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~~April 3130, ~~2023~~2024


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

For the transition period from to

Commission File number 1-8777


VIRCO MFG. CORPORATION (Exact Name of Registrant as Specified in its Charter)


Delaware						95-1613718
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

2027 Harpers Way, Torrance, CA						90501
(Address of Principal Executive Offices)						(Zip Code)

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

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value per share

VIRC

The Nasdaq Stock Market LLC

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☒

Emerging growth company

☐

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

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

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

Common Stock, $.01 par value — 16,~~347~~207,~~314~~612 shares as of ~~December~~June 47, ~~2023~~2024.

TABLE OF CONTENTS

Part I. Financial Information		3
	Item 1. Financial Statements	3
	Unaudited condensed consolidated balance sheets - October 31, 2023, January 31, 2023 and October 31, 2022	3
	Unaudited condensed consolidated balance sheets - April 30, 2024, January 31, 2024 and April 30, 2023	3
	Unaudited condensed consolidated statements of income - Three months ended October 31, 2023 and 2022	5
	Unaudited condensed consolidated statements of operations - Three months ended April 30, 2024 and 2023	5
	Unaudited condensed consolidated statements of income - Nine months ended October 31, 2023 and 2022	6
	Unaudited condensed consolidated statements of comprehensive income (loss) - Three months ended April 30, 2024 and 2023	6
	Unaudited condensed consolidated statements of comprehensive income - Three months ended October 31, 2023 and 2022	7
	Unaudited condensed consolidated statements of cash flows - Three months ended April 30, 2024 and 2023	7
	Unaudited condensed consolidated statements of comprehensive income - Nine months ended October 31, 2023 and 2022	8
	Unaudited condensed consolidated statements of changes in stockholders' equity - Three months ended April 30, 2024 and 2023	8
	Unaudited condensed consolidated statements of cash flows - Nine months ended October 31, 2023 and 2022	9
	Notes to unaudited condensed consolidated financial statements - April 30, 2024	9
	Unaudited condensed consolidated statements of changes in stockholders' equity - Three and nine months ended October 31, 2023 and 2022	10
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Notes to unaudited condensed consolidated financial statements - October 31, 2023	12
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	19
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 4. Controls and Procedures	19
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	22
Part II. Other Information		20
	Item 4. Controls and Procedures	22
	Item 1. Legal Proceedings	20
Part II. Other Information		24
	Item 1A. Risk Factors	20
	Item 1. Legal Proceedings	24
	Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	20
	Item 1A. Risk Factors	24
	Item 3. Defaults Upon Senior Securities	20
	Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	24
	Item 4. Mine Safety Disclosures	20
	Item 3. Defaults Upon Senior Securities	24
	Item 5. Other Information	21
	Item 4. Mine Safety Disclosures	24
	Item 6. Exhibits	21
	Item 5. Other Information	24
	Item 6. Exhibits	24

PART I. Financial Information

Item 1. Financial Statements

Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

10/31/2023

1/31/2023

10/31/2022

4/30/2024

1/31/2024

4/30/2023

(In thousands)

Assets

Current assets

Cash

~~4,887~~644

15,~~057~~286

~~2,175~~625

Trade accounts receivables, net

3319,~~029~~772

1823,~~435~~161

2815,~~028~~524

Other receivables

102

Income tax receivable

—

321

Income tax receivable

—

106

Inventories

71,333

58,371

85,640

Inventories

58,931

67,406

57,465

Prepaid expenses and other current assets

3,974

2,208

2,733

Prepaid expenses and other current assets

1,961

2,083

1,671

Total current assets

95,789

89,026

104,843

Total current assets

98,835

89,068

89,547

Non-current assets

Property, plant and equipment

Land

3,731

Land improvements

694

~~686~~694

686

Buildings and building improvements

51,~~498~~575

51,~~310~~576

51,~~459~~391

Machinery and equipment

~~116~~115,~~695~~215

~~113~~114,~~662~~400

114,~~762~~655

Leasehold improvements

~~976~~523

~~983~~523

~~1,012~~983

Total property, plant and equipment

~~173~~171,~~594~~738

170,~~372~~924

171,~~650~~446

Less accumulated depreciation and amortization

~~138~~137,~~650~~664

~~135~~136,~~810~~356

136,~~998~~779

Net property, plant and equipment

34,~~944~~074

34,~~562~~568

34,~~652~~667

Operating lease right-of-use assets

76,~~156~~274

106,~~120~~508

119,~~116~~326

Deferred tax assets, net

76,~~031~~705

76,~~800~~634

~~160~~8,249

Other assets, net

9,~~073~~631

89,~~576~~709

8,~~245~~848

Total assets

~~157~~152,~~039~~473

~~150~~146,~~126~~445

~~143~~165,~~720~~933

See accompanying notes to unaudited condensed consolidated financial statements.

Virco Mfg. Corporation

Unaudited Condensed Consolidated Balance Sheets

10/31/2023

1/31/2023

10/31/2022

4/30/2024

1/31/2024

4/30/2023

(In thousands, except share and par value data)

Liabilities

Current liabilities

Accounts payable

1419,~~351~~202

1912,~~448~~945

1823,~~926~~628

Accrued compensation and employee benefits

115,~~102~~626

910,~~554~~880

9,~~084~~416

Income tax payable

~~3,130~~—

—145

—

Current portion of long-term debt

~~245~~250

~~7,360~~248

220,~~457~~362

Current portion operating lease liability

56,~~465~~221

5,~~082~~744

45,~~985~~271

Other accrued liabilities

710,~~339~~362

78,~~081~~570

7,~~767~~868

Total current liabilities

41,~~632~~661

4838,~~525~~532

4366,~~219~~545

Non-current liabilities

Accrued self-insurance retention

~~748~~1,244

~~1,050~~650

1,~~454~~251

Accrued pension expenses

9,~~334~~480

109,~~676~~429

1110,~~776~~802

Long-term debt, less current portion

7,946

14,384

14,444

Income tax payable, less current portion

206

128

Operating lease liability, less current portion

2,933

6,796

8,028

Long-term debt, less current portion

6,766

4,136

14,323

Other long-term liabilities

657

634

771

Operating lease liability, less current portion

915

1,829

5,648

Total non-current liabilities

21,618

33,540

36,473

Other long-term liabilities

564

562

557

Total non-current liabilities

19,175

16,734

32,666

Commitments and contingencies (Notes 6, 7 and 13)

Stockholders’ equity

Preferred stock:

Authorized 3,000,000 shares, $0.01 par value; none issued or outstanding

—

Common stock:

Authorized 25,000,000 shares, $0.01 par value; issued and outstanding 16,347,314 shares at 10/31/2023 and 16,210,985 at 1/31/2023 and 10/31/2022

164

162

Authorized 25,000,000 shares, $0.01 par value; issued and outstanding 16,207,612 shares at 4/30/2024, 16,347,314 at 1/31/2024, and 16,210,985 at 4/30/2023

162

164

162

Additional paid-in capital

~~121~~120,~~201~~048

~~120~~121,~~890~~373

120,~~787~~993

Accumulated deficit

(2627,~~379~~235)

(5029,~~631~~048)

(5452,~~707~~073)

Accumulated other comprehensive loss

(1,~~197~~338)

(21,~~360~~310)

(2,~~214~~360)

Total stockholders’ equity

9391,~~789~~637

6891,~~061~~179

6466,~~028~~722

Total liabilities and stockholders’ equity

~~157~~152,~~039~~473

~~150~~146,~~126~~445

~~143~~165,~~720~~933

See accompanying notes to unaudited condensed consolidated financial statements.

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of ~~Income~~Operations

	Three months ended
	10/31/2023		10/31/2022
	4/30/2024		4/30/2023
	(In thousands, except per share data)
Net sales	$	8446,~~252~~735	$	7734,~~395~~943
Costs of goods sold	4626,~~041~~388		4621,~~618~~741
Gross profit	3820,~~211~~347		3013,~~777~~202
Selling, general and administrative expenses	2317,~~505~~376		2114,~~977~~514
Operating income	14,706		8,800
Operating income (loss)	2,971		(1,312)
Unrealized loss (gain) on investment in trust account	176		(220)
Unrealized gain on investment in trust account	(215)		(299)
Pension expense	~~301~~107		~~259~~161
Interest expense	~~765~~208		~~567~~712
Income before income taxes	13,464		8,194
Income (loss) before income taxes	2,871		(1,886)
Income tax expense	3,304		319
Income tax expense (benefit)	731		(444)
Net income	$	10,160	$	7,875
Net income (loss)	$	2,140	$	(1,442)
Net income per common share:
Cash dividends declared per common share:	$	0.02	$	—
Basic	$	0.62	$	0.49
Net income (loss) per common share:
Diluted	$	0.62	$	0.48
Basic	$	0.13	$	(0.09)
Diluted	$	0.13	$	(0.09)
Weighted average shares of common stock outstanding:
Basic	16,~~347~~264		16,211
Diluted	16,~~428~~393		16,~~249~~211

See accompanying notes to unaudited condensed consolidated financial statements.

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

	Nine months ended
	Three months ended
	10/31/2023		10/31/2022
	4/30/2024		4/30/2023
	(In thousands, except per share data)
	(In thousands)
Net sales	$	226,516	$	192,276
Net income (loss)	$	2,140	$	(1,442)
Costs of goods sold	126,525		119,947
Other comprehensive loss:
Gross profit	99,991		72,329
Pension adjustments (net of tax adjustment of $10 and $0)	(28)		—
Selling, general and administrative expenses	65,343		57,099
Net comprehensive income (loss)	$	2,112	$	(1,442)
Operating income	34,648		15,230
Unrealized (gain) loss on investment in trust account	(448)		85
Pension expense	623		650
Interest expense	2,560		1,692
Income before income taxes	31,913		12,803
Income tax expense	7,661		332
Net income	$	24,252	$	12,471
Net income per common share:
Basic	$	1.49	$	0.77
Diluted	$	1.48	$	0.77
Weighted average shares of common stock outstanding:
Basic	16,277		16,118
Diluted	16,334		16,136

See accompanying notes to unaudited condensed consolidated financial statements.

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of ~~Comprehensive~~Cash ~~Income~~Flows

	Three months ended
	10/31/2023		10/31/2022
	4/30/2024		4/30/2023
	(In thousands)
Net income	$	10,160	$	7,875
Operating activities
Other comprehensive income:
Net income (loss)	$	2,140	$	(1,442)
Pension adjustments (net of tax expense of $406 and $0 at October 31, 2023 and 2022, respectively)	1,163		3,545
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Net comprehensive income	$	11,323	$	11,420
Depreciation and amortization	1,334		1,195
Non-cash lease benefits	(203)		(165)
Provision for credit losses	15		15
Amortization of debt issuance costs	30		26
Loss on sale of property, plant and equipment	1		—
Deferred income taxes	(62)		(448)
Stock-based compensation	172		103
Amortization of net actuarial gain for pension plans	(38)		—
Non-cash unrealized gain on investment	(215)		(299)
Changes in operating assets and liabilities:
Trade accounts receivable	3,374		2,896
Other receivables	(27)		33
Inventories	(12,962)		(18,234)
Income taxes	(133)		(296)
Prepaid expenses and other current assets	(1,620)		(490)
Accounts payable and accrued liabilities	3,687		5,391
Net cash used in operating activities	(4,507)		(11,715)
Investing activities:
Purchases of property, plant and equipment	(1,088)		(1,533)
Proceeds from sale of property, plant and equipment	2		—
Proceeds from surrendering life insurance policies	145		—
Net cash used in investing activities	(941)		(1,533)
Financing activities:
Borrowing from long-term debt	15,737		15,241
Repayment of long-term debt	(13,105)		(2,300)
Common stock repurchased	(1,499)		—
Payment of deferred financing costs	—		(125)
Cash dividends paid	(327)		—
Net cash provided by financing activities	806		12,816
Net decrease in cash	(4,642)		(432)
Cash at beginning of period	5,286		1,057
Cash at end of period	$	644	$	625
Supplemental disclosures of cash flow information:
Property, plant and equipment acquired and not yet paid at end of period	$	248	$	402
Cash paid during the year for interest	$	208	$	712
Cash paid during the year for income taxes, net of refunds	$	971	$	344

See accompanying notes to unaudited condensed consolidated financial statements.

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Comprehensive Income

	Nine months ended
	10/31/2023		10/31/2022
	(In thousands)
Net income	$	24,252	$	12,471
Other comprehensive income:
Pension adjustments (net of tax expense of $406 and $0 at October 31, 2023 and 2022, respectively)	1,163		3,815
Net comprehensive income	$	25,415	$	16,286

See accompanying notes to unaudited condensed consolidated financial statements.

Virco Mfg. Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

	Nine months ended
	10/31/2023		10/31/2022
	(In thousands)
Operating activities
Net income	$	24,252	$	12,471
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,763		3,390
Non-cash lease benefits	(517)		(404)
Provision for doubtful accounts	45		60
Amortization of debt issuance costs	85		96
Deferred income taxes	363		239
Stock-based compensation	423		509
Defined pension plan settlement	372		64
Amortization of net actuarial loss for pension plans	3		405
Non-cash unrealized (gain) loss on investment	(448)		85
Surrender of life insurance policies	(95)		—
Changes in operating assets and liabilities:
Trade accounts receivable	(14,639)		(10,319)
Other receivables	41		16
Inventories	8,475		(10,092)
Income taxes	3,167		51
Prepaid expenses and other current assets	133		306
Accounts payable and accrued liabilities	(3,150)		4,578
Net cash provided by operating activities	22,273		1,455
Investing activities:
Capital expenditures	(4,605)		(2,614)
Purchases of marketable securities in trust accounts	—		(7,280)
Proceeds from sale of marketable securities in trust accounts	—		4,536
Proceeds from surrendering life insurance policies	—		2,744
Net cash used in investing activities	(4,605)		(2,614)
Financing activities:
Borrowing from long-term debt	36,906		32,947
Repayment of long-term debt	(50,459)		(30,559)
Payment of deferred financing costs	(175)		(200)
Tax withholding payments on share-based compensation	(110)		(213)
Net cash (used in) provided by financing activities	(13,838)		1,975
Net increase in cash	3,830		816
Cash at beginning of period	1,057		1,359
Cash at end of period	$	4,887	$	2,175
Supplemental disclosures of cash flow information:
Property, plant and equipment acquired and not yet paid at end of period	$	178	$	291
Cash paid during the year for interest	$	2,223	$	1,310
Cash paid during the year for income tax, net of refunds	$	4,156	$	65

See accompanying notes to unaudited condensed consolidated financial statements.

Virco Mfg. Corporation

Unaudited Consolidated Statements of Changes in Stockholders' Equity

	Three-Month Period Ended October 31, 2023
	Three-Month Period Ended April 30, 2024
	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 August 1, 2023	16,347,314	$	164	$	121,030	$	(36,539)	$	(2,360)	$	82,295
Balance at January 31, 2024	16,347,314	$	164	$	121,373	$	(29,048)	$	(1,310)	$	91,179
Net income	—	—		—		102,~~160~~140		—		102,~~160~~140
Cash dividends	—	—		—		—(327)		—		—(327)
Pension adjustments	—	—		—		—		~~1,163~~(28)		~~1,163~~(28)
Shares vested and others	—	—		—		—		—		—
Stock compensation expense	—	—		~~171~~172		—		—		~~171~~172
Balance at October 31, 2023	16,347,314	$	164	$	121,201	$	(26,379)	$	(1,197)	$	93,789
Stock repurchase	(139,702)	(2)		(1,497)		—		—		(1,499)
Balance at April 30, 2024	16,207,612	$	162	$	120,048	$	(27,235)	$	(1,338)	$	91,637

	Three-Month Period Ended October 31, 2022
	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 August 1, 2022	16,210,985	$	162	$	120,684	$	(62,582)	$	(5,759)	$	52,505
Balance at January 31, 2023	16,210,985	$	162	$	120,890	$	(50,631)	$	(2,360)	$	68,061
Net income	—	—		—		7,875		—		7,875
Net loss	—	—		—		(1,442)		—		(1,442)
Cash dividends	—	—		—		—		—		—
Pension adjustments	—	—		—		—		~~3,545~~—		~~3,545~~—
Shares vested and others	—	—		—		—		—		—
Stock compensation expense	—	—		103		—		—		103
Balance at October 31, 2022	16,210,985	$	162	$	120,787	$	(54,707)	$	(2,214)	$	64,028
Stock repurchase	—	—		—		—		—		—
Balance at April 30, 2023	16,210,985	$	162	$	120,993	$	(52,073)	$	(2,360)	$	66,722

	Nine-Month Period Ended October 31, 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	16,210,985	$	162	$	120,890	$	(50,631)	$	(2,360)	$	68,061
Net income	—	—		—		24,252		—		24,252
Cash dividends	—	—		—		—		—		—
Pension adjustments	—	—		—		—		1,163		1,163
Shares vested and others	136,329	2		(112)		—		—		(110)
Stock compensation expense	—	—		423		—		—		423
Balance at October 31, 2023	16,347,314	$	164	$	121,201	$	(26,379)	$	(1,197)	$	93,789

	Nine-Month Period Ended October 31, 2022
	Common Stock
In thousands, except share data	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholder's Equity
Balance at February 1, 2022	16,102,023	$	161	$	120,492	$	(67,178)	$	(6,029)	$	47,446
Net income	—	—		—		12,471		—		12,471
Cash dividends	—	—		—		—		—		—
Pension adjustments	—	—		—		—		3,815		3,815
Shares vested and others	108,962	1		(214)		—		—		(213)
Stock compensation expense	—	—		509		—		—		509
Balance at October 31, 2022	16,210,985	$	162	$	120,787	$	(54,707)	$	(2,214)	$	64,028

See accompanying notes to unaudited condensed consolidated financial statements.

118

VIRCO MFG. CORPORATION

Notes to unaudited Condensed Consolidated Financial Statements

~~October~~April 3130, ~~2023~~2024

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2023~~2024 (“Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ~~and nine months~~ ended ~~October~~April 3130, ~~2023~~2024 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, ~~2024~~2025. The balance sheet at January 31, ~~2023~~2024 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. All references to the “Company” refer to Virco Mfg. Corporation and its subsidiaries.

Note 2. Seasonality and Management Use of Estimates

The market for educational furniture is marked by extreme seasonality, with approximately 50% of the Company’s total sales typically occurring from June to August each year, the Company’s peak season. Hence, the Company typically builds and carries significant amounts of inventory during and in anticipation of this peak summer season to facilitate the rapid delivery requirements of customers in the educational market. This requires a large up-front investment in inventory, labor, storage and related costs as inventory is built in anticipation of peak sales during the summer months. As the capital required for this build-up generally exceeds cash available from operations, the Company has generally relied on third-party bank financing to meet cash flow requirements during the build-up period immediately preceding the peak season. In addition, the Company typically is faced with 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.

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.

Note 3. Recently Issued Accounting Standards

~~The Company evaluates all~~ Accounting Standards Updates ("ASUs") ~~issued~~2023-07, bySegment ~~the~~Reporting ~~Financial~~(Topic ~~Accounting~~280): ~~Standards~~Improvements ~~Board~~to ~~("FASB")~~Reportable ~~for~~Segment ~~consideration~~Disclosures. ofIn ~~their~~November ~~applicability~~2023, the FASB issued this ASU to ~~our~~update ~~condensed~~reportable ~~consolidated~~segment ~~financial~~disclosure ~~statements~~requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. WeThis ~~have~~ASU ~~assessed~~is ~~all~~effective ~~ASUs~~for ~~issued~~fiscal ~~but~~years ~~not~~beginning ~~yet~~after ~~adopted~~December 15, 2023, and ~~concluded~~interim ~~that~~periods ~~those~~within ~~not~~fiscal ~~disclosed~~years ~~are~~beginning ~~not~~after ~~relevant~~December to15, ~~the~~2024, ~~Company~~with orearly ~~are~~adoption permitted. We do not ~~expected~~expect tothat this guidance will have a material impact on our consolidated financial statements and disclosures.

ASU 2023-09, Income Taxes (Topic 740): Improvements to Tax Disclosures. In December 2023, the FASB issued this ASU which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. We do not expect that this guidance will have a material impact on our consolidated financial statements and disclosures.

The Company evaluates all 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.

Note 4. Revenue Recognition

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

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

include delivering the furniture into the classroom, school site or warehouse. Sales of furniture that are sold FOB factory are typically made to resellers of our product who in turn provide logistics to the ultimate customer. Once a product has been delivered per the shipping terms, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the asset. The Company considers control to have transferred upon shipment or delivery in accordance with shipping terms because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.

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

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

Note 5. Inventories

Inventory is valued at the lower of cost or net realizable value (determined on a first-in, first-out basis (“FIFO”)) 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 involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company's financial condition or results of operations. 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~~educational 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.

The following table presents a breakdown of the Company’s inventories as of ~~October~~April 3130, ~~2023~~2024, January 31, ~~2023~~2024 and ~~October~~April 3130, ~~2022~~2023:

10/31/2023

1/31/2023

10/31/2022

4/30/2024

1/31/2024

4/30/2023

(In thousands)

Finished goods

2028,~~587~~183

2518,~~740~~861

2434,~~173~~370

Work in process

2327,~~270~~588

25,~~303~~047

1832,~~829~~918

Raw materials

15,~~074~~562

1614,~~363~~463

1418,~~463~~352

Total inventories

$71,333

~~58,931~~

6758,~~406~~371

5785,~~465~~640

Note 6. 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. The Company's lease terms include options to extend or terminate the lease only when it is reasonably certain that we exercise that option. All of the Company’s leases are classified as operating 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 and manufacturing and distribution facility located in Torrance, California, currently with a remaining lease term through April 2025. The Company's leases equipment under a 5-year operating lease ~~terms~~arrangement. ~~include~~The ~~options~~Company tohas ~~extend~~the oroption ~~terminate~~of buying the assets at the end of the lease ~~only~~period ~~when~~at ita isprice that does not result in the Company being reasonably certain ~~that~~of weexercising ~~exercise~~the option. In addition, the Company leases trucks and automobiles under operating leases that ~~option~~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. 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 ~~equipment~~with ~~under~~an original term of 12 months or less that do not contain a 5 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.

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. 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:

~~Three Months Ended~~

Three Months Ended

~~Nine Months Ended~~

10/31/2023

10/31/2022

10/31/2023

10/31/2022

4/30/2024

4/30/2023

~~(In thousands, except lease term and discount rate)~~

(In thousands, except lease term and discount rate)

Operating lease cost

~~1,278~~

~~1,288~~

31,~~828~~419

31,~~903~~269

Short-term lease cost

~~119~~

~~113~~

~~307~~104

~~289~~108

Sublease income

~~(10)~~

(3010)

Variable lease cost

252

673

547

Variable lease (benefit) cost

(72)

261

Total lease cost

~~1,639~~

~~1,407~~

41,~~778~~441

41,~~709~~628

Other operating leases information:

Cash paid for amounts included in the measurement of lease liabilities

41,~~345~~621

41,~~306~~433

Right-of-use assets obtained in exchange for new lease liabilities

~~364~~954

~~469~~292

Weighted-average remaining lease term (years)

1.52

2.42

Weighted-average discount rate

6.36

6.3433

~~Minimum future lease payments for operating leases in effect as of October 31, 2023, are as follows:~~11

Minimum future lease payments for operating leases in effect as of April 30, 2024, are as follows:

	Operating Lease
For the year ending January 31,	(In thousands)
Remaining of 2024	$	1,447
Remaining of 2025	$	4,862
2025	5,825
2026	2,194
2026	1,564
2027	441
2027	8
2028	6
2028	—
2029	—
Thereafter	—
Remaining balance of lease payments	87,~~844~~503
Short-term lease liabilities	56,~~465~~221
Long-term lease liabilities	~~2,933~~915
Total lease liabilities	87,~~398~~136
Difference between undiscounted cash flows and discounted cash flows	$	~~446~~367

Note 7. Debt

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

10/31/2023

1/31/2023

10/31/2022

4/30/2024

1/31/2024

4/30/2023

(In thousands)

Revolving credit line

32,~~747~~693

~~17,122~~—

1230,~~221~~121

Other

4,~~444~~323

4,~~622~~384

4,~~680~~564

Total debt

87,~~191~~016

214,~~744~~384

1634,~~901~~685

Less current portion

~~245~~250

~~7,360~~248

220,~~457~~362

Non-current portion

76,~~946~~766

144,~~384~~136

14,~~444~~323

The Company and Virco Inc., its wholly-owned subsidiary (the “Borrowers”) has 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,~~most ~~the~~recently ~~Borrowers~~on ~~entered~~April ~~into an Amended and Restated Revolving Credit and Security Agreement (the “Restated Credit Agreement”) with PNC Bank~~29, ~~which amended and restated the prior Credit Agreement and effectively incorporated all of the prior amendments into an amended and restated form of agreement~~2024.

The ~~Restated~~ Credit Agreement as currently in effect permits the Company to issue dividends or make payments with respect to the Company’s capital stock in an aggregate amount up to $35.0 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 October 31, 2023.12

~~The~~in ~~Company's~~their ~~revolving~~ability ~~line~~to ofborrow ~~credit~~pursuant ~~with PNC is structured~~ to ~~provide seasonal credit availability during~~ the ~~Company's peak summer season. Approximately $23.1 million was available for~~ borrowing asbase ~~of October 31~~calculation, ~~2023. The interest rate for outstanding loan balances during~~ the ~~quarter~~Borrowers ~~ended~~may ~~October 31,~~not ~~2023~~have ~~was~~access ~~10.00%.~~to ~~The~~cash ~~Company~~liquidity ~~also~~unless ~~incurs~~provided aby ~~fee~~PNC ~~on the unused portion of the revolving line of credit~~ at aits ~~rate of 0~~discretion.~~375%.~~

15The other material terms of the Credit Agreement as currently in effect include the following: (i) a revolving line of credit with a Maximum Revolving Advance Amount of $65.0 million (increasing to $70.0 million during the months of June

Inthrough ~~addition~~August 2024) 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 ~~outstanding~~lesser ~~debt~~of ~~balance~~60% of the value of eligible inventory or 85% of the liquidation value of eligible inventory, plus $315.70 million onfrom ~~the~~January ~~Company's~~through ~~revolving~~July ~~credit~~of ~~line~~each year, ~~the~~minus ~~Company~~undrawn ~~also~~amounts ~~carries~~of aletters ~~mortgage~~of oncredit aand ~~manufacturing~~reserves; ~~building~~(ii) inventory insublimit ~~Conway~~of ~~Arkansas~~$35.0 million ~~The~~and ~~original~~assemble-to-ship ~~note~~(ATS) ~~was~~inventory ~~dated~~sublimit of $15.0 million during the months of May through August ~~2017~~2024; ~~for~~and (iii) an equipment loan of $52.80 million,. atThe aCredit ~~fixed~~Agreement ~~rate~~is secured by substantially all of 4%the ~~per~~Borrowers’ ~~year~~personal property and 20certain ~~year~~of ~~term~~the Borrowers’ real property. The Credit Agreement is subject to certain prepayment penalties upon early termination of the Credit Agreement. Prior to the maturity date, principal amounts outstanding ~~amount~~under the Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments and certain other conditions, including reduced borrowings under ~~this~~the ~~note~~revolving ~~was~~line to less than or equal $410.40 million for a period of 30 consecutive days during the fourth quarter of each fiscal year. The 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 ~~October~~April 3130, ~~2023~~2024.

OnThe ~~May~~Company's ~~19,~~revolving ~~2023,~~line ~~the~~of ~~Company~~credit ~~entered~~with ~~into~~PNC ~~Amendment~~is ~~No.~~structured 3 to ~~Amended~~provide ~~and~~seasonal ~~Restated~~credit ~~Revolving~~availability ~~Credit~~during ~~and~~the ~~Security~~Company's ~~Agreement~~peak ~~(“Amendment~~summer Noseason. ~~3”)~~Approximately ~~with~~$42.4 ~~PNC~~million was available for borrowing as of April 30, ~~with~~2024. The aninterest ~~effective~~rate ~~date~~is determined as a sum of ~~May~~the 5applicable margin rate, ~~2023~~which is 3.00% ~~Amendment~~from NoJanuary through July and 2.50% 3from ~~amended~~August through December, plus the ~~Restated~~Secured ~~Credit~~Overnight ~~Agreement~~Financing ~~and~~Rate ~~the~~(SOFR). The ~~secured~~interest ~~revolving~~rate ~~line~~for ofoutstanding ~~credit~~loan ~~provided~~balances toduring the quarter ended April 30, 2024 was 10.50%. The Company ~~under~~also incurs a fee on the unused portion of the revolving ~~credit~~line ~~facility~~of tocredit ~~reflect~~at ~~the~~a ~~following~~rate ~~material~~of ~~changes:~~0.375%.

~~i.Maximum~~In ~~size~~addition ofto the ~~PNC~~outstanding ~~line~~debt balance of $2.7 million on the Company's revolving credit ~~has~~line, ~~been~~the ~~increased~~Company toalso ~~$72~~carries a mortgage on a manufacturing building in Conway Arkansas. The original note was dated August 2017 for $5.8 million, ~~during~~at ~~the~~a ~~months~~fixed rate of ~~June~~4.0% ~~through~~per ~~August~~year ofand ~~2023,~~20-year toterm. The ~~provide~~outstanding ~~additional~~amount ~~availability~~under ~~for~~this ~~the~~note ~~Company’s~~was ~~forecast~~$4.3 ~~through~~million ~~the~~as ~~2023~~of ~~peak~~April 30, ~~borrowing period;~~2024.

~~ii.Increase~~On inApril ~~the~~29, ~~total~~2024, ~~inventory sublimit under~~ the ~~Credit~~Company ~~Agreement~~entered tointo ~~$35~~Amendment No.~~0 million~~ ~~and~~4 ~~increase~~to in the ~~Assemble-to-ship~~Credit Agreement (~~ATS~~"Amendment No. 4") ~~inventory~~with ~~sublimit~~PNC. toAmendment ~~$15~~No.~~0 million~~4 ~~during~~amended the ~~months~~Credit ofAgreement ~~May~~to ~~through~~reflect ~~August~~the offollowing ~~2023;~~material changes:

~~iii~~i.~~The~~Maximum ~~Company~~size ~~agreed~~of tothe ~~pay~~PNC anline ~~amendment~~of ~~fee~~credit ofhas ~~$50,000,~~been ~~which~~lowered isfrom 0$72.~~67%~~5 million onto ~~the~~$70.0 million ~~incremental~~during ~~line~~the ~~increase~~months of ~~$7.5 million;~~June through August, and

ivii.~~Increase~~Maximum inamount allowed for the ~~Applicable~~Company ~~Margin~~to ~~(as~~issue ~~defined~~dividends or repurchase stock has been increased from $3.0 million to $5.0 million in the ~~Credit~~aggregate ~~Agreement)~~during ofany 25fiscal ~~basis points~~year.

Management believes that the carrying value of debt approximated fair value at ~~October~~April 3130, ~~2023~~2024, as all of the long-term debt bears interest at variable rates based on prevailing market conditions , except mortgage on a manufacturing building in Conway Arkansas at a fixed rate of 4.0% per year.

Note 8. Income Taxes

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary 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 $~~255~~217,000, $~~864~~251,000 and $8575,~~893,~~000 as of ~~October~~April 3130, ~~2023~~2024, January 31, ~~2023~~2024 and ~~October~~April 3130, ~~2022~~2023, 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 ~~October~~April 3130, ~~2023~~2024 and ~~2022~~2023, the effective income tax rates were 2425.5% and 323.95%, respectively. ~~For~~Our ~~the nine months ended October 31, 2023 and 2022, the~~ effective ~~income~~ tax ~~rates~~rate ~~were~~varies ~~24.0%~~from ~~and~~the ~~2.6~~21%, ~~respectively. The change in effective tax rates for the three and nine months ended October 31, 2023 was primarily due to the change in forecasted mix of income before~~ federal ~~and~~statutory ~~state income taxes and estimated permanent differences. The lower effective tax~~ rate ~~for the three and nine months ended October 31, 2022 was~~ primarily due to ~~the recording of a valuation allowance needed for federal deferred tax assets and certain~~ state ~~net operating loss carryforwards~~taxes.

~~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.~~ 13

16The January 31, 2019 and subsequent fiscal years remain open for examination by the IRS and state tax authorities. The Company is not currently under any state examination.

Note 9. Net Income (Loss) per Share

The following table sets forth the computation of basic and diluted net income (loss) per share:

	Three Months Ended				~~Nine Months Ended~~
	10/31/2023		10/31/2022		10/31/2023		10/31/2022
	4/30/2024		4/30/2023
	(In thousands, except per share data)
Net income	$	10,160	$	7,875	$	24,252	$	12,471
Net income (loss)	$	2,140	$	(1,442)
Weighted average shares of common stock outstanding - basic	16,~~347~~264		16,211		~~16,277~~		~~16,118~~
Dilutive effect of common stock equivalents from equity incentive plans	81129		38—		57		18
Weighted average shares of common stock outstanding - diluted	16,~~428~~393		16,~~249~~211		~~16,334~~		~~16,136~~
Net income per share - basic	$	0.62	$	0.49	$	1.49	$	0.77
Net income (loss) per share - basic	$	0.13	$	(0.09)
Net income per share - diluted	$	0.62	$	0.48	$	1.48	$	0.77
Net income (loss) per share - diluted	$	0.13	$	(0.09)

Note 10. Stock-Based Compensation

Stock Incentive Plan

Under the Company's 2019 Omnibus Equity Incentive Plan (the “2019 Plan”), the Company may grant an aggregate of up to 1.0,000,000 ~~million~~ shares to its employees and non-employee directors in the form of restricted stock units, restricted stock awards and stock options. Restricted stock units and awards granted under the 2019 Plan are expensed ratably over the vesting period of the units and 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. ~~There~~During ~~were no awards grant and vested during~~ the three-month period ended ~~October 31, 2023. During the nine-month period ended October~~April 3130, ~~2023~~2024, the Company granted ~~70,510~~0 awards, vested ~~93,600~~0 shares according to their terms and forfeited 0 shares under the 2019 Plan. As of ~~October~~April 3130, ~~2023~~2024, there were approximately 537,925 shares available for future issuance under the 2019 Plan.

The following table summarizes the stock-based compensation expense related to restricted stock units and awards recognized in the Company's statements of operations for the three ~~and nine~~ months ended ~~October~~April 3130, ~~2023~~2024 and ~~2022~~2023:

	Three Months Ended				~~Nine Months Ended~~
	10/31/2023		10/31/2022		10/31/2023		10/31/2022
	4/30/2024		4/30/2023
	(In thousands)
Cost of goods sold	$	28	$	28	$	84	$	~~120~~
Selling, general and administrative expenses	~~143~~144		75		~~339~~		~~389~~
Total stock-based compensation expense	$	~~171~~172	$	103	$	~~423~~	$	~~509~~

As of ~~October~~April 3130, ~~2023~~2024, there was $~~400~~57,000 of unrecognized compensation expense related to unvested restricted stock units and/or awards, which is expected to be recognized over a weighted average period of approximately 1 ~~year~~month.

Note 11. Retirement Plans

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

1714

~~The~~accruals ~~Company~~under ~~also provides a supplementary retirement plan for certain key employees,~~ the ~~VIP~~Employees 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~~effective December 31, 2003. There is no service cost incurred under the ~~VIP~~Pension Plan.

The ~~following~~Company ~~table~~also ~~summarizes~~provides ~~the~~a ~~net~~supplementary ~~periodic~~retirement ~~pension~~plan ~~cost~~ for certain key employees, the ~~Pension~~VIP Retirement Plan ~~and~~ (the “VIP Plan”). As ~~for~~more fully described in the ~~three~~Annual ~~and~~Report ~~nine~~on ~~months~~Form 10-K for the year ended ~~October~~January 31, ~~2023~~2024, ~~and~~benefit ~~2022:~~accruals under the VIP Plan were frozen since December 31, 2003. There is no service cost incurred under the VIP Plan.

	Three Months Ended				Nine Months Ended
	10/31/2023		10/31/2022		10/31/2023		10/31/2022
	(In thousands)
Service cost	$	—	$	—	$	—	$	—
Interest cost	106		298		826		895
Expected return on plan assets	(203)		(237)		(601)		(711)
Plan settlement	372		64		372		64
Amortization of prior service cost	—		—		—		—
Recognized net actuarial loss	26		134		26		402
Benefit cost	$	301	$	259	$	623	$	650

The following table summarizes the net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2024 and 2023:


	Three Months Ended
	4/30/2024		4/30/2023
	(In thousands)
Service cost	$	—	$	—
Interest cost	311		360
Expected return on plan assets	(169)		(199)
Plan settlement	—		—
Amortization of prior service cost	(35)		—
Recognized net actuarial loss	—		—
Benefit cost	$	107	$	161

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 ~~October~~April 3130, ~~2023~~2024 and ~~2022~~2023, the plan held 1,~~404~~240,~~774~~365 shares and 1,~~250~~320,~~468~~482 shares of Virco stock, respectively. For the three~~-month~~ ~~period~~months ended ~~October~~April 3130, ~~2023~~2024 and ~~2022, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $356,000 and $333,000 respectively. For the nine-month period ended October 31,~~ 2023 ~~and 2022~~, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $1441,~~078,~~000 and $~~985~~403,000 respectively.

Note 12. Warranty Accrual

~~The Company provides a warranty against all substantial defects in material and workmanship. The standard warranty offered on products sold through January 31, 2013 is ten years.~~ Effective February 1, 2014 the Company modified its warranty to a limited lifetime warranty. The warranty was effective February 1, 2014, is not anticipated to have a significant effect on warranty expense. Effective January 1, 2017, the Company modified the standard warranty offered on products sold after January 1, 2017 to provide specific warranty periods by product component, with no warranty period longer than ten years. The Company’s warranty is not a guarantee of service life, which depends upon events outside the Company’s control and may be different from the warranty period. The Company accrues an estimate of its exposure to warranty claims based upon both product sales data and an analysis of actual warranty claims incurred.

The following is a summary of the Company’s warranty-claim activity for the three ~~and nine~~ months ended ~~October~~April 3130, ~~2023~~2024 and ~~2022~~2023:

Three Months Ended

~~Nine Months Ended~~

10/31/2023

10/31/2022

10/31/2023

10/31/2022

4/30/2024

4/30/2023

(In thousands)

Beginning balance

~~600~~500

~~650~~600

~~600~~

Provision

5430

~~106~~41

~~145~~

~~256~~

Costs incurred

(5430)

(5641)

~~(145)~~

~~(156)~~

Ending balance

~~600~~500

~~700~~600

~~600~~

~~700~~

Note 13. Contingencies

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

1815

~~$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~~.0 million. 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.

Note 14. Delivery Costs

For the three months ended ~~October~~April 3130, ~~2023~~2024 and ~~2022~~2023, shipping and classroom delivery costs of approximately $~~8,634,000~~4.2 million and $83.3 million,~~393,000,~~ respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

For the nine months ended October 31, 2023 and 2022, shipping and classroom delivery costs of approximately $21,968,000 and $18,776,000, respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Note 15. Subsequent Events

On ~~December 5~~June 4, ~~2023~~2024, the Company’s Board of Directors declared a cash dividend for the Company’s ~~fourth~~second fiscal quarter of $0.02 on each outstanding share of common stock. The dividend is payable on January 10, 2024 to stockholders of record of the common stock as of the close of business on December 22, 2023. While the Company intends to pay future dividends on a quarterly basis, following review and approval by the Board of Directors, the declaration and payment of future dividends, as well as the amounts thereof, are subject to the discretion of the Board as well as restrictive covenants in the Company’s lending agreements. There can be no assurance that the Company will declare and pay dividends in future periods.

In$0.02 ~~addition,~~on ~~the~~each ~~Board~~outstanding ofshare ~~Directors has authorized the repurchase~~ of ~~up to $5,000,000 of the Company’s~~ common stock. ~~Repurchases~~ ~~may~~The bedividend ~~made~~is atpayable ~~management’s~~on ~~discretion~~July ~~from time to time through open market purchases~~12, in2024 ~~privately negotiated transactions, or by other means, including through the use of trading plans intended~~ to ~~qualify~~stockholders ~~under Rule 10b5-1 under the Securities Exchange Act~~ of ~~1934,~~record ~~as amended, in accordance with applicable securities laws and other restrictions. The timing and total amount~~ of stock repurchases will depend upon business, economic and market conditions, corporate, legal and regulatory requirements, prevailing stock prices, trading volume, and other considerations. The repurchase program has no time limit and may be suspended for periods or discontinued at any time. The Company expects to utilize its existing cash and cash equivalents to fund repurchases under the ~~share repurchase program.~~

19common stock as of the close of business on June 21, 2024. While the Company currently intends to pay future dividends on a quarterly basis, following review and approval by the Board of Directors, the declaration and payment of future dividends, as well as the amounts thereof, are subject to the discretion of the Board as well as restrictive covenants in the Company’s lending agreements. There can be no assurance that the Company will declare and pay dividends in future periods.

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

Results of Operations

Overview

The ~~results~~market ~~of operations~~ for ~~the~~educational ~~three-month~~furniture ~~and~~is ~~nine-month~~marked ~~periods ended October 31, 2023 and the comparable periods ended October 31, 2022 have been impacted~~ by ~~economic~~extreme ~~conditions driven by the COVID-19 pandemic and global supply chain disruptions~~seasonality. ~~The impact of COVID-19 has been quite different during the current year compared to the prior years.~~ Typically, the Company has an exceptionally seasonal annual cycle where approximately 50% of sales occur in the months of June, July and August. Orders received from customers follow a similar ~~but~~seasonal ~~less pronounced~~ cycle~~. The~~, ~~Company~~with ~~typically~~the ~~receives~~bulk ~~orders for projects several months in advance~~ of ~~delivery, while smaller~~ orders ~~for~~arriving ~~fill~~approximately ~~in or replacements are typically received~~ 4-6 weeks ~~prior~~preceding tothe ~~delivery.~~selling season.

~~During~~The ~~the~~Company ~~months~~has ofreceived ~~June, July,~~ and ~~August~~filled ofa ~~2021,~~large ~~the~~series ~~Company~~of ~~was~~orders ~~severely~~related ~~impacted~~to bydisaster ~~shortages~~relief ~~of labor~~ and ~~materials~~recovery funding. ~~The~~This ~~Company~~project ~~delivered~~is ~~less~~now ~~than~~partially ~~40% of annual shipments during the traditional summer season~~complete. ~~During~~Approximately ~~the~~$9 ~~months~~million of ~~June,~~the ~~July,~~first ~~and~~quarter's ~~August~~increase ofin ~~2022~~sales ~~the~~compared ~~Company substantially returned~~ to the ~~traditional~~same ~~seasonal~~quarter ~~cycle~~in ~~and delivered approximately 47% of sales. For~~ the ~~three~~prior ~~months~~year ofwere ~~June,~~attributable ~~July, and August 2023 the Company believes that there has been a full return~~ to ~~the~~these ~~traditional seasonal summer peak~~orders. ~~The~~ ~~Company~~These ~~began the three-month period of June, July, and August of 2023 with a larger backlog of~~ orders ~~for~~materially ~~summer~~impacted ~~delivery,~~traditional ~~nearly~~first ~~$20~~quarter ~~million of increased inventory (as of April 30, 2023) and adequate availability of both full time and temporary labor to service the summer delivery season~~comparisons.

~~During~~With the ~~quarter~~exception ~~ended~~of ~~April~~this ~~30,~~one ~~2023~~event, for the ~~Company~~three-month ~~had~~period ~~experienced~~ended aApril ~~10.4%~~30, ~~increase in orders compared to the same quarter in 2022~~2024, ~~most~~management ofbelieves ~~which~~that ~~were for summer of 2023 delivery. During~~ the ~~quarter~~traditional ~~ended~~seasonal ~~July~~cycle ~~31,~~and ~~2023,~~ the Company’s ~~experienced~~ability ato ~~3.3%~~service ~~increase~~that inseasonal ~~orders~~cycle ~~compared~~has returned to ~~the same quarter in 2022~~normal. ~~During~~Overall aorder ~~seasonally light third quarter ended October 31~~intake, ~~2023~~including the ~~Company~~initial ~~experienced~~portion aof ~~25.0%~~this ~~increase~~one inlarge ~~orders~~project ~~compared~~previously ~~to the same quarter in 2022. During the first nine months of fiscal 2023~~mentioned, ~~the~~is ~~Company~~up ~~experienced~~approximately ~~a 10.3~~7% ~~increase in orders~~ compared to the same period inlast ~~2022~~year. At InApril ~~addition~~30, ~~the~~2024, ~~Company started~~ the ~~current fiscal year with an order backlog that was approximately $18 million greater than the prior year. This caused the~~ Company’s backlog of unshipped sales orders ~~when~~was ~~entering~~approximately ~~the~~$90.2 ~~traditional~~million ~~seasonal period at April 30, 2023~~ compared to ~~April 30, 2022 to increase by nearly~~ $~~19 million to $~~104.6 million ~~compared~~on toApril ~~$85.7~~30, ~~million~~2023. The ~~largest~~Company ~~portion~~believes ofthat ~~this~~a ~~increased~~significant ~~backlog~~majority ~~was~~of ~~delivered during~~ the ~~second~~sales ~~quarter~~order ~~ended~~backlog ~~July~~will ~~31,~~be ~~2023 with the balance~~ delivered during ~~the~~June, ~~third~~July, ~~quarter~~and ~~ended~~August ~~October~~of ~~31,~~the ~~2023.~~current year.

~~The~~As ~~increase~~discussed further in ~~sales~~the Risk Factors section of the Company’s Form 10-K for the ~~third~~fiscal ~~quarter~~year ended ~~October~~January 31, ~~2023~~2024, ~~was~~the ~~attributable~~Company utilizes one nationwide contract to ~~improved~~price ona ~~time~~significant ~~delivery~~portion of our orders. This contract/price list determines selling prices for goods and ~~increased~~services ~~order~~for ~~rates~~periods ~~during~~of ~~the~~one ~~third~~year ~~quarter~~and occasionally longer. ~~The~~Due ~~Company’s~~to ~~backlog~~the current volatile nature of ~~unshipped~~commodity ~~sales~~and ~~orders~~energy atprices ~~October~~in 31addition to general inflation, ~~2023~~the ~~declined~~Company byhas ~~$2.3~~negotiated ~~million~~the ability to ~~$42.5~~increase ~~million~~prices ~~compared~~for orders received after July 1 of each contract year in addition to ~~$44~~the annual January 1 price increase.8 ~~million~~There inis typically a several months' time lag between raising prices on orders and realizing the ~~prior~~increase ~~year~~in sales revenue.

~~Three~~Although ~~Months~~conditions ~~Ended~~are ~~October~~stable 31compared to the prior year, ~~2023~~financing challenges resulting from the recent bank failures and credit tightening and supply chain disruptions from international sources – primarily China – continue to adversely affect operations and the competitive landscape. Because the Company has maintained its domestic factories, management believes that the Company will be less vulnerable to international supply chain disruption compared to competitors that source finished goods overseas, but the Company will still be affected by these international events.

~~For~~Virco does not deliver furniture to new schools until the ~~three~~customer ~~months~~has ~~ended~~an ~~October~~occupancy ~~31,~~certificate. ~~2023,~~Supply chain disruptions in the ~~Company~~construction ~~earned~~industry, ~~pre-tax~~which ~~income~~may delay the completion of ~~$13.5~~new ~~million~~schools, ondid not significantly impact sales ofvolume ~~$84.2~~during ~~million~~the ~~compared~~quarter toended aApril ~~pre-tax~~30, ~~income~~2024, ofbut ~~$8.2~~may ~~million~~impact onthe timing of sales during the balance of ~~$77.4~~the ~~million~~year, possibly causing deliveries of furniture scheduled for the second quarter ending July 31, 2024 to occur in the ~~prior~~subsequent ~~year~~quarter.

~~Net~~Three ~~sales~~Months ~~for~~Ended ~~the~~April ~~third quarter increased by approximately $6.9 million or 8.9%~~30, ~~compared to the same period in 2022. The increase was attributable to an improvement in on-time deliveries during the traditional summer season and increased order rates during the third quarter.~~2024

~~Gross~~For ~~margin for~~ the ~~third~~three ~~quarter~~months ended ~~October~~April 3130, ~~2023~~2024, ~~was~~the ~~45.4%~~Company ~~compared~~earned toa ~~39.8%~~pre-tax inprofit ~~the~~of ~~prior year~~$2. ~~The~~9 ~~increase~~million inon ~~margin~~sales ~~was~~of ~~attributable~~$46.7 tomillion ~~the~~compared ~~price~~to ~~increases,~~a ~~relatively~~pre-tax ~~stable~~loss ~~commodity~~of ~~costs,~~$1.9 ~~and~~million anon ~~increase in~~ sales ~~which~~of ~~include Virco full service~~$34. ~~The~~9 ~~increase~~million in ~~full-service~~the ~~orders~~prior ~~improves gross margin, but does require increased freight and service costs, which are included in selling, general and administrative expenses~~year.

~~Selling,~~Sales ~~general and administrative expenses for the three months ended October 31, 2023~~ increased by approximately $111.58 million ~~but~~or ~~was~~33.7%, ~~slightly lower as a percentage of sales~~ compared to the same ~~period~~prior ~~last~~ year period. The increase in ~~selling,~~sales ~~general and administrative expenses~~ was primarily attributable into ~~part~~the toshipment ~~increased~~of ~~variable~~a ~~freight~~large ~~and~~project ~~service~~(discussed ~~expense~~above), ~~attributable~~combined towith a ~~larger~~slight ~~portion~~increase ofin ~~full-service orders, and increased variable~~ selling ~~expenses~~prices.

Gross margin for the quarter ended April 30, 2024 was 43.5% of sales compared to 37.8% in the prior year. The improvement in margin was attributable to a slight increase in selling prices, stable commodity costs, and improved factory efficiency. The improvement in factory efficiency resulted from approximately 20% increase in production hours to support increased first quarter sales.

~~Interest~~Selling, ~~expense~~general ~~increased~~and byadministrative ~~$0.2~~expenses ~~million~~("SG&A") for the three months ended ~~October~~April 3130, ~~2023~~2024 increased by approximately $2.9 million compared to the same period last year, but decreased as a percentage of sales to 37. 2% compared to 41.5% in the prior year. The increase ~~was~~in ~~primarily~~selling, general and administrative expenses was attributable to anincreased ~~increase~~variable inselling ~~the~~expenses ~~amount~~offset ~~borrowed~~slightly due to a change in ~~2023~~service tolevel ~~finance~~where ~~seasonal~~a ~~working~~smaller ~~capital~~portion of sales included full service. Because a significant portion of general and anadministrative ~~increase~~expenses indoes ~~interest~~not ~~rates~~fluctuate with sales volume, SG&A declined as a percentage of sales.

~~For the three months ended October 31, 2023 and 2022, the effective income tax rates were 24.5% and 3.9%, respectively.~~ The ~~lower~~Company ~~effective~~holds ~~tax~~equity ~~rate~~securities in ~~2022~~a ~~was~~Rabbi ~~due~~Trust ~~primarily~~ to ~~the~~fund ~~recording~~benefits ofunder ~~a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards, which commenced in~~ the ~~fourth~~VIP ~~quarter~~Pension ofPlan. ~~fiscal~~The ~~year~~Company ~~ended~~benefited ~~January~~from 31$215,000 ~~2022~~ and ~~continued through the period ended October 31~~$299,000 ~~2022. The~~of ~~increase~~unrealized ingains ~~the~~during ~~effective tax rate for~~ the ~~third~~three ~~quarter~~months ended ~~October~~April 3130, ~~2023~~2024 ~~was~~and ~~primarily~~April ~~due to the reversal of the valuation allowance at January 31~~30, 2023.

~~Nine Months Ended October 31, 2023~~17

~~For~~The ~~the~~primary ~~nine~~components ~~months ended October 31, 2023 the Company earned a pre-tax profit~~ of ~~$31.9~~pension ~~million~~expense onrelate ~~sales of $226.5 million compared~~ to ainterest ~~pre-tax~~cost ~~profit~~for ofthe ~~$12.8~~VIP ~~million~~plan on(presented ~~sales~~gross of ~~$192.3 million in~~ the ~~prior~~investment ~~year. Net~~income ~~sales~~described ~~increased~~above byand ~~approximately~~the ~~$34.2~~amortization ~~million or 17.8%. The increase was attributable to an increase in beginning~~ of ~~year~~AOCI ~~sales backlog, increased order rates, a price increase~~ for ~~orders~~both ~~received~~the ~~after~~VIP ~~January 1, 2023~~ and ~~July~~Qualified 1,Pensions). Interest ~~2022,~~cost and byamortization ~~the~~of ~~Company’s~~AOCI ~~ability~~decreased compared to ~~service~~ the ~~traditional~~prior ~~seasonal cycle~~year.

~~Gross~~Interest ~~margin~~expense decreased by $504,000 for the ~~first~~three ~~nine~~ months ofended ~~fiscal~~April 30, 2024 ~~was 44.1%~~ compared to ~~37.6%~~the insame ~~the~~period ~~prior~~last year. The ~~margin~~decrease was ~~affected~~primarily byattributable ~~price~~to ~~increases~~a onsignificant ~~July~~decrease 1,in ~~2022~~the ~~and~~amount ~~January~~borrowed 1,to ~~2023,~~finance ~~combined~~seasonal ~~with~~working ~~relatively~~capital ~~stable~~offset ~~costs~~slightly ~~for~~by ~~raw materials and labor expenses, and~~ an increase in ~~business~~the ~~which~~interest ~~included Virco full service~~rate.

~~Selling,~~For ~~general and administrative expenses for~~ the ~~nine~~three months ended ~~October~~April 3130, ~~2023~~2024 ~~increased~~and by2023, ~~$8.2~~the ~~million~~effective ~~compared~~income totax ~~the~~rates ~~same~~were ~~period~~25.5% ~~last~~and ~~year~~23.5%, ~~but~~respectively. ~~decreased~~The aschange ain ~~percentage~~effective oftax ~~sales. The~~rates ~~increase~~for inthe ~~selling,~~three ~~general~~months ~~and~~ended ~~administrative~~April ~~expenses~~30, 2024 was ~~attributable~~primarily due to anthe ~~increase~~change in ~~orders~~forecasted ~~which~~mix ~~include~~of ~~Virco~~income ~~full~~before ~~service,~~federal ~~increased variable freight~~ and ~~service~~state ~~expenses,~~income taxes and ~~variable~~estimated ~~selling~~permanent ~~expenses~~differences.

Interest expense increased by $0.9 million for the nine months ended October 31, 2023 compared to the same period last year. The increase was primarily attributable to an increase in the amount borrowed in 2023 to finance seasonal working capital and an increase in interest rates.

For the nine months ended October 31, 2023 and 2022, the effective income tax rates were 24.0% and 2.6%, respectively. The lower effective tax rate in 2022 was due primarily to the recording of a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards which commenced in the fourth quarter of fiscal year ended January 31, 2022 and continued through the period ended October 31, 2022. The increase in the effective tax rate for the nine months ended October 31, 2023 was primarily due to the reversal of the valuation allowance at January 31, 2023.

Liquidity and Capital Resources

The market for education furniture is extremely seasonal and approximately 50% of the Company's annual sales volume is shipped in the months of June through August of each year. The Company traditionally manufactures large quantities of inventory during the first and second quarters of each fiscal year in anticipation of seasonally high summer shipments. In addition, the Company finances a large balance of accounts receivable during the peak season. AsWhile ~~discussed above, due to COVID-19, during fiscal 2021 and 2022~~ the Company ~~incurred~~experienced ~~supply~~a ~~chain~~significant ~~disruptions~~increase ~~and~~in ~~labor~~first ~~shortages~~quarter ~~which~~sales ~~adversely~~in ~~affected~~ the ~~Company’s~~current ~~ability~~year, ~~to service~~ the ~~traditional summer delivery window. The~~ Company believes that the ~~Company’s ability to service the~~ traditional seasonal ~~sales~~nature ~~cycle~~of ~~has~~our ~~returned~~business ~~and~~ will continue ~~through the remainder of this fiscal year~~.

~~Accounts~~Inventory ~~receivable~~decreased ~~increased~~ by $514.03 million at ~~October~~April 3130, ~~2023~~2024, compared to ~~the~~April ~~same~~30, ~~period last year~~2023. The ~~increase~~decrease isin inventory was attributable to reduced quantity offset in part by increased inventory valuation. The quantity of inventory was decreased in response to a material increase in first quarter sales orders and a related reduction in ~~the~~order backlog at quarter ~~ended~~end. ~~October~~The ~~31,~~majority ~~2023~~of the backlog is scheduled for delivery during the traditional seasonal peak from June through August. The decrease in inventory enabled the Company to reduce borrowing under the Company’s line of credit with PNC Bank.

~~Inventory~~Accrual ~~increased~~basis bycapital ~~$1.5~~expenditures ~~million~~for atthe ~~October~~three ~~31,~~months ~~2023~~ended ~~compared~~April to30, ~~October~~2024 ~~31,~~were ~~2022~~$0. ~~The~~8 ~~increase~~million iscompared ~~primarily~~to ~~attributable~~$1.3 tomillion ~~increased~~for ~~cost,~~the ~~not~~same ~~increased~~period ~~quantity~~last year. ~~The~~ ~~increase~~Capital inexpenditures ~~inventory~~are ~~was~~being financed bythrough ~~cash~~the ~~flow~~Company's ~~from~~Credit ~~operations. Traditional~~Agreement ~~sources~~with ofPNC ~~financing,~~Bank ~~including~~and ~~borrowing~~operating ~~under~~cash ~~the~~flow ~~Company’s~~and ~~line~~restricted ofto ~~credit~~not ~~with~~exceed ~~PNC~~$8.0 ~~Bank~~million ~~and~~per ~~vendor~~year ~~credit~~by ~~declined~~covenant.

~~Accrual~~Subsequent ~~basis~~to ~~capital~~the ~~expenditures~~period ~~for~~ended April 30, 2024, the ~~nine~~Company ~~months~~entered ~~ended~~into ~~October~~Amendment 31No. 4 to its Credit Agreement with PNC Bank, ~~2023~~which ~~were~~decreased the borrowing limit from $472.15 million ~~compared~~ to $270.70 million ~~for~~during the ~~same~~peak seasonal period ~~last~~from ~~year.~~June ~~Capital expenditures are being financed~~ through ~~the~~August ~~Company's~~2024. ~~credit~~See ~~facility~~"Note ~~with~~7. ~~PNC~~Debt" ~~Bank~~in ~~and~~Notes ~~operating~~to ~~cash~~Unaudited ~~flow~~Consolidated ~~and~~Financial ~~restricted~~Statements tounder ~~not~~Item ~~exceed~~1 $8of ~~million~~this ~~per~~Quarterly ~~year~~Report byon ~~covenant~~Form 10-Q.

21Based on the Company’s current projections, raw material costs and its ability to introduce price increases, management believes it will maintain compliance with its financial covenants under the PNC Credit Agreement, although risks and uncertainties remain, such as economic conditions, changing raw material costs and supply chain challenges. The Company was in compliance with its debt covenants as of April 30, 2024.

The Company was in violation of its financial covenants under the Restated Credit Agreement as of January 31, 2022, due to an increase in the Company’s net loss primarily attributable to the effects of supply chain disruptions and labor shortages. On April 15, 2022, the Company entered into Amendment No. 2 to the Revolving Credit and Security Agreement with PNC Bank, which implemented certain changes to the Company’s credit facility with PNC Bank, including the extension of the final maturity date of the facility to April 15, 2027. On May 19, 2023, the Company entered into Amendment No. 3 which increased the borrowing limit to $72.5 million during the peak seasonal period from June through August 2023. See Note 7. Debt of Notes to Unaudited Consolidated Financial Statements under Item 1 of this Quarterly Report on Form 10-Q.

Based on the Company’s current projections, raw material costs and its ability to introduce price increases, management believes it will maintain compliance with its financial covenants under the Credit Agreement, although risks and uncertainties remain, such as changes in economic conditions, changing raw material costs and supply chain challenges. The Company was in compliance with its debt covenants as of October 31, 2023.

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

Off Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

The Company's critical accounting policies are outlined in its Annual Report on Form 10-K for the fiscal year ended January 31, ~~2023~~2024.

Forward-Looking Statements

From time to time, including in this Quarterly Report on Form 10-Q for the quarterly period ended ~~October~~April 3130, ~~2023~~2024, the Company or its representatives have made and may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in, without limitation, reports to stockholders, press releases, oral statements made with the approval of an authorized executive officer of the Company and filings with the Securities and Exchange Commission ("SEC"). The words or phrases “anticipates,” “expects,” “will continue,” “believes,” “estimates,” “projects,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The results contemplated by the Company's forward-looking statements are subject to certain risks and uncertainties that could cause actual results to vary materially from anticipated results, including without limitation, availability of funding for educational institutions, availability and cost of materials, availability and cost of labor, demand for the Company's products, competitive conditions affecting selling prices and margins, capital costs and general economic conditions. Such risks and uncertainties are discussed in more detail in the Company's Form 10-K for the fiscal year ended January 31, 2023, including under the caption "Risk Factors".

The words or phrases “anticipates,” “expects,” “will continue,” “believes,” “estimates,” “projects,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The results contemplated by the Company's forward-looking statements are subject to certain risks and uncertainties that could cause actual results to vary materially from anticipated results, including without limitation, availability of funding for educational institutions, availability and cost of materials, availability and cost of labor, demand for the Company's products, competitive conditions affecting selling prices and margins, capital costs and general economic conditions. Such risks and uncertainties are discussed in more detail in the Company's Form 10-K for the fiscal year ended January 31, 2024, including under the caption "Risk Factors".

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and is therefore not required to provide the information under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its Principal Executive Officer along with its Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of ~~October~~April 3130, ~~2023~~2024. Based upon the foregoing, the Company's Principal Executive Officer along with the Company's Principal Financial Officer concluded that the Company's disclosure controls and procedures as of such date were effective to ensure that the information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Company management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, Company management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

effective to ensure that the information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Company management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, Company management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

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

2319

PART II — Other Information

Virco Mfg. Corporation

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

You should carefully consider and evaluate the information in this Quarterly Report and the risk factors set forth under the caption “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2023~~2024 (the “Form 10-K”), which was filed with the SEC on April 2812, ~~2023~~2024. The risk factors associated with our business have not materially changed compared to the risk factors disclosed in the Form 10-K.

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

~~None.~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides the repurchases of our common stock during the fiscal quarter ending April 30, 2024:


Period	Total Number of Shares Purchased	Average Price Paid per Share (a)		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Number of Shares (or Approximate Dollar Value) that May Yet be Purchased Under the Programs (b)

February 2024	—	—		—	$	5,000,000

March 2024	—	—		—	$	5,000,000

April 2024	139,702	$	10.73	139,702	$	3,501,551

Total	139,702			139,702

(a) The average price paid per share includes any broker commissions.
(b) On December 5, 2023, the Board of Directors authorized the repurchase of up to $5.0 million of the Company's common stock, which repurchase program was publicly announced on December 8, 2023. The repurchase program does not obligate the Company to acquire a minimum amount of shares. Under the repurchase program, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. The repurchase program has no time limit and may be suspended or discontinued at any time. The actual dollar value of shares that may be repurchased in any fiscal year plus cash dividends during such fiscal year is limited to an aggregate of $5,000,000 under our Credit Agreement with PNC Bank, as further discussed above under “Note 7. Debt” to our Unaudited Consolidated Financial Statements.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the fiscal quarter ended ~~October~~April 3130, ~~2023~~2024, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K~~, nor has the Company adopted or terminated a "Rule 10-b5-1 trading arrangement~~.".

Item 6. Exhibits

ExhibitNumber			Document
10.1			Amendment No. 4 to Amended and Restated Revolving Credit and Security Agreement, effective as of April 29, 2024, by and among Virco Mfg. Corporation and Virco, Inc., as borrowers, and PNC Bank, National Association, as lender and administrative agent.
31.1			Certification of Robert A. Virtue, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Robert E. Dose, Vice President, Finance, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101.INS — XBRL Instance Document.

Exhibit 101.SCH — XBRL Taxonomy Extension Schema Document.

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

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

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

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SIGNATURES

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

	VIRCO MFG. CORPORATION
Date: December 8, 2023	By:	/s/ Robert E. Dose
Date: June 7, 2024	By:	/s/ Robert E. Dose
		Robert E. Dose
		Vice President — Finance
		(Principal Financial Officer)

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