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 October 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 Inco ...

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended July 31, 2022 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q 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 ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This section provides the company's unaudited condensed consolidated financial statements and management's analysis for the quarter [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and notes, reflecting increased sales but a wider net loss [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20condensed%20consolidated%20balance%20sheets) Total assets increased to **$139.4 million** driven by a **$18.9 million** inventory rise, while liabilities grew to **$96.7 million**, leading to a decrease in equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | 4/30/2022 | 1/31/2022 | 4/30/2021 | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Total current assets | $82,538 | $68,847 | $59,988 | | Inventories | $66,297 | $47,373 | $42,875 | | Total assets | $139,407 | $126,445 | $133,672 | | **Liabilities & Equity** | | | | | Total current liabilities | $54,215 | $36,284 | $29,642 | | Total liabilities | $96,657 | $79,000 | $82,814 | | Total stockholders' equity | $42,750 | $47,446 | $50,858 | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20condensed%20consolidated%20statements%20of%20operations) Net sales increased **13.1%** to **$32.1 million**, but net loss widened to **$5.1 million** due to higher costs and increased SG&A expenses Statements of Operations Highlights (in thousands, except per share data) | Metric | Three months ended 4/30/2022 | Three months ended 4/30/2021 | | :--- | :--- | :--- | | Net sales | $32,084 | $28,367 | | Gross profit | $9,707 | $7,688 | | Operating loss | $(4,744) | $(4,295) | | Net loss | $(5,084) | $(3,909) | | Net loss per share (Basic & Diluted) | $(0.32) | $(0.25) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20condensed%20consolidated%20statements%20of%20cash%20flows) Net cash used in operating activities increased to **$19.0 million** due to inventory build-up, offset by **$18.8 million** from financing activities, resulting in a slight cash decrease Condensed Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three months ended 4/30/2022 | Three months ended 4/30/2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,966) | $(6,958) | | Net cash used in investing activities | $(609) | $(233) | | Net cash provided by financing activities | $18,755 | $7,345 | | Net (decrease) increase in cash | $(820) | $154 | | Cash at end of period | $539 | $556 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20unaudited%20condensed%20consolidated%20financial%20statements) Notes detail accounting policies, business seasonality requiring debt-financed inventory, a waived debt covenant violation, and a **$10.1 million** valuation allowance against deferred tax assets - The educational furniture market's extreme seasonality requires the company to build significant inventory during its first and second quarters, typically financed through third-party debt, in anticipation of peak sales from June to August[31](index=31&type=chunk) - The company was in violation of its financial covenants as of January 31, 2022, due to losses from supply chain disruptions. On April 15, 2022, it entered into an amendment that waived the violation, extended the credit facility's maturity to 2027, and increased borrowing limits[50](index=50&type=chunk)[54](index=54&type=chunk) - Due to cumulative operating losses over the last three fiscal years, the company recorded a valuation allowance of **$10.1 million** against its deferred tax assets as of April 30, 2022, as their realization is no longer more-likely-than-not[55](index=55&type=chunk) Inventory Breakdown (in thousands) | Category | 4/30/2022 | 1/31/2022 | 4/30/2021 | | :--- | :--- | :--- | :--- | | Finished goods | $29,919 | $16,731 | $16,887 | | Work in process | $21,719 | $14,732 | $14,630 | | Raw materials | $14,659 | $15,910 | $11,358 | | **Total inventories** | **$66,297** | **$47,373** | **$42,875** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses performance impacted by seasonality and supply chain issues, with net sales up **13.1%** but increased losses, while order backlog grew to **$85.7 million** and credit facility was amended - The company experienced a **27.9%** increase in orders during the quarter, leading to a year-over-year increase in the unshipped order backlog of nearly **$36 million**, from **$49.7 million** to **$85.7 million**[74](index=74&type=chunk) - Gross profit margin improved to **30.3%** from **27.1%** YoY. However, this was not enough to offset cost increases, as a price hike implemented in January 2022 did not fully impact the quarter due to a large backlog of lower-priced orders[82](index=82&type=chunk) - SG&A expenses increased by approximately **$2.5 million** compared to the prior year, driven by higher variable freight costs, selling expenses, and legal fees related to intellectual property enforcement and advising a special committee on a rejected acquisition proposal[84](index=84&type=chunk) - Inventory increased by **$23.4 million** compared to April 30, 2021. Approximately **40%** of this increase was due to higher material and labor costs, while **60%** was due to increased quantities in anticipation of higher summer sales[88](index=88&type=chunk) - Following a covenant violation, the company amended its credit agreement on April 15, 2022, extending the maturity to April 2027 and increasing the borrowing limit to **$70 million** for the peak summer months[90](index=90&type=chunk)[91](index=91&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Virco Mfg. Corporation is exempt from providing 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[98](index=98&type=chunk) [Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of April 30, 2022, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of April 30, 2022[99](index=99&type=chunk) - There have been no changes in the Company's internal control over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[102](index=102&type=chunk) [Part II. Other Information](index=22&type=section&id=Part%20II.%20Other%20Information) This section covers legal proceedings, risk factors, and other required disclosures not included in the financial statements [Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) Management believes ongoing legal proceedings from ordinary business operations will not materially impact the company's financial position or results - Management is of the opinion that legal proceedings arising from normal business operations will not materially affect the Company's financial position, results of operations or cash flows[105](index=105&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2022 - The risk factors associated with the business have not materially changed from those disclosed in the Form 10-K for the fiscal year ended January 31, 2022[106](index=106&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[107](index=107&type=chunk) [Defaults Upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[108](index=108&type=chunk) [Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[109](index=109&type=chunk) [Other Information](index=22&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - None[110](index=110&type=chunk) [Exhibits](index=22&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including credit agreement amendments, CEO/CFO certifications, and XBRL data files - Lists exhibits filed with the report, including Amendment No. 2 to the Revolving Credit and Security Agreement, CEO and CFO certifications (31.1, 31.2, 32.1), and XBRL instance documents[111](index=111&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☑ Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended January 31, 2022 ☐ 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 ot ...

Orders and Backlog - Orders received during the nine months ended October 31, 2021 increased by 35.1% compared to the same period in 2020, with significant increases of 26.7% in Q1, 29.9% in Q2, and 59.0% in Q3[96] - The order backlog at October 31, 2021 was $50,955,000, representing a 195% increase from $17,249,000 at the same date in 2020[96] Financial Performance - The company earned a pre-tax profit of $1,620,000 on sales of $57,331,000 for the three months ended October 31, 2021, compared to a pre-tax profit of $4,864,000 on sales of $57,221,000 in the prior year[108] - Gross margin for the third quarter was 35.4% of sales, down from 38.9% in the prior year, primarily due to increased raw material costs[109] - Selling, general and administrative expenses for the three months ended October 31, 2021 increased due to higher variable freight and selling expenses[110] Production and Sales Outlook - Production rates decreased by 25% in Q1 and 8% in Q2 compared to the same periods last year, but increased by 39% in Q3[100] - The company anticipates that sales for the fourth quarter ending January 31, 2022 may be double compared to the same period last year, contingent on no unforeseen supply chain or COVID-related issues[106] Accounts and Expenditures - Accounts receivable increased by $7,947,000 at October 31, 2021, reflecting a shift in sales timing compared to the prior year[119] - Capital expenditures for the nine months ended October 31, 2021 were $2,552,000, up from $1,768,000 in the same period last year[121] Risk Factors - The company successfully negotiated an amendment to its credit agreement due to non-compliance with the fixed-charge coverage ratio requirement as of October 31, 2021[123] - The Company has made forward-looking statements regarding its performance and market conditions, indicating potential risks and uncertainties that could affect actual results[127] - Key risks include availability and cost of materials, particularly steel, and labor costs, which may impact product demand and pricing[127] - The Company is classified as a smaller reporting company and is not required to provide detailed market risk disclosures[129]

Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Virco Mfg. Corporation's unaudited condensed consolidated financial statements show increased six-month net sales, flat Q2 sales, and a reduced net loss Condensed Consolidated Balance Sheets Consolidated Balance Sheet Summary (in thousands) | Balance Sheet Item | Jul 31, 2021 | Jan 31, 2021 | Jul 31, 2020 | | :--- | :--- | :--- | :--- | | **Total current assets** | $79,760 | $50,967 | $85,779 | | **Total assets** | $149,922 | $125,036 | $163,369 | | **Total current liabilities** | $43,674 | $22,106 | $51,744 | | **Total liabilities** | $92,965 | $70,849 | $108,637 | | **Total stockholders' equity** | $56,957 | $54,187 | $54,732 | Condensed Consolidated Statements of Income & Operations Three Months Ended July 31 (in thousands, except per share data) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net sales | $59,022 | $59,456 | -0.7% | | Gross profit | $22,319 | $23,203 | -3.8% | | Operating income | $6,068 | $7,715 | -21.3% | | Net income | $3,760 | $3,553 | +5.8% | | Diluted EPS | $0.24 | $0.23 | +4.3% | Six Months Ended July 31 (in thousands, except per share data) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net sales | $87,389 | $77,273 | +13.1% | | Gross profit | $30,007 | $28,107 | +6.8% | | Operating income | $1,773 | $688 | +157.7% | | Net loss | $(149) | $(1,145) | +87.0% (improvement) | | Diluted EPS | $(0.01) | $(0.07) | +85.7% (improvement) | Condensed Consolidated Statements of Cash Flows Six Months Ended July 31 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,557) | $(15,855) | | Net cash used in investing activities | $(853) | $(1,359) | | Net cash provided by financing activities | $9,649 | $16,942 | | **Net increase (decrease) in cash** | **$239** | **$(272)** | Notes to Financial Statements - The company's market is highly seasonal, with about **50%** of sales typically occurring from June to August Due to COVID-19 and supply chain disruptions, the company anticipates a larger portion of annual sales will occur in **September, October, and November** of the current fiscal year[42](index=42&type=chunk) - The company was **not in compliance** with its fixed-charge coverage ratio covenant as of July 31, 2020, and October 31, 2020 It subsequently negotiated waivers and amendments with its lender, PNC Bank, and was **in compliance** as of July 31, 2021[39](index=39&type=chunk)[58](index=58&type=chunk) - The company's revolving line of credit with PNC Bank matures on **March 19, 2023** As of July 31, 2021, approximately **$41,182,000** was available for borrowing under this facility[57](index=57&type=chunk)[61](index=61&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the COVID-19 pandemic's impact, noting strong order growth but flat Q2 sales due to supply chain issues and labor shortages, leading to increased backlog Results of Operations - The company faced significant operational challenges, including **supply chain issues** for imported components, **volatile costs** for steel and plastic, and severe **labor shortages** for both permanent and temporary employees[91](index=91&type=chunk) Order Rate Growth vs. Prior Year | Period | Order Growth | | :--- | :--- | | Q1 ended Apr 30, 2021 | +26.7% | | Q2 ended Jul 31, 2021 | +29.9% | | H1 ended Jul 31, 2021 | +28.5% | - Despite strong order growth, Q2 sales were **flat (-0.7% YoY)** due to production and supply chain constraints This led to an order backlog approximately **$20 million greater** than the prior year as of July 31, 2021[93](index=93&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - Gross margin for Q2 2021 **decreased to 37.8% from 39.0%** in the prior year, affected by increased raw material costs and factory inefficiencies from supply interruptions[97](index=97&type=chunk) Liquidity and Capital Resources - **Reduced inventory levels** and moderated seasonal borrowing needs allowed the company to **decrease its reliance** on its revolving line of credit compared to the prior year[105](index=105&type=chunk)[107](index=107&type=chunk) - The company previously **violated** its fixed-charge coverage ratio covenant but **obtained waivers** and amendments Management believes it will **maintain compliance** for the next 12 months based on current forecasts and the amended covenant terms[110](index=110&type=chunk) - Capital expenditures were **reduced to $1.21 million** for the first six months of 2021, down from $1.63 million in the prior year, to preserve cash Management believes cash flows and borrowing capacity are **sufficient** to fund needs for the next twelve months[109](index=109&type=chunk)[111](index=111&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Virco is exempt from providing quantitative and qualitative market risk disclosures - As a **smaller reporting company**, Virco is **exempt** from the requirement to provide quantitative and qualitative disclosures about market risk[116](index=116&type=chunk) [Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of the end of the period[117](index=117&type=chunk)[118](index=118&type=chunk) - **No changes** in internal control over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[119](index=119&type=chunk) Part II. Other Information [Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal actions, which management believes will not materially impact its financial position - Management believes that ongoing legal actions, which arise from the normal course of business, will **not have a material impact** on the company's financials[122](index=122&type=chunk) [Risk Factors](index=27&type=page&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's most recent Annual Report on Form 10-K - The risk factors associated with the business have **not materially changed** from those disclosed in the most recent Form 10-K[123](index=123&type=chunk) [Other Items (Items 2, 3, 4, 5, & 6)](index=27&type=section&id=Other%20Items) This section confirms no unregistered equity sales, senior security defaults, or mine safety disclosures, and lists filed exhibits including officer certifications - The company reported **no information** under Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Item 6 lists the **exhibits filed** with the Form 10-Q, including **CEO and CFO certifications** required by the Sarbanes-Oxley Act and XBRL data files[128](index=128&type=chunk)

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 April 30, 2021 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 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 s ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Virco is the largest US K-12 furniture manufacturer, leveraging domestic production and an ATS strategy for seasonal demand [Introduction and Operations](index=4&type=section&id=Introduction%20and%20Operations) Virco, founded in 1950, is the largest US K-12 furniture manufacturer with facilities in CA and AR, serving diverse sectors - Virco is the largest manufacturer and supplier of moveable educational furniture for the preschool through 12th grade market in the United States[17](index=17&type=chunk) - The company operates a 560,000 sq. ft. facility in Torrance, CA, and three facilities in Conway, AR, totaling 1,750,000 sq. ft. of manufacturing and distribution space[20](index=20&type=chunk) - In addition to the K-12 market, Virco serves junior colleges, universities, convention centers, hospitality, government facilities, and places of worship[19](index=19&type=chunk) [Products and Services](index=5&type=section&id=Products%20and%20Services) Virco offers a broad range of GREENGUARD Gold certified furniture, adapting product focus to market needs and providing diverse delivery services - In fiscal 2021, due to the COVID-19 pandemic, product focus shifted from collaborative furniture to traditional single-student desks and chair-desk combos to facilitate physical distancing in schools[24](index=24&type=chunk) - Principal manufactured product categories include Seating (ZUMA®, Sage™), Tables (4000/5000 Series, TEXT®), Computer Furniture, Desks/Chair Desks, Administrative Office Furniture, Laboratory Furniture, Mobile Furniture, and Storage Equipment[35](index=35&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk) - Hundreds of Virco furniture models have earned GREENGUARD® Gold Certification for indoor air quality, and the company offers a Take-Back program for recycling out-of-service furniture components[44](index=44&type=chunk) - The company offers multiple delivery service levels, including Standard (tailgate), Inside Delivery, and Full-Service Delivery (placed in the classroom)[46](index=46&type=chunk) [Manufacturing, Distribution, and Marketing](index=7&type=section&id=Manufacturing%2C%20Distribution%2C%20and%20Marketing) Virco leverages a direct sales force, dealer network, and "Assemble-to-Ship" strategy for mass customization and seasonal demand - The company's "Assemble-to-Ship" (ATS) strategy involves sourcing low-cube components globally while fabricating bulky frames and tops domestically, allowing for customer-specific product and color combinations shortly before delivery[31](index=31&type=chunk)[32](index=32&type=chunk) - Virco's educational products are marketed through what management believes is the largest direct sales force of any education furniture manufacturer, supplemented by a dealer network[55](index=55&type=chunk) - The company relies on third-party carriers for over **90%** of its freight, which is effective for managing seasonal peaks but exposes Virco to freight rate volatility and capacity constraints[62](index=62&type=chunk)[67](index=67&type=chunk) [Seasonality and Working Capital](index=8&type=section&id=Seasonality%20and%20Working%20Capital) Extreme seasonality in educational furniture sales necessitates significant inventory build-up and reliance on bank financing for working capital % of Sales in June, July, August | Fiscal Year | % of Sales in June, July, August | | :--- | :--- | | 2021 | ~52% | | 2020 | ~49% | - Shipments during peak weeks in July and August can be six times greater than in the seasonally slow winter months[33](index=33&type=chunk)[63](index=63&type=chunk) - Due to seasonality, Virco builds significant inventory and carries large accounts receivable balances during the summer, relying on its line of credit with PNC Bank to meet cash flow requirements[64](index=64&type=chunk)[65](index=65&type=chunk) [Raw Materials and Supply Chain](index=10&type=section&id=Raw%20Materials%20and%20Supply%20Chain) Volatile raw material costs (steel, plastics) and supply chain disruptions, especially from China, pose significant risks to production and profitability - The company's largest raw material costs are for steel, followed by plastics and wood. Prices for these commodities can be volatile[48](index=48&type=chunk)[49](index=49&type=chunk) - The company purchases components from overseas, primarily China, and costs are impacted by tariffs, freight, and supplier price increases. In fiscal 2020, tariffs on components from China increased by **15%**[49](index=49&type=chunk)[50](index=50&type=chunk) - The company has experienced supply chain disruptions from China due to COVID-19 and freight availability, and domestic suppliers have also been disrupted[51](index=51&type=chunk)[52](index=52&type=chunk) [Customers, Competition, and Backlog](index=10&type=section&id=Customers%2C%20Competition%2C%20and%20Backlog) Virco serves diverse customers, with 67% of sales from a single contract, operating in a price-competitive market with stable backlog - Sales priced under a single nationwide purchasing contract, where Virco is the exclusive supplier, accounted for approximately **67%** of sales in fiscal 2021 and **65%** in fiscal 2020. This contract extends through December 2022[61](index=61&type=chunk) - Key competitors include manufacturers such as Artco-Bell, KI Inc., and Smith System (owned by Steelcase), and dealers like School Outfitters and School Specialty[70](index=70&type=chunk) Sales Order Backlog | Metric | Jan 31, 2021 | Jan 31, 2020 | | :--- | :--- | :--- | | Sales Order Backlog | $20.9 million | $20.7 million | [Human Capital and Other Matters](index=15&type=section&id=Human%20Capital%20and%20Other%20Matters) Virco employs 775 full-time staff, holds over 50 patents, and maintains strong environmental compliance, adapting to pandemic conditions - As of January 31, 2021, the company had approximately **775** full-time employees, with about **595** in manufacturing/distribution, **115** in sales/marketing, and **65** in administration[76](index=76&type=chunk) - The company holds over **50** patents issued in the last 15 years and numerous trademarks, which it actively protects. However, the business is not materially dependent on any single patent or trademark, except perhaps the "Virco" name[73](index=73&type=chunk)[74](index=74&type=chunk) - Virco is committed to environmental compliance, with policies for recycling and resource recovery that have earned repeated commendations from agencies like the EPA and CalRecycle[80](index=80&type=chunk)[81](index=81&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from COVID-19, education funding dependency, supply chain disruptions, seasonality, and commodity price volatility [Risks Related to COVID-19](index=17&type=section&id=RISKS%20RELATED%20TO%20COVID-19) COVID-19 adversely impacted school operations, reduced demand, and poses ongoing risks to funding and supply chains - The COVID-19 pandemic led to widespread school closures and remote learning, which had an immediate adverse impact on the company's operating activities and product demand during fiscal 2021[92](index=92&type=chunk) - The pandemic may materially harm state and local tax revenues, which could reduce school budgets and future demand for furniture, and there is no assurance that federal aid will be sufficient to offset these losses[96](index=96&type=chunk) [Risks Related to School Funding](index=19&type=section&id=RISKS%20RELATED%20TO%20SCHOOL%20FUNDING) Sales are highly dependent on education funding, vulnerable to economic downturns and state budget shortfalls impacting spending - Company sales are highly dependent on the level of education funding, which is a function of state and local tax revenues and the general economic environment[98](index=98&type=chunk) - State budget shortfalls, driven by factors like underfunded retirement obligations or economic downturns, may lead to cuts in education spending, which would adversely affect revenue and results of operations[100](index=100&type=chunk) [Strategic and Operational Risks](index=20&type=section&id=STRATEGIC%20AND%20OPERATIONAL%20RISKS) Risks include new product failures, supply chain dependence, freight issues, sales concentration in one contract, and seasonal working capital needs - The company depends on outside suppliers for raw materials and components, including from international sources like China, making it vulnerable to supply interruptions, tariffs, and transportation disruptions[104](index=104&type=chunk) - Approximately **67%** of sales in fiscal 2021 were priced through a single nationwide contract where Virco is the exclusive supplier. The loss of this status could cause sales to decline[107](index=107&type=chunk)[108](index=108&type=chunk) - The highly seasonal nature of the business requires significant working capital financed through a credit facility with PNC Bank, which imposes restrictive covenants that may limit operational and financial flexibility[110](index=110&type=chunk)[111](index=111&type=chunk) [Industry and Economic Risks](index=21&type=section&id=INDUSTRY%20AND%20ECONOMIC%20RISKS) Profitability is sensitive to volatile commodity prices (steel, plastics) and petroleum-based product costs, which are difficult to pass on - Volatility in the price and availability of commodities, particularly steel and plastics, can adversely affect profitability, as the company may be unable to pass on cost increases due to fixed-price annual contracts[113](index=113&type=chunk)[114](index=114&type=chunk) - Profitability is sensitive to the cost of fuel and petroleum-based products, which impact transportation costs, plastic material costs, and energy costs for manufacturing facilities[116](index=116&type=chunk) [Financing Risks](index=22&type=section&id=FINANCING%20RISKS) Reliance on a maturing credit facility, forecasting inaccuracies, and market volatility impacting pension costs pose financing risks - The company relies on its credit facility with PNC Bank, which matures in March 2023, and may not be able to renew it on favorable terms, which would adversely affect operations[117](index=117&type=chunk) - Inaccurate forecasts of peak summer season requirements for inventory, labor, and materials could diminish customer service or result in higher costs, negatively affecting results[118](index=118&type=chunk)[119](index=119&type=chunk) - Volatility in equity markets or interest rates could significantly increase pension costs for the company's defined benefit plans, as the funded status is sensitive to investment returns and discount rates[121](index=121&type=chunk) [Legal and Regulatory Risks](index=23&type=section&id=LEGAL%20AND%20REGULATORY%20RISKS) Risks include intellectual property protection, environmental compliance costs, labor disruptions, and anti-takeover provisions - The company's ability to compete depends on protecting its intellectual property through patents and trademarks; failure to do so could allow competitors to copy products and increase price competition[122](index=122&type=chunk) - The company is subject to extensive federal, state, and local environmental laws, and compliance with more stringent future regulations could require material expenditures[124](index=124&type=chunk)[125](index=125&type=chunk) - Corporate documents and Delaware law (Section 203) contain anti-takeover provisions, such as a staggered board, which could discourage, delay, or prevent a change in control[130](index=130&type=chunk)[131](index=131&type=chunk) [General Risk Factors](index=25&type=section&id=GENERAL%20RISK%20FACTORS) General risks include key personnel loss, IT system failures, privacy non-compliance, and stock price volatility - The success of operations is highly dependent on retaining the senior management team and other key employees[133](index=133&type=chunk) - Information technology systems are vulnerable to disruptions from network failures, cyber-attacks, and other events that could interrupt business operations[134](index=134&type=chunk) [Unresolved Staff Comments](index=26&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments from the SEC - None[138](index=138&type=chunk) [Properties](index=26&type=section&id=Item%202.%20Properties) Virco operates a leased 560,000 sq. ft. HQ in CA and owns 1,750,000 sq. ft. facilities in AR - The company leases a 560,000 sq. ft. facility in Torrance, California, which includes its corporate headquarters, under a lease expiring April 30, 2025[139](index=139&type=chunk) - In Conway, Arkansas, the company owns a primary 1,200,000 sq. ft. facility on 100 acres, a 375,000 sq. ft. fabrication facility, and a 175,000 sq. ft. manufacturing facility[140](index=140&type=chunk)[141](index=141&type=chunk) [Legal Proceedings](index=26&type=section&id=Item%203.%20Legal%20Proceedings) Ongoing legal proceedings are not expected to materially impact the company's financial position or results - Management does not consider any ongoing legal proceedings to be material to the company's financial condition or results of operations[142](index=142&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[143](index=143&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=27&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Virco's common stock trades on NASDAQ; dividend and repurchase ability was suspended through FY2020 - The company's common stock (VIRC) is traded on The NASDAQ Global Market[145](index=145&type=chunk) - The company's ability to pay cash dividends or repurchase stock was suspended through January 31, 2020, by an amendment to its credit facility[146](index=146&type=chunk) - No shares of stock were repurchased during fiscal years 2021 and 2020[147](index=147&type=chunk) [Selected Financial Data](index=27&type=section&id=Item%206.%20Selected%20Financial%20Data) As a smaller reporting company, selected financial data is not required - The Company is a smaller reporting company and is not required to provide the information under this item[148](index=148&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A details COVID-19's adverse impact on sales and profitability, liquidity challenges, and credit facility covenant waivers [Results of Operations (fiscal 2021 vs. 2020)](index=32&type=section&id=Results%20of%20Operations%20%28fiscal%202021%20vs.%202020%29) Net sales decreased by 20.8% in FY2021, resulting in a pre-tax loss due to reduced volume and higher cost of sales Financial Metric (In thousands) | Financial Metric | Fiscal 2021 | Fiscal 2020 | | :--- | :--- | :--- | | Net Sales | $152,795 | $193,001 | | Pre-tax (Loss)/Profit | ($2,976) | $2,727 | | Net (Loss)/Income per Diluted Share | ($0.14) | $0.15 | | Cash Flow from Operations | $7,799 | $9,759 | - Net sales decreased by **20.8%** in fiscal 2021, primarily due to a reduction in volume partially offset by a 5% increase in list selling prices[175](index=175&type=chunk) - Cost of sales increased as a percentage of net sales to **64.1%** in fiscal 2021 from **62.9%** in fiscal 2020, mainly due to increased manufacturing overhead variances from reduced production levels[179](index=179&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is driven by seasonality, relying on a PNC Bank credit facility, which required covenant waivers in FY2021 - The company relies on a secured revolving line of credit with PNC Bank of up to **$65 million** to meet its seasonal cash flow requirements. The facility matures on March 19, 2023[200](index=200&type=chunk)[201](index=201&type=chunk) - The company violated the fixed charge coverage ratio covenant in July and October 2020 but received waivers and amendments from PNC Bank to allow for a COVID-related cost add-back for calculation purposes[204](index=204&type=chunk)[205](index=205&type=chunk) - The company's accumulated deficit of approximately **$52 million** as of January 31, 2021, is primarily the result of accounting reclassifications from historical stock dividends (1983-2003), not accumulated operating losses[220](index=220&type=chunk) [Cash Flow](index=34&type=section&id=Cash%20Flow) Operating cash flow decreased to $7.8 million in FY2021, while investing cash use declined and financing cash use increased Cash Flow Summary (In thousands) | Cash Flow Summary (In thousands) | Year ended Jan 31, 2021 | Year ended Jan 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,799 | $9,759 | | Net cash used in investing activities | ($2,135) | ($4,258) | | Net cash used in financing activities | ($6,412) | ($5,089) | | Net (decrease) increase in cash | ($748) | $412 | [Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, market risk disclosures are not required - The Company is a smaller reporting company and is not required to provide the information under this item[228](index=228&type=chunk) [Financial Statements and Supplementary Data](index=42&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited financial statements and notes, including the auditor's report on critical audit matters [Report of Independent Registered Public Accounting Firm](index=43&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion, highlighting critical audit matters on inventory and deferred tax asset valuations - The auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements[231](index=231&type=chunk) - A critical audit matter was the valuation of slow-moving and obsolete inventories, due to the significant judgment required by management in forecasting consumption and sales[236](index=236&type=chunk)[237](index=237&type=chunk) - A second critical audit matter was the realizability of U.S. federal deferred tax assets, which required significant judgments regarding projections of future taxable income, especially given recent cumulative losses[239](index=239&type=chunk)[241](index=241&type=chunk) [Consolidated Financial Statements](index=46&type=section&id=Consolidated%20Financial%20Statements) Financial statements show decreased assets and liabilities, with a net loss in FY2021 compared to net income in FY2020 Balance Sheet Highlights (In thousands) | Balance Sheet Highlights (In thousands) | Jan 31, 2021 | Jan 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $50,967 | $58,342 | | Total Assets | $125,036 | $138,992 | | Total Current Liabilities | $22,106 | $25,118 | | Total Liabilities | $70,849 | $84,174 | | Total Stockholders' Equity | $54,187 | $54,818 | Statement of Operations Highlights (In thousands) | Statement of Operations Highlights (In thousands) | Year ended Jan 31, 2021 | Year ended Jan 31, 2020 | | :--- | :--- | :--- | | Net Sales | $152,795 | $193,001 | | Gross Profit | $54,925 | $71,675 | | Operating Income | $735 | $5,915 | | Net (Loss) Income | ($2,232) | $2,382 | [Notes to Consolidated Financial Statements](index=52&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, debt, pension plans, income taxes, and lease commitments, including COVID-19 impacts - The company's debt is primarily a revolving credit line with PNC Bank, which had an outstanding balance of **$4.6 million** at Jan 31, 2021, down from **$10.0 million** at Jan 31, 2020[310](index=310&type=chunk) - The company's two defined benefit pension plans had a combined unfunded status of (**$20.2 million**) as of Jan 31, 2021[327](index=327&type=chunk) - The company maintains a valuation allowance of **$1,064,000** against certain state net operating loss carryforwards that are not more-likely-than-not to be realized[346](index=346&type=chunk) - As of Jan 31, 2021, the company had total operating lease liabilities of **$20.3 million** with a weighted-average remaining lease term of **4.06 years**[356](index=356&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=70&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) No changes in or disagreements with accountants on financial disclosures - None[363](index=363&type=chunk) [Controls and Procedures](index=71&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective with no material weaknesses - Management concluded that the company's disclosure controls and procedures are effective as of the end of the fiscal year[365](index=365&type=chunk) - Management's assessment concluded that the company's internal control over financial reporting was effective as of January 31, 2021, with no material weaknesses identified[370](index=370&type=chunk) [Other Information](index=72&type=section&id=Item%209B.%20Other%20Information) No other information is reported under this item - None[373](index=373&type=chunk) Part III [Directors, Executive Officers of the Registrant and Corporate Governance](index=73&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20of%20the%20Registrant%20and%20Corporate%20Governance) Information is incorporated by reference from the definitive Proxy Statement - Information is incorporated by reference from the company's definitive Proxy Statement[376](index=376&type=chunk) [Executive Compensation](index=73&type=section&id=Item%2011.%20Executive%20Compensation) Information is incorporated by reference from the definitive Proxy Statement - Information is incorporated by reference from the company's definitive Proxy Statement[377](index=377&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=73&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information is incorporated by reference from the definitive Proxy Statement - Information is incorporated by reference from the company's definitive Proxy Statement[378](index=378&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=73&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information is incorporated by reference from the definitive Proxy Statement - Information is incorporated by reference from the company's definitive Proxy Statement[379](index=379&type=chunk) [Principal Accounting Fees and Services](index=73&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information is incorporated by reference from the definitive Proxy Statement - Information is incorporated by reference from the company's definitive Proxy Statement[380](index=380&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=74&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K - This section provides an index of all financial statements, schedules, and exhibits filed with the Form 10-K[382](index=382&type=chunk)[386](index=386&type=chunk) [Form 10-K Summary](index=76&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[388](index=388&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (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 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended July 31, 2020 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) Registra ...