | $ 600 | $ 600 |
Provision | 41 | 34 |
Costs incurred | (41) | (34) |
Ending balance | $ 600 | $ 600 |
Maximum [Member] | ||
Warranty [Line Items] | ||
Product warranty period | 10 years |
Contingencies (Details) - Maximum |
Apr. 30, 2023
USD ($)
|
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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 |
Delivery Costs (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Apr. 30, 2023 |
Apr. 30, 2022 |
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Other Income and Expenses [Abstract] | ||
Shipping and classroom delivery costs | $ 3,343,000 | $ 3,254,000 |