What changed in this filing

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Item 1. Financial Statements

2021-09-14 compared with 2021-06-11 · 139 added, 67 removed, 334 unchanged (38% of the section changed)

51 unchanged sentences

Authorized 25,000,000 shares, $ 0.01 par value;

issued and outstanding 15,918,642 shares at 4/30/2021 and 1/31/2021 and 15,713,549 at 4/30/2020

issued and outstanding 16,102,023 shares at 7/31/2021 and 15,918,642 at 1/31/2021 and 7/31/2020

Additional paid-in capital 119,985 119,655 119,149

4 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Operations

Unaudited Condensed Consolidated Statements of Income

Three months ended

5 unchanged sentences

Selling, general and administrative expenses 16,251 15,488

Operating loss ( 4,295 ) ( 7,027 )

Operating income 6,068 7,715

Pension expense 724 542

Interest expense 359 494

Income before income taxes 4,985 6,679

Income tax expense 1,225 3,126

Net income $ 3,760 $ 3,553

Net income per common share:

Basic $ 0.24 $ 0.23

Diluted $ 0.24 $ 0.23

Weighted average shares of common stock outstanding:

Basic 15,920 15,733

Diluted 15,929 15,746

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Operations

Six months ended

7/31/2021 7/31/2020

(In thousands, except per share data)

Net sales $ 87,389 $ 77,273

Costs of goods sold 57,382 49,166

Gross profit 30,007 28,107

Selling, general and administrative expenses 28,234 27,419

Operating income 1,773 688

Pension expense 1,230 1,084

Interest expense 652 898

Loss before income taxes ( 109 ) ( 1,294 )

Income tax benefits ( 1,185 ) ( 3,275 )

Income tax expense (benefit) 40 ( 149 )

Net loss $ ( 149 ) $ ( 1,145 )

1 unchanged sentence

Basic $ ( 0.01 ) $ ( 0.07 )

Diluted $ ( 0.25 ) $ ( 0.30 )

Diluted (a) $ ( 0.01 ) $ ( 0.07 )

Weighted average shares of common stock outstanding:

Basic 15,872 15,694

Diluted 15,824 15,654

Diluted (a) 15,872 15,694

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

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Comprehensive Loss

Unaudited Condensed Consolidated Statements of Comprehensive Income

Three months ended

1 unchanged sentence

(In thousands)

Net income $ 3,760 $ 3,553

Other comprehensive income:

Pension adjustments (net of tax expense of $ 803 and $ 120 at July 31, 2021 and 2020, respectively)

Net comprehensive income $ 6,020 $ 3,898

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

Six months ended

7/31//2021 7/31/2020

(In thousands)

Net loss $ ( 149 ) $ ( 1,145 )

Other comprehensive income:

Pension adjustments (net of tax expense of $ 116 and $ 120 at April 30, 2021 and 2020, respectively)

Net comprehensive loss $ ( 3,582 ) $ ( 4,353 )

Pension adjustments (net of tax expense of $ 919 and $ 240 at July 31, 2021 and 2020, respectively)

Net comprehensive income (loss) $ 2,438 $ ( 455 )

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Cash Flows

Three months ended

Six months ended

7/31/2021 7/31/2020

8 unchanged sentences

Stock-based compensation 506 506

Defined pension plan settlement 220 —

Amortization of net actuarial loss for pension plans 885 690

9 unchanged sentences

Capital expenditures ( 963 ) ( 1,359 )

Proceeds from life insurance policy 110 —

Net cash used in investing activities ( 853 ) ( 1,359 )

2 unchanged sentences

Repayment of long-term debt ( 5,040 ) ( 6,787 )

Tax withholding payments on share-based compensation ( 176 ) ( 155 )

Net cash provided by financing activities 9,649 16,942

4 unchanged sentences

Unaudited Consolidated Statements of Changes in Stockholders' Equity

Three-Month Period Ended April 30, 2021

Three-Month Period Ended July 31, 2021

In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder's Equity

Balance at May 1, 2021 15,918,642 $ 159 $ 119,908 $ ( 55,951 ) $ ( 13,258 ) $ 50,858

Net income — — — 3,760 — 3,760

Cash dividends — — — — — —

Pension adjustments, net of tax effect of $ 803

— — — — 2,260 2,260

Shares vested and others 183,381 2 ( 176 ) — — ( 174 )

Stock compensation expense — — 253 — — 253

Balance at July 31, 2021 16,102,023 $ 161 $ 119,985 $ ( 52,191 ) $ ( 10,998 ) $ 56,957

Three-Month Period Ended July 31, 2020

In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder's Equity

Balance at May 1, 2020 15,713,549 $ 157 $ 119,036 $ ( 54,508 ) $ ( 13,966 ) $ 50,719

Net income — — — 3,553 — 3,553

Cash dividends — — — — — —

Pension adjustments, net of tax effect of $ 120

— — — — 345 345

Shares vested and others 205,093 2 ( 139 ) — — ( 137 )

Stock compensation expense — — 252 — — 252

Balance at July 31, 2020 15,918,642 $ 159 $ 119,149 $ ( 50,955 ) $ ( 13,621 ) $ 54,732

Six-Month Period Ended July 31, 2021

In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive loss Total Stockholder's Equity

Balance at February 1, 2021 15,918,642 $ 159 $ 119,655 $ ( 52,042 ) $ ( 13,585 ) $ 54,187

5 unchanged sentences

Stock compensation expense — — 506 — — 506

Balance at April 30, 2021 15,918,642 $ 159 $ 119,908 $ ( 55,951 ) $ ( 13,258 ) $ 50,858

Three-Month Period Ended April 30, 2020

Balance at July 31, 2021 16,102,023 $ 161 $ 119,985 $ ( 52,191 ) $ ( 10,998 ) $ 56,957

Six-Month Period Ended July 31, 2020

In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive loss Total Stockholder's Equity

6 unchanged sentences

Stock compensation expense — — 506 — — 506

Balance at April 30, 2020 15,713,549 $ 157 $ 119,036 $ ( 54,508 ) $ ( 13,966 ) $ 50,719

Balance at July 31, 2020 15,918,642 $ 159 $ 119,149 $ ( 50,955 ) $ ( 13,621 ) $ 54,732

See accompanying notes to unaudited condensed consolidated financial statements.

Notes to unaudited Condensed Consolidated Financial Statements

April 30, 2021

July 31, 2021

Basis of Presentation

4 unchanged sentences

In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

Operating results for the three months ended April 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2022.

Operating results for the three and six months ended July 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2022.

The balance sheet at January 31, 2021 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.

5 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

The classification of certain prior year sales allowances of approximately $ 218,000 , representing the replacement of damaged goods, previously presented in net sales, is presented in costs of goods sold in the accompanying prior period statement of operations, which conforms to current period presentation.

Management evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern over the next 12 months through June 30, 2022.

The classification of certain prior year sales allowances of approximately $ 171,000 and $ 389,000 was made for the three and six months ended July 31, 2020, respectively.

The amounts of reclassification representing the replacement of damaged goods, previously presented in net sales, is presented in costs of goods sold in the accompanying prior period statements of income or operations, which conform to current period presentation.

The Company has experienced an overall decline in net sales and net income for the fiscal year ended January 31, 2021.

For the first three-months of fiscal 2022 the Company experienced a material increase in orders and shipments as schools received funding to support a return to classroom instruction.

For the first six-months of fiscal 2022 the Company experienced a material increase in orders and shipments as schools received funding to support a return to classroom instruction.

As a result of the reduced revenue in the prior fiscal year, the Company was not in compliance with its fixed-charge coverage ratio under its revolving and secured credit agreement with PNC Bank, as of July 31, 2020, prior to an amendment and waiver negotiated to satisfy the event of default that also reduced the ratio required for the rolling four-quarter period ended October 31, 2020 from 1.10 :1.00 to 1.00 :1.00.

2 unchanged sentences

The amended covenant allows the Company to add back certain COVID-19 related costs incurred between May 1, 2020 through April 30, 2021, not to exceed $ 2 million, to adjusted EBITDA and retains a minimum fixed-charge coverage ratio of 1.10 :1.00 beginning with the quarter ended January 31, 2021 (see Note 7 ).

The Company was in compliance with the covenants as of July 31, 2021.

The Company expects the impact of COVID-19 to continue to be a challenge for the foreseeable future and believes the economy will be adversely impacted for an indeterminate period, including the demand for its products and supply of materials and labor required to manufacture products.

10 unchanged sentences

Second, many customers during this period are educational institutions and government entities, which tend to pay accounts receivable slower than commercial customers.

For the three and six months ended July 31, 2021, management believes that the traditional peak season has been and will continue to be impacted by economic conditions related to COVID 19.

The Company has experienced difficulty sourcing desired levels of temporary labor and permanent hires in the manufacturing and distribution facilities.

In addition, the Company is experiencing supply chain disruptions for raw materials.

These conditions have adversely impacted sales volume for the months of June and July.

The Company anticipates that a larger portion of its annual sales will occur in September, October, and November of the current fiscal year compared to prior years.

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.

5 unchanged sentences

and the accounts receivable allowance for doubtful accounts.

Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after April 30, 2021, including those resulting from the continuing impacts of the COVID-19 pandemic, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after July 31, 2021, including those resulting from the continuing impacts of the COVID-19 pandemic, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

New Accounting Pronouncements

15 unchanged sentences

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.

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.

1 unchanged sentence

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.

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.

We do not consider our revenue generated through direct-to-customers and resellers to be meaningfully different revenue streams given similarities in the nature of the products, performance obligation and distribution processes.

2 unchanged sentences

Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or net realizable value and includes material, labor and factory overhead.

The Company maintains valuation allowances for estimated slow-moving and obsolete inventory to reflect the difference between the cost of inventory and the estimated net realizable value.

Valuation allowances for slow-moving and obsolete inventory are determined through a physical inspection of the product in connection with a physical inventory, a review of slow-moving product and consideration of active marketing programs.

The Company records valuation adjustments for the excess cost of the inventory over its estimated net realizable value.

Valuation adjustments for slow-moving and obsolete inventory are calculated using an estimated percentage applied to inventories based on a physical inspection of the product in connection with a physical inventory, a review of slow-moving products and component stage, inventory category, historical and forecasted consumption of sales, and consideration of active marketing programs.

The market for education furniture is traditionally driven by value, not style, and the Company has not typically incurred significant obsolescence expenses.

If market conditions are less favorable than those anticipated by management, additional valuation allowances may be required.

If market conditions are less favorable than those anticipated by management, additional valuation adjustments may be required.

Due to reductions in sales volume in the past years, the Company’s manufacturing facilities are operating at reduced levels of capacity.

The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation.

The following table presents a breakdown of the Company’s inventories as of April 30, 2021, January 31, 2021 and April 30, 2020:

The following table presents a breakdown of the Company’s inventories as of July 31, 2021, January 31, 2021 and July 31, 2020:

7/31/2021 1/31/2021 7/31/2020

1 unchanged sentence

Finished goods $ 14,163 $ 15,606 $ 23,065

WIP 14,630 11,907 19,159

Work in process 14,061 11,907 15,430

Raw materials 14,169 10,757 10,949

8 unchanged sentences

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

Three-Months Ended

Three-Months Ended Six-Months Ended

7/31/2021 7/31/2020 7/31/2021 7/31/2020

10 unchanged sentences

Weighted-average discount rate 6.4 % 6.4 %

Minimum future lease payments for operating leases in effect as of April 30, 2021, are as follows:

Minimum future lease payments for operating leases in effect as of July 31, 2021, are as follows:

Operating Lease

38 unchanged sentences

22, the Company also agreed to pay PNC Bank a non-refundable fee of $ 40,000 .

The Company was in compliance with the covenants as of April 30, 2021.

The Company was in compliance with the covenants as of July 31, 2021.

The Credit Agreement bears interest, at the Borrowers’ option, at either the Alternate Base Rate (as defined in the Credit Agreement) or the Eurodollar Currency Rate (as defined in the Credit Agreement), in each case plus an applicable margin.

The applicable margin for Alternate Base Rate loans is a percentage within a range of 1.25 % to 1.75 %, and the applicable margin for Eurodollar Currency Rate loans is a percentage within a range of 2.25 % to 2.75 %, in each case based on the EBITDA of the Borrower's at the end of each fiscal quarter and may be increased at PNC's option by 2.0 % during the continuance of an event of default.

The interest rate as of April 30, 2021 was 5.0 %.

The interest rate as of July 31, 2021 was 4.5 %.

The Company also incurs a fee on the unused portion of the revolving line of credit at a rate of 0.375 %.

6 unchanged sentences

The Company's revolving line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season.

Approximately $ 22,121,000 was available for borrowing as of April 30, 2021.

Management believes that the carrying value of debt approximated fair value at April 30, 2021 and 2020, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

Approximately $ 41,182,000 was available for borrowing as of July 31, 2021.

Management believes that the carrying value of debt approximated fair value at July 31, 2021 and 2020, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

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.

2 unchanged sentences

On the basis of this evaluation, and after considering future reversals of existing taxable temporary differences and the effects of seasonality on the Company’s business, the Company determined that its U.S.

federal deferred tax assets are more-likely-than-not to be realizable, but that valuation allowances of $ 996,000 , $ 1,064,000 and $ 1,075,000 as of April 30, 2021, January 31, 2021 and April 30, 2020, respectively, are needed for certain state NOL’s to reduce the carrying amount of deferred tax assets to an amount that is more-likely-than-not to be realized.

For the first quarter ended April 30, 2021 and 2020, the effective tax rates were 23.3 % and 41.1 %, respectively.

Effective tax rate for the first quarter ended April 30, 2021 is less than the prior year, primarily due to the change in forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets.

federal deferred tax assets are more-likely-than-not to be realizable, but that valuation allowances of $ 1,144,000 , $ 1,064,000 and $ 1,186,000 as of July 31, 2021, January 31, 2021 and July 31, 2020, respectively, are needed for certain state NOL’s 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 July 31, 2021 and 2020, the effective tax rates were 24.6 % and 46.8 %, respectively.

For the six months ended July 31, 2021 and 2020, the effective tax rates were ( 36.7 )% and 11.5 %, respectively.

Effective tax rates for the three months and six months ended July 31, 2021 and 2020 were primarily due to the change in forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets.

On March 27, 2020, the then President signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

7 unchanged sentences

The Company is currently under IRS examination for its fiscal year ended January 31, 2016 Federal tax return.

Net loss per Share

Three Months Ended

Net income (loss) per Share

Three Months Ended Six Months Ended

7/31/2021 7/31/2020 7/31/2021 7/31/2020

(In thousands, except per share data)

Net loss $ ( 3,909 ) $ ( 4,698 )

Net income (loss) $ 3,760 $ 3,553 $ ( 149 ) $ ( 1,145 )

Weighted average shares of common stock outstanding 15,920 15,733 15,872 15,694

1 unchanged sentence

Totals 15,929 15,746 15,872 15,694

Net loss per share - basic $ ( 0.25 ) $ ( 0.30 )

Net loss per share - diluted (a) $ ( 0.25 ) $ ( 0.30 )

(a) At April 30, 2021 and 2020, approximately 155,000 and 75,000 shares of common stock equivalents were excluded in the computation of diluted net loss per share, as the effect would be anti-dilutive since the Company reported a net loss.

Net income (loss) per share - basic $ 0.24 $ 0.23 $ ( 0.01 ) $ ( 0.07 )

Net income (loss) per share - diluted (a) $ 0.24 $ 0.23 $ ( 0.01 ) $ ( 0.07 )

(a) At July 31, 2021 and 2020, approximately 1,500 and 5,000 shares of common stock equivalents were excluded in the computation of diluted net loss per share, as the effect would be anti-dilutive since the Company reported a net loss.

Stock-Based Compensation

1 unchanged sentence

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

Under the 2019 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards.

Under the Company's 2019 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards.

Restricted stock units and awards granted under the 2019 Plan are expensed ratably over the vesting period of the awards.

The Company determines the fair value of its restricted stock units or awards and related compensation expense as the difference between the market value of the units or awards on the date of grant less the exercise price of the units or awards granted.

During the three-month period ended April 30, 2021, the Company granted 0 awards to non-employee directors, vested 0 shares according to their terms and forfeited 0 shares under the 2019 Plan.

As of April 30, 2021, there were approximately 677,305 shares available for future issuance under the 2019 Plan.

During the six-month period ended July 31, 2021, the Company granted 68,870 awards to non-employee directors, vested 140,295 shares according to their terms and forfeited 0 shares under the 2019 Plan.

As of July 31, 2021, there were approximately 628,435 shares available for future issuance under the 2019 Plan.

Under the 2011 Plan, the Company may grant an aggregate of 2,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards.

1 unchanged sentence

During the three-month period ended April 30, 2021, the Company granted 0 restricted awards to non-employee directors and 0 units to its employees;

During the six-month period ended July 31, 2021, the Company granted 0 restricted awards to non-employee directors and 0 units to its employees;

vested 0 stock awards and 119,200 units according to their terms and forfeited 0 stock units under the 2011 Plan.

As of April 30, 2021, there were approximately 32,892 shares available for future issuance under the 2011 Plan.

During the three months ended April 30, 2021, stock-based compensation expense related to restricted stock units and awards recognized in cost of goods sold and selling, general and administrative expenses was $ 55,000 and $ 198,000 , respectively.

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

As of April 30, 2021, there was $ 1,672,000 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 3 years.

As of July 31, 2021, there were approximately 12,892 shares available for future issuance under the 2011 Plan.

During the three months ended July 31, 2021, stock-based compensation expense related to restricted stock units and awards recognized in cost of goods sold and selling, general and administrative expenses was $ 55,000 and $ 198,000 , respectively.

During the three months ended July 31, 2020, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $ 65,000 and $ 187,000 , respectively.

During the six months ended July 31, 2021, stock-based compensation expense related to restricted stock units and awards recognized in cost of goods sold and selling, general and administrative expenses was $ 110,000 and $ 396,000 , respectively.

During the six months ended July 31, 2020, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $ 128,000 and $ 378,000 , respectively.

As of July 31, 2021, there was $ 1,668,000 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 3 years.

Retirement Plans

The Company and its subsidiaries cover certain employees under a noncontributory defined benefit retirement plan, entitled the Virco Employees’ Retirement Plan (the “Pension Plan”).

As more fully described in the Form 10-K, benefit accruals under the Employees Retirement Plan were frozen effective December 31, 2003.

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.

1 unchanged sentence

As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2021, benefit accruals under this plan were frozen since December 31, 2003.

There is no service cost incurred under this plan.

The net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2021 and 2020 were as follows:

During the second quarter ended July 31, 2021, the Company, at the retirees request, paid lump-sum distributions for the related benefit obligations.

As the amount of the lump-sum settlement exceeded the sum of the service and interest cost for the year, the distribution was treated as a settlement in accordance with U.S.

GAAP, resulting in plan settlement loss of $ 220,000 recorded in pension expense in the accompanying condensed consolidated statements of operations and an actuarial gain on the plan re-measurement of $ 1,770,000 , net of tax, recorded to accumulated other comprehensive income for the three and six-months ended July 31, 2021.

The net periodic pension cost for the Pension Plan and the VIP Plan for the three and six months ended July 31, 2021 and 2020 were as follows:

Combined Employee Retirement Plans

Three Months Ended

Three Months Ended Six Months Ended

7/31/2021 7/31/2020 7/31/2021 7/31/2020

(in thousands)

$ — $ — $ — $ —

Interest cost 280 301 561 602

3 unchanged sentences

Recognized net actuarial loss 442 465 885 930

$ 724 $ 542 $ 1,230 $ 1,084

401(k) Retirement Plan

2 unchanged sentences

The plan includes Virco stock as one of the investment options.

At April 30, 2021 and 2020, the plan held 970,632 shares and 763,586 shares of Virco stock, respectively.

For the three months ended April 30, 2021 and 2020, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $ 184,000 and $ 210,000 , respectively.

At July 31, 2021 and 2020, the plan held 991,899 shares and 850,789 shares of Virco stock, respectively.

For the three months ended July 31, 2021 and 2020, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $ 207,000 and $ 195,000 , respectively.

For the six months ended July 31, 2021 and 2020, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $ 391,000 and $ 405,000 , respectively.

Warranty Accrual

The Company provides an assurance type warranty against all substantial defects in material and workmanship.

The standard warranty offered on products sold after January 1, 2017 was modified to provide specific warranty periods by product component, with no warranty period longer than ten years .

The Company provides a warranty against all substantial defects in material and workmanship.

The standard warranty offered on products sold through January 31, 2013 is ten years .

Effective February 1, 2014 the Company modified its warranty to a limited lifetime warranty.

The warranty effective February 1, 2014 is not anticipated to have a significant effect on warranty expense.

Effective January 1, 2017, the Company modified the standard warranty offered on products sold after January 1, 2017 to provide specific warranty periods by product component, with no warranty period longer than ten years .

The Company’s warranty is not a guarantee of service life, which depends upon events outside the Company’s control and may be different from the warranty period.

The Company accrues an estimate of its exposure to warranty claims based upon both product sales data and an analysis of actual warranty claims incurred.

The following is a summary of the Company’s warranty-claim activity for the three months ended April 30, 2021 and 2020:

Three Months Ended

The following is a summary of the Company’s warranty-claim activity for the three and six months ended July 31, 2021 and 2020:

Three Months Ended Six Months Ended

7/31/2021 7/31/2020 7/31/2021 7/31/2020

5 unchanged sentences

Contingencies

The Company has a self-insured retention for product and general liability losses up to $ 250,000 per occurrence, workers’ compensation liability losses up to $ 250,000 per occurrence and for automobile liability losses up to $ 50,000 per occurrence.

The Company has 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 and automobile liability losses up to $ 50,000 per occurrence.

The Company has purchased insurance to cover losses in excess of the retention up to a limit of $ 30,000,000 .

The Company has

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

The Company 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.

1 unchanged sentence

Delivery Costs

For the quarter ended April 30, 2021 and 2020, shipping and classroom delivery costs of approximately $ 2,921,000 and $ 2,078,000 , respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

For the three months ended July 31, 2021 and 2020, shipping and classroom delivery costs of approximately $ 5,112,000 and $ 4,907,000 , respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income.

For the six months ended July 31, 2021 and 2020, shipping and classroom delivery costs of approximately $ 8,033,000 and $ 6,985,000 , respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

On March 11, 2020, the World Health Organization declared the current coronavirus (COVID-19) outbreak to be a global pandemic.

In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restriction on social and commercial activity to promote social distancing in an effort to slow the spread of the illness.

Through the first quarter ended April 30, 2021 the Company operated its manufacturing and distribution facilities on a voluntary basis to give employees the flexibility to remain at home with children who are out of school or for other personal reasons as they deem necessary.

During first quarter ended April 30, 2021, the Company operated its manufacturing and distribution facilities on a voluntary basis to give employees the flexibility to remain at home with children who are out of school or for other personal reasons as they deem necessary.

Subsequent to April 30, 2021 and after vaccinations were available, the Company required all manufacturing and distribution employees to return to work.

Office employees and others who can work from home continued to do so through April 30, 2021, but are anticipated to return during the Company’s second quarter.

Appropriate measures are being taken to protect the health of employees performing essential on-site operations.

Office employees and others who can work from home continued to work from home.

The Company’s Conway, Arkansas facilities, which represent approximately two thirds of the Company’s production and distribution capacity, has been fully operational during the pandemic.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements